UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-07820 | |||||
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. | ||||||
(Exact name of registrant as specified in charter) | ||||||
4500 MAIN STREET, KANSAS CITY, MISSOURI | 64111 | |||||
(Address of principal executive offices) | (Zip Code) | |||||
CHARLES A. ETHERINGTON 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 | ||||||
(Name and address of agent for service) | ||||||
Registrant’s telephone number, including area code: | 816-531-5575 | |||||
Date of fiscal year end: | 03-31 | |||||
Date of reporting period: | 09-30-2011 |
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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Equity Income Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 12 |
Statement of Operations | 13 |
Statement of Changes in Net Assets | 14 |
Notes to Financial Statements | 15 |
Financial Highlights | 22 |
Approval of Management Agreement | 25 |
Additional Information | 30 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the six months ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
This reporting period differed dramatically from the six months that preceded it. As the period covered by this report opened in April 2011, U.S. stocks were approaching the crest of an eight-month rally, originating back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
![](https://capedge.com/proxy/N-CSRS/0001437749-11-009308/prattsignature.jpg)
Don Pratt
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Total Returns as of September 30, 2011 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | TWEIX | -9.48% | 0.49% | 0.55% | 5.58% | 9.78% | 8/1/94 |
Russell 3000 Value Index | — | -17.20% | -2.22% | -3.50% | 3.58% | 7.80%(2) | — |
S&P 500 Index | — | -13.78% | 1.14% | -1.18% | 2.82% | 7.40%(2) | — |
Lipper Equity Income Funds Index | — | -13.59% | 0.27% | -1.64% | 3.24% | 6.45%(2) | — |
Institutional Class | ACIIX | -9.37% | 0.69% | 0.78% | 5.80% | 6.62% | 7/8/98 |
A Class(3) No sales charge* With sales charge* | TWEAX | -9.60% -14.76% | 0.23% -5.49% | 0.30% -0.88% | 5.31% 4.70% | 7.53% 7.10% | 3/7/97 |
B Class No sales charge* With sales charge* | AEKBX | -9.93% -14.93% | -0.53% -4.53% | — — | — — | -3.23% -3.79% | 9/28/07 |
C Class No sales charge* With sales charge* | AEYIX | -9.93% -10.82% | -0.53% -0.53% | -0.42% -0.42% | 4.55% 4.55% | 4.06% 4.06% | 7/13/01 |
R Class | AEURX | -9.72% | -0.02% | 0.08% | — | 4.45% | 8/29/03 |
* | 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%. B Class shares redeemed within six years of purchase are subject to a CDSC that declines from 5.00% during the first year after purchase to 0.00% the sixth year after purchase. 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. |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Since 7/31/94, the date nearest the Investor Class’s inception for which data are available. |
(3) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | |||||
Investor Class | Institutional Class | A Class | B Class | C Class | R Class |
0.96% | 0.76% | 1.21% | 1.96% | 1.96% | 1.46% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. International investing involves special risks, such as political instability and currency fluctuations. 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.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
4
SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Exxon Mobil Corp. | 3.5% |
Wells Fargo & Co. (Convertible) | 3.1% |
Procter & Gamble Co. (The) | 2.9% |
AT&T, Inc. | 2.9% |
Marsh & McLennan Cos., Inc. | 2.8% |
Total SA | 2.8% |
Bank of America Corp. (Convertible) | 2.2% |
International Game Technology (Convertible) | 2.2% |
Consolidated Edison, Inc. | 2.2% |
Lincare Holdings, Inc., Series A (Convertible) | 2.1% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 13.5% |
Pharmaceuticals | 8.7% |
Insurance | 7.2% |
Household Products | 6.1% |
Commercial Banks | 6.0% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 63.4% |
Foreign Common Stocks* | 6.8% |
Convertible Bonds | 18.0% |
Convertible Preferred Stocks | 9.8% |
Exchange-Traded Funds | 1.0% |
Total Equity Exposure | 99.0% |
Temporary Cash Investments | 0.9% |
Other Assets and Liabilities | 0.1% |
*Includes depositary shares, dual listed securities and foreign ordinary shares.
5
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 April 1, 2011 to September 30, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
6
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 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period(1) 4/1/11 – 9/30/11 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $905.20 | $4.52 | 0.95% |
Institutional Class | $1,000 | $906.30 | $3.57 | 0.75% |
A Class | $1,000 | $904.00 | $5.71 | 1.20% |
B Class | $1,000 | $900.70 | $9.27 | 1.95% |
C Class | $1,000 | $900.70 | $9.27 | 1.95% |
R Class | $1,000 | $902.80 | $6.90 | 1.45% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.25 | $4.80 | 0.95% |
Institutional Class | $1,000 | $1,021.25 | $3.79 | 0.75% |
A Class | $1,000 | $1,019.00 | $6.06 | 1.20% |
B Class | $1,000 | $1,015.25 | $9.82 | 1.95% |
C Class | $1,000 | $1,015.25 | $9.82 | 1.95% |
R Class | $1,000 | $1,017.75 | $7.31 | 1.45% |
(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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
7
Shares/ Principal Amount | Value | |
Common Stocks — 70.2% | ||
AEROSPACE AND DEFENSE — 0.9% | ||
Lockheed Martin Corp. | 297,465 | $ 21,607,857 |
Raytheon Co. | 1,258,272 | 51,425,577 |
73,033,434 | ||
AIR FREIGHT AND LOGISTICS — 1.8% | ||
United Parcel Service, Inc., Class B | 2,392,595 | 151,092,374 |
BEVERAGES — 1.1% | ||
Dr Pepper Snapple Group, Inc. | 2,290,071 | 88,808,953 |
CAPITAL MARKETS — 1.5% | ||
Northern Trust Corp. | 3,692,083 | 129,149,063 |
CHEMICALS — 1.5% | ||
E.I. du Pont de Nemours & Co. | 3,091,642 | 123,572,931 |
COMMERCIAL BANKS — 2.5% | ||
Comerica, Inc. | 1,395,662 | 32,058,356 |
Commerce Bancshares, Inc. | 1,655,826 | 57,539,954 |
PNC Financial Services Group, Inc. | 1,994,636 | 96,121,509 |
SunTrust Banks, Inc. | 1,194,777 | 21,446,247 |
207,166,066 | ||
COMMERCIAL SERVICES AND SUPPLIES — 1.9% | ||
Pitney Bowes, Inc. | 786,438 | 14,785,034 |
Republic Services, Inc. | 2,987,074 | 83,817,297 |
Waste Management, Inc. | 1,860,038 | 60,562,837 |
159,165,168 | ||
COMPUTERS AND PERIPHERALS — 0.4% | ||
Diebold, Inc. | 1,191,921 | 32,789,747 |
CONSTRUCTION MATERIALS — 0.2% | ||
Martin Marietta Materials, Inc. | 291,491 | 18,428,061 |
DISTRIBUTORS — 0.9% | ||
Genuine Parts Co. | 1,496,409 | 76,017,577 |
DIVERSIFIED FINANCIAL SERVICES — 0.7% | ||
JPMorgan Chase & Co. | 1,992,579 | 60,016,479 |
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.1% | ||
AT&T, Inc. | 8,389,146 | 239,258,444 |
CenturyLink, Inc. | 3,093,755 | 102,465,166 |
341,723,610 | ||
ELECTRIC UTILITIES — 0.9% | ||
Northeast Utilities | 1,077,537 | 36,259,120 |
Portland General Electric Co. | 1,590,966 | 37,689,985 |
73,949,105 | ||
ELECTRICAL EQUIPMENT — 1.1% | ||
ABB Ltd.(1) | 1,706,778 | 29,147,852 |
Emerson Electric Co. | 198,542 | 8,201,770 |
Rockwell Automation, Inc. | 997,589 | 55,864,984 |
93,214,606 | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 0.4% | ||
Molex, Inc., Class A | 1,967,258 | 33,207,315 |
FOOD AND STAPLES RETAILING — 2.8% | ||
SYSCO Corp. | 6,386,548 | 165,411,593 |
Wal-Mart Stores, Inc. | 1,293,478 | 67,131,508 |
232,543,101 | ||
FOOD PRODUCTS — 0.3% | ||
General Mills, Inc. | 691,464 | 26,600,620 |
GAS UTILITIES — 3.3% | ||
AGL Resources, Inc. | 1,290,970 | 52,594,118 |
Nicor, Inc.(2) | 2,196,091 | 120,806,966 |
Piedmont Natural Gas Co., Inc. | 298,216 | 8,615,460 |
WGL Holdings, Inc.(2) | 2,553,317 | 99,758,095 |
281,774,639 | ||
HEALTH CARE EQUIPMENT AND SUPPLIES — 1.6% | ||
Becton, Dickinson and Co. | 1,785,715 | 130,928,624 |
HOUSEHOLD PRODUCTS — 6.1% | ||
Clorox Co. | 1,895,846 | 125,751,465 |
Kimberly-Clark Corp. | 1,981,614 | 140,714,410 |
Procter & Gamble Co. (The) | 3,894,590 | 246,060,197 |
512,526,072 | ||
INDUSTRIAL CONGLOMERATES — 3.2% | ||
3M Co. | 1,087,923 | 78,101,992 |
Koninklijke Philips Electronics NV(1) | 2,987,635 | 53,480,739 |
Tyco International Ltd. | 3,437,182 | 140,065,167 |
271,647,898 | ||
INSURANCE — 5.6% | ||
ACE Ltd. | 484,981 | 29,389,849 |
Allstate Corp. (The) | 4,371,152 | 103,552,591 |
Chubb Corp. (The) | 1,494,135 | 89,633,159 |
Marsh & McLennan Cos., Inc. | 8,987,680 | 238,533,027 |
Transatlantic Holdings, Inc. | 299,064 | 14,510,585 |
475,619,211 | ||
IT SERVICES — 0.3% | ||
Automatic Data Processing, Inc. | 86,263 | 4,067,300 |
Paychex, Inc. | 897,602 | 23,669,765 |
27,737,065 |
8
Shares/ Principal Amount | Value |
MACHINERY — 0.3% | ||
Atlas Copco AB B Shares | 1,895,965 | $ 29,743,534 |
MEDIA — 0.2% | ||
Omnicom Group, Inc. | 429,823 | 15,834,679 |
METALS AND MINING — 0.4% | ||
Freeport-McMoRan Copper & Gold, Inc. | 1,150,848 | 35,043,322 |
MULTI-UTILITIES — 2.2% | ||
Consolidated Edison, Inc. | 3,256,178 | 185,667,270 |
OIL, GAS AND CONSUMABLE FUELS — 10.6% | ||
BP plc | 4,990,778 | 29,934,216 |
Chevron Corp. | 1,895,092 | 175,333,912 |
El Paso Pipeline Partners LP | 3,188,442 | 113,094,038 |
Exxon Mobil Corp. | 3,992,782 | 289,995,756 |
Spectra Energy Partners LP | 1,523,480 | 42,977,371 |
Total SA | 5,392,725 | 237,768,860 |
889,104,153 | ||
PHARMACEUTICALS — 8.7% | ||
Abbott Laboratories | 2,198,753 | 112,444,228 |
Bristol-Myers Squibb Co. | 5,329,329 | 167,234,344 |
Eli Lilly & Co. | 1,092,788 | 40,400,372 |
Johnson & Johnson | 2,561,080 | 163,166,407 |
Merck & Co., Inc. | 3,993,631 | 130,631,670 |
Pfizer, Inc. | 6,491,179 | 114,764,045 |
728,641,066 | ||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 1.4% | ||
Applied Materials, Inc. | 9,483,002 | 98,149,071 |
Intel Corp. | 797,000 | 17,000,010 |
115,149,081 | ||
SOFTWARE — 0.4% | ||
Microsoft Corp. | 1,296,514 | 32,270,233 |
SPECIALTY RETAIL — 0.6% | ||
Lowe’s Cos., Inc. | 2,690,002 | 52,024,639 |
THRIFTS AND MORTGAGE FINANCE — 2.1% | ||
Capitol Federal Financial, Inc.(2) | 8,287,959 | 87,520,847 |
Hudson City Bancorp., Inc. | 254,947 | 1,443,000 |
People’s United Financial, Inc. | 7,973,106 | 90,893,408 |
179,857,255 | ||
WIRELESS TELECOMMUNICATION SERVICES — 0.2% | ||
Vodafone Group plc | 8,187,876 | 21,143,926 |
TOTAL COMMON STOCKS (Cost $5,872,579,061) | 5,905,190,877 | |
Convertible Bonds — 18.0% | ||
CAPITAL MARKETS — 0.2% | ||
Janus Capital Group, Inc., 3.25%, 7/15/14 | 13,833,000 | 13,539,049 |
COMMERCIAL BANKS — 0.4% | ||
Deutsche Bank AG, (convertible into SunTrust Banks, Inc.), 6.76%, 11/23/11(3)(4) | 862,000 | 15,622,888 |
UBS AG, (convertible into Comerica, Inc.), 4.05%, 1/17/12(3)(4) | 701,600 | 16,266,596 |
31,889,484 | ||
DIVERSIFIED FINANCIAL SERVICES — 0.4% | ||
Deutsche Bank AG, (convertible into JPMorgan Chase & Co.), 4.60%, 12/9/11(3)(4) | 568,000 | 17,091,688 |
UBS AG, (convertible into JPMorgan Chase & Co.), 5.45%, 1/17/12(3)(4) | 591,600 | 17,872,237 |
34,963,925 | ||
FOOD PRODUCTS — 0.2% | ||
Deutsche Bank AG, (convertible into Ralcorp Holdings, Inc.), 6.85%, 12/22/11(3)(4) | 125,900 | 9,775,065 |
Goldman Sachs Group, Inc. (The), (convertible into Ralcorp Holdings, Inc.), 5.25%, 12/22/11(3)(4) | 116,000 | 8,856,716 |
18,631,781 | ||
HEALTH CARE PROVIDERS AND SERVICES — 5.3% | ||
LifePoint Hospitals, Inc., 3.50%, 5/15/14 | 111,234,000 | 113,180,595 |
LifePoint Hospitals, Inc., 3.25%, 8/15/25 | 155,285,000 | 157,808,381 |
Lincare Holdings, Inc., Series A, 2.75%, 11/1/37 | 171,846,000 | 175,497,728 |
446,486,704 | ||
HOTELS, RESTAURANTS AND LEISURE — 2.2% | ||
International Game Technology, 3.25%, 5/1/14 | 160,793,000 | 185,715,915 |
LIFE SCIENCES TOOLS AND SERVICES — 1.6% | ||
Credit Suisse AG, (convertible into Life Technologies Corp.), MTN, 3.20%, 1/27/12(3)(4) | 476,900 | 18,066,879 |
Invitrogen Corp., (convertible into Life Technologies Corp.), 1.50%, 2/15/24(4) | 113,886,000 | 115,594,290 |
133,661,169 |
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Shares/ Principal Amount | Value |
MEDIA — 0.4% | ||
tw telecom, inc., 2.375%, 4/1/26 | $ 26,916,000 | $ 29,607,600 |
METALS AND MINING — 0.3% | ||
Newmont Mining Corp., 3.00%, 2/15/12 | 19,973,000 | 27,687,571 |
OIL, GAS AND CONSUMABLE FUELS — 2.1% | ||
Peabody Energy Corp., 4.75%, 12/15/41 | 168,413,000 | 175,149,520 |
PAPER AND FOREST PRODUCTS — 0.9% | ||
Rayonier TRS Holdings, Inc., 3.75%, 10/15/12 | 67,970,000 | 76,466,250 |
REAL ESTATE INVESTMENT TRUSTS (REITs) — 2.0% | ||
Boston Properties LP, 2.875%, 2/15/37 | 39,405,000 | 39,749,794 |
Host Hotels & Resorts LP, 3.25%, 4/15/24(4) | 125,724,000 | 128,867,100 |
168,616,894 | ||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 1.5% | ||
Intel Corp., 2.95%, 12/15/35 | 36,400,000 | 37,082,500 |
Microchip Technology, Inc., 2.125%, 12/15/37 | 77,537,000 | 89,845,999 |
126,928,499 | ||
SPECIALTY RETAIL — 0.2% | ||
Goldman Sachs Group, Inc. (The), (convertible into Lowe’s Cos., Inc.), 2.95%, 11/29/11(3)(4) | 950,000 | 18,349,250 |
WIRELESS TELECOMMUNICATION SERVICES — 0.3% | ||
Credit Suisse AG, (convertible into American Tower Corp.), MTN, 7.10%, 2/27/12(3)(4) | 495,300 | 25,861,099 |
TOTAL CONVERTIBLE BONDS (Cost $1,576,895,400) | 1,513,554,710 | |
Convertible Preferred Stocks — 9.8% | ||
COMMERCIAL BANKS — 3.1% | ||
Wells Fargo & Co., 7.50% | 252,639 | 260,991,245 |
DIVERSIFIED FINANCIAL SERVICES — 2.2% | ||
Bank of America Corp., 7.25% | 243,719 | 186,686,317 |
INSURANCE — 1.6% | ||
Hartford Financial Services Group, Inc., 7.25% | 398,161 | 7,668,581 |
MetLife, Inc., 5.00% | 2,191,661 | 123,960,346 |
131,628,927 | ||
MACHINERY — 1.9% | ||
Stanley Black & Decker, Inc., 4.75% | 1,588,670 | 164,014,291 |
OIL, GAS AND CONSUMABLE FUELS — 0.8% | ||
Apache Corp., 6.00% | 1,329,513 | 68,031,180 |
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.2% | ||
Health Care REIT, Inc., 6.50% | 356,393 | 16,500,996 |
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $917,730,107) | 827,852,956 | |
Exchange-Traded Funds — 1.0% | ||
SPDR S&P 500 ETF Trust (Cost $79,094,305) | 698,114 | 79,005,561 |
Temporary Cash Investments — 0.9% | ||
Repurchase Agreement, Bank America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 0.25%, 9/15/14, valued at $24,294,707), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $23,808,233) | 23,808,213 | |
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 3.50%, 2/15/39, valued at $20,909,285), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $20,407,056) | 20,407,039 | |
SSgA U.S. Government Money Market Fund | 32,540,055 | 32,540,055 |
TOTAL TEMPORARY CASH INVESTMENTS(Cost $76,755,307) | 76,755,307 | |
TOTAL INVESTMENT SECURITIES — 99.9%(Cost $8,523,054,180) | 8,402,359,411 | |
OTHER ASSETS AND LIABILITIES — 0.1% | 12,033,975 | |
TOTAL NET ASSETS — 100.0% | $8,414,393,386 |
10
Forward Foreign Currency Exchange Contracts | |||||||||||||
Contracts to Sell | Counterparty | Settlement Date | Value | Unrealized Gain (Loss) | |||||||||
22,281,448 | CHF for USD | Credit Suisse Securities | 10/31/11 | $24,594,882 | $326,771 | ||||||||
150,702,103 | EUR for USD | UBS AG | 10/31/11 | 201,862,428 | 3,191,896 | ||||||||
28,285,746 | GBP for USD | Credit Suisse Securities | 10/31/11 | 44,096,986 | 136,020 | ||||||||
141,719,624 | SEK for USD | Credit Suisse Securities | 10/31/11 | 20,625,816 | 398,534 | ||||||||
$291,180,112 | $4,053,221 |
(Value on Settlement Date $295,233,333)
Notes to Schedule of Investments
CHF = Swiss Franc
ETF = Exchange-Traded Fund
EUR = Euro
GBP = British Pound
MTN = Medium Term Note
SEK = Swedish Krona
SPDR = Standard & Poor’s Depositary Receipts
USD = United States Dollar
(1) | Non-income producing. |
(2) | Affiliated Company: the fund’s holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. |
(3) | Equity-linked debt security. The aggregate value of these securities at the period end was $147,762,418, which represented 1.8% of total net assets. |
(4) | Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of these securities at the period end was $392,223,808, which represented 4.7% of total net assets. |
See Notes to Financial Statements.
11
SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities — unaffiliated, at value (cost of $8,264,804,417) | $8,094,273,503 | |||
Investment securities — affiliated, at value (cost of $258,249,763) | 308,085,908 | |||
Total investments securities, at value (cost of $8,523,054,180) | 8,402,359,411 | |||
Foreign currency holdings, at value (cost of $442,063) | 417,358 | |||
Receivable for investments sold | 46,919,719 | |||
Receivable for capital shares sold | 14,704,301 | |||
Unrealized gain on forward foreign currency exchange contracts | 4,053,221 | |||
Dividends and interest receivable | 27,540,575 | |||
8,495,994,585 | ||||
Liabilities | ||||
Payable for investments purchased | 52,123,200 | |||
Payable for capital shares redeemed | 22,140,158 | |||
Accrued management fees | 6,487,620 | |||
Distribution and service fees payable | 850,221 | |||
81,601,199 | ||||
Net Assets | $8,414,393,386 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $9,104,843,003 | |||
Undistributed net investment income | 10,984,966 | |||
Accumulated net realized loss | (584,783,356 | ) | ||
Net unrealized depreciation | (116,651,227 | ) | ||
$8,414,393,386 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $4,730,991,259 | 713,154,738 | $6.63 | |||||||||
Institutional Class, $0.01 Par Value | $954,187,782 | 143,786,863 | $6.64 | |||||||||
A Class, $0.01 Par Value | $2,183,643,114 | 329,133,437 | $6.63 | * | ||||||||
B Class, $0.01 Par Value | $7,117,199 | 1,071,201 | $6.64 | |||||||||
C Class, $0.01 Par Value | $396,835,345 | 59,786,777 | $6.64 | |||||||||
R Class, $0.01 Par Value | $141,618,687 | 21,389,970 | $6.62 |
*Maximum offering price $7.03 (net asset value divided by 0.9425)
See Notes to Financial Statements.
12
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (including $5,117,719 from affiliates and net of foreign taxes withheld of $2,037,321) | $141,488,631 | |||
Interest | 19,340,814 | |||
160,829,445 | ||||
Expenses: | ||||
Management fees | 41,109,142 | |||
Distribution and service fees: | ||||
A Class | 2,855,733 | |||
B Class | 39,657 | |||
C Class | 2,051,913 | |||
R Class | 369,372 | |||
Directors’ fees and expenses | 242,423 | |||
Other expenses | 1,054 | |||
46,669,294 | ||||
Net investment income (loss) | 114,160,151 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investment transactions (including $(81,695) from affiliates) | 46,433,642 | |||
Foreign currency transactions | 6,532,509 | |||
52,966,151 | ||||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (1,061,405,931 | ) | ||
Translation of assets and liabilities in foreign currencies | 5,068,955 | |||
(1,056,336,976 | ) | |||
Net realized and unrealized gain (loss) | (1,003,370,825 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(889,210,674 | ) |
See Notes to Financial Statements.
13
SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) AND YEAR ENDED MARCH 31, 2011 | ||||||||
Increase (Decrease) in Net Assets | September 30, 2011 | March 31, 2011 | ||||||
Operations | ||||||||
Net investment income (loss) | $114,160,151 | $213,149,787 | ||||||
Net realized gain (loss) | 52,966,151 | 571,410,835 | ||||||
Change in net unrealized appreciation (depreciation) | (1,056,336,976 | ) | 146,847,882 | |||||
Net increase (decrease) in net assets resulting from operations | (889,210,674 | ) | 931,408,504 | |||||
Distributions to Shareholders | ||||||||
From net investment income: | ||||||||
Investor Class | (72,111,253 | ) | (127,239,350 | ) | ||||
Institutional Class | (15,041,021 | ) | (25,131,472 | ) | ||||
A Class | (29,600,761 | ) | (45,917,774 | ) | ||||
B Class | (70,639 | ) | (144,442 | ) | ||||
C Class | (3,758,853 | ) | (5,156,476 | ) | ||||
R Class | (1,722,258 | ) | (2,708,042 | ) | ||||
Decrease in net assets from distributions | (122,304,785 | ) | (206,297,556 | ) | ||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions | 684,001,146 | 1,716,446,204 | ||||||
Net increase (decrease) in net assets | (327,514,313 | ) | 2,441,557,152 | |||||
Net Assets | ||||||||
Beginning of period | 8,741,907,699 | 6,300,350,547 | ||||||
End of period | $8,414,393,386 | $8,741,907,699 | ||||||
Undistributed net investment income | $10,984,966 | $19,129,600 |
See Notes to Financial Statements.
14
SEPTEMBER 30, 2011 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Equity Income Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek current income. Capital appreciation is a secondary objective. The fund pursues its objectives by investing in securities of companies with a favorable income-paying history that have prospects for income payments to continue or increase.
The fund is authorized to issue the Investor Class, the Institutional Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing in greater than 60 days at the time of purchase 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. Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost. Forward foreign currency exchange contracts are valued at the mean of the latest bid and asked prices of the forward currency rates as provided by an independent pricing service.
15
The value of investments initially expressed in foreign currencies is translated into U.S. dollars at prevailing exchange rates.
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Equity-Linked Debt and Linked-Equity Securities — The fund may invest in hybrid equity securities, which usually convert into common stock at a date predetermined by the issuer. These securities generally offer a higher dividend yield than that of the common stock to which the security is linked. These instruments are issued by a company other than the one to which the security is linked and carry the credit of the issuer, not that of the underlying common stock. The securities’ appreciation is limited based on a predetermined final cap price at the date of the conversion. Risks of investing in these securities include, but are not limited to, a set time to capture the yield advantage, limited appreciation potential, decline in value of the underlying stock, and failure of the issuer to pay dividends or to deliver common stock at maturity.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
16
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. The fund is no longer subject to examination by tax authorities for years prior to 2008. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, 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
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 0.80% to 1.00% for the Investor Class, A Class, B Class, C Class and R Class. The Institutional Class is 0.20% less at each point within the range. The effective annual management fee for each class for the six months ended September 30, 2011 was 0.94% for the Investor Class, A Class, B Class, C Class and R Class and 0.74% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B 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 American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. The plans provide that the B Class and C Class will each 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 six months ended September 30, 2011 are detailed in the Statement of Operations.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC.
17
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a securities lending agreement with JPMorgan Chase Bank (JPMCB) and a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMCB was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2011 were $7,072,875,600 and $6,123,384,117, respectively.
For the six months ended September 30, 2011, the fund incurred net realized gains of $502,147 from redemptions in kind. A redemption in kind occurs when a fund delivers securities from its portfolio in lieu of cash as payment to a redeeming shareholder.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2011 | Year ended March 31, 2011 | ||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||
Investor Class/Shares Authorized | 3,000,000,000 | 2,000,000,000 | |||||||||||||
Sold | 110,602,147 | $800,657,188 | 231,643,115 | $1,618,310,410 | |||||||||||
Issued in reinvestment of distributions | 8,896,814 | 63,012,495 | 16,106,262 | 111,703,824 | |||||||||||
Redeemed | (95,575,906 | ) | (681,527,620 | ) | (124,629,876 | ) | (863,182,079 | ) | |||||||
23,923,055 | 182,142,063 | 123,119,501 | 866,832,155 | ||||||||||||
Institutional Class/Shares Authorized | 800,000,000 | 500,000,000 | |||||||||||||
Sold | 45,567,530 | 330,845,940 | 51,792,333 | 361,926,134 | |||||||||||
Issued in reinvestment of distributions | 1,821,601 | 12,885,003 | 3,171,612 | 21,930,455 | |||||||||||
Redeemed | (23,893,395 | ) | (172,229,009 | ) | (51,710,777 | ) | (364,060,285 | ) | |||||||
23,495,736 | 171,501,934 | 3,253,168 | 19,796,304 | ||||||||||||
A Class/Shares Authorized | 1,000,000,000 | 800,000,000 | |||||||||||||
Sold | 69,960,773 | 507,343,967 | 140,580,589 | 980,178,252 | |||||||||||
Issued in reinvestment of distributions | 3,966,204 | 28,071,609 | 6,295,025 | 43,714,333 | |||||||||||
Redeemed | (39,190,664 | ) | (280,536,576 | ) | (57,277,580 | ) | (395,435,348 | ) | |||||||
34,736,313 | 254,879,000 | 89,598,034 | 628,457,237 | ||||||||||||
B Class/Shares Authorized | 10,000,000 | 5,000,000 | |||||||||||||
Sold | 40,433 | 297,026 | 128,636 | 917,990 | |||||||||||
Issued in reinvestment of distributions | 8,147 | 57,847 | 17,390 | 120,156 | |||||||||||
Redeemed | (65,649 | ) | (460,996 | ) | (147,707 | ) | (1,017,495 | ) | |||||||
(17,069 | ) | (106,123 | ) | (1,681 | ) | 20,651 | |||||||||
C Class/Shares Authorized | 250,000,000 | 150,000,000 | |||||||||||||
Sold | 12,801,683 | 93,049,738 | 28,320,019 | 198,971,103 | |||||||||||
Issued in reinvestment of distributions | 390,670 | 2,766,552 | 585,054 | 4,056,721 | |||||||||||
Redeemed | (5,161,287 | ) | (36,903,961 | ) | (5,784,209 | ) | (39,889,794 | ) | |||||||
8,031,066 | 58,912,329 | 23,120,864 | 163,138,030 | ||||||||||||
R Class/Shares Authorized | 100,000,000 | 50,000,000 | |||||||||||||
Sold | 4,915,475 | 35,646,090 | 8,627,866 | 60,331,760 | |||||||||||
Issued in reinvestment of distributions | 234,647 | 1,657,179 | 378,382 | 2,619,109 | |||||||||||
Redeemed | (2,857,899 | ) | (20,631,326 | ) | (3,570,063 | ) | (24,749,042 | ) | |||||||
2,292,223 | 16,671,943 | 5,436,185 | 38,201,827 | ||||||||||||
Net increase (decrease) | 92,461,324 | $684,001,146 | 244,526,071 | $1,716,446,204 |
18
6. Affiliated Company Transactions
If a fund’s holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2011 follows:
March 31, 2011 | September 30, 2011 | |||||||||||||||||||
Company | Share Balance | Purchase Cost | Sales Cost | Realized Gain (Loss) | Dividend Income | Share Balance | Market Value | |||||||||||||
Capitol Federal Financial, Inc. | 7,089,005 | $17,500,270 | $3,960,033 | $(442,875 | ) | $1,097,701 | 8,287,959 | $87,520,847 | ||||||||||||
Nicor, Inc. | 2,125,440 | 4,189,160 | 377,726 | 92,518 | 2,040,794 | 2,196,091 | 120,806,966 | |||||||||||||
WGL Holdings, Inc. | 2,552,888 | 2,082,969 | 1,996,413 | 268,662 | 1,979,224 | 2,553,317 | 99,758,095 | |||||||||||||
$23,772,399 | $6,334,172 | $(81,695 | ) | $5,117,719 | $308,085,908 |
7. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||||||
Investment Securities | ||||||||||||
Domestic Common Stocks | $5,334,516,734 | — | — | |||||||||
Foreign Common Stocks | 169,455,016 | $401,219,127 | — | |||||||||
Convertible Bonds | — | 1,513,554,710 | — | |||||||||
Convertible Preferred Stocks | — | 827,852,956 | — | |||||||||
Exchange-Traded Funds | 79,005,561 | — | — | |||||||||
Temporary Cash Investments | 32,540,055 | 44,215,252 | — | |||||||||
Total Value of Investment Securities | $5,615,517,366 | $2,786,842,045 | — | |||||||||
Other Financial Instruments | ||||||||||||
Total Unrealized Gain (Loss) on Forward Foreign Currency Exchange Contracts | — | $4,053,221 | — |
19
8. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund’s exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, 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 risk of loss from non-performance by the counterparty may be reduced by the use of master netting agreements. The foreign currency risk derivative instruments held at period end as disclosed on the Schedule of Investments are indicative of the fund’s typical volume during the period.
The value of foreign currency risk derivative instruments as of September 30, 2011, is disclosed on the Statement of Assets and Liabilities as an asset of $4,053,221 in unrealized gain on forward foreign currency exchange contracts. For the six months ended September 30, 2011, the effect of foreign currency risk derivative instruments on the Statement of Operations was $6,198,649 in net realized gain (loss) on foreign currency transactions and $5,076,661 in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
9. Risk Factors
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
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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10. Federal Tax Information
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 September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $8,756,935,887 | |||
Gross tax appreciation of investments | $503,344,882 | |||
Gross tax depreciation of investments | (857,921,358 | ) | ||
Net tax appreciation (depreciation) of investments | $(354,576,476 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2011, the fund had accumulated capital losses of $(449,422,342), which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers expire in 2018.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused.
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |
Investor Class | |||||||||||||
2011(3) | $7.43 | 0.10 | (0.80) | (0.70) | (0.10) | — | (0.10) | $6.63 | (9.48)% | 0.95%(4) | 2.66%(4) | 70% | $4,730,991 |
2011 | $6.76 | 0.21 | 0.67 | 0.88 | (0.21) | — | (0.21) | $7.43 | 13.23% | 0.96% | 3.09% | 146% | $5,123,937 |
2010 | $5.42 | 0.18 | 1.33 | 1.51 | (0.17) | — | (0.17) | $6.76 | 28.04% | 0.97% | 2.93% | 105% | $3,829,492 |
2009 | $7.30 | 0.22 | (1.87) | (1.65) | (0.23) | — | (0.23) | $5.42 | (22.98)% | 0.98% | 3.36% | 296% | $2,913,351 |
2008 | $8.65 | 0.23 | (0.62) | (0.39) | (0.23) | (0.73) | (0.96) | $7.30 | (5.17)% | 0.97% | 2.68% | 165% | $3,719,757 |
2007 | $8.11 | 0.21 | 1.05 | 1.26 | (0.17) | (0.55) | (0.72) | $8.65 | 15.79% | 0.97% | 2.43% | 160% | $4,790,510 |
Institutional Class | |||||||||||||
2011(3) | $7.44 | 0.10 | (0.79) | (0.69) | (0.11) | — | (0.11) | $6.64 | (9.37)% | 0.75%(4) | 2.86%(4) | 70% | $954,188 |
2011 | $6.77 | 0.23 | 0.66 | 0.89 | (0.22) | — | (0.22) | $7.44 | 13.60% | 0.76% | 3.29% | 146% | $894,544 |
2010 | $5.42 | 0.19 | 1.34 | 1.53 | (0.18) | — | (0.18) | $6.77 | 28.30% | 0.77% | 3.13% | 105% | $792,024 |
2009 | $7.31 | 0.23 | (1.88) | (1.65) | (0.24) | — | (0.24) | $5.42 | (22.94)% | 0.78% | 3.56% | 296% | $502,435 |
2008 | $8.65 | 0.25 | (0.61) | (0.36) | (0.25) | (0.73) | (0.98) | $7.31 | (4.85)% | 0.77% | 2.88% | 165% | $496,033 |
2007 | $8.11 | 0.23 | 1.05 | 1.28 | (0.19) | (0.55) | (0.74) | $8.65 | 16.01% | 0.77% | 2.63% | 160% | $551,202 |
A Class(5) | |||||||||||||
2011(3) | $7.43 | 0.09 | (0.80) | (0.71) | (0.09) | — | (0.09) | $6.63 | (9.60)% | 1.20%(4) | 2.41%(4) | 70% | $2,183,643 |
2011 | $6.76 | 0.20 | 0.66 | 0.86 | (0.19) | — | (0.19) | $7.43 | 12.95% | 1.21% | 2.84% | 146% | $2,188,714 |
2010 | $5.42 | 0.17 | 1.32 | 1.49 | (0.15) | — | (0.15) | $6.76 | 27.71% | 1.22% | 2.68% | 105% | $1,385,436 |
2009 | $7.30 | 0.20 | (1.86) | (1.66) | (0.22) | — | (0.22) | $5.42 | (23.18)% | 1.23% | 3.11% | 296% | $794,323 |
2008 | $8.65 | 0.20 | (0.61) | (0.41) | (0.21) | (0.73) | (0.94) | $7.30 | (5.40)% | 1.22% | 2.43% | 165% | $933,600 |
2007 | $8.11 | 0.19 | 1.05 | 1.24 | (0.15) | (0.55) | (0.70) | $8.65 | 15.51% | 1.22% | 2.18% | 160% | $1,280,888 |
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) |
B Class | |||||||||||||
2011(3) | $7.44 | 0.06 | (0.79) | (0.73) | (0.07) | — | (0.07) | $6.64 | (9.93)% | 1.95%(4) | 1.66%(4) | 70% | $7,117 |
2011 | $6.77 | 0.15 | 0.66 | 0.81 | (0.14) | — | (0.14) | $7.44 | 12.08% | 1.96% | 2.09% | 146% | $8,102 |
2010 | $5.42 | 0.12 | 1.33 | 1.45 | (0.10) | — | (0.10) | $6.77 | 26.92% | 1.97% | 1.93% | 105% | $7,383 |
2009 | $7.30 | 0.15 | (1.86) | (1.71) | (0.17) | — | (0.17) | $5.42 | (23.75)% | 1.98% | 2.36% | 296% | $2,392 |
2008(6) | $8.99 | 0.08 | (0.95) | (0.87) | (0.09) | (0.73) | (0.82) | $7.30 | (10.28)% | 1.97%(4) | 2.11%(4) | 165%(7) | $235 |
C Class | |||||||||||||
2011(3) | $7.44 | 0.06 | (0.79) | (0.73) | (0.07) | — | (0.07) | $6.64 | (9.93)% | 1.95%(4) | 1.66%(4) | 70% | $396,835 |
2011 | $6.77 | 0.15 | 0.66 | 0.81 | (0.14) | — | (0.14) | $7.44 | 12.25% | 1.96% | 2.09% | 146% | $384,918 |
2010 | $5.42 | 0.12 | 1.33 | 1.45 | (0.10) | — | (0.10) | $6.77 | 26.74% | 1.97% | 1.93% | 105% | $193,776 |
2009 | $7.30 | 0.15 | (1.86) | (1.71) | (0.17) | — | (0.17) | $5.42 | (23.75)% | 1.98% | 2.36% | 296% | $96,930 |
2008 | $8.65 | 0.14 | (0.61) | (0.47) | (0.15) | (0.73) | (0.88) | $7.30 | (6.10)% | 1.97% | 1.68% | 165% | $116,985 |
2007 | $8.11 | 0.12 | 1.06 | 1.18 | (0.09) | (0.55) | (0.64) | $8.65 | 14.65% | 1.97% | 1.43% | 160% | $127,266 |
R Class | |||||||||||||
2011(3) | $7.42 | 0.08 | (0.80) | (0.72) | (0.08) | — | (0.08) | $6.62 | (9.72)% | 1.45%(4) | 2.16%(4) | 70% | $141,619 |
2011 | $6.75 | 0.18 | 0.66 | 0.84 | (0.17) | — | (0.17) | $7.42 | 12.68% | 1.46% | 2.59% | 146% | $141,693 |
2010 | $5.41 | 0.15 | 1.32 | 1.47 | (0.13) | — | (0.13) | $6.75 | 27.44% | 1.47% | 2.43% | 105% | $92,239 |
2009 | $7.29 | 0.18 | (1.86) | (1.68) | (0.20) | — | (0.20) | $5.41 | (23.40)% | 1.48% | 2.86% | 296% | $35,588 |
2008 | $8.63 | 0.18 | (0.60) | (0.42) | (0.19) | (0.73) | (0.92) | $7.29 | (5.53)% | 1.47% | 2.18% | 165% | $42,720 |
2007 | $8.09 | 0.17 | 1.05 | 1.22 | (0.13) | (0.55) | (0.68) | $8.63 | 15.25% | 1.47% | 1.93% | 160% | $44,767 |
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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) | Six months ended September 30, 2011 (unaudited). |
(4) | Annualized. |
(5) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class. |
(6) | September 28, 2007 (commencement of sale) through March 31, 2008. |
(7) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2008. |
See Notes to Financial Statements.
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At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
● | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
● | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
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Nature, Extent and Quality of Services — Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
● | constructing and designing the Fund |
● | portfolio research and security selection |
● | initial capitalization/funding |
● | securities trading |
● | Fund administration |
● | custody of Fund assets |
● | daily valuation of the Fund’s portfolio |
● | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
● | legal services |
● | regulatory and portfolio compliance |
● | financial reporting |
● | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons.
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The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance section of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry
best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
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Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
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Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent directors, taking into account all of the factors discussed above and the information provided by the Advisor and others, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
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Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73669 1111
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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Global Real Estate Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 10 |
Statement of Operations | 11 |
Statement of Changes in Net Assets | 12 |
Notes to Financial Statements | 13 |
Financial Highlights | 18 |
Approval of Management Agreement | 19 |
Additional Information | 21 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the period ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
As the period covered by this report opened in late April 2011, U.S. stocks had crested, following an eight-month rally that had originated back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield had climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
![](https://capedge.com/proxy/N-CSRS/0001437749-11-009308/prattsignature.jpg)
Don Pratt
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Total Returns as of September 30, 2011 | |||
Ticker Symbol | Since Inception(1) | Inception Date | |
Investor Class | ARYVX | -17.20% | 4/29/11 |
MSCI All Country World IMI/ Real Estate Index | — | -19.62% | — |
MSCI All Country World Index | — | -20.47% | — |
Institutional Class | ARYNX | -17.10% | 4/29/11 |
A Class No sales charge* With sales charge* | ARYMX | -17.30% -22.05% | 4/29/11 |
C Class No sales charge* With sales charge* | ARYTX | -17.60% -18.42% | 4/29/11 |
R Class | ARYWX | -17.40% | 4/29/11 |
* | 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. |
(1) | Total returns for periods less than one year are not annualized. |
Total Annual Fund Operating Expenses | ||||
Investor Class | Institutional Class | A Class | C Class | R Class |
1.20% | 1.00% | 1.45% | 2.20% | 1.70% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The fund 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. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
4
SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Simon Property Group, Inc. | 5.6% |
Mitsubishi Estate Co. Ltd. | 4.0% |
Public Storage | 3.8% |
Sun Hung Kai Properties Ltd. | 3.6% |
Ventas, Inc. | 3.5% |
HCP, Inc. | 3.4% |
Unibail-Rodamco SE | 3.2% |
ProLogis | 3.1% |
Nippon Building Fund, Inc. | 2.9% |
Health Care REIT, Inc. | 2.9% |
Types of Investments in Portfolio | % of net assets |
Foreign Common Stocks(1) | 53.7% |
Domestic Common Stocks | 42.2% |
Total Equity Exposure | 95.9% |
Temporary Cash Investments | 1.6% |
Other Assets and Liabilities | 2.5% |
(1)Includes depositary shares, dual listed securities and foreign ordinary shares. | |
Investments by Country | % of net assets |
United States | 42.2% |
Japan | 14.6% |
Hong Kong | 8.4% |
Australia | 6.2% |
Canada | 5.8% |
Singapore | 5.3% |
France | 3.2% |
United Kingdom | 3.0% |
Other Countries | 7.2% |
Cash and Equivalents(2) | 4.1% |
(2)Includes temporary cash investments and other assets and liabilities. |
5
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 April 1, 2011 to September 30, 2011 (except as noted).
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period(1) 4/1/11 – 9/30/11 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $828.00(2) | $4.65(3) | 1.21% |
Institutional Class | $1,000 | $829.00(2) | $3.89(3) | 1.01% |
A Class | $1,000 | $827.00(2) | $5.61(3) | 1.46% |
C Class | $1,000 | $824.00(2) | $8.48(3) | 2.21% |
R Class | $1,000 | $826.00(2) | $6.57(3) | 1.71% |
Hypothetical | ||||
Investor Class | $1,000 | $1,018.95(4) | $6.11(4) | 1.21% |
Institutional Class | $1,000 | $1,019.95(4) | $5.10(4) | 1.01% |
A Class | $1,000 | $1,017.70(4) | $7.36(4) | 1.46% |
C Class | $1,000 | $1,013.95(4) | $11.13(4) | 2.21% |
R Class | $1,000 | $1,016.45(4) | $8.62(4) | 1.71% |
(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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
(2) | Ending account value based on actual return from April 29, 2011 (fund inception) through September 30, 2011. |
(3) | 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 154, the number of days in the period from April 29, 2011 (fund inception) through September 30, 2011, divided by 366, to reflect the period. Had the class been available for the full period, the expenses paid during the period would have been higher. |
(4) | Ending account value and expenses paid during period assumes the class had been available throughout the entire period and are calculated using the class’s annualized expense ratio listed in the table above. |
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Shares | Value | |
Common Stocks — 95.9% | ||
AUSTRALIA — 6.2% | ||
Dexus Property Group | 74,930 | $ 59,102 |
Goodman Group | 94,605 | 51,763 |
GPT Group | 21,490 | 64,223 |
175,088 | ||
BRAZIL — 1.1% | ||
BR Malls Participacoes SA | 2,900 | 29,058 |
CANADA — 5.8% | ||
Boardwalk Real Estate Investment Trust | 1,165 | 53,564 |
Brookfield Office Properties, Inc. | 2,951 | 40,805 |
RioCan Real Estate Investment Trust | 2,723 | 67,562 |
161,931 | ||
FRANCE — 3.2% | ||
Unibail-Rodamco SE | 498 | 88,754 |
GERMANY — 1.2% | ||
Alstria Office REIT-AG | 2,881 | 33,424 |
HONG KONG — 8.4% | ||
Cheung Kong Holdings Ltd. | 3,000 | 32,022 |
China Overseas Land & Investment Ltd. | 18,000 | 25,755 |
Link Real Estate Investment Trust (The) | 24,500 | 77,421 |
Sun Hung Kai Properties Ltd. | 9,000 | 101,970 |
237,168 | ||
INDIA — 1.0% | ||
DLF Ltd. | 4,032 | 17,655 |
Sobha Developers Ltd. | 2,581 | 11,351 |
29,006 | ||
JAPAN — 14.6% | ||
Japan Real Estate Investment Corp. | 8 | 78,039 |
Mitsubishi Estate Co. Ltd. | 7,000 | 113,289 |
Mitsui Fudosan Co. Ltd. | 5,000 | 79,136 |
Nippon Building Fund, Inc. | 8 | 82,693 |
Sumitomo Realty & Development Co. Ltd. | 3,000 | 57,647 |
410,804 | ||
PEOPLE’S REPUBLIC OF CHINA — 0.4% | ||
Country Garden Holdings Co. | 42,000 | 11,311 |
PHILIPPINES — 1.0% | ||
Ayala Land, Inc. | 42,300 | 13,995 |
SM Prime Holdings, Inc. | 53,000 | 14,735 |
28,730 | ||
SINGAPORE — 5.3% | ||
Frasers Centrepoint Trust | 52,000 | 57,003 |
Global Logistic Properties Ltd.(1) | 30,000 | 37,641 |
Mapletree Industrial Trust | 65,000 | 53,749 |
148,393 | ||
SOUTH AFRICA — 0.4% | ||
Growthpoint Properties Ltd. | 5,547 | 12,175 |
SWEDEN — 0.9% | ||
Castellum AB | 2,131 | 25,956 |
SWITZERLAND — 1.2% | ||
PSP Swiss Property AG(1) | 363 | 32,571 |
UNITED KINGDOM — 3.0% | ||
Hammerson plc | 6,550 | 38,230 |
Shaftesbury plc | 6,356 | 46,012 |
84,242 | ||
UNITED STATES — 42.2% | ||
American Campus Communities, Inc. | 1,736 | 64,597 |
American Tower Corp. Class A(1) | 1,076 | 57,889 |
Equity Lifestyle Properties, Inc. | 987 | 61,885 |
Extra Space Storage, Inc. | 3,204 | 59,690 |
General Growth Properties, Inc. | 5,870 | 71,027 |
HCP, Inc. | 2,731 | 95,749 |
Health Care REIT, Inc. | 1,751 | 81,947 |
ProLogis | 3,649 | 88,488 |
Public Storage | 953 | 106,117 |
Simon Property Group, Inc. | 1,444 | 158,811 |
Strategic Hotels & Resorts, Inc.(1) | 12,764 | 55,013 |
Taubman Centers, Inc. | 1,270 | 63,894 |
UDR, Inc. | 3,136 | 69,431 |
Ventas, Inc. | 2,011 | 99,343 |
Wyndham Worldwide Corp. | 1,900 | 54,169 |
1,188,050 | ||
TOTAL COMMON STOCKS (Cost $2,945,098) | 2,696,661 | |
Temporary Cash Investments — 1.6% | ||
SSgA U.S. Government Money Market Fund (Cost $44,841) | 44,841 | 44,841 |
TOTAL INVESTMENT SECURITIES — 97.5% (Cost $2,989,939) | 2,741,502 | |
OTHER ASSETS AND LIABILITIES — 2.5% | 71,113 | |
TOTAL NET ASSETS — 100.0% | $2,812,615 |
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Sub-Industry Allocation | |
(as a % of net assets) | |
Retail REITs | 22.2% |
Specialized REITs | 17.7% |
Diversified Real Estate Activities | 13.6% |
Residential REITs | 8.9% |
Real Estate Operating Companies | 7.0% |
Office REITs | 6.9% |
Industrial REITs | 6.8% |
Diversified REITs | 6.0% |
Real Estate Development | 2.8% |
Wireless Telecommunication Services | 2.1% |
Hotels, Resorts and Cruise Lines | 1.9% |
Cash and Equivalents* | 4.1% |
*Includes temporary cash investments and other assets and liabilities.
Notes to Schedule of Investments
REIT = Real Estate Investment Trust
(1) | Non-income producing. |
See Notes to Financial Statements.
9
SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities, at value (cost of $2,989,939) | $2,741,502 | |||
Receivable for investments sold | 158,353 | |||
Receivable for capital shares sold | 6,058 | |||
Dividends receivable | 9,175 | |||
2,915,088 | ||||
Liabilities | ||||
Foreign currency overdraft payable, at value (cost of $985) | 941 | |||
Payable for investments purchased | 98,221 | |||
Accrued management fees | 2,797 | |||
Distribution and service fees payable | 514 | |||
102,473 | ||||
Net Assets | $2,812,615 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $3,316,608 | |||
Undistributed net investment income | 19,778 | |||
Accumulated net realized loss | (275,030 | ) | ||
Net unrealized depreciation | (248,741 | ) | ||
$2,812,615 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $1,488,435 | 179,709 | $8.28 | |||||||||
Institutional Class, $0.01 Par Value | $331,513 | 40,000 | $8.29 | |||||||||
A Class, $0.01 Par Value | $332,265 | 40,166 | $8.27 | * | ||||||||
C Class, $0.01 Par Value | $329,856 | 40,000 | $8.25 | |||||||||
R Class, $0.01 Par Value | $330,546 | 40,000 | $8.26 |
*Maximum offering price $8.77 (net asset value divided by 0.9425)
See Notes to Financial Statements.
10
FOR THE PERIOD ENDED SEPTEMBER 30, 2011 (UNAUDITED)(1) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $1,822) | $33,661 | |||
Expenses: | ||||
Management fees | 11,064 | |||
Distribution and service fees: | ||||
A Class | 398 | |||
C Class | 1,587 | |||
R Class | 794 | |||
Directors’ fees and expenses | 40 | |||
13,883 | ||||
Net investment income (loss) | 19,778 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (271,360 | ) | ||
Foreign currency transactions (net of foreign tax expenses paid (refunded) of $2,680) | (3,670 | ) | ||
(275,030 | ) | |||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (248,437 | ) | ||
Translation of assets and liabilities in foreign currencies | (304 | ) | ||
(248,741 | ) | |||
Net realized and unrealized gain (loss) | (523,771 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(503,993 | ) |
(1) | April 29, 2011 (fund inception) through September 30, 2011. |
See Notes to Financial Statements.
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PERIOD ENDED SEPTEMBER 30, 2011(1) | ||||
Increase (Decrease) in Net Assets | ||||
Operations | ||||
Net investment income (loss) | $19,778 | |||
Net realized gain (loss) | (275,030 | ) | ||
Change in net unrealized appreciation (depreciation) | (248,741 | ) | ||
Net increase (decrease) in net assets resulting from operations | (503,993 | ) | ||
Capital Share Transactions | ||||
Net increase (decrease) in net assets from capital share transactions | 3,316,608 | |||
Net increase (decrease) in net assets | 2,812,615 | |||
Net Assets | ||||
End of period | $2,812,615 | |||
Undistributed net investment income | $19,778 |
(1) | April 29, 2011 (fund inception) through September 30, 2011. |
See Notes to Financial Statements.
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SEPTEMBER 30, 2011 (UNAUDITED)
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 is nondiversified as defined under the 1940 Act. The fund’s investment objective is to seek high total investment return through a combination of capital appreciation and current income. The fund pursues its objective by investing primarily in securities issued by real estate investment trusts and companies engaged in the real estate industry. The fund invests primarily in companies located in developed countries world-wide but may also invest in emerging markets.
The fund is authorized to issue the Investor Class, the Institutional Class, the A Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee. All classes of the fund commenced sale on April 29, 2011, the fund’s inception date.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share.
The value of investments initially expressed in foreign currencies is translated into U.S. dollars at prevailing exchange rates.
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If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund estimates the components of distributions received that may be considered nontaxable distributions or capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. Certain countries impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The fund records the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions.
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. All tax years for the fund remain subject to examination by tax authorities. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income and net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
14
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with American Century Investment Management, Inc. (ACIM) (the investment advisor), under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The annual management fee is 1.20% for the Investor Class, A Class, C Class and R Class and 1.00% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the 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 American Century Investment Services, Inc. (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 April 29, 2011 (fund inception) through September 30, 2011 are detailed in the Statement of Operations.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC. ACIM and an interested director who is an officer own 62% of the outstanding shares of the fund.
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMorgan Chase Bank (JPMCB) was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period April 29, 2011 (fund inception) through September 30, 2011 were $7,569,286 and $4,351,201, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Period ended September 30, 2011(1) | ||||||||
Shares | Amount | |||||||
Investor Class/Shares Authorized | 100,000,000 | |||||||
Sold | 181,484 | $1,730,453 | ||||||
Redeemed | (1,775 | ) | (15,345 | ) | ||||
179,709 | 1,715,108 | |||||||
Institutional Class/Shares Authorized | 50,000,000 | |||||||
Sold | 40,000 | 400,000 | ||||||
A Class/Shares Authorized | 50,000,000 | |||||||
Sold | 40,166 | 401,500 | ||||||
C Class/Shares Authorized | 50,000,000 | |||||||
Sold | 40,000 | 400,000 | ||||||
R Class/Shares Authorized | 50,000,000 | |||||||
Sold | 40,000 | 400,000 | ||||||
Net increase (decrease) | 339,875 | $3,316,608 |
(1) | April 29, 2011 (fund inception) through September 30, 2011. |
6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||||||
Investment Securities | ||||||||||||
Foreign Common Stocks | — | $1,508,611 | — | |||||||||
Domestic Common Stocks | $1,188,050 | — | — | |||||||||
Temporary Cash Investments | 44,841 | — | — | |||||||||
Total Value of Investment Securities | $1,232,891 | $1,508,611 | — |
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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 future adverse political, social, and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions. Investing in emerging markets may accentuate these risks.
The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors
8. Federal Tax Information
As of September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $3,075,653 | |||
Gross tax appreciation of investments | $11,281 | |||
Gross tax depreciation of investments | (345,432 | ) | ||
Net tax appreciation (depreciation) of investments | $(334,151 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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For a Share Outstanding Throughout the Period Indicated | ||||||||||
Per-Share Data | Ratios and Supplemental Data | |||||||||
Net Asset Value, Beginning of Period | Income From Investment Operations: | Net Asset Value, End of Period | Total Return(2) | Ratio to Average Net Assets of: | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | ||||
Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Operating Expenses | Net Investment Income (Loss) | ||||||
Investor Class | ||||||||||
2011(3) | $10.00 | 0.09 | (1.81) | (1.72) | $8.28 | (17.20)% | 1.21%(4) | 2.32%(4) | 198% | $1,488 |
Institutional Class | ||||||||||
2011(3) | $10.00 | 0.10 | (1.81) | (1.71) | $8.29 | (17.10)% | 1.01%(4) | 2.52%(4) | 198% | $332 |
A Class | ||||||||||
2011(3) | $10.00 | 0.08 | (1.81) | (1.73) | $8.27 | (17.30)% | 1.46%(4) | 2.07%(4) | 198% | $332 |
C Class | ||||||||||
2011(3) | $10.00 | 0.05 | (1.80) | (1.75) | $8.25 | (17.60)% | 2.21%(4) | 1.32%(4) | 198% | $330 |
R Class | ||||||||||
2011(3) | $10.00 | 0.07 | (1.81) | (1.74) | $8.26 | (17.40)% | 1.71%(4) | 1.82%(4) | 198% | $331 |
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 29, 2011 (fund inception) through September 30, 2011 (unaudited). |
(4) | Annualized. |
See Notes to Financial Statements.
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At a meeting held on December 9, 2010, the Fund’s Board of Directors unanimously approved the initial 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, new contracts for investment advisory services are required to be approved by a majority of a fund’s independent directors (the “Directors”) each year and to be evaluated on an annual basis thereafter.
In advance of the Board’s consideration, the Advisor provided information concerning the fund. The materials circulated in advance of the meeting and the discussions held at the meeting detailed the investment objective and strategy proposed to be utilized by the Advisor, the Fund’s characteristics and key attributes, the rationale for launching the Fund, the experience of the staff designated to manage the Fund, the proposed pricing, and the markets in which the Fund would be sold. The information considered and the discussions held at the meeting included, but were not limited to
● | the nature, extent, and quality of investment management, shareholder services, and other services to be provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor would provide to the Fund and its shareholders on a routine and non-routine basis; |
● | the Fund’s proposed investment objective and strategy, including a discussion of the Fund’s anticipated investment performance and proposed benchmark; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
American Century Investments’ funds utilize a unified management fee structure. 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 Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Advisor and Board believe the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, because 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.
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When considering the approval of the management agreement for the Fund, the Board considered the entrepreneurial risk that the Advisor assumes in launching a new fund. In particular, they considered the effect of the unified management fee structure and the fact that the Advisor will assume a substantial part of the start-up costs of the Fund and the risk that the Fund will grow to a level that will become profitable to the Advisor. The Board considered the position that the Fund would take in the lineup of the American Century Investments’ family of funds and the benefits to shareholders of existing funds of the broadened product offering. Finally, while not specifically discussed, but important in the decision to approve the management agreement, is the Directors’ familiarity with the Advisor. The Board oversees and evaluates on a continuous basis the nature and quality of all services the Advisor performs for other funds within the American Century Investments’ complex. As such, the Directors have confidence in the Advisor’s integrity and competence in providing services to the Fund.
In their deliberations, the Board did not identify any particular information that was all-important or controlling, and each Director attributed different weights to various factors. However, based on their evaluation of all material factors and assisted by the advice of independent legal counsel, the Directors, concluded that the overall arrangements between the Fund and the Advisor, as provided in the management agreement, were fair and reasonable in light of the services to be performed and should be approved.
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Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73671 1111
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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![](https://capedge.com/proxy/N-CSRS/0001437749-11-009308/frontpagebanner.jpg)
Equity Index Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 16 |
Statement of Operations | 17 |
Statement of Changes in Net Assets | 18 |
Notes to Financial Statements | 19 |
Financial Highlights | 24 |
Approval of Management Agreement | 26 |
Additional Information | 31 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the six months ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
This reporting period differed dramatically from the six months that preceded it. As the period covered by this report opened in April 2011, U.S. stocks were approaching the crest of an eight-month rally, originating back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
![](https://capedge.com/proxy/N-CSRS/0001437749-11-009308/prattsignature.jpg)
Don Pratt
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Total Returns as of September 30, 2011 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ACIVX | -13.93% | 0.92% | -1.56% | 2.37% | 0.63% | 2/26/99 |
S&P 500 Index | — | -13.78% | 1.14% | -1.18% | 2.82% | 1.08% | — |
Institutional Class | ACQIX | -13.84% | 1.13% | -1.40% | 2.55% | 0.83% | 2/26/99 |
(1) | Total returns for periods less than one year are not annualized. |
Total Annual Fund Operating Expenses | |
Investor Class | Institutional Class |
0.50% | 0.30% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not.
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SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Apple, Inc. | 3.4% |
Exxon Mobil Corp. | 3.4% |
International Business Machines Corp. | 2.0% |
Microsoft Corp. | 1.7% |
Chevron Corp. | 1.8% |
Johnson & Johnson | 1.7% |
Procter & Gamble Co. (The) | 1.6% |
AT&T, Inc. | 1.6% |
General Electric Co. | 1.5% |
Coca-Cola Co. (The) | 1.4% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 9.6% |
Pharmaceuticals | 6.1% |
Computers and Peripherals | 4.7% |
IT Services | 4.0% |
Software | 3.9% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 98.4% |
Temporary Cash Investments | 1.8% |
Other Assets and Liabilities | (0.2%) |
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Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2011 to September 30, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period(1) 4/1/11 – 9/30/11 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $860.70 | $2.33 | 0.50% |
Institutional Class | $1,000 | $861.60 | $1.40 | 0.30% |
Hypothetical | ||||
Investor Class | $1,000 | $1,022.50 | $2.53 | 0.50% |
Institutional Class | $1,000 | $1,023.50 | $1.52 | 0.30% |
(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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
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SEPTEMBER 30, 2011 (UNAUDITED)
Shares | Value | |
Common Stocks — 98.4% | ||
AEROSPACE AND DEFENSE — 2.7% | ||
Boeing Co. (The) | 15,865 | $ 959,991 |
General Dynamics Corp. | 7,645 | 434,924 |
Goodrich Corp. | 2,675 | 322,819 |
Honeywell International, Inc. | 16,711 | 733,780 |
ITT Corp. | 3,888 | 163,296 |
L-3 Communications Holdings, Inc. | 2,278 | 141,168 |
Lockheed Martin Corp. | 5,781 | 419,932 |
Northrop Grumman Corp. | 5,990 | 312,438 |
Precision Castparts Corp. | 3,022 | 469,800 |
Raytheon Co. | 7,614 | 311,184 |
Rockwell Collins, Inc. | 3,292 | 173,686 |
Textron, Inc. | 6,245 | 110,162 |
United Technologies Corp. | 19,444 | 1,368,080 |
5,921,260 | ||
AIR FREIGHT AND LOGISTICS — 1.0% | ||
CH Robinson Worldwide, Inc. | 3,512 | 240,467 |
Expeditors International of Washington, Inc. | 4,491 | 182,110 |
FedEx Corp. | 6,767 | 457,991 |
United Parcel Service, Inc., Class B | 21,002 | 1,326,276 |
2,206,844 | ||
AIRLINES — 0.1% | ||
Southwest Airlines Co. | 16,863 | 135,578 |
AUTO COMPONENTS — 0.2% | ||
Goodyear Tire & Rubber Co. (The)(1) | 5,318 | 53,659 |
Johnson Controls, Inc. | 14,479 | 381,811 |
435,470 | ||
AUTOMOBILES — 0.4% | ||
Ford Motor Co.(1) | 80,666 | 780,040 |
Harley-Davidson, Inc. | 4,944 | 169,728 |
949,768 | ||
BEVERAGES — 2.7% | ||
Brown-Forman Corp., Class B | 2,074 | 145,470 |
Coca-Cola Co. (The) | 49,003 | 3,310,643 |
Coca-Cola Enterprises, Inc. | 6,887 | 171,348 |
Constellation Brands, Inc., Class A(1) | 3,600 | 64,800 |
Dr Pepper Snapple Group, Inc. | 4,772 | 185,058 |
Molson Coors Brewing Co., Class B | 3,531 | 139,863 |
PepsiCo, Inc. | 33,772 | 2,090,487 |
6,107,669 | ||
BIOTECHNOLOGY — 1.3% | ||
Amgen, Inc. | 19,697 | 1,082,350 |
Biogen Idec, Inc.(1) | 5,129 | 477,766 |
Celgene Corp.(1) | 9,843 | 609,479 |
Cephalon, Inc.(1) | 1,651 | 133,236 |
Gilead Sciences, Inc.(1) | 16,343 | 634,108 |
2,936,939 | ||
BUILDING PRODUCTS† | ||
Masco Corp. | 7,799 | 55,529 |
CAPITAL MARKETS — 1.9% | ||
Ameriprise Financial, Inc. | 5,033 | 198,099 |
Bank of New York Mellon Corp. (The) | 26,148 | 486,091 |
BlackRock, Inc. | 2,142 | 317,037 |
Charles Schwab Corp. (The) | 23,112 | 260,472 |
E*Trade Financial Corp.(1) | 5,684 | 51,781 |
Federated Investors, Inc. Class B | 1,860 | 32,606 |
Franklin Resources, Inc. | 3,043 | 291,033 |
Goldman Sachs Group, Inc. (The) | 10,792 | 1,020,384 |
Invesco Ltd. | 9,820 | 152,308 |
Janus Capital Group, Inc. | 3,680 | 22,080 |
Legg Mason, Inc. | 2,997 | 77,053 |
Morgan Stanley | 31,732 | 428,382 |
Northern Trust Corp. | 5,478 | 191,621 |
State Street Corp. | 10,739 | 345,366 |
T. Rowe Price Group, Inc. | 5,343 | 255,235 |
4,129,548 | ||
CHEMICALS — 2.1% | ||
Air Products & Chemicals, Inc. | 4,515 | 344,811 |
Airgas, Inc. | 1,375 | 87,752 |
CF Industries Holdings, Inc. | 1,504 | 185,579 |
Dow Chemical Co. (The) | 25,255 | 567,227 |
E.I. du Pont de Nemours & Co. | 20,058 | 801,718 |
Eastman Chemical Co. | 1,485 | 101,767 |
Ecolab, Inc. | 4,990 | 243,961 |
FMC Corp. | 1,440 | 99,590 |
International Flavors & Fragrances, Inc. | 1,730 | 97,261 |
Monsanto Co. | 11,463 | 688,239 |
Mosaic Co. (The) | 5,912 | 289,511 |
PPG Industries, Inc. | 3,312 | 234,026 |
Praxair, Inc. | 6,440 | 602,011 |
Sherwin-Williams Co. (The) | 1,847 | 137,269 |
Sigma-Aldrich Corp. | 2,536 | 156,699 |
4,637,421 |
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Shares | Value |
COMMERCIAL BANKS — 2.5% | ||
BB&T Corp. | 15,004 | $ 320,035 |
Comerica, Inc. | 4,327 | 99,391 |
Fifth Third Bancorp | 19,534 | 197,293 |
First Horizon National Corp. | 5,373 | 32,023 |
Huntington Bancshares, Inc. | 19,335 | 92,808 |
KeyCorp | 20,451 | 121,275 |
M&T Bank Corp. | 2,661 | 186,004 |
PNC Financial Services Group, Inc. | 11,010 | 530,572 |
Regions Financial Corp. | 25,910 | 86,280 |
SunTrust Banks, Inc. | 11,600 | 208,220 |
U.S. Bancorp. | 41,169 | 969,118 |
Wells Fargo & Co. | 112,812 | 2,721,026 |
Zions BanCorp. | 3,969 | 55,844 |
5,619,889 | ||
COMMERCIAL SERVICES AND SUPPLIES — 0.5% | ||
Avery Dennison Corp. | 2,475 | 62,073 |
Cintas Corp. | 2,605 | 73,305 |
Iron Mountain, Inc. | 4,363 | 137,958 |
Pitney Bowes, Inc. | 4,641 | 87,251 |
Republic Services, Inc. | 6,982 | 195,915 |
RR Donnelley & Sons Co. | 4,129 | 58,301 |
Stericycle, Inc.(1) | 1,759 | 141,986 |
Waste Management, Inc. | 9,919 | 322,963 |
1,079,752 | ||
COMMUNICATIONS EQUIPMENT — 2.0% | ||
Cisco Systems, Inc. | 117,090 | 1,813,724 |
F5 Networks, Inc.(1) | 1,688 | 119,932 |
Harris Corp. | 2,512 | 85,835 |
JDS Uniphase Corp.(1) | 4,479 | 44,656 |
Juniper Networks, Inc.(1) | 11,419 | 197,092 |
Motorola Mobility Holdings, Inc.(1) | 5,582 | 210,888 |
Motorola Solutions, Inc. | 6,451 | 270,297 |
QUALCOMM, Inc. | 35,952 | 1,748,346 |
Tellabs, Inc. | 8,750 | 37,537 |
4,528,307 | ||
COMPUTERS AND PERIPHERALS — 4.7% | ||
Apple, Inc.(1) | 19,796 | 7,545,839 |
Dell, Inc.(1) | 33,183 | 469,539 |
EMC Corp.(1) | 44,409 | 932,145 |
Hewlett-Packard Co. | 44,011 | 988,047 |
Lexmark International, Inc., Class A(1) | 1,757 | 47,492 |
NetApp, Inc.(1) | 8,015 | 272,029 |
SanDisk Corp.(1) | 5,013 | 202,275 |
Western Digital Corp.(1) | 4,692 | 120,678 |
10,578,044 | ||
CONSTRUCTION AND ENGINEERING — 0.2% | ||
Fluor Corp. | 3,753 | 174,702 |
Jacobs Engineering Group, Inc.(1) | 2,861 | 92,382 |
Quanta Services, Inc.(1) | 4,092 | 76,888 |
343,972 | ||
CONSTRUCTION MATERIALS† | ||
Vulcan Materials Co. | 2,930 | 80,751 |
CONSUMER FINANCE — 0.8% | ||
American Express Co. | 22,245 | 998,801 |
Capital One Financial Corp. | 9,727 | 385,481 |
Discover Financial Services | 11,677 | 267,870 |
SLM Corp. | 10,577 | 131,684 |
1,783,836 | ||
CONTAINERS AND PACKAGING — 0.1% | ||
Ball Corp. | 3,591 | 111,393 |
Bemis Co., Inc. | 1,971 | 57,770 |
Owens-Illinois, Inc.(1) | 3,725 | 56,322 |
Sealed Air Corp. | 3,345 | 55,861 |
281,346 | ||
DISTRIBUTORS — 0.1% | ||
Genuine Parts Co. | 3,291 | 167,183 |
DIVERSIFIED CONSUMER SERVICES — 0.1% | ||
Apollo Group, Inc., Class A(1) | 2,562 | 101,481 |
DeVry, Inc. | 1,439 | 53,185 |
H&R Block, Inc. | 6,813 | 90,681 |
245,347 | ||
DIVERSIFIED FINANCIAL SERVICES — 3.0% | ||
Bank of America Corp. | 216,079 | 1,322,404 |
Citigroup, Inc. | 62,261 | 1,595,127 |
CME Group, Inc. | 1,411 | 347,670 |
IntercontinentalExchange, Inc.(1) | 1,540 | 182,120 |
JPMorgan Chase & Co. | 83,059 | 2,501,737 |
Leucadia National Corp. | 4,371 | 99,134 |
McGraw-Hill Cos., Inc. (The) | 6,563 | 269,083 |
Moody’s Corp. | 4,282 | 130,387 |
NASDAQ OMX Group, Inc. (The)(1) | 2,729 | 63,149 |
NYSE Euronext | 5,473 | 127,193 |
6,638,004 | ||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.9% | ||
AT&T, Inc. | 126,639 | 3,611,744 |
CenturyLink, Inc. | 12,988 | 430,162 |
Frontier Communications Corp. | 20,660 | 126,233 |
Verizon Communications, Inc. | 60,342 | 2,220,586 |
Windstream Corp. | 10,979 | 128,015 |
6,516,740 |
9
Shares | Value |
ELECTRIC UTILITIES — 2.1% | ||
American Electric Power Co., Inc. | 10,444 | $ 397,081 |
Duke Energy Corp. | 28,313 | 565,977 |
Edison International | 6,996 | 267,597 |
Entergy Corp. | 3,866 | 256,277 |
Exelon Corp. | 14,210 | 605,488 |
FirstEnergy Corp. | 8,762 | 393,501 |
NextEra Energy, Inc. | 8,968 | 484,451 |
Northeast Utilities | 3,565 | 119,962 |
Pepco Holdings, Inc. | 4,768 | 90,211 |
Pinnacle West Capital Corp. | 2,459 | 105,589 |
PPL Corp. | 12,542 | 357,949 |
Progress Energy, Inc. | 6,294 | 325,526 |
Southern Co. | 18,372 | 778,422 |
4,748,031 | ||
ELECTRICAL EQUIPMENT — 0.4% | ||
Emerson Electric Co. | 15,747 | 650,509 |
Rockwell Automation, Inc. | 3,006 | 168,336 |
Roper Industries, Inc. | 2,130 | 146,778 |
965,623 | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 0.4% | ||
Amphenol Corp. Class A | 3,610 | 147,180 |
Corning, Inc. | 33,629 | 415,655 |
FLIR Systems, Inc. | 3,581 | 89,704 |
Jabil Circuit, Inc. | 3,946 | 70,199 |
Molex, Inc. | 3,017 | 61,456 |
784,194 | ||
ENERGY EQUIPMENT AND SERVICES — 1.8% | ||
Baker Hughes, Inc. | 9,344 | 431,319 |
Cameron International Corp.(1) | 5,227 | 217,130 |
Diamond Offshore Drilling, Inc. | 1,532 | 83,862 |
FMC Technologies, Inc.(1) | 5,051 | 189,918 |
Halliburton Co. | 19,462 | 593,980 |
Helmerich & Payne, Inc. | 2,416 | 98,090 |
Nabors Industries Ltd.(1) | 5,924 | 72,628 |
National Oilwell Varco, Inc. | 9,084 | 465,282 |
Noble Corp.(1) | 5,393 | 158,284 |
Rowan Cos., Inc.(1) | 2,754 | 83,143 |
Schlumberger Ltd. | 28,772 | 1,718,552 |
4,112,188 | ||
FOOD AND STAPLES RETAILING — 2.4% | ||
Costco Wholesale Corp. | 9,413 | 772,996 |
CVS Caremark Corp. | 28,818 | 967,708 |
Kroger Co. (The) | 13,085 | 287,347 |
Safeway, Inc. | 7,794 | 129,614 |
SUPERVALU, Inc. | 4,372 | 29,118 |
SYSCO Corp. | 12,701 | 328,956 |
Wal-Mart Stores, Inc. | 37,515 | 1,947,028 |
Walgreen Co. | 19,325 | 635,599 |
Whole Foods Market, Inc. | 3,352 | 218,919 |
5,317,285 | ||
FOOD PRODUCTS — 2.0% | ||
Archer-Daniels-Midland Co. | 14,091 | 349,598 |
Campbell Soup Co. | 3,882 | 125,660 |
ConAgra Foods, Inc. | 9,099 | 220,378 |
Dean Foods Co.(1) | 3,575 | 31,710 |
General Mills, Inc. | 13,644 | 524,885 |
H.J. Heinz Co. | 6,777 | 342,103 |
Hershey Co. (The) | 3,227 | 191,167 |
Hormel Foods Corp. | 3,086 | 83,384 |
J.M. Smucker Co. (The) | 2,492 | 181,642 |
Kellogg Co. | 5,455 | 290,151 |
Kraft Foods, Inc., Class A | 37,536 | 1,260,459 |
McCormick & Co., Inc. | 2,672 | 123,340 |
Mead Johnson Nutrition Co. | 4,374 | 301,062 |
Sara Lee Corp. | 12,479 | 204,032 |
Tyson Foods, Inc., Class A | 6,625 | 115,010 |
4,344,581 | ||
GAS UTILITIES — 0.1% | ||
Nicor, Inc. | 901 | 49,564 |
ONEOK, Inc. | 2,208 | 145,816 |
195,380 | ||
HEALTH CARE EQUIPMENT AND SUPPLIES — 1.9% | ||
Baxter International, Inc. | 12,070 | 677,610 |
Becton, Dickinson and Co. | 4,675 | 342,771 |
Boston Scientific Corp.(1) | 32,374 | 191,330 |
C.R. Bard, Inc. | 1,886 | 165,100 |
CareFusion Corp.(1) | 4,441 | 106,362 |
Covidien plc | 10,541 | 464,858 |
DENTSPLY International, Inc. | 3,044 | 93,420 |
Edwards Lifesciences Corp.(1) | 2,552 | 181,907 |
Intuitive Surgical, Inc.(1) | 846 | 308,181 |
Medtronic, Inc. | 22,344 | 742,715 |
St. Jude Medical, Inc. | 6,966 | 252,100 |
Stryker Corp. | 6,903 | 325,338 |
Varian Medical Systems, Inc.(1) | 2,468 | 128,731 |
Zimmer Holdings, Inc.(1) | 3,952 | 211,432 |
4,191,855 | ||
HEALTH CARE PROVIDERS AND SERVICES — 2.1% | ||
Aetna, Inc. | 7,733 | 281,094 |
AmerisourceBergen Corp. | 5,885 | 219,334 |
Cardinal Health, Inc. | 7,536 | 315,608 |
10
Shares | Value |
CIGNA Corp. | 5,819 | $ 244,049 |
Coventry Health Care, Inc.(1) | 3,361 | 96,830 |
DaVita, Inc.(1) | 2,018 | 126,468 |
Express Scripts, Inc.(1) | 10,516 | 389,828 |
Humana, Inc. | 3,611 | 262,628 |
Laboratory Corp. of America Holdings(1) | 2,125 | 167,981 |
McKesson Corp. | 5,321 | 386,837 |
Medco Health Solutions, Inc.(1) | 8,217 | 385,295 |
Patterson Cos., Inc. | 2,093 | 59,923 |
Quest Diagnostics, Inc. | 3,309 | 163,332 |
Tenet Healthcare Corp.(1) | 11,044 | 45,612 |
UnitedHealth Group, Inc. | 23,007 | 1,061,083 |
WellPoint, Inc. | 7,597 | 495,932 |
4,701,834 | ||
HOTELS, RESTAURANTS AND LEISURE — 2.0% | ||
Carnival Corp. | 9,861 | 298,788 |
Chipotle Mexican Grill, Inc.(1) | 689 | 208,733 |
Darden Restaurants, Inc. | 2,845 | 121,624 |
International Game Technology | 6,766 | 98,310 |
Marriott International, Inc. Class A | 6,008 | 163,658 |
McDonald’s Corp. | 21,949 | 1,927,561 |
Starbucks Corp. | 15,888 | 592,463 |
Starwood Hotels & Resorts Worldwide, Inc. | 4,040 | 156,833 |
Wyndham Worldwide Corp. | 3,502 | 99,842 |
Wynn Resorts Ltd. | 1,719 | 197,822 |
Yum! Brands, Inc. | 9,992 | 493,505 |
4,359,139 | ||
HOUSEHOLD DURABLES — 0.3% | ||
D.R. Horton, Inc. | 6,454 | 58,344 |
Fortune Brands, Inc. | 3,209 | 173,543 |
Harman International Industries, Inc. | 1,585 | 45,299 |
Leggett & Platt, Inc. | 2,851 | 56,421 |
Lennar Corp., Class A | 3,708 | 50,206 |
Newell Rubbermaid, Inc. | 6,576 | 78,057 |
PulteGroup, Inc.(1) | 7,031 | 27,773 |
Whirlpool Corp. | 1,718 | 85,746 |
575,389 | ||
HOUSEHOLD PRODUCTS — 2.4% | ||
Clorox Co. | 2,722 | 180,550 |
Colgate-Palmolive Co. | 10,378 | 920,321 |
Kimberly-Clark Corp. | 8,455 | 600,390 |
Procter & Gamble Co. (The) | 58,652 | 3,705,633 |
5,406,894 | ||
INDEPENDENT POWER PRODUCERS AND ENERGY TRADERS — 0.2% | ||
AES Corp. (The)(1) | 13,792 | 134,610 |
Constellation Energy Group, Inc. | 4,136 | 157,416 |
NRG Energy, Inc.(1) | 4,854 | 102,953 |
394,979 | ||
INDUSTRIAL CONGLOMERATES — 2.4% | ||
3M Co. | 15,212 | 1,092,069 |
Danaher Corp. | 12,158 | 509,907 |
General Electric Co. | 226,136 | 3,446,313 |
Tyco International Ltd. | 9,715 | 395,886 |
5,444,175 | ||
INSURANCE — 3.5% | ||
ACE Ltd. | 7,206 | 436,684 |
Aflac, Inc. | 10,063 | 351,702 |
Allstate Corp. (The) | 11,202 | 265,375 |
American International Group, Inc.(1) | 9,189 | 201,698 |
Aon Corp. | 6,825 | 286,513 |
Assurant, Inc. | 1,827 | 65,407 |
Berkshire Hathaway, Inc., Class B(1) | 37,497 | 2,663,787 |
Chubb Corp. (The) | 6,144 | 368,578 |
Cincinnati Financial Corp. | 3,699 | 97,395 |
Genworth Financial, Inc. Class A(1) | 11,104 | 63,737 |
Hartford Financial Services Group, Inc. | 9,539 | 153,959 |
Lincoln National Corp. | 6,603 | 103,205 |
Loews Corp. | 6,804 | 235,078 |
Marsh & McLennan Cos., Inc. | 11,257 | 298,761 |
MetLife, Inc. | 22,313 | 624,987 |
Principal Financial Group, Inc. | 6,742 | 152,841 |
Progressive Corp. (The) | 13,443 | 238,748 |
Prudential Financial, Inc. | 10,473 | 490,765 |
Torchmark Corp. | 2,344 | 81,712 |
Travelers Cos., Inc. (The) | 8,820 | 429,799 |
Unum Group | 6,572 | 137,749 |
XL Group plc | 7,189 | 135,153 |
7,883,633 | ||
INTERNET AND CATALOG RETAIL — 1.1% | ||
Amazon.com, Inc.(1) | 7,772 | 1,680,539 |
Expedia, Inc. | 4,077 | 104,983 |
Netflix, Inc.(1) | 1,129 | 127,758 |
priceline.com, Inc.(1) | 1,074 | 482,720 |
2,396,000 |
11
Shares | Value |
INTERNET SOFTWARE AND SERVICES — 1.8% | ||
Akamai Technologies, Inc.(1) | 4,119 | $ 81,886 |
eBay, Inc.(1) | 24,482 | 721,974 |
Google, Inc. Class A(1) | 5,371 | 2,762,735 |
Monster Worldwide, Inc.(1) | 2,740 | 19,673 |
VeriSign, Inc. | 3,441 | 98,447 |
Yahoo!, Inc.(1) | 26,409 | 347,542 |
4,032,257 | ||
IT SERVICES — 4.0% | ||
Accenture plc, Class A | 13,631 | 718,081 |
Automatic Data Processing, Inc. | 10,250 | 483,287 |
Cognizant Technology Solutions Corp., Class A(1) | 6,460 | 405,042 |
Computer Sciences Corp. | 3,505 | 94,109 |
Fidelity National Information Services, Inc. | 5,494 | 133,614 |
Fiserv, Inc.(1) | 3,135 | 159,164 |
International Business Machines Corp. | 25,532 | 4,468,866 |
MasterCard, Inc., Class A | 2,286 | 725,028 |
Paychex, Inc. | 6,832 | 180,160 |
SAIC, Inc.(1) | 5,778 | 68,238 |
Teradata Corp.(1) | 3,534 | 189,175 |
Total System Services, Inc. | 3,616 | 61,219 |
Visa, Inc., Class A | 10,937 | 937,520 |
Western Union Co. (The) | 12,958 | 198,128 |
8,821,631 | ||
LEISURE EQUIPMENT AND PRODUCTS — 0.1% | ||
Hasbro, Inc. | 2,534 | 82,634 |
Mattel, Inc. | 7,280 | 188,479 |
271,113 | ||
LIFE SCIENCES TOOLS AND SERVICES — 0.4% | ||
Agilent Technologies, Inc.(1) | 7,512 | 234,750 |
Life Technologies Corp.(1) | 3,826 | 147,033 |
PerkinElmer, Inc. | 2,672 | 51,329 |
Thermo Fisher Scientific, Inc.(1) | 8,224 | 416,463 |
Waters Corp.(1) | 1,883 | 142,148 |
991,723 | ||
MACHINERY — 1.8% | ||
Caterpillar, Inc. | 13,840 | 1,021,946 |
Cummins, Inc. | 4,209 | 343,707 |
Deere & Co. | 8,773 | 566,473 |
Dover Corp. | 3,965 | 184,769 |
Eaton Corp. | 7,297 | 259,043 |
Flowserve Corp. | 1,263 | 93,462 |
Illinois Tool Works, Inc. | 10,345 | 430,352 |
Ingersoll-Rand plc | 7,092 | 199,214 |
Joy Global, Inc. | 2,290 | 142,850 |
PACCAR, Inc. | 7,996 | 270,425 |
Pall Corp. | 2,602 | 110,325 |
Parker-Hannifin Corp. | 3,226 | 203,657 |
Snap-On, Inc. | 1,315 | 58,386 |
Stanley Black & Decker, Inc. | 3,559 | 174,747 |
4,059,356 | ||
MEDIA — 2.9% | ||
Cablevision Systems Corp., Class A | 4,851 | 76,306 |
CBS Corp., Class B | 14,047 | 286,278 |
Comcast Corp., Class A | 58,363 | 1,219,787 |
DirecTV, Class A(1) | 15,875 | 670,719 |
Discovery Communications, Inc. Class A(1) | 6,056 | 227,827 |
Gannett Co., Inc. | 5,406 | 51,519 |
Interpublic Group of Cos., Inc. (The) | 9,943 | 71,589 |
News Corp. Class A | 48,597 | 751,795 |
Omnicom Group, Inc. | 5,977 | 220,193 |
Scripps Networks Interactive, Inc. Class A | 1,994 | 74,117 |
Time Warner Cable, Inc. | 6,879 | 431,107 |
Time Warner, Inc. | 22,135 | 663,386 |
Viacom, Inc., Class B | 12,232 | 473,868 |
Walt Disney Co. (The) | 39,675 | 1,196,598 |
Washington Post Co. (The) Class B | 98 | 32,043 |
6,447,132 | ||
METALS AND MINING — 0.9% | ||
AK Steel Holding Corp. | 2,431 | 15,899 |
Alcoa, Inc. | 22,839 | 218,569 |
Allegheny Technologies, Inc. | 2,232 | 82,562 |
Cliffs Natural Resources, Inc. | 3,057 | 156,427 |
Freeport-McMoRan Copper & Gold, Inc. | 20,310 | 618,439 |
Newmont Mining Corp. | 10,610 | 667,369 |
Nucor Corp. | 6,817 | 215,690 |
Titanium Metals Corp. | 2,222 | 33,286 |
United States Steel Corp. | 3,255 | 71,642 |
2,079,883 | ||
MULTI-UTILITIES — 1.5% | ||
Ameren Corp. | 4,940 | 147,064 |
CenterPoint Energy, Inc. | 8,884 | 174,304 |
CMS Energy Corp. | 5,679 | 112,387 |
Consolidated Edison, Inc. | 6,270 | 357,515 |
Dominion Resources, Inc. | 12,144 | 616,551 |
DTE Energy Co. | 3,649 | 178,874 |
Integrys Energy Group, Inc. | 1,591 | 77,355 |
NiSource, Inc. | 6,083 | 130,055 |
12
Shares | Value |
PG&E Corp. | 8,657 | $ 366,278 |
Public Service Enterprise Group, Inc. | 10,973 | 366,169 |
SCANA Corp. | 2,563 | 103,673 |
Sempra Energy | 5,160 | 265,740 |
TECO Energy, Inc. | 4,470 | 76,571 |
Wisconsin Energy Corp. | 4,775 | 149,410 |
Xcel Energy, Inc. | 10,383 | 256,356 |
3,378,302 | ||
MULTILINE RETAIL — 0.8% | ||
Big Lots, Inc.(1) | 1,470 | 51,200 |
Family Dollar Stores, Inc. | 2,559 | 130,151 |
JC Penney Co., Inc. | 3,043 | 81,491 |
Kohl’s Corp. | 6,029 | 296,024 |
Macy’s, Inc. | 9,048 | 238,143 |
Nordstrom, Inc. | 3,520 | 160,794 |
Sears Holdings Corp.(1) | 742 | 42,680 |
Target Corp. | 14,277 | 700,144 |
1,700,627 | ||
OFFICE ELECTRONICS — 0.1% | ||
Xerox Corp. | 29,875 | 208,229 |
OIL, GAS AND CONSUMABLE FUELS — 9.6% | ||
Alpha Natural Resources, Inc.(1) | 5,036 | 89,087 |
Anadarko Petroleum Corp. | 10,556 | 665,556 |
Apache Corp. | 8,157 | 654,518 |
Cabot Oil & Gas Corp. | 2,177 | 134,778 |
Chesapeake Energy Corp. | 13,850 | 353,867 |
Chevron Corp.(2) | 42,775 | 3,957,543 |
ConocoPhillips | 29,336 | 1,857,556 |
CONSOL Energy, Inc. | 4,793 | 162,626 |
Denbury Resources, Inc.(1) | 8,271 | 95,117 |
Devon Energy Corp. | 8,954 | 496,410 |
El Paso Corp. | 16,214 | 283,421 |
EOG Resources, Inc. | 5,803 | 412,071 |
EQT Corp. | 3,122 | 166,590 |
Exxon Mobil Corp. | 103,764 | 7,536,379 |
Hess Corp. | 6,346 | 332,911 |
Marathon Oil Corp. | 15,124 | 326,376 |
Marathon Petroleum Corp. | 7,395 | 200,109 |
Murphy Oil Corp. | 4,116 | 181,763 |
Newfield Exploration Co.(1) | 2,806 | 111,370 |
Noble Energy, Inc. | 3,786 | 268,049 |
Occidental Petroleum Corp. | 17,369 | 1,241,883 |
Peabody Energy Corp. | 5,849 | 198,164 |
Pioneer Natural Resources Co. | 2,468 | 162,320 |
QEP Resources, Inc. | 3,974 | 107,576 |
Range Resources Corp. | 3,394 | 198,413 |
Southwestern Energy Co.(1) | 7,496 | 249,842 |
Spectra Energy Corp. | 14,102 | 345,922 |
Sunoco, Inc. | 2,632 | 81,618 |
Tesoro Corp.(1) | 3,274 | 63,745 |
Valero Energy Corp. | 12,241 | 217,645 |
Williams Cos., Inc. (The) | 12,700 | 309,118 |
21,462,343 | ||
PAPER AND FOREST PRODUCTS — 0.1% | ||
International Paper Co. | 9,396 | 218,457 |
MeadWestvaco Corp. | 3,721 | 91,388 |
309,845 | ||
PERSONAL PRODUCTS — 0.2% | ||
Avon Products, Inc. | 9,172 | 179,771 |
Estee Lauder Cos., Inc. (The), Class A | 2,419 | 212,485 |
392,256 | ||
PHARMACEUTICALS — 6.1% | ||
Abbott Laboratories | 33,301 | 1,703,013 |
Allergan, Inc. | 6,562 | 540,578 |
Bristol-Myers Squibb Co. | 36,361 | 1,141,008 |
Eli Lilly & Co. | 21,715 | 802,804 |
Forest Laboratories, Inc.(1) | 5,626 | 173,225 |
Hospira, Inc.(1) | 3,507 | 129,759 |
Johnson & Johnson | 58,420 | 3,721,938 |
Merck & Co., Inc. | 65,843 | 2,153,724 |
Mylan, Inc.(1) | 9,251 | 157,267 |
Pfizer, Inc. | 166,499 | 2,943,702 |
Watson Pharmaceuticals, Inc.(1) | 2,611 | 178,201 |
13,645,219 | ||
PROFESSIONAL SERVICES — 0.1% | ||
Dun & Bradstreet Corp. | 1,062 | 65,058 |
Equifax, Inc. | 2,727 | 83,828 |
Robert Half International, Inc. | 3,134 | 66,504 |
215,390 | ||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 1.7% | ||
Apartment Investment & Management Co., Class A | 2,496 | 55,212 |
AvalonBay Communities, Inc. | 1,983 | 226,161 |
Boston Properties, Inc. | 3,111 | 277,190 |
Equity Residential | 6,389 | 331,397 |
HCP, Inc. | 8,470 | 296,958 |
Health Care REIT, Inc. | 3,771 | 176,483 |
Host Hotels & Resorts, Inc. | 15,083 | 165,008 |
Kimco Realty Corp. | 8,428 | 126,673 |
Plum Creek Timber Co., Inc. | 3,656 | 126,900 |
ProLogis | 9,954 | 241,384 |
Public Storage | 3,091 | 344,183 |
13
Shares | Value |
Simon Property Group, Inc. | 6,283 | $ 691,004 |
Ventas, Inc. | 6,265 | 309,491 |
Vornado Realty Trust | 3,845 | 286,914 |
Weyerhaeuser Co. | 11,412 | 177,457 |
3,832,415 | ||
REAL ESTATE MANAGEMENT AND DEVELOPMENT† | ||
CB Richard Ellis Group, Inc., Class A(1) | 6,981 | 93,964 |
ROAD AND RAIL — 0.8% | ||
CSX Corp. | 23,399 | 436,859 |
Norfolk Southern Corp. | 7,333 | 447,460 |
Ryder System, Inc. | 1,199 | 44,975 |
Union Pacific Corp. | 10,405 | 849,776 |
1,779,070 | ||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 2.3% | ||
Advanced Micro Devices, Inc.(1) | 12,296 | 62,464 |
Altera Corp. | 6,871 | 216,643 |
Analog Devices, Inc. | 6,639 | 207,469 |
Applied Materials, Inc. | 28,130 | 291,145 |
Broadcom Corp., Class A(1) | 10,152 | 337,960 |
First Solar, Inc.(1) | 1,222 | 77,243 |
Intel Corp. | 112,228 | 2,393,823 |
KLA-Tencor Corp. | 3,411 | 130,573 |
Linear Technology Corp. | 5,077 | 140,379 |
LSI Corp.(1) | 11,285 | 58,456 |
MEMC Electronic Materials, Inc.(1) | 4,903 | 25,692 |
Microchip Technology, Inc. | 4,234 | 131,720 |
Micron Technology, Inc.(1) | 21,547 | 108,597 |
Novellus Systems, Inc.(1) | 1,271 | 34,647 |
NVIDIA Corp.(1) | 12,450 | 155,625 |
Teradyne, Inc.(1) | 3,699 | 40,726 |
Texas Instruments, Inc. | 24,424 | 650,899 |
Xilinx, Inc. | 5,872 | 161,128 |
5,225,189 | ||
SOFTWARE — 3.9% | ||
Adobe Systems, Inc.(1) | 10,464 | 252,915 |
Autodesk, Inc.(1) | 4,618 | 128,288 |
BMC Software, Inc.(1) | 3,725 | 143,636 |
CA, Inc. | 7,971 | 154,717 |
Cerner Corp.(1) | 3,014 | 206,519 |
Citrix Systems, Inc.(1) | 4,057 | 221,228 |
Compuware Corp.(1) | 5,249 | 40,208 |
Electronic Arts, Inc.(1) | 6,864 | 140,369 |
Intuit, Inc.(1) | 6,547 | 310,590 |
Microsoft Corp. | 159,255 | 3,963,857 |
Oracle Corp. | 84,422 | 2,426,288 |
Red Hat, Inc.(1) | 3,932 | 166,166 |
salesforce.com, inc.(1) | 2,908 | 332,326 |
Symantec Corp.(1) | 15,912 | 259,366 |
8,746,473 | ||
SPECIALTY RETAIL — 1.9% | ||
Abercrombie & Fitch Co., Class A | 1,926 | 118,565 |
AutoNation, Inc.(1) | 922 | 30,223 |
AutoZone, Inc.(1) | 630 | 201,090 |
Bed Bath & Beyond, Inc.(1) | 5,276 | 302,368 |
Best Buy Co., Inc. | 6,316 | 147,163 |
CarMax, Inc.(1) | 4,533 | 108,112 |
GameStop Corp., Class A(1) | 2,974 | 68,699 |
Gap, Inc. (The) | 7,197 | 116,879 |
Home Depot, Inc. (The) | 33,381 | 1,097,233 |
Limited Brands, Inc. | 5,468 | 210,573 |
Lowe’s Cos., Inc. | 26,858 | 519,434 |
O’Reilly Automotive, Inc.(1) | 2,897 | 193,027 |
Ross Stores, Inc. | 2,528 | 198,928 |
Staples, Inc. | 14,661 | 194,991 |
Tiffany & Co. | 2,645 | 160,869 |
TJX Cos., Inc. | 8,293 | 460,013 |
Urban Outfitters, Inc.(1) | 2,310 | 51,559 |
4,179,726 | ||
TEXTILES, APPAREL AND LUXURY GOODS — 0.6% | ||
Coach, Inc. | 6,151 | 318,806 |
NIKE, Inc. Class B | 8,040 | 687,501 |
Ralph Lauren Corp. | 1,354 | 175,614 |
VF Corp. | 1,833 | 222,746 |
1,404,667 | ||
THRIFTS AND MORTGAGE FINANCE — 0.1% | ||
Hudson City Bancorp., Inc. | 11,508 | 65,135 |
People’s United Financial, Inc. | 8,104 | 92,386 |
157,521 | ||
TOBACCO — 1.8% | ||
Altria Group, Inc. | 44,104 | 1,182,428 |
Lorillard, Inc. | 2,958 | 327,451 |
Philip Morris International, Inc. | 37,498 | 2,339,125 |
Reynolds American, Inc. | 7,237 | 271,243 |
4,120,247 | ||
TRADING COMPANIES AND DISTRIBUTORS — 0.2% | ||
Fastenal Co. | 6,209 | 206,636 |
W.W. Grainger, Inc. | 1,308 | 195,598 |
402,234 |
14
Shares | Value |
WIRELESS TELECOMMUNICATION SERVICES — 0.3% | ||
American Tower Corp. Class A(1) | 8,398 | $ 451,812 |
MetroPCS Communications, Inc.(1) | 6,234 | 54,298 |
Sprint Nextel Corp.(1) | 64,519 | 196,138 |
702,248 | ||
TOTAL COMMON STOCKS (Cost $187,253,407) | 219,859,437 | |
Temporary Cash Investments — 1.8% | ||
Repurchase Agreement, Bank America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 0.25%, 9/15/14, valued at $1,047,638), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $1,026,660) | 1,026,659 |
Shares/ Principal Amount | Value | |
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 3.50%, 2/15/39, valued at $901,652), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $879,995) | $ 879,994 | |
SSgA U.S. Government Money Market Fund | 1,413,925 | 1,413,925 |
U.S. Treasury Bill, 0.051%, 11/17/11(2)(3) | $ 730,000 | 729,988 |
TOTAL TEMPORARY CASH INVESTMENTS (Cost $4,050,530) | 4,050,566 | |
TOTAL INVESTMENT SECURITIES — 100.2% (Cost $191,303,937) | 223,910,003 | |
OTHER ASSETS AND LIABILITIES — (0.2)% | (485,974) | |
TOTAL NET ASSETS — 100.0% | $223,424,029 |
Futures Contracts | ||||||||||||
Contracts Purchased | Expiration Date | Underlying Face Amount at Value | Unrealized Gain (Loss) | |||||||||
75 | S&P 500 E-Mini | December 2011 | $4,222,500 | $(223,867 | ) |
Notes to Schedule of Investments
REIT = Real Estate Investment Trust
† Category is less than 0.05% of total net assets.
(1) | Non-income producing. |
(2) | Security, or a portion thereof, has been segregated for futures contracts. At the period end, the aggregate value of securities pledgedwas $4,223,000. |
(3) | The rate indicated is the yield to maturity at purchase. |
See Notes to Financial Statements.
15
SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities, at value (cost of $191,303,937) | $223,910,003 | |||
Receivable for capital shares sold | 75,894 | |||
Dividends and interest receivable | 320,803 | |||
224,306,700 | ||||
Liabilities | ||||
Payable for capital shares redeemed | 681,314 | |||
Payable for variation margin on futures contracts | 112,736 | |||
Accrued management fees | 88,621 | |||
882,671 | ||||
Net Assets | $223,424,029 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $194,746,474 | |||
Undistributed net investment income | 130,398 | |||
Accumulated net realized loss | (3,835,042 | ) | ||
Net unrealized appreciation | 32,382,199 | |||
$223,424,029 |
Net assets | Shares outstanding | Net asset value per share | |
Investor Class, $0.01 Par Value | $190,623,631 | 42,373,834 | $4.50 |
Institutional Class, $0.01 Par Value | $32,800,398 | 7,289,931 | $4.50 |
See Notes to Financial Statements.
16
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends | $2,614,599 | |||
Interest | 1,067 | |||
2,615,666 | ||||
Expenses: | ||||
Management fees | 595,837 | |||
Directors’ fees and expenses | 5,314 | |||
601,151 | ||||
Net investment income (loss) | 2,014,515 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 5,113,513 | |||
Futures contract transactions | (215,294 | ) | ||
4,898,219 | ||||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (43,380,953 | ) | ||
Futures contracts | (264,415 | ) | ||
(43,645,368 | ) | |||
Net realized and unrealized gain (loss) | (38,747,149 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(36,732,634 | ) |
See Notes to Financial Statements.
17
SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) AND YEAR ENDED MARCH 31, 2011 | ||||||||
Increase (Decrease) in Net Assets | September 30, 2011 | March 31, 2011 | ||||||
Operations | ||||||||
Net investment income (loss) | $2,014,515 | $5,972,214 | ||||||
Net realized gain (loss) | 4,898,219 | 70,207,172 | ||||||
Change in net unrealized appreciation (depreciation) | (43,645,368 | ) | (30,566,414 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (36,732,634 | ) | 45,612,972 | |||||
Distributions to Shareholders | ||||||||
From net investment income: | ||||||||
Investor Class | (1,679,636 | ) | (3,291,548 | ) | ||||
Institutional Class | (335,574 | ) | (2,459,234 | ) | ||||
Decrease in net assets from distributions | (2,015,210 | ) | (5,750,782 | ) | ||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions | (12,127,728 | ) | (206,054,304 | ) | ||||
Net increase (decrease) in net assets | (50,875,572 | ) | (166,192,114 | ) | ||||
Net Assets | ||||||||
Beginning of period | 274,299,601 | 440,491,715 | ||||||
End of period | $223,424,029 | $274,299,601 | ||||||
Undistributed net investment income | $130,398 | $131,093 |
See Notes to Financial Statements.
18
SEPTEMBER 30, 2011 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Equity Index Fund (the fund) is one fund in a series issued by the corporation. The fund is nondiversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. The fund pursues its objectives by matching, as closely as possible, the investment characteristics and results of the S&P 500 Index.
The fund is authorized to issue the Investor Class and the Institutional Class. The share classes differ principally in their respective distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate clearing corporation.
19
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, 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.
20
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 0.350% to 0.490% for the Investor Class. The Institutional Class is 0.200% less at each point within the range. The effective annual management fee for each class for the six months ended September 30, 2011 was 0.49% and 0.29% for the Investor Class and Institutional Class, respectively.
ACIM has entered into a subadvisory agreement with Northern Trust Investments, N.A. (NTI) (the subadvisor) on behalf of the fund. The subadvisor makes investment decisions for the fund in accordance with the fund’s investment objectives, policies and restrictions under the supervision of ACIM and the Board of Directors. ACIM pays all costs associated with retaining NTI as the subadvisor of the fund.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC.
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a securities lending agreement with JPMorgan Chase Bank (JPMCB) and a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMCB was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2011 were $3,806,525 and $13,926,922, respectively.
21
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2011 | Year ended March 31, 2011 | ||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||
Investor Class/Shares Authorized | 200,000,000 | 200,000,000 | |||||||||||||
Sold | 2,642,052 | $13,401,370 | 7,592,817 | $36,013,103 | |||||||||||
Issued in reinvestment of distributions | 332,684 | 1,640,574 | 675,260 | 3,212,242 | |||||||||||
Redeemed | (4,457,725 | ) | (22,479,786 | ) | (9,367,020 | ) | (43,371,841 | ) | |||||||
(1,482,989 | ) | (7,437,842 | ) | (1,098,943 | ) | (4,146,496 | ) | ||||||||
Institutional Class/Shares Authorized | 200,000,000 | 200,000,000 | |||||||||||||
Sold | 886,274 | 4,416,856 | 3,607,728 | 16,847,390 | |||||||||||
Issued in reinvestment of distributions | 67,933 | 335,574 | 533,303 | 2,459,234 | |||||||||||
Redeemed | (1,845,468 | ) | (9,442,316 | ) | (45,862,531 | ) | (221,214,432 | ) | |||||||
(891,261 | ) | (4,689,886 | ) | (41,721,500 | ) | (201,907,808 | ) | ||||||||
Net increase (decrease) | (2,374,250 | ) | $(12,127,728 | ) | (42,820,443 | ) | $(206,054,304 | ) |
6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||||||
Investment Securities | ||||||||||||
Common Stocks | $219,859,437 | — | — | |||||||||
Temporary Cash Investments | 1,413,925 | $2,636,641 | — | |||||||||
Total Value of Investment Securities | $221,273,362 | $2,636,641 | — | |||||||||
Other Financial Instruments | ||||||||||||
Total Unrealized Gain (Loss) on Futures Contracts | $(223,867 | ) | — | — |
22
7. Derivative Instruments
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 equity price risk derivative instruments held at period end as disclosed in the Schedule of Investments are indicative of the fund’s typical volume during the period.
The value of equity price risk derivative instruments as of September 30, 2011, is disclosed on the Statement of Assets and Liabilities as a liability of $112,736 in payable for variation margin on futures contracts. For the six months ended September 30, 2011, the effect of equity price risk derivative instruments on the Statement of Operations was $(215,294) in net realized gain (loss) on futures contract transactions and $(264,415) in change in net unrealized appreciation (depreciation) on futures contracts.
8. Federal Tax Information
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 September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $201,070,319 | |||
Gross tax appreciation of investments | $60,139,640 | |||
Gross tax depreciation of investments | (37,299,956 | ) | ||
Net tax appreciation (depreciation) of investments | $22,839,684 |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2011, the fund had accumulated capital losses of $(2,885,439), which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers expire in 2015.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused.
23
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Tax Return of Capital | 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 | |||||||||||||
2011(3) | $5.27 | 0.04 | (0.77) | (0.73) | (0.04) | — | (0.04) | $4.50 | (13.93)% | 0.50%(4) | 1.53%(4) | 2% | $190,624 |
2011 | $4.64 | 0.07 | 0.64 | 0.71 | (0.08) | — | (0.08) | $5.27 | 15.39% | 0.50% | 1.54% | 4% | $231,171 |
2010 | $3.17 | 0.07 | 1.47 | 1.54 | (0.07) | — | (0.07) | $4.64 | 48.96% | 0.49% | 1.81% | 12% | $208,726 |
2009 | $5.26 | 0.09 | (2.09) | (2.00) | (0.09) | — | (0.09) | $3.17 | (38.36)% | 0.49% | 1.93% | 5% | $129,026 |
2008 | $5.66 | 0.09 | (0.39) | (0.30) | (0.10) | —(5) | (0.10) | $5.26 | (5.46)% | 0.49% | 1.51% | 9% | $207,571 |
2007 | $5.16 | 0.08 | 0.50 | 0.58 | (0.08) | — | (0.08) | $5.66 | 11.28% | 0.49% | 1.49% | 4% | $232,880 |
Institutional Class | |||||||||||||
2011(3) | $5.27 | 0.04 | (0.77) | (0.73) | (0.04) | — | (0.04) | $4.50 | (13.84)% | 0.30%(4) | 1.73%(4) | 2% | $32,800 |
2011 | $4.64 | 0.08 | 0.64 | 0.72 | (0.09) | — | (0.09) | $5.27 | 15.62% | 0.30% | 1.74% | 4% | $43,129 |
2010 | $3.17 | 0.08 | 1.47 | 1.55 | (0.08) | — | (0.08) | $4.64 | 49.27% | 0.29% | 2.01% | 12% | $231,766 |
2009 | $5.26 | 0.10 | (2.09) | (1.99) | (0.10) | — | (0.10) | $3.17 | (38.24)% | 0.29% | 2.13% | 5% | $191,053 |
2008 | $5.67 | 0.10 | (0.40) | (0.30) | (0.11) | —(5) | (0.11) | $5.26 | (5.27)% | 0.29% | 1.71% | 9% | $599,914 |
2007 | $5.16 | 0.09 | 0.51 | 0.60 | (0.09) | — | (0.09) | $5.67 | 11.50% | 0.29% | 1.69% | 4% | $813,571 |
24
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) | Six months ended September 30, 2011 (unaudited). |
(4) | Annualized. |
(5) | Per share amount was less than $0.005. |
See Notes to Financial Statements.
25
At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
● | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
● | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
26
Nature, Extent and Quality of Services — Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
● | constructing and designing the Fund |
● | portfolio research and security selection |
● | initial capitalization/funding |
● | securities trading |
● | Fund administration |
● | custody of Fund assets |
● | daily valuation of the Fund’s portfolio |
● | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
● | legal services |
● | regulatory and portfolio compliance |
● | financial reporting |
● | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons.
27
The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance section of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
28
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
29
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent directors, taking into account all of the factors discussed above and the information provided by the Advisor and others, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
30
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73670 1111
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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Large Company Value Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 11 |
Statement of Operations | 12 |
Statement of Changes in Net Assets | 13 |
Notes to Financial Statements | 14 |
Financial Highlights | 21 |
Approval of Management Agreement | 24 |
Additional Information | 29 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the six months ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
This reporting period differed dramatically from the six months that preceded it. As the period covered by this report opened in April 2011, U.S. stocks were approaching the crest of an eight-month rally, originating back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
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Don Pratt
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Total Returns as of September 30, 2011 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ALVIX | -15.08% | -1.80% | -4.41% | 2.60% | 2.25% | 7/30/99 |
Russell 1000 Value Index | — | -16.62% | -1.89% | -3.53% | 3.36% | 2.06% | — |
S&P 500 Index | — | -13.78% | 1.14% | -1.18% | 2.82% | 0.50% | — |
Institutional Class | ALVSX | -15.00% | -1.60% | -4.22% | 2.80% | 1.77% | 8/10/01 |
A Class(2) No sales charge* With sales charge* | ALPAX | -15.05% -19.89% | -2.04% -7.71% | -4.65% -5.78% | 2.34% 1.74% | 2.68% 2.12% | 10/26/00 |
B Class No sales charge* With sales charge* | ALBVX | -15.49% -20.49% | -2.78% -6.78% | -5.39% -5.64% | — — | 2.93% 2.93% | 1/31/03 |
C Class No sales charge* With sales charge* | ALPCX | -15.52% -16.36% | -2.79% -2.79% | -5.37% -5.37% | — — | 1.14% 1.14% | 11/7/01 |
R Class | ALVRX | -15.30% | -2.29% | -4.89% | — | 1.71% | 8/29/03 |
* | 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%. B Class shares redeemed within six years of purchase are subject to a CDSC that declines from 5.00% during the first year after purchase to 0.00% the sixth year after purchase. 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. |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Prior to December 3, 2007, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | |||||
Investor Class | Institutional Class | A Class | B Class | C Class | R Class |
0.87% | 0.67% | 1.12% | 1.87% | 1.87% | 1.37% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
4
SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Chevron Corp. | 4.6% |
AT&T, Inc. | 3.8% |
Pfizer, Inc. | 3.6% |
Exxon Mobil Corp. | 3.5% |
Procter & Gamble Co. (The) | 3.5% |
General Electric Co. | 3.3% |
Wells Fargo & Co. | 3.2% |
Johnson & Johnson | 3.2% |
Merck & Co., Inc. | 3.0% |
JPMorgan Chase & Co. | 2.9% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 12.1% |
Pharmaceuticals | 10.6% |
Insurance | 8.5% |
Diversified Telecommunication Services | 6.2% |
Commercial Banks | 6.2% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 99.0% |
Temporary Cash Investments | 2.0% |
Other Assets and Liabilities | (1.0)% |
5
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 April 1, 2011 to September 30, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
6
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 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period(1) 4/1/11 – 9/30/11 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $849.20 | $4.02 | 0.87% |
Institutional Class | $1,000 | $850.00 | $3.10 | 0.67% |
A Class | $1,000 | $849.50 | $5.18 | 1.12% |
B Class | $1,000 | $845.10 | $8.63 | 1.87% |
C Class | $1,000 | $844.80 | $8.62 | 1.87% |
R Class | $1,000 | $847.00 | $6.33 | 1.37% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.65 | $4.39 | 0.87% |
Institutional Class | $1,000 | $1,021.65 | $3.39 | 0.67% |
A Class | $1,000 | $1,019.40 | $5.65 | 1.12% |
B Class | $1,000 | $1,015.65 | $9.42 | 1.87% |
C Class | $1,000 | $1,015.65 | $9.42 | 1.87% |
R Class | $1,000 | $1,018.15 | $6.91 | 1.37% |
(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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
7
Shares | Value | |
Common Stocks — 99.0% | ||
AEROSPACE AND DEFENSE — 1.6% | ||
Honeywell International, Inc. | 59,400 | $ 2,608,254 |
Lockheed Martin Corp. | 35,300 | 2,564,192 |
Northrop Grumman Corp. | 31,900 | 1,663,904 |
Raytheon Co. | 93,100 | 3,804,997 |
10,641,347 | ||
AIRLINES — 0.4% | ||
Southwest Airlines Co. | 351,100 | 2,822,844 |
AUTOMOBILES — 0.6% | ||
Ford Motor Co.(1) | 426,700 | 4,126,189 |
BEVERAGES — 0.8% | ||
PepsiCo, Inc. | 87,200 | 5,397,680 |
BIOTECHNOLOGY — 2.4% | ||
Amgen, Inc. | 200,500 | 11,017,475 |
Gilead Sciences, Inc.(1) | 130,800 | 5,075,040 |
16,092,515 | ||
CAPITAL MARKETS — 3.3% | ||
Ameriprise Financial, Inc. | 120,600 | 4,746,816 |
Bank of New York Mellon Corp. (The) | 331,600 | 6,164,444 |
Goldman Sachs Group, Inc. (The) | 84,800 | 8,017,840 |
Morgan Stanley | 278,500 | 3,759,750 |
22,688,850 | ||
CHEMICALS — 0.4% | ||
E.I. du Pont de Nemours & Co. | 65,800 | 2,630,026 |
COMMERCIAL BANKS — 6.2% | ||
PNC Financial Services Group, Inc. | 185,100 | 8,919,969 |
U.S. Bancorp. | 485,200 | 11,421,608 |
Wells Fargo & Co. | 889,200 | 21,447,504 |
41,789,081 | ||
COMMERCIAL SERVICES AND SUPPLIES — 0.3% | ||
Avery Dennison Corp. | 91,200 | 2,287,296 |
COMMUNICATIONS EQUIPMENT — 2.4% | ||
Cisco Systems, Inc. | 1,063,800 | 16,478,262 |
COMPUTERS AND PERIPHERALS — 2.0% | ||
Hewlett-Packard Co. | 447,400 | 10,044,130 |
Western Digital Corp.(1) | 131,500 | 3,382,180 |
13,426,310 | ||
DIVERSIFIED FINANCIAL SERVICES — 5.3% | ||
Bank of America Corp. | 759,800 | 4,649,976 |
Citigroup, Inc. | 453,400 | 11,616,108 |
JPMorgan Chase & Co. | 648,000 | 19,517,760 |
35,783,844 | ||
DIVERSIFIED TELECOMMUNICATION SERVICES — 6.2% | ||
AT&T, Inc. | 898,000 | 25,610,960 |
CenturyLink, Inc. | 224,200 | 7,425,504 |
Verizon Communications, Inc. | 242,100 | 8,909,280 |
41,945,744 | ||
ELECTRIC UTILITIES — 3.0% | ||
American Electric Power Co., Inc. | 239,000 | 9,086,780 |
Exelon Corp. | 94,100 | 4,009,601 |
PPL Corp. | 246,500 | 7,035,110 |
20,131,491 | ||
ENERGY EQUIPMENT AND SERVICES — 0.8% | ||
National Oilwell Varco, Inc. | 37,600 | 1,925,872 |
Transocean Ltd. | 70,700 | 3,375,218 |
5,301,090 | ||
FOOD AND STAPLES RETAILING — 3.4% | ||
CVS Caremark Corp. | 306,600 | 10,295,628 |
Kroger Co. (The) | 172,200 | 3,781,512 |
SYSCO Corp. | 62,500 | 1,618,750 |
Wal-Mart Stores, Inc. | 137,500 | 7,136,250 |
22,832,140 | ||
FOOD PRODUCTS — 0.7% | ||
Kraft Foods, Inc., Class A | 137,200 | 4,607,176 |
HEALTH CARE EQUIPMENT AND SUPPLIES — 0.9% | ||
Medtronic, Inc. | 196,500 | 6,531,660 |
HEALTH CARE PROVIDERS AND SERVICES — 1.6% | ||
Aetna, Inc. | 105,900 | 3,849,465 |
Quest Diagnostics, Inc. | 59,600 | 2,941,856 |
WellPoint, Inc. | 67,700 | 4,419,456 |
11,210,777 | ||
HOUSEHOLD PRODUCTS — 3.5% | ||
Procter & Gamble Co. (The) | 375,700 | 23,736,726 |
INDUSTRIAL CONGLOMERATES — 3.8% | ||
General Electric Co. | 1,456,000 | 22,189,440 |
Tyco International Ltd. | 86,100 | 3,508,575 |
25,698,015 | ||
INSURANCE — 8.5% | ||
Allstate Corp. (The) | 180,300 | 4,271,307 |
American International Group, Inc.(1) | 129,400 | 2,840,330 |
Berkshire Hathaway, Inc., Class B(1) | 86,300 | 6,130,752 |
Chubb Corp. (The) | 115,300 | 6,916,847 |
Loews Corp. | 180,200 | 6,225,910 |
MetLife, Inc. | 317,000 | 8,879,170 |
Principal Financial Group, Inc. | 197,000 | 4,465,990 |
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Shares | Value |
Prudential Financial, Inc. | 108,400 | $ 5,079,624 |
Torchmark Corp. | 99,100 | 3,454,626 |
Travelers Cos., Inc. (The) | 187,800 | 9,151,494 |
57,416,050 | ||
IT SERVICES — 0.5% | ||
Fiserv, Inc.(1) | 63,800 | 3,239,126 |
MACHINERY — 1.1% | ||
Dover Corp. | 79,600 | 3,709,360 |
Ingersoll-Rand plc | 144,600 | 4,061,814 |
7,771,174 | ||
MEDIA — 3.7% | ||
CBS Corp., Class B | 188,100 | 3,833,478 |
Comcast Corp., Class A | 481,200 | 10,057,080 |
Time Warner, Inc. | 288,900 | 8,658,333 |
Viacom, Inc., Class B | 61,100 | 2,367,014 |
24,915,905 | ||
METALS AND MINING — 0.7% | ||
Freeport-McMoRan Copper & Gold, Inc. | 37,300 | 1,135,785 |
Nucor Corp. | 123,100 | 3,894,884 |
5,030,669 | ||
MULTI-UTILITIES — 1.0% | ||
PG&E Corp. | 158,000 | 6,684,980 |
MULTILINE RETAIL — 2.6% | ||
Kohl’s Corp. | 83,200 | 4,085,120 |
Macy’s, Inc. | 198,000 | 5,211,360 |
Target Corp. | 172,800 | 8,474,112 |
17,770,592 | ||
OIL, GAS AND CONSUMABLE FUELS — 12.1% | ||
Apache Corp. | 37,300 | 2,992,952 |
Chevron Corp. | 337,300 | 31,206,996 |
ConocoPhillips | 198,300 | 12,556,356 |
Exxon Mobil Corp. | 328,600 | 23,866,218 |
Occidental Petroleum Corp. | 61,800 | 4,418,700 |
Total SA ADR | 100,000 | 4,387,000 |
Valero Energy Corp. | 160,100 | 2,846,578 |
82,274,800 | ||
PAPER AND FOREST PRODUCTS — 0.6% | ||
International Paper Co. | 176,400 | 4,101,300 |
PHARMACEUTICALS — 10.6% | ||
Abbott Laboratories | 111,300 | 5,691,882 |
Johnson & Johnson | 335,100 | 21,349,221 |
Merck & Co., Inc. | 627,300 | 20,518,983 |
Pfizer, Inc. | 1,365,500 | 24,142,040 |
71,702,126 | ||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 3.5% | ||
Applied Materials, Inc. | 395,600 | 4,094,460 |
Intel Corp. | 757,600 | 16,159,608 |
Marvell Technology Group Ltd.(1) | 254,900 | 3,703,697 |
23,957,765 | ||
SOFTWARE — 2.2% | ||
Activision Blizzard, Inc. | 288,800 | 3,436,720 |
Adobe Systems, Inc.(1) | 30,200 | 729,934 |
Microsoft Corp. | 204,700 | 5,094,983 |
Oracle Corp. | 189,400 | 5,443,356 |
14,704,993 | ||
SPECIALTY RETAIL — 1.6% | ||
Lowe’s Cos., Inc. | 367,000 | 7,097,780 |
Staples, Inc. | 300,700 | 3,999,310 |
11,097,090 | ||
TOBACCO — 0.7% | ||
Altria Group, Inc. | 175,100 | 4,694,431 |
TOTAL COMMON STOCKS(Cost $630,672,132) | 671,520,064 | |
Temporary Cash Investments — 2.0% | ||
Repurchase Agreement, Bank America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 0.25%, 9/15/14, valued at $4,215,728), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $4,131,313) | 4,131,310 | |
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 3.50%, 2/15/39, valued at $3,628,275), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $3,541,126) | 3,541,123 | |
SSgA U.S. Government Money Market Fund | 5,647,346 | 5,647,346 |
TOTAL TEMPORARY CASH INVESTMENTS (Cost $13,319,779) | 13,319,779 | |
TOTAL INVESTMENT SECURITIES — 101.0% (Cost $643,991,911) | 684,839,843 | |
OTHER ASSETS AND LIABILITIES — (1.0)% | (6,893,436) | |
TOTAL NET ASSETS — 100.0% | $677,946,407 |
9
Forward Foreign Currency Exchange Contracts | |||||||||||||
Contracts to Sell | Counterparty | Settlement Date | Value | Unrealized Gain (Loss) | |||||||||
2,643,151 | EUR for USD | UBS AG | 10/31/11 | $3,540,446 | $56,051 |
(Value on Settlement Date $3,596,497)
Notes to Schedule of Investments
ADR = American Depositary Receipt
EUR = Euro
USD = United States Dollar
(1) | Non-income producing. |
See Notes to Financial Statements.
10
SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities, at value (cost of $643,991,911) | $684,839,843 | |||
Receivable for investments sold | 37,255,494 | |||
Receivable for capital shares sold | 659,079 | |||
Unrealized gain on forward foreign currency exchange contracts | 56,051 | |||
Dividends and interest receivable | 1,282,207 | |||
724,092,674 | ||||
Liabilities | ||||
Payable for investments purchased | 3,259,786 | |||
Payable for capital shares redeemed | 42,355,135 | |||
Accrued management fees | 505,603 | |||
Distribution and service fees payable | 25,743 | |||
46,146,267 | ||||
Net Assets | $677,946,407 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $1,102,838,725 | |||
Undistributed net investment income | 313,116 | |||
Accumulated net realized loss | (466,109,417 | ) | ||
Net unrealized appreciation | 40,903,983 | |||
$677,946,407 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $451,803,553 | 92,610,163 | $4.88 | |||||||||
Institutional Class, $0.01 Par Value | $144,249,823 | 29,557,227 | $4.88 | |||||||||
A Class, $0.01 Par Value | $65,565,266 | 13,445,437 | $4.88 | * | ||||||||
B Class, $0.01 Par Value | $2,931,963 | 599,096 | $4.89 | |||||||||
C Class, $0.01 Par Value | $7,942,809 | 1,627,887 | $4.88 | |||||||||
R Class, $0.01 Par Value | $5,452,993 | 1,117,324 | $4.88 |
*Maximum offering price $5.18 (net asset value divided by 0.9425)
See Notes to Financial Statements.
11
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $15,367) | $11,263,081 | |||
Interest | 2,860 | |||
11,265,941 | ||||
Expenses: | ||||
Management fees | 3,603,323 | |||
Distribution and service fees: | ||||
A Class | 102,754 | |||
B Class | 19,647 | |||
C Class | 48,415 | |||
R Class | 16,526 | |||
Directors’ fees and expenses | 20,885 | |||
3,811,550 | ||||
Net investment income (loss) | 7,454,391 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 31,249,659 | |||
Futures contract transactions | (3,022,626 | ) | ||
Foreign currency transactions | 133,477 | |||
28,360,510 | ||||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (168,114,329 | ) | ||
Futures contracts | (10,395 | ) | ||
Translation of assets and liabilities in foreign currencies | 84,850 | |||
(168,039,874 | ) | |||
Net realized and unrealized gain (loss) | (139,679,364 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(132,224,973 | ) |
See Notes to Financial Statements.
12
SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) AND YEAR ENDED MARCH 31, 2011 | |||||||
Increase (Decrease) in Net Assets | September 30, 2011 | March 31, 2011 | |||||
Operations | |||||||
Net investment income (loss) | $7,454,391 | $16,838,086 | |||||
Net realized gain (loss) | 28,360,510 | 10,567,602 | |||||
Change in net unrealized appreciation (depreciation) | (168,039,874 | ) | 67,053,564 | ||||
Net increase (decrease) in net assets resulting from operations | (132,224,973 | ) | 94,459,252 | ||||
Distributions to Shareholders | |||||||
From net investment income: | |||||||
Investor Class | (5,033,324 | ) | (10,094,453 | ) | |||
Institutional Class | (1,813,772 | ) | (4,486,401 | ) | |||
A Class | (604,364 | ) | (1,545,719 | ) | |||
B Class | (14,184 | ) | (25,699 | ) | |||
C Class | (36,399 | ) | (66,454 | ) | |||
R Class | (41,438 | ) | (133,483 | ) | |||
Decrease in net assets from distributions | (7,543,481 | ) | (16,352,209 | ) | |||
Capital Share Transactions | |||||||
Net increase (decrease) in net assets from capital share transactions | (159,689,339 | ) | (368,865,579 | ) | |||
Net increase (decrease) in net assets | (299,457,793 | ) | (290,758,536 | ) | |||
Net Assets | |||||||
Beginning of period | 977,404,200 | 1,268,162,736 | |||||
End of period | $677,946,407 | $977,404,200 | |||||
Undistributed net investment income | $313,116 | $402,206 |
See Notes to Financial Statements.
13
SEPTEMBER 30, 2011 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Large Company Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund pursues its objectives by investing primarily in companies with larger market capitalization that management believes to be undervalued at the time of purchase.
The fund is authorized to issue the Investor Class, the Institutional Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate clearing corporation. Forward foreign currency exchange contracts are valued at the mean of the latest bid and asked prices of the forward currency rates as provided by an independent pricing service.
The value of investments initially expressed in foreign currencies is translated into U.S. dollars at prevailing exchange rates.
14
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
15
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The strategy assets of the fund include the assets of NT Large Company Value Fund, one fund in a series issued by the corporation. The annual management fee schedule ranges from 0.70% to 0.90% for the Investor Class, A Class, B Class, C Class and R Class. The Institutional Class is 0.20% less at each point within the range. The effective annual management fee for each class for the six months ended September 30, 2011 was 0.87% for the Investor Class, A Class, B Class, C Class and R Class and 0.67% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B 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 American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. The plans provide that the B Class and C Class will each 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 six months ended September 30, 2011 are detailed in the Statement of Operations.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC. Various funds in a series issued by American Century Asset Allocation Portfolios, Inc. (ACAAP) own, in aggregate, 27% of the shares of the fund. ACAAP does not invest in the fund for the purpose of exercising management or control.
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a securities lending agreement with JPMorgan Chase Bank (JPMCB) and a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMCB was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2011 were $239,885,570 and $389,137,225, respectively.
16
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2011 | Year ended March 31, 2011 | ||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||
Investor Class/Shares Authorized | 600,000,000 | 600,000,000 | |||||||||||||
Sold | 11,978,783 | $65,445,777 | 20,916,343 | $109,100,382 | |||||||||||
Issued in reinvestment of distributions | 927,562 | 4,953,990 | 1,779,568 | 9,380,186 | |||||||||||
Redeemed | (28,926,498 | ) | (154,606,584 | ) | (64,195,407 | ) | (323,475,000 | ) | |||||||
(16,020,153 | ) | (84,206,817 | ) | (41,499,496 | ) | (204,994,432 | ) | ||||||||
Institutional Class/Shares Authorized | 200,000,000 | 200,000,000 | |||||||||||||
Sold | 6,002,832 | 33,573,698 | 29,525,804 | 147,147,279 | |||||||||||
Issued in reinvestment of distributions | 178,089 | 960,334 | 520,671 | 2,722,184 | |||||||||||
Redeemed | (16,433,362 | ) | (91,380,958 | ) | (36,615,092 | ) | (191,057,880 | ) | |||||||
(10,252,441 | ) | (56,846,926 | ) | (6,568,617 | ) | (41,188,417 | ) | ||||||||
A Class/Shares Authorized | 100,000,000 | 100,000,000 | |||||||||||||
Sold | 871,670 | 4,777,571 | 3,212,940 | 16,652,036 | |||||||||||
Issued in reinvestment of distributions | 106,472 | 569,189 | 229,789 | 1,207,718 | |||||||||||
Redeemed | (3,783,574 | ) | (20,838,376 | ) | (25,429,363 | ) | (122,762,880 | ) | |||||||
(2,805,432 | ) | (15,491,616 | ) | (21,986,634 | ) | (104,903,126 | ) | ||||||||
B Class/Shares Authorized | 5,000,000 | 5,000,000 | |||||||||||||
Sold | 2,538 | 14,252 | 643 | 3,334 | |||||||||||
Issued in reinvestment of distributions | 2,396 | 12,812 | 4,307 | 22,547 | |||||||||||
Redeemed | (221,614 | ) | (1,235,011 | ) | (265,915 | ) | (1,412,132 | ) | |||||||
(216,680 | ) | (1,207,947 | ) | (260,965 | ) | (1,386,251 | ) | ||||||||
C Class/Shares Authorized | 20,000,000 | 20,000,000 | |||||||||||||
Sold | 37,479 | 211,268 | 120,132 | 617,790 | |||||||||||
Issued in reinvestment of distributions | 3,221 | 17,114 | 5,425 | 28,283 | |||||||||||
Redeemed | (290,584 | ) | (1,629,259 | ) | (1,530,898 | ) | (8,001,009 | ) | |||||||
(249,884 | ) | (1,400,877 | ) | (1,405,341 | ) | (7,354,936 | ) | ||||||||
R Class/Shares Authorized | 10,000,000 | 10,000,000 | |||||||||||||
Sold | 173,856 | 985,202 | 455,818 | 2,340,631 | |||||||||||
Issued in reinvestment of distributions | 7,142 | 38,133 | 24,699 | 128,656 | |||||||||||
Redeemed | (280,916 | ) | (1,558,491 | ) | (2,066,106 | ) | (11,507,704 | ) | |||||||
(99,918 | ) | (535,156 | ) | (1,585,589 | ) | (9,038,417 | ) | ||||||||
Net increase (decrease) | (29,644,508 | ) | $(159,689,339 | ) | (73,306,642 | ) | $(368,865,579 | ) |
6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
17
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||||||
Investment Securities | ||||||||||||
Common Stocks | $671,520,064 | — | — | |||||||||
Temporary Cash Investments | 5,647,346 | $7,672,433 | — | |||||||||
Total Value of Investment Securities | $677,167,410 | $7,672,433 | — | |||||||||
Other Financial Instruments | ||||||||||||
Total Unrealized Gain (Loss) on Forward Foreign Currency Exchange Contracts | — | $56,051 | — |
7. Derivative Instruments
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. During the period, the fund regularly held equity price risk derivative instruments though none were held at period end.
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund’s exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, 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 risk of loss from non-performance by the counterparty may be reduced by the use of master netting agreements. The foreign currency risk derivative instruments held at period end as disclosed on the Schedule of Investments are indicative of the fund’s typical volume.
18
Value of Derivative Instruments as of September 30, 2011 | |||||
Asset Derivatives | Liability Derivatives | ||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | |
Foreign Currency Risk | Unrealized gain on forward foreign currency exchange contracts | $56,051 | Unrealized loss on forward foreign currency exchange contracts | — | |
Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended September 30, 2011 | |||||
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 | |
Equity Price Risk | Net realized gain (loss) on futures contract transactions | $(3,022,626) | Change in net unrealized appreciation (depreciation) on futures contracts | $(10,395) | |
Foreign Currency Risk | Net realized gain (loss) on foreign currency transactions | 133,477 | Change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies | 84,850 | |
$(2,889,149) | $74,455 |
8. Federal Tax Information
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 September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $676,566,263 | |||
Gross tax appreciation of investments | $66,277,013 | |||
Gross tax depreciation of investments | (58,003,433 | ) | ||
Net tax appreciation (depreciation) of investments | $8,273,580 |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2011, the fund had accumulated capital losses of $(455,857,625), which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers of $(153,780,525) and $(302,077,100) expire in 2017 and 2018, respectively.
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On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |
Investor Class | |||||||||||||
2011(3) | $5.80 | 0.05 | (0.92) | (0.87) | (0.05) | — | (0.05) | $4.88 | (15.08)% | 0.87%(4) | 1.70%(4) | 28% | $451,804 |
2011 | $5.24 | 0.08 | 0.56 | 0.64 | (0.08) | — | (0.08) | $5.80 | 12.39% | 0.87% | 1.58% | 38% | $629,706 |
2010 | $3.64 | 0.09 | 1.60 | 1.69 | (0.09) | — | (0.09) | $5.24 | 46.68% | 0.85% | 1.87% | 25% | $786,992 |
2009 | $6.48 | 0.14 | (2.76) | (2.62) | (0.14) | (0.08) | (0.22) | $3.64 | (41.07)% | 0.83% | 2.57% | 22% | $569,483 |
2008 | $7.55 | 0.14 | (0.85) | (0.71) | (0.15) | (0.21) | (0.36) | $6.48 | (9.88)% | 0.83% | 1.93% | 18% | $1,251,631 |
2007 | $6.72 | 0.13 | 0.89 | 1.02 | (0.13) | (0.06) | (0.19) | $7.55 | 15.37% | 0.83% | 1.86% | 12% | $1,498,119 |
Institutional Class | |||||||||||||
2011(3) | $5.80 | 0.05 | (0.92) | (0.87) | (0.05) | — | (0.05) | $4.88 | (15.00)% | 0.67%(4) | 1.90%(4) | 28% | $144,250 |
2011 | $5.24 | 0.09 | 0.56 | 0.65 | (0.09) | — | (0.09) | $5.80 | 12.61% | 0.67% | 1.78% | 38% | $230,853 |
2010 | $3.64 | 0.10 | 1.60 | 1.70 | (0.10) | — | (0.10) | $5.24 | 46.97% | 0.65% | 2.07% | 25% | $243,190 |
2009 | $6.48 | 0.15 | (2.76) | (2.61) | (0.15) | (0.08) | (0.23) | $3.64 | (40.95)% | 0.63% | 2.77% | 22% | $275,245 |
2008 | $7.55 | 0.16 | (0.86) | (0.70) | (0.16) | (0.21) | (0.37) | $6.48 | (9.70)% | 0.63% | 2.13% | 18% | $540,297 |
2007 | $6.72 | 0.15 | 0.88 | 1.03 | (0.14) | (0.06) | (0.20) | $7.55 | 15.60% | 0.63% | 2.06% | 12% | $587,012 |
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) |
A Class(5) | |||||||||||||
2011(3) | $5.79 | 0.04 | (0.91) | (0.87) | (0.04) | — | (0.04) | $4.88 | (15.05)% | 1.12%(4) | 1.45%(4) | 28% | $65,565 |
2011 | $5.24 | 0.07 | 0.55 | 0.62 | (0.07) | — | (0.07) | $5.79 | 11.92% | 1.12% | 1.33% | 38% | $94,159 |
2010 | $3.64 | 0.08 | 1.60 | 1.68 | (0.08) | — | (0.08) | $5.24 | 46.31% | 1.10% | 1.62% | 25% | $200,408 |
2009 | $6.47 | 0.12 | (2.74) | (2.62) | (0.13) | (0.08) | (0.21) | $3.64 | (41.12)% | 1.08% | 2.32% | 22% | $162,957 |
2008 | $7.55 | 0.12 | (0.86) | (0.74) | (0.13) | (0.21) | (0.34) | $6.47 | (10.24)% | 1.08% | 1.68% | 18% | $373,078 |
2007 | $6.72 | 0.12 | 0.88 | 1.00 | (0.11) | (0.06) | (0.17) | $7.55 | 15.08% | 1.08% | 1.61% | 12% | $282,930 |
B Class | |||||||||||||
2011(3) | $5.81 | 0.02 | (0.92) | (0.90) | (0.02) | — | (0.02) | $4.89 | (15.49)% | 1.87%(4) | 0.70%(4) | 28% | $2,932 |
2011 | $5.26 | 0.03 | 0.55 | 0.58 | (0.03) | — | (0.03) | $5.81 | 11.04% | 1.87% | 0.58% | 38% | $4,743 |
2010 | $3.65 | 0.04 | 1.61 | 1.65 | (0.04) | — | (0.04) | $5.26 | 45.34% | 1.85% | 0.87% | 25% | $5,662 |
2009 | $6.49 | 0.08 | (2.75) | (2.67) | (0.09) | (0.08) | (0.17) | $3.65 | (41.58)% | 1.83% | 1.57% | 22% | $5,285 |
2008 | $7.57 | 0.07 | (0.87) | (0.80) | (0.07) | (0.21) | (0.28) | $6.49 | (10.88)% | 1.83% | 0.93% | 18% | $12,965 |
2007 | $6.74 | 0.06 | 0.89 | 0.95 | (0.06) | (0.06) | (0.12) | $7.57 | 14.18% | 1.83% | 0.86% | 12% | $17,374 |
C Class | |||||||||||||
2011(3) | $5.80 | 0.02 | (0.92) | (0.90) | (0.02) | — | (0.02) | $4.88 | (15.52)% | 1.87%(4) | 0.70%(4) | 28% | $7,943 |
2011 | $5.24 | 0.03 | 0.56 | 0.59 | (0.03) | — | (0.03) | $5.80 | 11.27% | 1.87% | 0.58% | 38% | $10,885 |
2010 | $3.64 | 0.04 | 1.60 | 1.64 | (0.04) | — | (0.04) | $5.24 | 45.19% | 1.85% | 0.87% | 25% | $17,211 |
2009 | $6.47 | 0.08 | (2.74) | (2.66) | (0.09) | (0.08) | (0.17) | $3.64 | (41.56)% | 1.83% | 1.57% | 22% | $17,246 |
2008 | $7.55 | 0.07 | (0.87) | (0.80) | (0.07) | (0.21) | (0.28) | $6.47 | (10.91)% | 1.83% | 0.93% | 18% | $51,775 |
2007 | $6.72 | 0.06 | 0.89 | 0.95 | (0.06) | (0.06) | (0.12) | $7.55 | 14.22% | 1.83% | 0.86% | 12% | $71,792 |
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) |
R Class | |||||||||||||
2011(3) | $5.80 | 0.03 | (0.91) | (0.88) | (0.04) | — | (0.04) | $4.88 | (15.30)% | 1.37%(4) | 1.20%(4) | 28% | $5,453 |
2011 | $5.24 | 0.05 | 0.56 | 0.61 | (0.05) | — | (0.05) | $5.80 | 11.83% | 1.37% | 1.08% | 38% | $7,058 |
2010 | $3.64 | 0.06 | 1.61 | 1.67 | (0.07) | — | (0.07) | $5.24 | 45.93% | 1.35% | 1.37% | 25% | $14,699 |
2009 | $6.48 | 0.11 | (2.76) | (2.65) | (0.11) | (0.08) | (0.19) | $3.64 | (41.36)% | 1.33% | 2.07% | 22% | $9,587 |
2008 | $7.56 | 0.11 | (0.87) | (0.76) | (0.11) | (0.21) | (0.32) | $6.48 | (10.45)% | 1.33% | 1.43% | 18% | $16,675 |
2007 | $6.72 | 0.10 | 0.89 | 0.99 | (0.09) | (0.06) | (0.15) | $7.56 | 14.95% | 1.33% | 1.36% | 12% | $17,765 |
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) | Six months ended September 30, 2011 (unaudited). |
(4) | Annualized. |
(5) | Prior to December 3, 2007, the A Class was referred to as the Advisor Class. |
See Notes to Financial Statements.
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At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
● | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
● | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
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Nature, Extent and Quality of Services — Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety
of services including:
● | constructing and designing the Fund |
● | portfolio research and security selection |
● | initial capitalization/funding |
● | securities trading |
● | Fund administration |
● | custody of Fund assets |
● | daily valuation of the Fund’s portfolio |
● | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
● | legal services |
● | regulatory and portfolio compliance |
● | financial reporting |
● | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different
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time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance section of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
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Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
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Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent directors, taking into account all of the factors discussed above and the information provided by the Advisor and others, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
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Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73672 1111
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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Mid Cap Value Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 11 |
Statement of Operations | 12 |
Statement of Changes in Net Assets | 13 |
Notes to Financial Statements | 14 |
Financial Highlights | 20 |
Approval of Management Agreement | 23 |
Additional Information | 28 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the six months ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
This reporting period differed dramatically from the six months that preceded it. As the period covered by this report opened in April 2011, U.S. stocks were approaching the crest of an eight-month rally, originating back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
![](https://capedge.com/proxy/N-CSRS/0001437749-11-009308/prattsignature.jpg)
Don Pratt
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Total Returns as of September 30, 2011 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | Since Inception | Inception Date | |
Investor Class | ACMVX | -15.13% | -1.48% | 2.09% | 6.30% | 3/31/04 |
Russell Midcap Value Index | — | -19.02% | -2.36% | -0.84% | 4.64% | — |
Institutional Class | AVUAX | -15.10% | -1.37% | 2.27% | 6.69% | 8/2/04 |
A Class(2) No sales charge* With sales charge* | ACLAX | -15.24% -20.10% | -1.73% -7.35% | 1.83% 0.64% | 4.86% 3.94% | 1/13/05 |
C Class No sales charge* With sales charge* | ACCLX | -15.55% -16.39% | -2.50% -2.50% | — — | 1.37% 1.37% | 3/1/10 |
R Class | AMVRX | -15.33% | -1.89% | 1.60% | 3.12% | 7/29/05 |
* | 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. |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Prior to March 1, 2010, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | ||||
Investor Class | Institutional Class | A Class | C Class | R Class |
1.01% | 0.81% | 1.26% | 2.01% | 1.51% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index does not.
4
Fund Characteristics |
SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Republic Services, Inc. | 2.9% |
Northern Trust Corp. | 2.5% |
American Tower Corp., Class A | 2.3% |
Imperial Oil Ltd. | 2.2% |
Lowe’s Cos., Inc. | 2.1% |
Zimmer Holdings, Inc. | 2.0% |
Ralcorp Holdings, Inc. | 1.8% |
Westar Energy, Inc. | 1.7% |
Kimberly-Clark Corp. | 1.6% |
PG&E Corp. | 1.6% |
Top Five Industries | % of net assets |
Insurance | 10.5% |
Electric Utilities | 7.5% |
Oil, Gas and Consumable Fuels | 6.0% |
Health Care Equipment and Supplies | 4.4% |
Capital Markets | 4.1% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 90.8% |
Foreign Common Stocks* | 6.7% |
Total Common Stocks | 97.5% |
Temporary Cash Investments | 2.4% |
Other Assets and Liabilities | 0.1% |
*Includes depositary shares, dual listed securities and foreign ordinary shares.
5
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 April 1, 2011 to September 30, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period(1) 4/1/11 - 9/30/11 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $848.70 | $4.67 | 1.01% |
Institutional Class | $1,000 | $849.00 | $3.74 | 0.81% |
A Class | $1,000 | $847.60 | $5.82 | 1.26% |
C Class | $1,000 | $844.50 | $9.27 | 2.01% |
R Class | $1,000 | $846.70 | $6.97 | 1.51% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.95 | $5.10 | 1.01% |
Institutional Class | $1,000 | $1,020.95 | $4.09 | 0.81% |
A Class | $1,000 | $1,018.70 | $6.36 | 1.26% |
C Class | $1,000 | $1,014.95 | $10.13 | 2.01% |
R Class | $1,000 | $1,017.45 | $7.62 | 1.51% |
(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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
7
SEPTEMBER 30, 2011 (UNAUDITED)
Shares | Value | |
Common Stocks — 97.5% | ||
AEROSPACE AND DEFENSE — 1.6% | ||
Huntington Ingalls Industries, Inc.(1) | 170,341 | $4,144,396 |
ITT Corp. | 521,347 | 21,896,574 |
26,040,970 | ||
AIRLINES — 1.0% | ||
Southwest Airlines Co. | 2,142,160 | 17,222,966 |
AUTOMOBILES — 0.3% | ||
Thor Industries, Inc. | 259,658 | 5,751,425 |
BEVERAGES — 1.0% | ||
Dr Pepper Snapple Group, Inc. | 417,193 | 16,178,744 |
CAPITAL MARKETS — 4.1% | ||
Franklin Resources, Inc. | 104,370 | 9,981,947 |
Northern Trust Corp. | 1,173,835 | 41,060,748 |
State Street Corp. | 206,103 | 6,628,273 |
T. Rowe Price Group, Inc. | 224,978 | 10,747,199 |
68,418,167 | ||
CHEMICALS — 1.0% | ||
Minerals Technologies, Inc. | 187,978 | 9,261,676 |
Olin Corp. | 445,492 | 8,023,311 |
17,284,987 | ||
COMMERCIAL BANKS — 3.7% | ||
Comerica, Inc. | 964,363 | 22,151,418 |
Commerce Bancshares, Inc. | 484,438 | 16,834,221 |
Cullen/Frost Bankers, Inc. | 142,527 | 6,536,288 |
SunTrust Banks, Inc. | 434,828 | 7,805,163 |
Westamerica Bancorp. | 204,901 | 7,851,806 |
61,178,896 | ||
COMMERCIAL SERVICES AND SUPPLIES — 3.5% | ||
Republic Services, Inc. | 1,706,871 | 47,894,800 |
Waste Management, Inc. | 306,685 | 9,985,664 |
57,880,464 | ||
COMMUNICATIONS EQUIPMENT — 0.9% | ||
Emulex Corp.(1) | 1,213,592 | 7,766,989 |
Harris Corp. | 188,452 | 6,439,405 |
14,206,394 | ||
COMPUTERS AND PERIPHERALS — 0.3% | ||
Seagate Technology plc | 446,500 | 4,590,020 |
CONSTRUCTION MATERIALS — 0.3% | ||
Martin Marietta Materials, Inc. | 91,920 | 5,811,182 |
CONTAINERS AND PACKAGING — 1.3% | ||
Bemis Co., Inc. | 764,300 | 22,401,633 |
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.1% | ||
CenturyLink, Inc. | 625,123 | 20,704,074 |
tw telecom, inc.(1) | 489,581 | 8,087,878 |
Windstream Corp. | 573,562 | 6,687,733 |
35,479,685 | ||
ELECTRIC UTILITIES — 7.5% | ||
Empire District Electric Co. (The) | 987,095 | 19,129,901 |
Great Plains Energy, Inc. | 1,076,393 | 20,774,385 |
IDACORP, Inc. | 260,077 | 9,825,709 |
Northeast Utilities | 372,024 | 12,518,607 |
NV Energy, Inc. | 1,746,862 | 25,696,340 |
Portland General Electric Co. | 401,256 | 9,505,755 |
Westar Energy, Inc. | 1,062,214 | 28,063,694 |
125,514,391 | ||
ELECTRICAL EQUIPMENT — 3.2% | ||
Brady Corp., Class A | 285,646 | 7,549,624 |
Emerson Electric Co. | 200,288 | 8,273,897 |
Hubbell, Inc., Class B | 273,983 | 13,573,118 |
Thomas & Betts Corp.(1) | 591,873 | 23,621,651 |
53,018,290 | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 0.8% | ||
Molex, Inc., Class A | 775,447 | 13,089,545 |
FOOD AND STAPLES RETAILING — 2.4% | ||
CVS Caremark Corp. | 466,911 | 15,678,871 |
SYSCO Corp. | 920,484 | 23,840,536 |
39,519,407 | ||
FOOD PRODUCTS — 3.7% | ||
General Mills, Inc. | 329,766 | 12,686,098 |
H.J. Heinz Co. | 50,853 | 2,567,059 |
Kellogg Co. | 306,572 | 16,306,565 |
Ralcorp Holdings, Inc.(1) | 388,136 | 29,773,913 |
61,333,635 | ||
GAS UTILITIES — 0.7% | ||
AGL Resources, Inc. | 266,200 | 10,844,988 |
HEALTH CARE EQUIPMENT AND SUPPLIES — 4.4% | ||
Boston Scientific Corp.(1) | 2,492,462 | 14,730,450 |
CareFusion Corp.(1) | 848,489 | 20,321,312 |
Hologic, Inc.(1) | 364,689 | 5,546,920 |
Zimmer Holdings, Inc.(1) | 615,378 | 32,922,723 |
73,521,405 |
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Shares | Value |
HEALTH CARE PROVIDERS AND SERVICES — 3.8% | ||
CIGNA Corp. | 250,851 | $10,520,691 |
Humana, Inc. | 98,866 | 7,190,524 |
LifePoint Hospitals, Inc.(1) | 673,450 | 24,675,208 |
Patterson Cos., Inc. | 617,574 | 17,681,144 |
Select Medical Holdings Corp.(1) | 458,626 | 3,059,035 |
63,126,602 | ||
HOTELS, RESTAURANTS AND LEISURE — 1.6% | ||
CEC Entertainment, Inc. | 638,823 | 18,187,291 |
International Speedway Corp., Class A | 264,014 | 6,030,079 |
Speedway Motorsports, Inc. | 264,647 | 3,196,936 |
27,414,306 | ||
HOUSEHOLD DURABLES — 1.3% | ||
Whirlpool Corp. | 419,141 | 20,919,327 |
HOUSEHOLD PRODUCTS — 2.5% | ||
Clorox Co. | 216,087 | 14,333,051 |
Kimberly-Clark Corp. | 384,753 | 27,321,310 |
41,654,361 | ||
INDUSTRIAL CONGLOMERATES — 2.9% | ||
Koninklijke Philips Electronics NV | 1,461,000 | 26,152,914 |
Tyco International Ltd. | 555,047 | 22,618,165 |
48,771,079 | ||
INSURANCE — 10.5% | ||
ACE Ltd. | 187,321 | 11,351,653 |
Allstate Corp. (The) | 814,808 | 19,302,802 |
Aon Corp. | 319,419 | 13,409,210 |
Arthur J. Gallagher & Co. | 316,063 | 8,312,457 |
Chubb Corp. (The) | 140,972 | 8,456,910 |
HCC Insurance Holdings, Inc. | 819,252 | 22,160,767 |
Marsh & McLennan Cos., Inc. | 846,262 | 22,459,793 |
Primerica, Inc. | 78,409 | 1,690,498 |
Symetra Financial Corp. | 634,775 | 5,173,416 |
Torchmark Corp. | 200,427 | 6,986,885 |
Transatlantic Holdings, Inc. | 535,545 | 25,984,643 |
Travelers Cos., Inc. (The) | 358,357 | 17,462,737 |
Unum Group | 599,371 | 12,562,816 |
175,314,587 | ||
IT SERVICES — 1.1% | ||
Booz Allen Hamilton Holding Corp.(1) | 825,697 | 12,278,115 |
Paychex, Inc. | 225,736 | 5,952,658 |
18,230,773 | ||
MACHINERY — 3.2% | ||
Harsco Corp. | 306,688 | 5,946,680 |
Ingersoll-Rand plc | 335,806 | 9,432,791 |
Kaydon Corp. | 765,407 | 21,951,873 |
Oshkosh Corp.(1) | 517,724 | 8,148,976 |
Stanley Black & Decker, Inc. | 162,312 | 7,969,519 |
53,449,839 | ||
MEDIA — 0.5% | ||
Omnicom Group, Inc. | 215,905 | 7,953,940 |
METALS AND MINING — 0.6% | ||
Newmont Mining Corp. | 156,900 | 9,869,010 |
MULTI-UTILITIES — 3.7% | ||
Consolidated Edison, Inc. | 170,125 | 9,700,527 |
PG&E Corp. | 631,951 | 26,737,847 |
Wisconsin Energy Corp. | 224,341 | 7,019,630 |
Xcel Energy, Inc. | 763,284 | 18,845,482 |
62,303,486 | ||
MULTILINE RETAIL — 0.3% | ||
Target Corp. | 106,314 | 5,213,639 |
OIL, GAS AND CONSUMABLE FUELS — 6.0% | ||
Devon Energy Corp. | 174,344 | 9,665,631 |
EQT Corp. | 206,671 | 11,027,965 |
Imperial Oil Ltd. | 1,046,500 | 37,589,713 |
Murphy Oil Corp. | 442,830 | 19,555,373 |
Peabody Energy Corp. | 139,200 | 4,716,096 |
Spectra Energy Partners LP | 138,518 | 3,907,593 |
Ultra Petroleum Corp.(1) | 461,320 | 12,787,790 |
99,250,161 | ||
PHARMACEUTICALS — 0.2% | ||
Eli Lilly & Co. | 113,010 | 4,177,980 |
REAL ESTATE INVESTMENT TRUSTS (REITs) — 3.5% | ||
Government Properties Income Trust | 1,059,713 | 22,794,427 |
Host Hotels & Resorts, Inc. | 717,741 | 7,852,086 |
National Health Investors, Inc. | 79,299 | 3,340,867 |
Piedmont Office Realty Trust, Inc., Class A | 927,921 | 15,004,483 |
Weyerhaeuser Co. | 597,748 | 9,294,981 |
58,286,844 | ||
ROAD AND RAIL — 0.2% | ||
Heartland Express, Inc. | 211,671 | 2,870,259 |
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 2.6% | ||
Applied Materials, Inc. | 2,281,022 | 23,608,577 |
Teradyne, Inc.(1) | 1,822,971 | 20,070,911 |
43,679,488 |
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Shares | Value |
SPECIALTY RETAIL — 3.6% | ||
Best Buy Co., Inc. | 209,990 | $4,892,767 |
Lowe’s Cos., Inc. | 1,804,039 | 34,890,114 |
Staples, Inc. | 1,462,250 | 19,447,925 |
59,230,806 | ||
THRIFTS AND MORTGAGE FINANCE — 3.3% | ||
Capitol Federal Financial, Inc. | 1,536,585 | 16,226,338 |
Hudson City Bancorp., Inc. | 3,166,380 | 17,921,711 |
People’s United Financial, Inc. | 1,755,849 | 20,016,678 |
54,164,727 | ||
WIRELESS TELECOMMUNICATION SERVICES — 2.3% | ||
American Tower Corp., Class A(1) | 721,404 | 38,811,535 |
TOTAL COMMON STOCKS(Cost $1,804,547,360) | 1,623,979,943 | |
Temporary Cash Investments — 2.4% | ||
Repurchase Agreement, Bank America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 0.25%, 9/15/14, valued at $12,347,111), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $12,099,875) | 12,099,865 | |
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 3.50%, 2/15/39, valued at $10,626,565), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $10,371,321) | 10,371,312 | |
SSgA U.S. Government Money Market Fund | 16,539,065 | 16,539,065 |
TOTAL TEMPORARY CASH INVESTMENTS(Cost $39,010,242) | 39,010,242 | |
TOTAL INVESTMENT SECURITIES — 99.9%(Cost $1,843,557,602) | 1,662,990,185 | |
OTHER ASSETS AND LIABILITIES — 0.1% | 2,277,821 | |
TOTAL NET ASSETS — 100.0% | $1,665,268,006 |
Forward Foreign Currency Exchange Contracts | |||||||||||||
Contracts to Sell | Counterparty | Settlement Date | Value | Unrealized Gain (Loss) | |||||||||
32,832,368 | CAD for USD | UBS AG | 10/31/11 | $31,309,995 | $734,587 | ||||||||
17,541,132 | EUR for USD | UBS AG | 10/31/11 | 23,495,991 | 364,482 | ||||||||
$54,805,986 | $1,099,069 | ||||||||||||
(Value on Settlement Date $55,905,055) |
Notes to Schedule of Investments
CAD = Canadian Dollar
EUR = Euro
USD = United States Dollar
(1) Non-income producing.
See Notes to Financial Statements.
10
SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities, at value (cost of $1,843,557,602) | $1,662,990,185 | |||
Receivable for investments sold | 14,406,675 | |||
Receivable for capital shares sold | 3,896,981 | |||
Unrealized gain on forward foreign currency exchange contracts | 1,099,069 | |||
Dividends and interest receivable | 4,038,113 | |||
1,686,431,023 | ||||
Liabilities | ||||
Payable for investments purchased | 16,066,322 | |||
Payable for capital shares redeemed | 3,657,109 | |||
Accrued management fees | 1,368,553 | |||
Distribution and service fees payable | 71,033 | |||
21,163,017 | ||||
Net Assets | $1,665,268,006 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $1,783,287,331 | |||
Undistributed net investment income | 1,861,371 | |||
Undistributed net realized gain | 59,595,444 | |||
Net unrealized depreciation | (179,476,140 | ) | ||
$1,665,268,006 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $1,206,125,317 | 109,114,779 | $11.05 | |||||||||
Institutional Class, $0.01 Par Value | $187,471,832 | 16,957,600 | $11.06 | |||||||||
A Class, $0.01 Par Value | $222,074,594 | 20,088,614 | $11.05 | * | ||||||||
C Class, $0.01 Par Value | $9,435,786 | 853,082 | $11.06 | |||||||||
R Class, $0.01 Par Value | $40,160,477 | 3,632,420 | $11.06 |
*Maximum offering price $11.72 (net asset value divided by 0.9425)
See Notes to Financial Statements.
11
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $233,265) | $23,297,882 | |||
Interest | 506 | |||
23,298,388 | ||||
Expenses: | ||||
Management fees | 8,923,617 | |||
Distribution and service fees: | ||||
A Class | 289,498 | |||
C Class | 41,633 | |||
R Class | 106,257 | |||
Directors’ fees and expenses | 41,858 | |||
9,402,863 | ||||
Net investment income (loss) | 13,895,525 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 35,946,028 | |||
Foreign currency transactions | 2,566,543 | |||
38,512,571 | ||||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (352,307,355 | ) | ||
Translation of assets and liabilities in foreign currencies | 1,493,387 | |||
(350,813,968 | ) | |||
Net realized and unrealized gain (loss) | (312,301,397 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(298,405,872 | ) |
See Notes to Financial Statements.
12
SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) AND YEAR ENDED MARCH 31, 2011 | |||||||
Increase (Decrease) in Net Assets | September 30, 2011 | March 31, 2011 | |||||
Operations | |||||||
Net investment income (loss) | $13,895,525 | $20,789,702 | |||||
Net realized gain (loss) | 38,512,571 | 89,778,862 | |||||
Change in net unrealized appreciation (depreciation) | (350,813,968 | ) | 87,435,934 | ||||
Net increase (decrease) in net assets resulting from operations | (298,405,872 | ) | 198,004,498 | ||||
Distributions to Shareholders | |||||||
From net investment income: | |||||||
Investor Class | (11,026,666 | ) | (13,839,031 | ) | |||
Institutional Class | (1,907,385 | ) | (2,589,110 | ) | |||
A Class | (1,629,914 | ) | (2,017,571 | ) | |||
C Class | (28,935 | ) | (11,585 | ) | |||
R Class | (245,274 | ) | (327,247 | ) | |||
Decrease in net assets from distributions | (14,838,174 | ) | (18,784,544 | ) | |||
Capital Share Transactions | |||||||
Net increase (decrease) in net assets from capital share transactions | 211,365,364 | 948,545,915 | |||||
Net increase (decrease) in net assets | (101,878,682 | ) | 1,127,765,869 | ||||
Net Assets | |||||||
Beginning of period | 1,767,146,688 | 639,380,819 | |||||
End of period | $1,665,268,006 | $1,767,146,688 | |||||
Undistributed net investment income | $1,861,371 | $2,804,020 |
See Notes to Financial Statements.
13
SEPTEMBER 30, 2011 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Mid Cap Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund pursues its objectives by investing primarily in stocks of medium size companies that management believes to be undervalued at the time of purchase.
The fund is authorized to issue the Investor Class, the Institutional Class, the A Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost. Forward foreign currency exchange contracts are valued at the mean of the latest bid and asked prices of the forward currency rates as provided by an independent pricing service.
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The value of investments initially expressed in foreign currencies is translated into U.S. dollars at prevailing exchange rates.
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
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Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The annual management fee is 1.00% for the Investor Class, A Class, C Class and R Class and 0.80% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the 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 American Century Investment Services, Inc. (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 six months ended September 30, 2011 are detailed in the Statement of Operations.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC. Various funds in a series issued by American Century Asset Allocation Portfolios, Inc. (ACAAP) own, in aggregate, 6% of the shares of the fund. ACAAP does not invest in the fund for the purpose of exercising management or control.
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a securities lending agreement with JPMorgan Chase Bank (JPMCB) and a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMCB was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2011 were $1,006,250,609 and $777,711,598, respectively.
For the six months ended September 30, 2011, the fund incurred net realized losses of $(219,323) from redemptions in kind. A redemption in kind occurs when a fund delivers securities from its portfolio in lieu of cash as payment to a redeeming shareholder.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2011 | Year ended March 31, 2011 | ||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||
Investor Class/Shares Authorized | 500,000,000 | 250,000,000 | |||||||||||||
Sold | 25,144,784 | $315,696,083 | 72,679,735 | $882,067,136 | |||||||||||
Issued in reinvestment of distributions | 877,539 | 10,601,096 | 1,048,319 | 12,365,504 | |||||||||||
Redeemed | (18,493,271 | ) | (226,422,704 | ) | (14,116,783 | ) | (168,457,048 | ) | |||||||
7,529,052 | 99,874,475 | 59,611,271 | 725,975,592 | ||||||||||||
Institutional Class/Shares Authorized | 100,000,000 | 40,000,000 | |||||||||||||
Sold | 6,334,476 | 80,761,689 | 8,642,241 | 99,291,094 | |||||||||||
Issued in reinvestment of distributions | 115,814 | 1,399,898 | 151,992 | 1,786,456 | |||||||||||
Redeemed | (2,447,071 | ) | (29,835,937 | ) | (1,842,986 | ) | (22,136,228 | ) | |||||||
4,003,219 | 52,325,650 | 6,951,247 | 78,941,322 | ||||||||||||
A Class/Shares Authorized | 100,000,000 | 50,000,000 | |||||||||||||
Sold | 7,050,731 | 88,961,204 | 12,326,960 | 147,472,567 | |||||||||||
Issued in reinvestment of distributions | 132,129 | 1,591,768 | 170,784 | 2,000,933 | |||||||||||
Redeemed | (3,524,859 | ) | (42,863,673 | ) | (2,680,188 | ) | (31,630,079 | ) | |||||||
3,658,001 | 47,689,299 | 9,817,556 | 117,843,421 | ||||||||||||
C Class/Shares Authorized | 10,000,000 | 10,000,000 | |||||||||||||
Sold | 456,128 | 5,736,141 | 457,926 | 5,640,665 | |||||||||||
Issued in reinvestment of distributions | 2,125 | 25,491 | 948 | 10,937 | |||||||||||
Redeemed | (61,018 | ) | (747,347 | ) | (7,495 | ) | (95,061 | ) | |||||||
397,235 | 5,014,285 | 451,379 | 5,556,541 | ||||||||||||
R Class/Shares Authorized | 15,000,000 | 10,000,000 | |||||||||||||
Sold | 1,109,418 | 13,926,181 | 2,347,333 | 28,450,865 | |||||||||||
Issued in reinvestment of distributions | 20,344 | 245,209 | 28,213 | 327,105 | |||||||||||
Redeemed | (613,363 | ) | (7,709,735 | ) | (715,651 | ) | (8,548,931 | ) | |||||||
516,399 | 6,461,655 | 1,659,895 | 20,229,039 | ||||||||||||
Net increase (decrease) | 16,103,906 | $211,365,364 | 78,491,348 | $948,545,915 |
6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
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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 | ||||||||||
Investment Securities | ||||||||||||
Domestic Common Stocks | $1,512,244,687 | — | — | |||||||||
Foreign Common Stocks | 47,992,629 | $63,742,627 | — | |||||||||
Temporary Cash Investments | 16,539,065 | 22,471,177 | — | |||||||||
Total Value of Investment Securities | $1,576,776,381 | $86,213,804 | — | |||||||||
Other Financial Instruments | ||||||||||||
Total Unrealized Gain (Loss) on Forward Foreign Currency Exchange Contracts | — | $1,099,069 | — |
7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund’s exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, 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 risk of loss from non-performance by the counterparty may be reduced by the use of master netting agreements. The foreign currency risk derivative instruments held at period end as disclosed on the Schedule of Investments are indicative of the fund’s typical volume during the period.
The value of foreign currency risk derivative instruments as of September 30, 2011, is disclosed on the Statement of Assets and Liabilities as an asset of $1,099,069 in unrealized gain on forward foreign currency exchange contracts. For the six months ended September 30, 2011, the effect of foreign currency risk derivative instruments on the Statement of Operations was $2,515,993 in net realized gain (loss) on foreign currency transactions and $1,504,553 in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
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8. Risk Factors
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
9. Federal Tax Information
The 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 September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $1,874,886,627 | |||
Gross tax appreciation of investments | $49,119,673 | |||
Gross tax depreciation of investments | (261,016,115 | ) | ||
Net tax appreciation (depreciation) of investments | $(211,896,442 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period.
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |
Investor Class | |||||||||||||
2011(3) | $13.13 | 0.10 | (2.08) | (1.98) | (0.10) | — | (0.10) | $11.05 | (15.13)% | 1.01%(4) | 1.56%(4) | 43% | $1,206,125 |
2011 | $11.41 | 0.25 | 1.70 | 1.95 | (0.23) | — | (0.23) | $13.13 | 17.34% | 1.01% | 2.07% | 71% | $1,334,230 |
2010 | $7.34 | 0.18 | 4.03 | 4.21 | (0.14) | — | (0.14) | $11.41 | 57.68% | 1.00% | 1.79% | 126% | $478,796 |
2009 | $10.66 | 0.19 | (3.32) | (3.13) | (0.19) | — | (0.19) | $7.34 | (29.66)% | 1.00% | 2.10% | 173% | $210,960 |
2008 | $13.33 | 0.16 | (1.51) | (1.35) | (0.16) | (1.16) | (1.32) | $10.66 | (10.84)% | 1.00% | 1.25% | 206% | $274,918 |
2007 | $12.10 | 0.16 | 1.87 | 2.03 | (0.14) | (0.66) | (0.80) | $13.33 | 17.12% | 1.00% | 1.30% | 187% | $301,642 |
Institutional Class | |||||||||||||
2011(3) | $13.14 | 0.11 | (2.08) | (1.97) | (0.11) | — | (0.11) | $11.06 | (15.10)% | 0.81%(4) | 1.76%(4) | 43% | $187,472 |
2011 | $11.41 | 0.28 | 1.70 | 1.98 | (0.25) | — | (0.25) | $13.14 | 17.66% | 0.81% | 2.27% | 71% | $170,182 |
2010 | $7.34 | 0.20 | 4.03 | 4.23 | (0.16) | — | (0.16) | $11.41 | 58.00% | 0.80% | 1.99% | 126% | $68,487 |
2009 | $10.66 | 0.21 | (3.32) | (3.11) | (0.21) | — | (0.21) | $7.34 | (29.52)% | 0.80% | 2.30% | 173% | $17,859 |
2008 | $13.33 | 0.18 | (1.51) | (1.33) | (0.18) | (1.16) | (1.34) | $10.66 | (10.67)% | 0.80% | 1.45% | 206% | $17,378 |
2007 | $12.10 | 0.19 | 1.87 | 2.06 | (0.17) | (0.66) | (0.83) | $13.33 | 17.36% | 0.80% | 1.50% | 187% | $20,623 |
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) |
A Class(5) | |||||||||||||
2011(3) | $13.13 | 0.08 | (2.07) | (1.99) | (0.09) | — | (0.09) | $11.05 | (15.24)% | 1.26%(4) | 1.31%(4) | 43% | $222,075 |
2011 | $11.41 | 0.21 | 1.71 | 1.92 | (0.20) | — | (0.20) | $13.13 | 17.05% | 1.26% | 1.82% | 71% | $215,813 |
2010 | $7.34 | 0.15 | 4.04 | 4.19 | (0.12) | — | (0.12) | $11.41 | 57.28% | 1.25% | 1.54% | 126% | $75,435 |
2009 | $10.66 | 0.17 | (3.32) | (3.15) | (0.17) | — | (0.17) | $7.34 | (29.84)% | 1.25% | 1.85% | 173% | $26,039 |
2008 | $13.33 | 0.13 | (1.51) | (1.38) | (0.13) | (1.16) | (1.29) | $10.66 | (11.07)% | 1.25% | 1.00% | 206% | $25,932 |
2007 | $12.10 | 0.14 | 1.86 | 2.00 | (0.11) | (0.66) | (0.77) | $13.33 | 16.83% | 1.25% | 1.05% | 187% | $21,412 |
C Class | |||||||||||||
2011(3) | $13.14 | 0.03 | (2.07) | (2.04) | (0.04) | — | (0.04) | $11.06 | (15.55)% | 2.01%(4) | 0.56%(4) | 43% | $9,436 |
2011 | $11.42 | 0.13 | 1.71 | 1.84 | (0.12) | — | (0.12) | $13.14 | 16.24% | 2.01% | 1.07% | 71% | $5,989 |
2010(6) | $10.97 | 0.02 | 0.43 | 0.45 | — | — | — | $11.42 | 4.10% | 2.00%(4) | 2.07%(4) | 126%(7) | $51 |
R Class | |||||||||||||
2011(3) | $13.14 | 0.07 | (2.08) | (2.01) | (0.07) | — | (0.07) | $11.06 | (15.33)% | 1.51%(4) | 1.06%(4) | 43% | $40,160 |
2011 | $11.41 | 0.19 | 1.71 | 1.90 | (0.17) | — | (0.17) | $13.14 | 16.85% | 1.51% | 1.57% | 71% | $40,933 |
2010 | $7.34 | 0.13 | 4.03 | 4.16 | (0.09) | — | (0.09) | $11.41 | 56.88% | 1.50% | 1.29% | 126% | $16,611 |
2009 | $10.65 | 0.15 | (3.32) | (3.17) | (0.14) | — | (0.14) | $7.34 | (29.95)% | 1.50% | 1.60% | 173% | $3,926 |
2008 | $13.32 | 0.10 | (1.51) | (1.41) | (0.10) | (1.16) | (1.26) | $10.65 | (11.30)% | 1.50% | 0.75% | 206% | $3,172 |
2007 | $12.09 | 0.13 | 1.84 | 1.97 | (0.08) | (0.66) | (0.74) | $13.32 | (16.55)% | 1.50% | 0.80% | 187% | $820 |
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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) | Six months ended September 30, 2011 (unaudited). |
(4) | Annualized. |
(5) | Prior to March 1, 2010, the A Class was referred to as the Advisor Class. |
(6) | March 1, 2010 (commencement of sale) through March 31, 2010. |
(7) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2010. |
See Notes to Financial Statements.
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At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
● | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
● | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
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Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
● | constructing and designing the Fund |
● | portfolio research and security selection |
● | initial capitalization/funding |
● | securities trading |
● | Fund administration |
● | custody of Fund assets |
● | daily valuation of the Fund’s portfolio |
● | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
● | legal services |
● | regulatory and portfolio compliance |
● | financial reporting |
● | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons.
24
The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance section of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
25
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
26
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent directors, taking into account all of the factors discussed above and the information provided by the Advisor and others, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
27
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73673 1111
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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NT Large Company Value Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 11 |
Statement of Operations | 12 |
Statement of Changes in Net Assets | 13 |
Notes to Financial Statements | 14 |
Financial Highlights | 20 |
Approval of Management Agreement | 21 |
Additional Information | 26 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the six months ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
This reporting period differed dramatically from the six months that preceded it. As the period covered by this report opened in April 2011, U.S. stocks were approaching the crest of an eight-month rally, originating back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
![](https://capedge.com/proxy/N-CSRS/0001437749-11-009308/prattsignature.jpg)
Don Pratt
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Total Returns as of September 30, 2011 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | Since Inception | Inception Date | |
Institutional Class | ACLLX | -15.13% | -1.76% | -4.45% | -3.16% | 5/12/06 |
Russell 1000 Value Index | — | -16.62% | -1.89% | -3.53% | -2.53%(2) | — |
S&P 500 Index | — | -13.78% | 1.14% | -1.18% | -0.59%(2) | — |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Since 4/30/06, the date nearest the Institutional Class’s inception for which data are available. |
Total Annual Fund Operating Expenses |
Institutional Class 0.67% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com.
Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
4
SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Chevron Corp. | 4.7% |
AT&T, Inc. | 3.9% |
Pfizer, Inc. | 3.7% |
Exxon Mobil Corp. | 3.6% |
Procter & Gamble Co. (The) | 3.6% |
General Electric Co. | 3.4% |
Wells Fargo & Co. | 3.2% |
Johnson & Johnson | 3.2% |
Merck & Co., Inc. | 3.1% |
JPMorgan Chase & Co. | 2.9% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 12.3% |
Pharmaceuticals | 10.9% |
Insurance | 8.6% |
Diversified Telecommunication Services | 6.3% |
Commercial Banks | 6.3% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 100.5% |
Exchange-Traded Funds | 0.6% |
Temporary Cash Investments | 3.4% |
Other Assets and Liabilities | (4.5)% |
5
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 April 1, 2011 to September 30, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
6
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 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period(1) 4/1/11 – 9/30/11 | Annualized Expense Ratio(1) | |
Actual | ||||
Institutional Class | $1,000 | $848.70 | $3.10 | 0.67% |
Hypothetical | ||||
Institutional Class | $1,000 | $1,021.65 | $3.39 | 0.67% |
(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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
7
SEPTEMBER 30, 2011 (UNAUDITED)
Shares | Value | |
Common Stocks — 100.5% | ||
AEROSPACE AND DEFENSE — 1.6% | ||
Honeywell International, Inc. | 42,500 | $ 1,866,175 |
Lockheed Martin Corp. | 26,500 | 1,924,960 |
Northrop Grumman Corp. | 23,200 | 1,210,112 |
Raytheon Co. | 67,400 | 2,754,638 |
7,755,885 | ||
AIRLINES — 0.4% | ||
Southwest Airlines Co. | 258,200 | 2,075,928 |
AUTOMOBILES — 0.6% | ||
Ford Motor Co.(1) | 311,500 | 3,012,205 |
BEVERAGES — 0.8% | ||
PepsiCo, Inc. | 63,700 | 3,943,030 |
BIOTECHNOLOGY — 2.4% | ||
Amgen, Inc. | 145,700 | 8,006,215 |
Gilead Sciences, Inc.(1) | 95,200 | 3,693,760 |
11,699,975 | ||
CAPITAL MARKETS — 3.4% | ||
Ameriprise Financial, Inc. | 87,700 | 3,451,872 |
Bank of New York Mellon Corp. (The) | 242,000 | 4,498,780 |
Goldman Sachs Group, Inc. (The) | 59,600 | 5,635,180 |
Morgan Stanley | 199,300 | 2,690,550 |
16,276,382 | ||
CHEMICALS — 0.4% | ||
E.I. du Pont de Nemours & Co. | 47,300 | 1,890,581 |
COMMERCIAL BANKS — 6.3% | ||
PNC Financial Services Group, Inc. | 134,800 | 6,496,012 |
U.S. Bancorp. | 351,600 | 8,276,664 |
Wells Fargo & Co. | 645,200 | 15,562,224 |
30,334,900 | ||
COMMERCIAL SERVICES AND SUPPLIES — 0.3% | ||
Avery Dennison Corp. | 66,900 | 1,677,852 |
COMMUNICATIONS EQUIPMENT — 2.4% | ||
Cisco Systems, Inc. | 752,400 | 11,654,676 |
COMPUTERS AND PERIPHERALS — 2.0% | ||
Hewlett-Packard Co. | 315,900 | 7,091,955 |
Western Digital Corp.(1) | 91,300 | 2,348,236 |
9,440,191 | ||
DIVERSIFIED FINANCIAL SERVICES — 5.4% | ||
Bank of America Corp. | 550,300 | 3,367,836 |
Citigroup, Inc. | 329,500 | 8,441,790 |
JPMorgan Chase & Co. | 469,800 | 14,150,376 |
25,960,002 | ||
DIVERSIFIED TELECOMMUNICATION SERVICES — 6.3% | ||
AT&T, Inc. | 651,600 | 18,583,632 |
CenturyLink, Inc. | 164,400 | 5,444,928 |
Verizon Communications, Inc. | 176,800 | 6,506,240 |
30,534,800 | ||
ELECTRIC UTILITIES — 3.1% | ||
American Electric Power Co., Inc. | 175,400 | 6,668,708 |
Exelon Corp. | 68,600 | 2,923,046 |
PPL Corp. | 180,800 | 5,160,032 |
14,751,786 | ||
ENERGY EQUIPMENT AND SERVICES — 0.8% | ||
National Oilwell Varco, Inc. | 25,600 | 1,311,232 |
Transocean Ltd. | 50,800 | 2,425,192 |
3,736,424 | ||
FOOD AND STAPLES RETAILING — 3.5% | ||
CVS Caremark Corp. | 222,400 | 7,468,192 |
Kroger Co. (The) | 124,300 | 2,729,628 |
Sysco Corp. | 45,600 | 1,181,040 |
Wal-Mart Stores, Inc. | 100,600 | 5,221,140 |
16,600,000 | ||
FOOD PRODUCTS — 0.7% | ||
Kraft Foods, Inc., Class A | 100,600 | 3,378,148 |
HEALTH CARE EQUIPMENT AND SUPPLIES — 1.0% | ||
Medtronic, Inc. | 143,300 | 4,763,292 |
HEALTH CARE PROVIDERS AND SERVICES — 1.7% | ||
Aetna, Inc. | 76,700 | 2,788,045 |
Quest Diagnostics, Inc. | 43,900 | 2,166,904 |
WellPoint, Inc. | 49,000 | 3,198,720 |
8,153,669 | ||
HOUSEHOLD PRODUCTS — 3.6% | ||
Procter & Gamble Co. (The) | 274,300 | 17,330,274 |
INDUSTRIAL CONGLOMERATES — 3.9% | ||
General Electric Co. | 1,056,900 | 16,107,156 |
Tyco International Ltd. | 60,900 | 2,481,675 |
18,588,831 | ||
INSURANCE — 8.6% | ||
Allstate Corp. (The) | 129,200 | 3,060,748 |
American International Group, Inc.(1) | 92,700 | 2,034,765 |
Berkshire Hathaway, Inc., Class B(1) | 62,900 | 4,468,416 |
Chubb Corp. (The) | 81,200 | 4,871,188 |
Loews Corp. | 129,800 | 4,484,590 |
MetLife, Inc. | 226,500 | 6,344,265 |
Principal Financial Group, Inc. | 144,100 | 3,266,747 |
8
Shares | Value |
Prudential Financial, Inc. | 78,000 | $ 3,655,080 |
Torchmark Corp. | 72,000 | 2,509,920 |
Travelers Cos., Inc. (The) | 138,000 | 6,724,740 |
41,420,459 | ||
IT SERVICES — 0.5% | ||
Fiserv, Inc.(1) | 47,700 | 2,421,729 |
MACHINERY — 1.2% | ||
Dover Corp. | 57,500 | 2,679,500 |
Ingersoll-Rand plc | 104,700 | 2,941,023 |
5,620,523 | ||
MEDIA — 3.8% | ||
CBS Corp., Class B | 137,500 | 2,802,250 |
Comcast Corp., Class A | 348,600 | 7,285,740 |
Time Warner, Inc. | 210,300 | 6,302,691 |
Viacom, Inc., Class B | 43,600 | 1,689,064 |
18,079,745 | ||
METALS AND MINING — 0.8% | ||
Freeport-McMoRan Copper & Gold, Inc. | 27,400 | 834,330 |
Nucor Corp. | 91,200 | 2,885,568 |
3,719,898 | ||
MULTI-UTILITIES — 1.0% | ||
PG&E Corp. | 115,200 | 4,874,112 |
MULTILINE RETAIL — 2.7% | ||
Kohl’s Corp. | 60,000 | 2,946,000 |
Macy’s, Inc. | 144,500 | 3,803,240 |
Target Corp. | 125,400 | 6,149,616 |
12,898,856 | ||
OIL, GAS AND CONSUMABLE FUELS — 12.3% | ||
Apache Corp. | 25,600 | 2,054,144 |
Chevron Corp. | 245,500 | 22,713,660 |
ConocoPhillips | 139,600 | 8,839,472 |
Exxon Mobil Corp. | 240,400 | 17,460,252 |
Occidental Petroleum Corp. | 42,800 | 3,060,200 |
Total SA ADR | 70,300 | 3,084,061 |
Valero Energy Corp. | 115,100 | 2,046,478 |
59,258,267 | ||
PAPER AND FOREST PRODUCTS — 0.6% | ||
International Paper Co. | 128,900 | 2,996,925 |
PHARMACEUTICALS — 10.9% | ||
Abbott Laboratories | 81,000 | 4,142,340 |
Johnson & Johnson | 243,400 | 15,507,014 |
Merck & Co., Inc. | 459,100 | 15,017,161 |
Pfizer, Inc. | 992,300 | 17,543,864 |
52,210,379 | ||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 3.6% | ||
Applied Materials, Inc. | 289,500 | 2,996,325 |
Intel Corp. | 550,400 | 11,740,032 |
Marvell Technology Group Ltd.(1) | 184,700 | 2,683,691 |
17,420,048 | ||
SOFTWARE — 2.2% | ||
Activision Blizzard, Inc. | 204,700 | 2,435,930 |
Adobe Systems, Inc.(1) | 20,500 | 495,485 |
Microsoft Corp. | 147,400 | 3,668,786 |
Oracle Corp. | 132,200 | 3,799,428 |
10,399,629 | ||
SPECIALTY RETAIL — 1.7% | ||
Lowe’s Cos., Inc. | 268,300 | 5,188,922 |
Staples, Inc. | 221,000 | 2,939,300 |
8,128,222 | ||
TOTAL COMMON STOCKS (Cost $496,975,100) | 483,007,623 | |
Exchange-Traded Funds — 0.6% | ||
SPDR S&P 500 ETF Trust (Cost $2,979,910) | 28,400 | 3,214,028 |
Temporary Cash Investments — 3.4% | ||
Repurchase Agreement, Bank America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 0.25%, 9/15/14, valued at $5,153,728), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $5,050,531) | 5,050,527 | |
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 3.50%, 2/15/39, valued at $4,435,566), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $4,329,027) | 4,329,023 | |
SSgA U.S. Government Money Market Fund | 6,901,874 | 6,901,874 |
TOTAL TEMPORARY CASH INVESTMENTS (Cost $16,281,424) | 16,281,424 | |
TOTAL INVESTMENT SECURITIES — 104.5% (Cost $516,236,434) | 502,503,075 | |
OTHER ASSETS AND LIABILITIES — (4.5)% | (21,779,381) | |
TOTAL NET ASSETS — 100.0% | $480,723,694 |
9
Forward Foreign Currency Exchange Contracts | |||||||||||||
Contracts to Sell | Counterparty | Settlement Date | Value | Unrealized Gain (Loss) | |||||||||
1,861,839 | EUR for USD | UBS AG | 10/31/11 | $2,493,895 | $38,712 |
(Value on Settlement Date $2,532,607)
Notes to Schedule of Investments
ADR = American Depositary Receipt
ETF = Exchange-Traded Fund
EUR = Euro
SPDR = Standard & Poor’s Depositary Receipts
USD = United States Dollar
(1) | Non-income producing. |
See Notes to Financial Statements.
10
SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities, at value (cost of $516,236,434) | $502,503,075 | |||
Receivable for investments sold | 2,089,402 | |||
Unrealized gain on forward foreign currency exchange contracts | 38,712 | |||
Dividends and interest receivable | 800,252 | |||
505,431,441 | ||||
Liabilities | ||||
Payable for investments purchased | 16,347,041 | |||
Payable for capital shares redeemed | 8,084,534 | |||
Accrued management fees | 276,172 | |||
24,707,747 | ||||
Net Assets | $480,723,694 | |||
Institutional Class Capital Shares, $0.01 Par Value | ||||
Shares authorized | 205,000,000 | |||
Shares outstanding | 64,511,389 | |||
Net Asset Value Per Share | $7.45 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $515,177,796 | |||
Undistributed net investment income | 256,787 | |||
Accumulated net realized loss | (21,016,242 | ) | ||
Net unrealized depreciation | (13,694,647 | ) | ||
$480,723,694 |
See Notes to Financial Statements.
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FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $10,368) | $6,391,173 | |||
Interest | 1,439 | |||
6,392,612 | ||||
Expenses: | ||||
Management fees | 1,677,730 | |||
Directors’ fees and expenses | 9,960 | |||
1,687,690 | ||||
Net investment income (loss) | 4,704,922 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 7,504,466 | |||
Futures contract transactions | (2,299,533 | ) | ||
Foreign currency transactions | 111,692 | |||
5,316,625 | ||||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (91,280,185 | ) | ||
Futures contracts | (44,325 | ) | ||
Translation of assets and liabilities in foreign currencies | 52,867 | |||
(91,271,643 | ) | |||
Net realized and unrealized gain (loss) | (85,955,018 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(81,250,096 | ) |
See Notes to Financial Statements.
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SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) AND YEAR ENDED MARCH 31, 2011 | |||||||
Increase (Decrease) in Net Assets | September 30, 2011 | March 31, 2011 | |||||
Operations | |||||||
Net investment income (loss) | $4,704,922 | $6,430,900 | |||||
Net realized gain (loss) | 5,316,625 | 7,008,253 | |||||
Change in net unrealized appreciation (depreciation) | (91,271,643 | ) | 40,763,481 | ||||
Net increase (decrease) in net assets resulting from operations | (81,250,096 | ) | 54,202,634 | ||||
Distributions to Shareholders | |||||||
From net investment income | (4,665,982 | ) | (6,198,514 | ) | |||
Capital Share Transactions | |||||||
Proceeds from shares sold | 90,525,044 | 133,067,297 | |||||
Proceeds from reinvestment of distributions | 4,665,982 | 6,198,514 | |||||
Payments for shares redeemed | (10,437,884 | ) | (13,417,836 | ) | |||
Net increase (decrease) in net assets from capital share transactions | 84,753,142 | 125,847,975 | |||||
Net increase (decrease) in net assets | (1,162,936 | ) | 173,852,095 | ||||
Net Assets | |||||||
Beginning of period | 481,886,630 | 308,034,535 | |||||
End of period | $480,723,694 | $481,886,630 | |||||
Undistributed net investment income | $256,787 | $217,847 | |||||
Transactions in Shares of the Fund | |||||||
Sold | 10,900,158 | 16,968,918 | |||||
Issued in reinvestment of distributions | 573,276 | 764,337 | |||||
Redeemed | (1,371,777 | ) | (1,718,087 | ) | |||
Net increase (decrease) in shares of the fund | 10,101,657 | 16,015,168 |
See Notes to Financial Statements.
13
SEPTEMBER 30, 2011 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. NT Large Company Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund pursues its objectives by investing primarily in companies with larger market capitalization that management believes to be undervalued at the time of purchase. The fund is not permitted to invest in any securities issued by companies assigned the Global Industry Classification Standard for the tobacco industry.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate clearing corporation. Forward foreign currency exchange contracts are valued at the mean of the latest bid and asked prices of the forward currency rates as provided by an independent pricing service.
The value of investments initially expressed in foreign currencies is translated into U.S. dollars at prevailing exchange rates.
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If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
15
3. Fees and Transactions with Related Parties
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). 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 the daily net assets of the fund and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The strategy assets of the fund include the assets of Large Company Value Fund, one fund in a series issued by the corporation. The annual management fee schedule for the fund ranges from 0.50% to 0.70%. The effective annual management fee for the six months September 30, 2011 was 0.67%.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC. The fund is wholly owned, in aggregate, by various funds in a series issued by American Century Asset Allocation Portfolios, Inc. (ACAAP). ACAAP does not invest in the fund for the purpose of exercising management or control.
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a securities lending agreement with JPMorgan Chase Bank (JPMCB) and a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMCB was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2011 were $242,911,610 and $144,420,463, respectively.
5. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
16
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||||||
Investment Securities | ||||||||||||
Common Stocks | $483,007,623 | — | — | |||||||||
Exchange-Traded Funds | 3,214,028 | — | — | |||||||||
Temporary Cash Investments | 6,901,874 | $9,379,550 | — | |||||||||
Total Value of Investment Securities | $493,123,525 | $9,379,550 | — | |||||||||
Other Financial Instruments | ||||||||||||
Total Unrealized Gain (Loss) on Forward Foreign Currency Exchange Contracts | — | $38,712 | — |
6. Derivative Instruments
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. During the period, the fund regularly held equity price risk derivative instruments though none were held at period end.
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund’s exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, 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 risk of loss from non-performance by the counterparty may be reduced by the use of master netting agreements. The foreign currency risk derivative instruments held at period end as disclosed on the Schedule of Investments are indicative of the fund’s typical volume during the period.
17
Value of Derivative Instruments as of September 30, 2011 | |||||
Asset Derivatives | Liability Derivatives | ||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | |
Foreign Currency Risk | Unrealized gain on forward foreign currency exchange contracts | $38,712 | Unrealized loss on forward foreign currency exchange contracts | — | |
Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended September 30, 2011 | |||||
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 | |
Equity Price Risk | Net realized gain (loss) on futures contract transactions | $(2,299,533) | Change in net unrealized appreciation (depreciation) on futures contracts | $(44,325) | |
Foreign Currency Risk | Net realized gain (loss) on foreign currency transactions | 111,692 | Change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies | 52,867 | |
$(2,187,841) | $ 8,542 |
7. Federal Tax Information
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 September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $531,135,891 | |||
Gross tax appreciation of investments | $24,264,266 | |||
Gross tax depreciation of investments | (52,897,082 | ) | ||
Net tax appreciation (depreciation) of investments | $(28,632,816 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2011, the fund had accumulated capital losses of $(15,428,044), which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers expire in 2018.
18
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused.
19
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | 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(1) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |
Institutional Class | |||||||||||||
2011(2) | $8.86 | 0.08(3) | (1.41) | (1.33) | (0.08) | — | (0.08) | $7.45 | (15.13)% | 0.67%(4) | 1.88%(4) | 29% | $480,724 |
2011 | $8.02 | 0.14(3) | 0.83 | 0.97 | (0.13) | — | (0.13) | $8.86 | 12.24% | 0.66% | 1.70% | 38% | $481,887 |
2010 | $5.55 | 0.14(3) | 2.47 | 2.61 | (0.14) | — | (0.14) | $8.02 | 47.28% | 0.64% | 1.99% | 23% | $308,035 |
2009 | $9.71 | 0.20(3) | (4.16) | (3.96) | (0.20) | — | (0.20) | $5.55 | (41.22)% | 0.63% | 2.82% | 26% | $152,678 |
2008 | $11.13 | 0.22 | (1.29) | (1.07) | (0.22) | (0.13) | (0.35) | $9.71 | (9.93)% | 0.62% | 2.10% | 20% | $98,618 |
2007(5) | $10.00 | 0.18 | 1.14 | 1.32 | (0.18) | (0.01) | (0.19) | $11.13 | 13.26% | 0.63%(4) | 2.01%(4) | 18% | $71,970 |
Notes to Financial Highlights
(1) | 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. |
(2) | Six months ended September 30, 2011 (unaudited). |
(3) | Computed using average shares outstanding throughout the period. |
(4) | Annualized. |
(5) | May 12, 2006 (fund inception) through March 31, 2007. |
See Notes to Financial Statements.
20
Approval of Management Agreement |
At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
● | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
● | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
21
Nature, Extent and Quality of Services — Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
● | constructing and designing the Fund |
● | portfolio research and security selection |
● | initial capitalization/funding |
● | securities trading |
● | Fund administration |
● | custody of Fund assets |
● | daily valuation of the Fund’s portfolio |
● | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
● | legal services |
● | regulatory and portfolio compliance |
● | financial reporting |
● | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different
22
time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance section of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
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Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
24
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent directors, taking into account all of the factors discussed above and the information provided by the Advisor and others, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
25
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73692 1111
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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NT Mid Cap Value Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 11 |
Statement of Operations | 12 |
Statement of Changes in Net Assets | 13 |
Notes to Financial Statements | 14 |
Financial Highlights | 19 |
Approval of Management Agreement | 20 |
Additional Information | 25 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the six months ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
This reporting period differed dramatically from the six months that preceded it. As the period covered by this report opened in April 2011, U.S. stocks were approaching the crest of an eight-month rally, originating back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
![](https://capedge.com/proxy/N-CSRS/0001437749-11-009308/prattsignature.jpg)
Don Pratt
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Total Returns as of September 30, 2011 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | Since Inception | Inception Date | |
Institutional Class | ACLMX | -14.87% | -0.83% | 2.48% | 2.85% | 5/12/06 |
Russell Midcap Value Index | — | -19.02% | -2.36% | -0.84% | -0.41%(2) | — |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Since 4/30/06, the date nearest the Institutional Class’s inception for which data are available. |
Total Annual Fund Operating Expenses |
Institutional Class 0.81% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. International investing involves special risks, such as political instability and currency fluctuations. 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.
Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index does not.
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Fund Characteristics |
SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Republic Services, Inc. | 2.9% |
Northern Trust Corp. | 2.5% |
American Tower Corp., Class A | 2.4% |
Imperial Oil Ltd. | 2.3% |
Lowe’s Cos., Inc. | 2.1% |
Zimmer Holdings, Inc. | 2.0% |
Ralcorp Holdings, Inc. | 1.8% |
Westar Energy, Inc. | 1.7% |
Kimberly-Clark Corp. | 1.6% |
PG&E Corp. | 1.6% |
Top Five Industries | % of net assets |
Insurance | 10.6% |
Electric Utilities | 7.6% |
Oil, Gas and Consumable Fuels | 6.0% |
Health Care Equipment and Supplies | 4.5% |
Capital Markets | 4.2% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 92.1% |
Foreign Common Stocks* | 6.8% |
Total Common Stocks | 98.9% |
Temporary Cash Investments | 1.9% |
Other Assets and Liabilities | (0.8)% |
*Includes depositary shares, dual listed securities and foreign ordinary shares. |
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Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2011 to September 30, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period* 4/1/11 – 9/30/11 | Annualized Expense Ratio* | |
Actual | ||||
Institutional Class | $1,000 | $851.30 | $3.75 | 0.81% |
Hypothetical | ||||
Institutional Class | $1,000 | $1,020.95 | $4.09 | 0.81% |
* | 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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
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SEPTEMBER 30, 2011 (UNAUDITED)
Shares | Value | |
Common Stocks — 98.9% | ||
AEROSPACE AND DEFENSE — 1.6% | ||
Huntington Ingalls Industries, Inc.(1) | 22,600 | $ 549,858 |
ITT Corp. | 69,500 | 2,919,000 |
3,468,858 | ||
AIRLINES — 1.0% | ||
Southwest Airlines Co. | 283,000 | 2,275,320 |
AUTOMOBILES — 0.3% | ||
Thor Industries, Inc. | 34,300 | 759,745 |
BEVERAGES — 1.0% | ||
Dr Pepper Snapple Group, Inc. | 55,100 | 2,136,778 |
CAPITAL MARKETS — 4.2% | ||
Franklin Resources, Inc. | 13,800 | 1,319,832 |
Northern Trust Corp. | 156,189 | 5,463,491 |
State Street Corp. | 27,600 | 887,616 |
T. Rowe Price Group, Inc. | 29,800 | 1,423,546 |
9,094,485 | ||
CHEMICALS — 1.1% | ||
Minerals Technologies, Inc. | 24,870 | 1,225,345 |
Olin Corp. | 59,600 | 1,073,396 |
2,298,741 | ||
COMMERCIAL BANKS — 3.7% | ||
Comerica, Inc. | 128,907 | 2,960,994 |
Commerce Bancshares, Inc. | 64,261 | 2,233,069 |
Cullen/Frost Bankers, Inc. | 19,000 | 871,340 |
SunTrust Banks, Inc. | 57,400 | 1,030,330 |
Westamerica Bancorp. | 27,200 | 1,042,304 |
8,138,037 | ||
COMMERCIAL SERVICES AND SUPPLIES — 3.5% | ||
Republic Services, Inc. | 225,464 | 6,326,520 |
Waste Management, Inc. | 40,678 | 1,324,475 |
7,650,995 | ||
COMMUNICATIONS EQUIPMENT — 0.9% | ||
Emulex Corp.(1) | 161,700 | 1,034,880 |
Harris Corp. | 25,000 | 854,250 |
1,889,130 | ||
COMPUTERS AND PERIPHERALS — 0.3% | ||
Seagate Technology plc | 59,000 | 606,520 |
CONSTRUCTION MATERIALS — 0.3% | ||
Martin Marietta Materials, Inc. | 12,100 | 764,962 |
CONTAINERS AND PACKAGING — 1.4% | ||
Bemis Co., Inc. | 101,179 | 2,965,556 |
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.2% | ||
CenturyLink, Inc. | 82,838 | 2,743,595 |
tw telecom, inc.(1) | 64,900 | 1,072,148 |
Windstream Corp. | 75,900 | 884,994 |
4,700,737 | ||
ELECTRIC UTILITIES — 7.6% | ||
Empire District Electric Co. (The) | 130,900 | 2,536,842 |
Great Plains Energy, Inc. | 142,200 | 2,744,460 |
IDACORP, Inc. | 34,400 | 1,299,632 |
Northeast Utilities | 49,330 | 1,659,954 |
NV Energy, Inc. | 230,800 | 3,395,068 |
Portland General Electric Co. | 53,271 | 1,261,990 |
Westar Energy, Inc. | 141,438 | 3,736,792 |
16,634,738 | ||
ELECTRICAL EQUIPMENT — 3.2% | ||
Brady Corp., Class A | 37,900 | 1,001,697 |
Emerson Electric Co. | 26,500 | 1,094,715 |
Hubbell, Inc., Class B | 36,196 | 1,793,150 |
Thomas & Betts Corp.(1) | 78,500 | 3,132,935 |
7,022,497 | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 0.8% | ||
Molex, Inc., Class A | 102,800 | 1,735,264 |
FOOD AND STAPLES RETAILING — 2.4% | ||
CVS Caremark Corp. | 62,200 | 2,088,676 |
SYSCO Corp. | 122,100 | 3,162,390 |
5,251,066 | ||
FOOD PRODUCTS — 3.7% | ||
General Mills, Inc. | 43,600 | 1,677,292 |
H.J. Heinz Co. | 6,800 | 343,264 |
Kellogg Co. | 40,600 | 2,159,514 |
Ralcorp Holdings, Inc.(1) | 51,500 | 3,950,565 |
8,130,635 | ||
GAS UTILITIES — 0.7% | ||
AGL Resources, Inc. | 35,300 | 1,438,122 |
HEALTH CARE EQUIPMENT AND SUPPLIES — 4.5% | ||
Boston Scientific Corp.(1) | 332,100 | 1,962,711 |
CareFusion Corp.(1) | 112,988 | 2,706,063 |
Hologic, Inc.(1) | 48,400 | 736,164 |
Zimmer Holdings, Inc.(1) | 81,600 | 4,365,600 |
9,770,538 | ||
HEALTH CARE PROVIDERS AND SERVICES — 3.8% | ||
CIGNA Corp. | 33,100 | 1,388,214 |
Humana, Inc. | 13,000 | 945,490 |
LifePoint Hospitals, Inc.(1) | 89,200 | 3,268,288 |
Patterson Cos., Inc. | 81,900 | 2,344,797 |
Select Medical Holdings Corp.(1) | 60,519 | 403,662 |
8,350,451 |
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Shares | Value |
HOTELS, RESTAURANTS AND LEISURE — 1.7% | ||
CEC Entertainment, Inc. | 84,700 | $ 2,411,409 |
International Speedway Corp., Class A | 34,815 | 795,175 |
Speedway Motorsports, Inc. | 34,939 | 422,063 |
3,628,647 | ||
HOUSEHOLD DURABLES — 1.3% | ||
Whirlpool Corp. | 55,600 | 2,774,996 |
HOUSEHOLD PRODUCTS — 2.5% | ||
Clorox Co. | 28,700 | 1,903,671 |
Kimberly-Clark Corp. | 50,795 | 3,606,953 |
5,510,624 | ||
INDUSTRIAL CONGLOMERATES — 3.0% | ||
Koninklijke Philips Electronics NV | 193,900 | 3,470,944 |
Tyco International Ltd. | 73,300 | 2,986,975 |
6,457,919 | ||
INSURANCE — 10.6% | ||
ACE Ltd. | 24,800 | 1,502,880 |
Allstate Corp. (The) | 107,900 | 2,556,151 |
Aon Corp. | 42,800 | 1,796,744 |
Arthur J. Gallagher & Co. | 41,800 | 1,099,340 |
Chubb Corp. (The) | 18,700 | 1,121,813 |
HCC Insurance Holdings, Inc. | 108,693 | 2,940,146 |
Marsh & McLennan Cos., Inc. | 112,754 | 2,992,491 |
Primerica, Inc. | 10,347 | 223,081 |
Symetra Financial Corp. | 83,737 | 682,457 |
Torchmark Corp. | 26,500 | 923,790 |
Transatlantic Holdings, Inc. | 71,475 | 3,467,967 |
Travelers Cos., Inc. (The) | 46,500 | 2,265,945 |
Unum Group | 75,400 | 1,580,384 |
23,153,189 | ||
IT SERVICES — 1.1% | ||
Booz Allen Hamilton Holding Corp.(1) | 109,473 | 1,627,863 |
Paychex, Inc. | 30,200 | 796,374 |
2,424,237 | ||
MACHINERY — 3.3% | ||
Harsco Corp. | 40,700 | 789,173 |
Ingersoll-Rand plc | 44,400 | 1,247,196 |
Kaydon Corp. | 102,032 | 2,926,278 |
Oshkosh Corp.(1) | 68,400 | 1,076,616 |
Stanley Black & Decker, Inc. | 21,400 | 1,050,740 |
7,090,003 | ||
MEDIA — 0.5% | ||
Omnicom Group, Inc. | 28,600 | 1,053,624 |
METALS AND MINING — 0.6% | ||
Newmont Mining Corp. | 20,778 | 1,306,936 |
MULTI-UTILITIES — 3.8% | ||
Consolidated Edison, Inc. | 22,700 | 1,294,354 |
PG&E Corp. | 83,800 | 3,545,578 |
Wisconsin Energy Corp. | 29,920 | 936,197 |
Xcel Energy, Inc. | 101,681 | 2,510,504 |
8,286,633 | ||
MULTILINE RETAIL — 0.3% | ||
Target Corp. | 14,100 | 691,464 |
OIL, GAS AND CONSUMABLE FUELS — 6.0% | ||
Devon Energy Corp. | 23,000 | 1,275,120 |
EQT Corp. | 27,400 | 1,462,064 |
Imperial Oil Ltd. | 139,100 | 4,996,396 |
Murphy Oil Corp. | 58,700 | 2,592,192 |
Peabody Energy Corp. | 18,400 | 623,392 |
Spectra Energy Partners LP | 18,251 | 514,861 |
Ultra Petroleum Corp.(1) | 60,900 | 1,688,148 |
13,152,173 | ||
PHARMACEUTICALS — 0.2% | ||
Eli Lilly & Co. | 15,000 | 554,550 |
REAL ESTATE INVESTMENT TRUSTS (REITs) — 3.6% | ||
Government Properties Income Trust | 140,025 | 3,011,938 |
Host Hotels & Resorts, Inc. | 95,600 | 1,045,864 |
National Health Investors, Inc. | 10,500 | 442,365 |
Piedmont Office Realty Trust, Inc., Class A | 123,575 | 1,998,208 |
Weyerhaeuser Co. | 80,022 | 1,244,342 |
7,742,717 | ||
ROAD AND RAIL — 0.2% | ||
Heartland Express, Inc. | 28,000 | 379,680 |
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 2.7% | ||
Applied Materials, Inc. | 302,500 | 3,130,875 |
Teradyne, Inc.(1) | 241,800 | 2,662,218 |
5,793,093 | ||
SPECIALTY RETAIL — 3.6% | ||
Best Buy Co., Inc. | 28,000 | 652,400 |
Lowe’s Cos., Inc. | 239,300 | 4,628,062 |
Staples, Inc. | 194,800 | 2,590,840 |
7,871,302 | ||
THRIFTS AND MORTGAGE FINANCE — 3.3% | ||
Capitol Federal Financial, Inc. | 204,706 | 2,161,696 |
Hudson City Bancorp., Inc. | 424,000 | 2,399,840 |
People’s United Financial, Inc. | 232,533 | 2,650,876 |
7,212,412 | ||
WIRELESS TELECOMMUNICATION SERVICES — 2.4% | ||
American Tower Corp., Class A(1) | 95,500 | 5,137,900 |
TOTAL COMMON STOCKS(Cost $232,594,030) | 215,305,274 |
9
Shares | Value |
Temporary Cash Investments — 1.9% | ||
Repurchase Agreement, Bank America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 0.25%, 9/15/14, valued at $1,281,003), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $1,255,352) | $ 1,255,351 | |
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 3.50%, 2/15/39, valued at $1,102,498), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $1,076,017) | 1,076,016 | |
SSgA U.S. Government Money Market Fund | 1,715,929 | 1,715,929 |
TOTAL TEMPORARY CASH INVESTMENTS(Cost $4,047,296) | 4,047,296 | |
TOTAL INVESTMENT SECURITIES — 100.8%(Cost $236,641,326) | 219,352,570 | |
OTHER ASSETS AND LIABILITIES — (0.8)% | (1,752,706) | |
TOTAL NET ASSETS — 100.0% | $217,599,864 |
Forward Foreign Currency Exchange Contracts | |||||||||||||
Contracts to Sell | Counterparty | Settlement Date | Value | Unrealized Gain (Loss) | |||||||||
4,364,054 | CAD for USD | UBS AG | 10/31/11 | $4,161,701 | $97,641 | ||||||||
2,328,012 | EUR for USD | UBS AG | 10/31/11 | 3,118,325 | 48,373 | ||||||||
$7,280,026 | $146,014 | ||||||||||||
(Value on Settlement Date $7,426,040) |
Notes to Schedule of Investments
CAD = Canadian Dollar
EUR = Euro
USD = United States Dollar
(1) | Non-income producing. |
See Notes to Financial Statements.
10
SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities, at value (cost of $236,641,326) | $219,352,570 | |||
Receivable for investments sold | 2,061,433 | |||
Unrealized gain on forward foreign currency exchange contracts | 146,014 | |||
Dividends and interest receivable | 536,401 | |||
222,096,418 | ||||
Liabilities | ||||
Payable for investments purchased | 2,006,268 | |||
Payable for capital shares redeemed | 2,341,517 | |||
Accrued management fees | 148,769 | |||
4,496,554 | ||||
Net Assets | $217,599,864 | |||
Institutional Class Capital Shares, $0.01 Par Value | ||||
Shares authorized | 150,000,000 | |||
Shares outstanding | 24,101,581 | |||
Net Asset Value Per Share | $9.03 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $219,831,010 | |||
Undistributed net investment income | 235,992 | |||
Undistributed net realized gain | 14,676,641 | |||
Net unrealized depreciation | (17,143,779 | ) | ||
$217,599,864 |
See Notes to Financial Statements.
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FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $29,218) | $2,908,591 | |||
Interest | 36 | |||
2,908,627 | ||||
Expenses: | ||||
Management fees | 907,113 | |||
Directors’ fees and expenses | 4,468 | |||
911,581 | ||||
Net investment income (loss) | 1,997,046 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 6,790,103 | |||
Foreign currency transactions | 339,814 | |||
7,129,917 | ||||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (45,467,194 | ) | ||
Translation of assets and liabilities in foreign currencies | 196,335 | |||
(45,270,859 | ) | |||
Net realized and unrealized gain (loss) | (38,140,942 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(36,143,896 | ) |
See Notes to Financial Statements.
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SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) AND YEAR ENDED MARCH 31, 2011 | ||||||||
Increase (Decrease) in Net Assets | September 30, 2011 | March 31, 2011 | ||||||
Operations | ||||||||
Net investment income (loss) | $1,997,046 | $3,974,165 | ||||||
Net realized gain (loss) | 7,129,917 | 20,268,900 | ||||||
Change in net unrealized appreciation (depreciation) | (45,270,859 | ) | 7,346,078 | |||||
Net increase (decrease) in net assets resulting from operations | (36,143,896 | ) | 31,589,143 | |||||
Distributions to Shareholders | ||||||||
From net investment income | (1,961,583 | ) | (3,847,606 | ) | ||||
From net realized gains | — | (8,513,579 | ) | |||||
Decrease in net assets from distributions | (1,961,583 | ) | (12,361,185 | ) | ||||
Capital Share Transactions | ||||||||
Proceeds from shares sold | 39,986,884 | 53,326,426 | ||||||
Proceeds from reinvestment of distributions | 1,961,583 | 12,361,185 | ||||||
Payments for shares redeemed | (2,624,230 | ) | (6,263,686 | ) | ||||
Net increase (decrease) in net assets from capital share transactions | 39,324,237 | 59,423,925 | ||||||
Net increase (decrease) in net assets | 1,218,758 | 78,651,883 | ||||||
Net Assets | ||||||||
Beginning of period | 216,381,106 | 137,729,223 | ||||||
End of period | $217,599,864 | $216,381,106 | ||||||
Undistributed net investment income | $235,992 | $200,529 | ||||||
Transactions in Shares of the Fund | ||||||||
Sold | 3,970,114 | 5,451,225 | ||||||
Issued in reinvestment of distributions | 200,115 | 1,235,583 | ||||||
Redeemed | (290,109 | ) | (620,123 | ) | ||||
Net increase (decrease) in shares of the fund | 3,880,120 | 6,066,685 |
See Notes to Financial Statements.
13
SEPTEMBER 30, 2011 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. NT Mid Cap Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund pursues its objectives by investing primarily in stocks of medium size companies that management believes to be undervalued at the time of purchase. The fund is not permitted to invest in any securities issued by companies assigned the Global Industry Classification Standard for the tobacco industry.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost. Forward foreign currency exchange contracts are valued at the mean of the latest bid and asked prices of the forward currency rates as provided by an independent pricing service.
The value of investments initially expressed in foreign currencies is translated into U.S. dollars at prevailing exchange rates.
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
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Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. The fund is no longer subject to examination by tax authorities for years prior to 2008. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
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.
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3. Fees and Transactions with Related Parties
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). 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 the daily net assets of the fund and paid monthly in arrears. The annual management fee is 0.80%.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC. The fund is wholly owned, in aggregate, by various funds in a series issued by American Century Asset Allocation Portfolios, Inc. (ACAAP). ACAAP does not invest in the fund for the purpose of exercising management or control.
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a securities lending agreement with JPMorgan Chase Bank (JPMCB) and a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMCB was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2011 were $137,300,417 and $96,254,159, respectively.
5. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
16
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||||||
Investment Securities | ||||||||||||
Domestic Common Stocks | $200,494,363 | — | — | |||||||||
Foreign Common Stocks | 6,343,571 | $8,467,340 | — | |||||||||
Temporary Cash Investments | 1,715,929 | 2,331,367 | — | |||||||||
Total Value of Investment Securities | $208,553,863 | $10,798,707 | — | |||||||||
Other Financial Instruments | ||||||||||||
Total Unrealized Gain (Loss) on Forward Foreign Currency Exchange Contracts | — | $146,014 | — |
6. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund’s exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, 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 risk of loss from non-performance by the counterparty may be reduced by the use of master netting agreements. The foreign currency risk derivative instruments held at period end as disclosed on the Schedule of Investments are indicative of the fund’s typical volume during the period.
The value of foreign currency risk derivative instruments as of September 30, 2011, is disclosed on the Statement of Assets and Liabilities as an asset of $146,014 in unrealized gain on forward foreign currency exchange contracts. For the six months ended September 30, 2011, the effect of foreign currency risk derivative instruments on the Statement of Operations was $329,273 in net realized gain (loss) on foreign currency transactions and $197,975 in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
7. Risk Factors
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
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.
17
8. Federal Tax Information
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 September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $241,874,470 | |||
Gross tax appreciation of investments | $8,361,718 | |||
Gross tax depreciation of investments | (30,883,618 | ) | ||
Net tax appreciation (depreciation) of investments | $(22,521,900 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period.
18
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Net Asset Value, Beginning of Period | Income From Investment Operations: | Distributions From: | Net Asset Value, End of Period | Total Return(1) | Ratio to Average Net Assets of: | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | ||||||
Net Investment Income (Loss) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Operating Expenses | Net Investment Income (Loss) | ||||||
Institutional Class | |||||||||||||
2011(2) | $10.70 | 0.09(3) | (1.67) | (1.58) | (0.09) | — | (0.09) | $9.03 | (14.87)% | 0.81%(4) | 1.77%(4) | 43% | $217,600 |
2011 | $9.73 | 0.23(3) | 1.45 | 1.68 | (0.23) | (0.48) | (0.71) | $10.70 | 17.91% | 0.80% | 2.35% | 102% | $216,381 |
2010 | $6.25 | 0.17(3) | 3.45 | 3.62 | (0.14) | — | (0.14) | $9.73 | 58.29% | 0.80% | 1.98% | 143% | $137,729 |
2009 | $9.04 | 0.18(3) | (2.79) | (2.61) | (0.18) | — | (0.18) | $6.25 | (29.25)% | 0.80% | 2.36% | 181% | $67,933 |
2008 | $11.28 | 0.16(3) | (1.29) | (1.13) | (0.15) | (0.96) | (1.11) | $9.04 | (10.79)% | 0.80% | 1.48% | 208% | $45,832 |
2007(5) | $10.00 | 0.14 | 1.44 | 1.58 | (0.12) | (0.18) | (0.30) | $11.28 | 16.03% | 0.80%(4) | 1.55%(4) | 203% | $33,375 |
Notes to Financial Highlights
(1) | 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. |
(2) | Six months ended September 30, 2011 (unaudited). |
(3) | Computed using average shares outstanding throughout the period. |
(4) | Annualized. |
(5) | May 12, 2006 (fund inception) through March 31, 2007. |
See Notes to Financial Statements.
19
At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
● | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
● | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
20
Nature, Extent and Quality of Services — Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety
of services including:
● | constructing and designing the Fund |
● | portfolio research and security selection |
● | initial capitalization/funding |
● | securities trading |
● | Fund administration |
● | custody of Fund assets |
● | daily valuation of the Fund’s portfolio |
● | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
● | legal services |
● | regulatory and portfolio compliance |
● | financial reporting |
● | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time
21
horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance section of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
22
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
23
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent directors, taking into account all of the factors discussed above and the information provided by the Advisor and others, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
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Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73693 1111
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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Real Estate Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 10 |
Statement of Operations | 11 |
Statement of Changes in Net Assets | 12 |
Notes to Financial Statements | 13 |
Financial Highlights | 19 |
Approval of Management Agreement | 22 |
Additional Information | 27 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the six months ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
This reporting period differed dramatically from the six months that preceded it. As the period covered by this report opened in April 2011, U.S. stocks were approaching the crest of an eight-month rally, originating back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
![](https://capedge.com/proxy/N-CSRS/0001437749-11-009308/prattsignature.jpg)
Don Pratt
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Performance |
Total Returns as of September 30, 2011 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | REACX | -9.85% | 4.77% | -3.92% | 8.86% | 10.06% | 9/21/95(2) |
MSCI U.S. REIT Index | — | -11.46% | 1.26% | -2.56% | 9.13% | 9.64%(3) | — |
S&P 500 Index | — | -13.78% | 1.14% | -1.18% | 2.82% | 6.11%(3) | — |
Institutional Class | REAIX | -9.75% | 5.04% | -3.72% | 9.08% | 8.12% | 6/16/97 |
A Class(4) No sales charge* With sales charge* | AREEX | -9.95% -15.15% | 4.57% -1.43% | -4.15% -5.28% | 8.60% 7.96% | 9.31% 8.81% | 10/6/98 |
B Class No sales charge* With sales charge* | ARYBX | -10.33% -15.33% | 3.72% -0.28% | — — | — — | -7.13% -7.76% | 9/28/07 |
C Class No sales charge* With sales charge* | ARYCX | -10.32% -11.22% | 3.72% 3.72% | — — | — — | -7.11% -7.11% | 9/28/07 |
R Class | AREWX | -10.08% | 4.27% | — | — | -6.66% | 9/28/07 |
* | 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%. B Class shares redeemed within six years of purchase are subject to a CDSC that declines from 5.00% during the first year after purchase to 0.00% the sixth year after purchase. 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. |
(1) | Total returns for periods less than one year are not annualized. |
(2) | The inception date for RREEF Real Estate Securities Fund, Real Estate’s predecessor. That fund merged with Real Estate on 6/13/97 and Real Estate was first offered to the public on 6/16/97. |
(3) | Since 9/30/95, the date nearest the Investor Class’s inception for which data are available. |
(4) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | |||||
Investor Class | Institutional Class | A Class | B Class | C Class | R Class |
1.16% | 0.96% | 1.41% | 2.16% | 2.16% | 1.66% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters and interest rate risk. The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
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SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Simon Property Group, Inc. | 12.4% |
Ventas, Inc. | 6.3% |
Public Storage | 5.7% |
Equity Residential | 5.4% |
HCP, Inc. | 5.4% |
Boston Properties, Inc. | 4.7% |
ProLogis | 4.6% |
Health Care REIT, Inc. | 4.6% |
AvalonBay Communities, Inc. | 4.1% |
Host Hotels & Resorts, Inc. | 3.6% |
Sub-Industry Allocation | % of net assets |
Specialized REITs | 28.1% |
Retail REITs | 26.5% |
Residential REITs | 21.1% |
Office REITs | 11.2% |
Industrial REITs | 5.6% |
Diversified REITs | 4.2% |
Hotels, Resorts and Cruise Lines | 1.5% |
Wireless Telecommunication Services | 1.5% |
Real Estate Operating Companies | 0.3% |
Cash and Equivalents(1) | —(2) |
(1)Includes temporary cash investments and other assets and liabilities. (2)Category is less than 0.05% of total net assets. | |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 100.0% |
Temporary Cash Investments | 2.0% |
Other Assets and Liabilities | (2.0%) |
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Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2011 to September 30, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period(1) 4/1/11 – 9/30/11 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $901.50 | $5.51 | 1.16% |
Institutional Class | $1,000 | $902.50 | $4.57 | 0.96% |
A Class | $1,000 | $900.50 | $6.70 | 1.41% |
B Class | $1,000 | $896.70 | $10.24 | 2.16% |
C Class | $1,000 | $896.80 | $10.24 | 2.16% |
R Class | $1,000 | $899.20 | $7.88 | 1.66% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.20 | $5.86 | 1.16% |
Institutional Class | $1,000 | $1,020.20 | $4.85 | 0.96% |
A Class | $1,000 | $1,017.95 | $7.11 | 1.41% |
B Class | $1,000 | $1,014.20 | $10.88 | 2.16% |
C Class | $1,000 | $1,014.20 | $10.88 | 2.16% |
R Class | $1,000 | $1,016.70 | $8.37 | 1.66% |
(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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
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SEPTEMBER 30, 2011 (UNAUDITED)
Shares | Value | |
Common Stocks — 100.0% | ||
DIVERSIFIED REITs — 4.2% | ||
Colonial Properties Trust | 391,000 | $ 7,100,560 |
Vornado Realty Trust | 398,778 | 29,756,814 |
36,857,374 | ||
HOTELS, RESORTS AND CRUISE LINES — 1.5% | ||
Starwood Hotels & Resorts Worldwide, Inc. | 133,700 | 5,190,234 |
Wyndham Worldwide Corp. | 276,600 | 7,885,866 |
13,076,100 | ||
INDUSTRIAL REITs — 5.6% | ||
DuPont Fabros Technology, Inc. | 215,600 | 4,245,164 |
First Industrial Realty Trust, Inc.(1) | 495,100 | 3,960,800 |
ProLogis | 1,685,900 | 40,883,075 |
49,089,039 | ||
OFFICE REITs — 11.2% | ||
Alexandria Real Estate Equities, Inc. | 220,900 | 13,561,051 |
Boston Properties, Inc. | 469,900 | 41,868,090 |
Digital Realty Trust, Inc. | 375,400 | 20,707,064 |
Kilroy Realty Corp. | 245,100 | 7,671,630 |
SL Green Realty Corp. | 266,000 | 15,467,900 |
99,275,735 | ||
REAL ESTATE OPERATING COMPANIES — 0.3% | ||
Brookfield Office Properties, Inc. | 221,700 | 3,052,809 |
RESIDENTIAL REITs — 21.1% | ||
American Campus Communities, Inc. | 358,000 | 13,321,180 |
AvalonBay Communities, Inc. | 318,700 | 36,347,735 |
BRE Properties, Inc. | 264,800 | 11,211,632 |
Camden Property Trust | 249,400 | 13,781,844 |
Education Realty Trust, Inc. | 158,200 | 1,358,938 |
Equity Lifestyle Properties, Inc. | 328,300 | 20,584,410 |
Equity Residential | 915,500 | 47,486,985 |
Essex Property Trust, Inc. | 116,500 | 13,984,660 |
Post Properties, Inc. | 232,300 | 8,070,102 |
UDR, Inc. | 894,600 | 19,806,444 |
185,953,930 | ||
RETAIL REITs — 26.5% | ||
DDR Corp. | 714,462 | 7,787,636 |
Federal Realty Investment Trust | 238,300 | 19,638,303 |
General Growth Properties, Inc. | 1,849,600 | 22,380,160 |
Glimcher Realty Trust | 570,700 | 4,040,556 |
Kimco Realty Corp. | 1,275,600 | 19,172,268 |
Macerich Co. (The) | 287,600 | 12,260,388 |
National Retail Properties, Inc. | 436,000 | 11,715,320 |
Realty Income Corp. | 94,000 | 3,030,560 |
Regency Centers Corp. | 126,400 | 4,465,712 |
Simon Property Group, Inc. | 993,900 | 109,309,122 |
Taubman Centers, Inc. | 402,800 | 20,264,868 |
234,064,893 | ||
SPECIALIZED REITs — 28.1% | ||
Extra Space Storage, Inc. | 792,400 | 14,762,412 |
HCP, Inc. | 1,349,000 | 47,295,940 |
Health Care REIT, Inc. | 860,888 | 40,289,558 |
Host Hotels & Resorts, Inc. | 2,923,700 | 31,985,278 |
LaSalle Hotel Properties | 141,200 | 2,711,040 |
Public Storage | 450,300 | 50,140,905 |
Strategic Hotels & Resorts, Inc.(1) | 1,122,700 | 4,838,837 |
Ventas, Inc. | 1,120,199 | 55,337,831 |
247,361,801 | ||
WIRELESS TELECOMMUNICATION SERVICES — 1.5% | ||
American Tower Corp. Class A(1) | 240,800 | 12,955,040 |
TOTAL COMMON STOCKS(Cost $699,561,124) | 881,686,721 | |
Temporary Cash Investments — 2.0% | ||
Repurchase Agreement, Bank America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 0.25%, 9/15/14, valued at $5,565,893), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $5,454,443) | 5,454,438 | |
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 3.50%, 2/15/39, valued at $4,790,297), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $4,675,237) | 4,675,233 | |
SSgA U.S. Government Money Market Fund | 7,455,635 | 7,455,635 |
TOTAL TEMPORARY CASH INVESTMENTS (Cost $17,585,306) | 17,585,306 | |
TOTAL INVESTMENT SECURITIES — 102.0% (Cost $717,146,430) | 899,272,027 | |
OTHER ASSETS AND LIABILITIES — (2.0)% | (17,940,040) | |
TOTAL NET ASSETS — 100.0% | $ 881,331,987 |
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Notes to Schedule of Investments
REIT = Real Estate Investment Trust
(1) | Non-income producing. |
See Notes to Financial Statements.
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SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities, at value (cost of $717,146,430) | $899,272,027 | |||
Receivable for investments sold | 19,460,986 | |||
Receivable for capital shares sold | 762,768 | |||
Dividends and interest receivable | 1,838,120 | |||
921,333,901 | ||||
Liabilities | ||||
Payable for investments purchased | 14,283,044 | |||
Payable for capital shares redeemed | 24,802,646 | |||
Accrued management fees | 887,429 | |||
Distribution and service fees payable | 28,795 | |||
40,001,914 | ||||
Net Assets | $881,331,987 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $1,279,965,999 | |||
Undistributed net investment income | 2,346,067 | |||
Accumulated net realized loss | (583,105,676 | ) | ||
Net unrealized appreciation | 182,125,597 | |||
$881,331,987 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $528,999,896 | 30,030,493 | $17.62 | |||||||||
Institutional Class, $0.01 Par Value | $227,440,042 | 12,886,841 | $17.65 | |||||||||
A Class, $0.01 Par Value | $121,700,020 | 6,902,622 | $17.63 | * | ||||||||
B Class, $0.01 Par Value | $69,228 | 3,966 | $17.46 | |||||||||
C Class, $0.01 Par Value | $1,576,001 | 90,195 | $17.47 | |||||||||
R Class, $0.01 Par Value | $1,546,800 | 87,993 | $17.58 |
*Maximum offering price $18.71 (net asset value divided by 0.9425)
See Notes to Financial Statements.
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FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends | $10,737,644 | |||
Interest | 1,537 | |||
10,739,181 | ||||
Expenses: | ||||
Management fees | 5,786,123 | |||
Distribution and service fees: | ||||
A Class | 175,502 | |||
B Class | 423 | |||
C Class | 8,744 | |||
R Class | 4,078 | |||
Directors’ fees and expenses | 24,237 | |||
5,999,107 | ||||
Net investment income (loss) | 4,740,074 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on investment transactions | 17,081,715 | |||
Change in net unrealized appreciation (depreciation) on investments | (122,592,042 | ) | ||
Net realized and unrealized gain (loss) | (105,510,327 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(100,770,253 | ) |
See Notes to Financial Statements.
11
SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) AND YEAR ENDED MARCH 31, 2011 | ||||||||
Increase (Decrease) in Net Assets | September 30, 2011 | March 31, 2011 | ||||||
Operations | ||||||||
Net investment income (loss) | $4,740,074 | $7,560,401 | ||||||
Net realized gain (loss) | 17,081,715 | 200,334,854 | ||||||
Change in net unrealized appreciation (depreciation) | (122,592,042 | ) | 10,715,797 | |||||
Net increase (decrease) in net assets resulting from operations | (100,770,253 | ) | 218,611,052 | |||||
Distributions to Shareholders | ||||||||
From net investment income: | ||||||||
Investor Class | (1,349,868 | ) | (5,541,757 | ) | ||||
Institutional Class | (892,999 | ) | (2,952,541 | ) | ||||
A Class | (149,221 | ) | (1,046,525 | ) | ||||
B Class | — | (229 | ) | |||||
C Class | — | (3,154 | ) | |||||
R Class | — | (3,917 | ) | |||||
Decrease in net assets from distributions | (2,392,088 | ) | (9,548,123 | ) | ||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions | (63,078,334 | ) | (96,616,583 | ) | ||||
Net increase (decrease) in net assets | (166,240,675 | ) | 112,446,346 | |||||
Net Assets | ||||||||
Beginning of period | 1,047,572,662 | 935,126,316 | ||||||
End of period | $881,331,987 | $1,047,572,662 | ||||||
Accumulated undistributed net investment income (loss) | $2,346,067 | $(1,919 | ) |
See Notes to Financial Statements.
12
SEPTEMBER 30, 2011 (UNAUDITED)
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 is nondiversified as defined under the 1940 Act. The fund’s investment objective is to seek high total investment return through a combination of capital appreciation and current income. The fund pursues its objective by investing primarily in securities issued by real estate investment trusts and in the securities of companies which are principally engaged in the real estate industry.
The fund is authorized to issue the Investor Class, the Institutional Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee. On October 21, 2011, all outstanding B Class shares were converted to A Class shares and the fund discontinued issuance of the B 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 financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost.
13
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund estimates the components of distributions received that may be considered nontaxable distributions or capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
14
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 1.05% to 1.20% for the Investor Class, A Class, B Class, C Class and R Class. The Institutional Class is 0.20% less at each point within the range. The effective annual management fee for each class for the six months ended September 30, 2011 was 1.16% for the Investor Class, A Class, B Class, C Class and R Class and 0.96% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B 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 American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. The plans provide that the B Class and C Class will each 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 six months ended September 30, 2011 are detailed in the Statement of Operations.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC. Various funds in a series issued by American Century Asset Allocation Portfolios, Inc. (ACAAP) own, in aggregate, 12% of the shares of the fund. ACAAP does not invest in the fund for the purpose of exercising management or control.
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a securities lending agreement with JPMorgan Chase Bank (JPMCB) and a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMCB was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
15
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2011 were $881,474,065 and $934,943,815, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2011 | Year ended March 31, 2011 | ||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||
Investor Class/Shares Authorized | 150,000,000 | 150,000,000 | |||||||||||||
Sold | 4,758,930 | $94,798,874 | 9,936,153 | $171,304,273 | |||||||||||
Issued in reinvestment of distributions | 68,782 | 1,323,360 | 293,260 | 5,155,307 | |||||||||||
Redeemed | (5,716,011 | ) | (111,811,533 | ) | (15,118,463 | ) | (258,085,198 | ) | |||||||
(888,299 | ) | (15,689,299 | ) | (4,889,050 | ) | (81,625,618 | ) | ||||||||
Institutional Class/Shares Authorized | 75,000,000 | 75,000,000 | |||||||||||||
Sold | 1,492,419 | 29,245,769 | 5,250,292 | 90,751,885 | |||||||||||
Issued in reinvestment of distributions | 45,651 | 880,150 | 165,593 | 2,916,541 | |||||||||||
Redeemed | (3,825,920 | ) | (72,373,411 | ) | (4,792,589 | ) | (84,080,224 | ) | |||||||
(2,287,850 | ) | (42,247,492 | ) | 623,296 | 9,588,202 | ||||||||||
A Class/Shares Authorized | 40,000,000 | 40,000,000 | |||||||||||||
Sold | 1,229,238 | 24,444,059 | 2,827,581 | 49,364,023 | |||||||||||
Issued in reinvestment of distributions | 7,650 | 147,330 | 58,754 | 1,035,857 | |||||||||||
Redeemed | (1,540,229 | ) | (30,258,460 | ) | (4,408,803 | ) | (76,067,947 | ) | |||||||
(303,341 | ) | (5,667,071 | ) | (1,522,468 | ) | (25,668,067 | ) | ||||||||
B Class/Shares Authorized | 5,000,000 | 5,000,000 | |||||||||||||
Sold | — | — | 290 | 4,972 | |||||||||||
Issued in reinvestment of distributions | — | — | 13 | 229 | |||||||||||
Redeemed | (529 | ) | (10,463 | ) | (1,598 | ) | (28,164 | ) | |||||||
(529 | ) | (10,463 | ) | (1,295 | ) | (22,963 | ) | ||||||||
C Class/Shares Authorized | 5,000,000 | 5,000,000 | |||||||||||||
Sold | 23,866 | 478,623 | 30,885 | 544,430 | |||||||||||
Issued in reinvestment of distributions | — | — | 165 | 2,914 | |||||||||||
Redeemed | (15,568 | ) | (299,473 | ) | (11,531 | ) | (196,244 | ) | |||||||
8,298 | 179,150 | 19,519 | 351,100 | ||||||||||||
R Class/Shares Authorized | 5,000,000 | 5,000,000 | |||||||||||||
Sold | 29,908 | 589,917 | 46,748 | 851,148 | |||||||||||
Issued in reinvestment of distributions | — | — | 218 | 3,871 | |||||||||||
Redeemed | (11,671 | ) | (233,076 | ) | (5,337 | ) | (94,256 | ) | |||||||
18,237 | 356,841 | 41,629 | 760,763 | ||||||||||||
Net increase (decrease) | (3,453,484 | ) | $(63,078,334 | ) | (5,728,369 | ) | $(96,616,583 | ) |
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6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||||||
Investment Securities | ||||||||||||
Common Stocks | $881,686,721 | — | — | |||||||||
Temporary Cash Investments | 7,455,635 | $10,129,671 | — | |||||||||
Total Value of Investment Securities | $889,142,356 | $10,129,671 | — |
7. Risk Factors
The fund concentrates its investments in a narrow segment of the total market. Because of this, the fund is subject to certain additional risks as compared to investing in a more diversified portfolio of investments. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters, and interest rate risk.
The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
17
8. Federal Tax Information
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 September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $797,743,935 | |||
Gross tax appreciation of investments | $118,899,928 | |||
Gross tax depreciation of investments | (17,371,836 | ) | ||
Net tax appreciation (depreciation) of investments | $101,528,092 |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2011, the fund had accumulated capital losses of $(517,761,855), which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers of $(50,561,948) and $(467,199,907) expire in 2017 and 2018, respectively.
The fund has elected to treat $(1,919) of net foreign currency losses incurred in the five-month period ended March 31, 2011, as having been incurred in the following fiscal year for federal income tax purposes.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused.
18
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |
Investor Class | |||||||||||||
2011(3) | $19.58 | 0.09 | (2.01) | (1.92) | (0.04) | — | (0.04) | $17.62 | (9.85)% | 1.16%(4) | 0.88%(4) | 84% | $529,000 |
2011 | $15.79 | 0.13 | 3.83 | 3.96 | (0.17) | — | (0.17) | $19.58 | 25.19% | 1.16% | 0.76% | 238% | $605,529 |
2010 | $7.80 | 0.28 | 8.01 | 8.29 | (0.30) | — | (0.30) | $15.79 | 107.30% | 1.16% | 2.24% | 236% | $565,463 |
2009 | $21.67 | 0.46 | (13.91) | (13.45) | (0.42) | — | (0.42) | $7.80 | (62.80)% | 1.15% | 2.87% | 109% | $361,510 |
2008 | $31.37 | 0.43 | (5.53) | (5.10) | (0.51) | (4.09) | (4.60) | $21.67 | (16.60)% | 1.14% | 1.60% | 153% | $864,011 |
2007 | $29.00 | 0.53 | 5.70 | 6.23 | (0.49) | (3.37) | (3.86) | $31.37 | 22.02% | 1.13% | 1.72% | 197% | $1,590,428 |
Institutional Class | |||||||||||||
2011(3) | $19.62 | 0.11 | (2.02) | (1.91) | (0.06) | — | (0.06) | $17.65 | (9.75)% | 0.96%(4) | 1.08%(4) | 84% | $227,440 |
2011 | $15.81 | 0.17 | 3.84 | 4.01 | (0.20) | — | (0.20) | $19.62 | 25.48% | 0.96% | 0.96% | 238% | $297,740 |
2010 | $7.81 | 0.30 | 8.03 | 8.33 | (0.33) | — | (0.33) | $15.81 | 107.71% | 0.96% | 2.44% | 236% | $230,109 |
2009 | $21.71 | 0.50 | (13.94) | (13.44) | (0.46) | — | (0.46) | $7.81 | (62.73)% | 0.95% | 3.07% | 109% | $104,565 |
2008 | $31.41 | 0.48 | (5.54) | (5.06) | (0.55) | (4.09) | (4.64) | $21.71 | (16.44)% | 0.94% | 1.80% | 153% | $200,982 |
2007 | $29.03 | 0.59 | 5.71 | 6.30 | (0.55) | (3.37) | (3.92) | $31.41 | 22.27% | 0.93% | 1.92% | 197% | $379,044 |
A Class(5) | |||||||||||||
2011(3) | $19.60 | 0.06 | (2.01) | (1.95) | (0.02) | — | (0.02) | $17.63 | (9.95)% | 1.41%(4) | 0.63%(4) | 84% | $121,700 |
2011 | $15.81 | 0.09 | 3.83 | 3.92 | (0.13) | — | (0.13) | $19.60 | 24.92% | 1.41% | 0.51% | 238% | $141,257 |
2010 | $7.81 | 0.24 | 8.02 | 8.26 | (0.26) | — | (0.26) | $15.81 | 106.76% | 1.41% | 1.99% | 236% | $138,037 |
2009 | $21.69 | 0.42 | (13.94) | (13.52) | (0.36) | — | (0.36) | $7.81 | (62.88)% | 1.40% | 2.62% | 109% | $84,568 |
2008 | $31.41 | 0.36 | (5.53) | (5.17) | (0.46) | (4.09) | (4.55) | $21.69 | (16.84)% | 1.39% | 1.35% | 153% | $253,419 |
2007 | $29.04 | 0.45 | 5.71 | 6.16 | (0.42) | (3.37) | (3.79) | $31.41 | 21.70% | 1.38% | 1.47% | 197% | $488,277 |
19
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) |
B Class |
2011(3) | $19.46 | (0.01) | (1.99) | (2.00) | — | — | — | $17.46 | (10.33)% | 2.16%(4) | (0.12)%(4) | 84% | $69 |
2011 | $15.74 | (0.04) | 3.81 | 3.77 | (0.05) | — | (0.05) | $19.46 | 23.95% | 2.16% | (0.24)% | 238% | $87 |
2010 | $7.77 | 0.16 | 7.97 | 8.13 | (0.16) | — | (0.16) | $15.74 | 105.35% | 2.16% | 1.24% | 236% | $91 |
2009 | $21.62 | 0.37 | (13.93) | (13.56) | (0.29) | — | (0.29) | $7.77 | (63.17)% | 2.15% | 1.87% | 109% | $40 |
2008(6) | $29.12 | 0.14 | (3.42) | (3.28) | (0.13) | (4.09) | (4.22) | $21.62 | (11.57)% | 2.14%(4) | 1.17%(4) | 153%(7) | $33 |
C Class |
2011(3) | $19.48 | (0.01) | (2.00) | (2.01) | — | — | — | $17.47 | (10.32)% | 2.16%(4) | (0.12)%(4) | 84% | $1,576 |
2011 | $15.75 | (0.04) | 3.82 | 3.78 | (0.05) | — | (0.05) | $19.48 | 24.00% | 2.16% | (0.24)% | 238% | $1,595 |
2010 | $7.78 | 0.14 | 7.99 | 8.13 | (0.16) | — | (0.16) | $15.75 | 105.21% | 2.16% | 1.24% | 236% | $983 |
2009 | $21.62 | 0.35 | (13.90) | (13.55) | (0.29) | — | (0.29) | $7.78 | (63.12)% | 2.15% | 1.87% | 109% | $334 |
2008(6) | $29.12 | 0.13 | (3.41) | (3.28) | (0.13) | (4.09) | (4.22) | $21.62 | (11.57)% | 2.14%(4) | 1.15%(4) | 153%(7) | $62 |
R Class |
2011(3) | $19.55 | 0.04 | (2.01) | (1.97) | — | — | — | $17.58 | (10.08)% | 1.66%(4) | 0.38%(4) | 84% | $1,547 |
2011 | $15.78 | 0.06 | 3.81 | 3.87 | (0.10) | — | (0.10) | $19.55 | 24.60% | 1.66% | 0.26% | 238% | $1,364 |
2010 | $7.79 | 0.21 | 8.01 | 8.22 | (0.23) | — | (0.23) | $15.78 | 106.38% | 1.66% | 1.74% | 236% | $444 |
2009 | $21.65 | 0.44 | (13.96) | (13.52) | (0.34) | — | (0.34) | $7.79 | (62.98)% | 1.65% | 2.37% | 109% | $127 |
2008(6) | $29.12 | 0.19 | (3.41) | (3.22) | (0.16) | (4.09) | 4.25 | $21.65 | (11.37)% | 1.64%(4) | 1.65%(4) | 153%(7) | $26 |
20
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) | Six months ended September 30, 2011 (unaudited). |
(4) | Annualized. |
(5) | Prior to September 4, 2007, the A class was referred to as the Advisor Class. |
(6) | September 28, 2007 (commencement of sale) through March 31, 2008. |
(7) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2008. |
See Notes to Financial Statements.
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At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
● | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
● | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
22
Nature, Extent and Quality of Services — Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
● | constructing and designing the Fund |
● | portfolio research and security selection |
● | initial capitalization/funding |
● | securities trading |
● | Fund administration |
● | custody of Fund assets |
● | daily valuation of the Fund’s portfolio |
● | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
● | legal services |
● | regulatory and portfolio compliance |
● | financial reporting |
● | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons.
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The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance section of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
24
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
25
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent directors, taking into account all of the factors discussed above and the information provided by the Advisor and others, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
26
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73674 1111
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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Small Cap Value Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 14 |
Statement of Operations | 15 |
Statement of Changes in Net Assets | 16 |
Notes to Financial Statements | 17 |
Financial Highlights | 23 |
Approval of Management Agreement | 26 |
Additional Information | 31 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the six months ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
This reporting period differed dramatically from the six months that preceded it. As the period covered by this report opened in April 2011, U.S. stocks were approaching the crest of an eight-month rally, originating back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
![](https://capedge.com/proxy/N-CSRS/0001437749-11-009308/prattsignature.jpg)
Don Pratt
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Total Returns as of September 30, 2011 | |||||||
Average Annual Returns | |||||||
Ticker ymbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ASVIX | -22.59% | -6.51% | 1.20% | 7.91% | 9.70% | 7/31/98 |
Russell 2000 Value Index | — | -23.56% | -5.99% | -3.08% | 6.47% | 5.99% | — |
Institutional Class | ACVIX | -22.49% | -6.30% | 1.40% | 8.12% | 10.41% | 10/26/98 |
A Class(2) No sales charge* With sales charge* | ACSCX | -22.65% -27.13% | -6.81% -12.18% | 0.95% -0.24% | 7.65% 7.01% | 10.44% 9.89% | 12/31/99 |
C Class No sales charge* With sales charge* | ASVNX | -22.94% -23.71% | -7.45% -7.45% | — — | — — | -2.73% -2.73% | 3/1/10 |
R Class | ASVRX | -22.76% | -7.05% | — | — | -2.24% | 3/1/10 |
* | 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. |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Prior to March 1, 2010, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | ||||
Investor Class | Institutional Class | A Class | C Class | R Class |
1.41% | 1.21% | 1.66% | 2.41% | 1.91% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Historically, small company stocks have been more volatile than the stocks of larger, more established companies. The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not.
4
SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Quest Software, Inc. | 1.6% |
HCC Insurance Holdings, Inc. | 1.6% |
iShares S&P SmallCap 600 Index Fund | 1.4% |
Aspen Insurance Holdings Ltd., Series AHL, 5.625% (Convertible) | 1.4% |
Granite Construction, Inc. | 1.3% |
Young Innovations, Inc. | 1.1% |
DST Systems, Inc. | 1.1% |
Great Plains Energy, Inc. | 1.0% |
First Horizon National Corp. | 1.0% |
Curtiss-Wright Corp. | 0.9% |
Top Five Industries | % of net assets |
Real Estate Investment Trusts (REITs) | 8.5% |
Commercial Banks | 8.1% |
Insurance | 6.6% |
Health Care Providers and Services | 4.4% |
Aerospace and Defense | 4.1% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 92.6% |
Convertible Preferred Stocks | 2.4% |
Exchange-Traded Funds | 1.7% |
Preferred Stocks | 0.9% |
Total Equity Exposure | 97.6% |
Temporary Cash Investments | 1.6% |
Other Assets and Liabilities | 0.8% |
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Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2011 to September 30, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
6
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 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period(1) 4/1/11 - 9/30/11 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $774.10 | $5.46 | 1.23% |
Institutional Class | $1,000 | $775.10 | $4.57 | 1.03% |
A Class | $1,000 | $773.50 | $6.56 | 1.48% |
C Class | $1,000 | $770.60 | $9.87 | 2.23% |
R Class | $1,000 | $772.40 | $7.67 | 1.73% |
Hypothetical | ||||
Investor Class | $1,000 | $1,018.85 | $6.21 | 1.23% |
Institutional Class | $1,000 | $1,019.85 | $5.20 | 1.03% |
A Class | $1,000 | $1,017.60 | $7.47 | 1.48% |
C Class | $1,000 | $1,013.85 | $11.23 | 2.23% |
R Class | $1,000 | $1,016.35 | $8.72 | 1.73% |
(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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
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Schedule of Investments |
SEPTEMBER 30, 2011 (UNAUDITED)
Shares | Value | |
Common Stocks — 92.6% | ||
AEROSPACE AND DEFENSE — 4.1% | ||
AAR Corp. | 115,000 | $1,917,050 |
Alliant Techsystems, Inc. | 255,000 | 13,900,050 |
American Science & Engineering, Inc. | 200,000 | 12,210,000 |
Ceradyne, Inc.(1) | 110,571 | 2,973,254 |
Curtiss-Wright Corp. | 525,000 | 15,135,750 |
Esterline Technologies Corp.(1) | 50,000 | 2,592,000 |
Moog, Inc., Class A(1) | 110,000 | 3,588,200 |
National Presto Industries, Inc. | 119,423 | 10,379,053 |
Orbital Sciences Corp.(1) | 195,000 | 2,496,000 |
Teledyne Technologies, Inc.(1) | 70,000 | 3,420,200 |
Triumph Group, Inc. | 25,000 | 1,218,500 |
69,830,057 | ||
AIRLINES — 0.6% | ||
Alaska Air Group, Inc.(1) | 75,000 | 4,221,750 |
Allegiant Travel Co.(1) | 60,000 | 2,827,800 |
JetBlue Airways Corp.(1) | 575,000 | 2,357,500 |
9,407,050 | ||
AUTO COMPONENTS — 1.3% | ||
American Axle & Manufacturing Holdings, Inc.(1) | 825,000 | 6,294,750 |
Cooper Tire & Rubber Co. | 550,000 | 5,989,500 |
Dana Holding Corp.(1) | 525,000 | 5,512,500 |
Standard Motor Products, Inc. | 280,000 | 3,631,600 |
21,428,350 | ||
BEVERAGES — 0.3% | ||
Primo Water Corp.(1) | 900,000 | 5,076,000 |
BUILDING PRODUCTS — 0.2% | ||
Apogee Enterprises, Inc. | 215,000 | 1,846,850 |
Simpson Manufacturing Co., Inc. | 93,400 | 2,328,462 |
4,175,312 | ||
CAPITAL MARKETS — 2.4% | ||
Apollo Investment Corp. | 1,100,000 | 8,272,000 |
Artio Global Investors, Inc. | 440,000 | 3,502,400 |
BlackRock Kelso Capital Corp. | 325,000 | 2,372,500 |
Fifth Street Finance Corp. | 325,000 | 3,029,000 |
Hercules Technology Growth Capital, Inc. | 480,278 | 4,091,969 |
Knight Capital Group, Inc., Class A(1) | 265,000 | 3,222,400 |
MCG Capital Corp. | 583,451 | 2,310,466 |
PennantPark Investment Corp. | 550,000 | 4,906,000 |
Prospect Capital Corp. | 300,000 | 2,523,000 |
Waddell & Reed Financial, Inc. | 290,000 | 7,252,900 |
41,482,635 | ||
CHEMICALS — 1.9% | ||
A. Schulman, Inc. | 85,000 | 1,444,150 |
Georgia Gulf Corp.(1) | 220,000 | 3,042,600 |
H.B. Fuller Co. | 260,000 | 4,737,200 |
Hawkins, Inc. | 115,000 | 3,661,600 |
Innophos Holdings, Inc. | 22,195 | 884,915 |
Kraton Performance Polymers, Inc.(1) | 150,000 | 2,427,000 |
Minerals Technologies, Inc. | 135,000 | 6,651,450 |
Olin Corp. | 115,000 | 2,071,150 |
OM Group, Inc.(1) | 185,000 | 4,804,450 |
Sensient Technologies Corp. | 85,000 | 2,766,750 |
32,491,265 | ||
COMMERCIAL BANKS — 8.1% | ||
American National Bankshares, Inc. | 215,000 | 3,891,500 |
BOK Financial Corp. | 245,000 | 11,488,050 |
Boston Private Financial Holdings, Inc. | 700,000 | 4,116,000 |
City National Corp. | 115,000 | 4,342,400 |
Community Bank System, Inc. | 115,000 | 2,609,350 |
Cullen/Frost Bankers, Inc. | 150,000 | 6,879,000 |
CVB Financial Corp. | 359,590 | 2,765,247 |
F.N.B. Corp. | 400,000 | 3,428,000 |
First Horizon National Corp. | 2,800,000 | 16,688,000 |
First Interstate Bancsystem, Inc. | 255,000 | 2,731,050 |
First Midwest Bancorp., Inc. | 8,154 | 59,687 |
FirstMerit Corp. | 900,000 | 10,224,000 |
Fulton Financial Corp. | 1,275,000 | 9,753,750 |
Heritage Financial Corp. | 440,000 | 4,857,600 |
IBERIABANK Corp. | 95,000 | 4,470,700 |
Lakeland Financial Corp. | 265,000 | 5,474,900 |
National Bankshares, Inc. | 165,000 | 3,981,450 |
Old National Bancorp. | 525,000 | 4,893,000 |
Pacific Continental Corp. | 396,950 | 2,814,376 |
Park Sterling Corp.(1) | 975,000 | 3,334,500 |
TCF Financial Corp. | 600,000 | 5,496,000 |
Trico Bancshares | 330,000 | 4,049,100 |
Trustmark Corp. | 285,000 | 5,172,750 |
Umpqua Holdings Corp. | 400,000 | 3,516,000 |
8
Shares | Value |
United Bankshares, Inc. | 160,000 | $3,214,400 |
Washington Banking Co. | 260,000 | 2,529,800 |
Webster Financial Corp. | 140,000 | 2,142,000 |
Wintrust Financial Corp. | 120,000 | 3,097,200 |
138,019,810 | ||
COMMERCIAL SERVICES AND SUPPLIES — 1.3% | ||
Brink’s Co. (The) | 195,000 | 4,545,450 |
Metalico, Inc.(1) | 1,000,000 | 3,900,000 |
SYKES Enterprises, Inc.(1) | 455,000 | 6,802,250 |
US Ecology, Inc. | 445,000 | 6,884,150 |
22,131,850 | ||
COMMUNICATIONS EQUIPMENT — 1.0% | ||
Bel Fuse, Inc., Class B | 280,000 | 4,365,200 |
Blue Coat Systems, Inc.(1) | 215,000 | 2,984,200 |
Emulex Corp.(1) | 510,000 | 3,264,000 |
Oplink Communications, Inc.(1) | 160,000 | 2,422,400 |
Tellabs, Inc. | 1,050,000 | 4,504,500 |
17,540,300 | ||
COMPUTERS AND PERIPHERALS — 0.9% | ||
Electronics for Imaging, Inc.(1) | 50,000 | 673,500 |
Lexmark International, Inc., Class A(1) | 175,000 | 4,730,250 |
QLogic Corp.(1) | 765,000 | 9,700,200 |
15,103,950 | ||
CONSTRUCTION AND ENGINEERING — 1.9% | ||
Comfort Systems USA, Inc. | 233,500 | 1,942,720 |
EMCOR Group, Inc.(1) | 230,000 | 4,675,900 |
Granite Construction, Inc. | 1,135,000 | 21,303,950 |
Pike Electric Corp.(1) | 680,000 | 4,603,600 |
32,526,170 | ||
CONSTRUCTION MATERIALS — 0.2% | ||
Martin Marietta Materials, Inc. | 65,000 | 4,109,300 |
CONTAINERS AND PACKAGING — 1.1% | ||
Bemis Co., Inc. | 395,000 | 11,577,450 |
Sonoco Products Co. | 260,000 | 7,339,800 |
18,917,250 | ||
DISTRIBUTORS — 0.1% | ||
Core-Mark Holding Co., Inc.(1) | 79,390 | 2,431,716 |
DIVERSIFIED FINANCIAL SERVICES — 0.2% | ||
Compass Diversified Holdings | 350,000 | 4,263,000 |
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.3% | ||
Atlantic Tele-Network, Inc. | 180,000 | 5,918,400 |
ELECTRIC UTILITIES — 3.6% | ||
Cleco Corp. | 150,000 | 5,121,000 |
El Paso Electric Co. | 80,000 | 2,567,200 |
Great Plains Energy, Inc. | 880,000 | 16,984,000 |
IDACORP, Inc. | 170,000 | 6,422,600 |
MGE Energy, Inc. | 110,000 | 4,473,700 |
NV Energy, Inc. | 415,000 | 6,104,650 |
Portland General Electric Co. | 385,000 | 9,120,650 |
Unitil Corp. | 180,000 | 4,622,400 |
Westar Energy, Inc. | 240,000 | 6,340,800 |
61,757,000 | ||
ELECTRICAL EQUIPMENT — 1.9% | ||
Brady Corp., Class A | 440,000 | 11,629,200 |
Encore Wire Corp. | 535,000 | 11,010,300 |
Hubbell, Inc., Class B | 80,000 | 3,963,200 |
II-VI, Inc.(1) | 140,000 | 2,450,000 |
LSI Industries, Inc. | 385,000 | 2,398,550 |
31,451,250 | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 3.4% | ||
Anixter International, Inc. | 50,000 | 2,372,000 |
Benchmark Electronics, Inc.(1) | 355,000 | 4,618,550 |
Coherent, Inc.(1) | 105,000 | 4,510,800 |
Electro Scientific Industries, Inc.(1) | 165,000 | 1,961,850 |
Littelfuse, Inc. | 230,000 | 9,248,300 |
Methode Electronics, Inc. | 430,000 | 3,194,900 |
Molex, Inc. | 300,000 | 6,111,000 |
Park Electrochemical Corp. | 275,000 | 5,876,750 |
Plexus Corp.(1) | 565,000 | 12,780,300 |
Tech Data Corp.(1) | 150,000 | 6,484,500 |
57,158,950 | ||
ENERGY EQUIPMENT AND SERVICES — 1.7% | ||
Bristow Group, Inc. | 135,000 | 5,728,050 |
Cal Dive International, Inc.(1) | 1,200,000 | 2,292,000 |
Helix Energy Solutions Group, Inc.(1) | 180,000 | 2,358,000 |
SandRidge Permian Trust(1) | 175,000 | 2,948,750 |
Tetra Technologies, Inc.(1) | 925,000 | 7,141,000 |
Tidewater, Inc. | 50,000 | 2,102,500 |
Unit Corp.(1) | 150,000 | 5,538,000 |
28,108,300 | ||
FOOD AND STAPLES RETAILING — 1.0% | ||
Ruddick Corp. | 65,000 | 2,534,350 |
Village Super Market, Inc., Class A | 160,000 | 3,830,400 |
Weis Markets, Inc. | 280,000 | 10,376,800 |
16,741,550 | ||
FOOD PRODUCTS — 1.4% | ||
Dole Food Co., Inc.(1) | 260,000 | 2,600,000 |
J&J Snack Foods Corp. | 140,000 | 6,727,000 |
Ralcorp Holdings, Inc.(1) | 65,000 | 4,986,150 |
9
Shares | Value |
Snyders-Lance, Inc. | 210,000 | $4,378,500 |
TreeHouse Foods, Inc.(1) | 70,000 | 4,328,800 |
23,020,450 | ||
GAS UTILITIES — 1.9% | ||
AGL Resources, Inc. | 180,000 | 7,333,200 |
Atmos Energy Corp. | 195,000 | 6,327,750 |
Chesapeake Utilities Corp. | 180,000 | 7,219,800 |
Laclede Group, Inc. (The) | 110,000 | 4,262,500 |
WGL Holdings, Inc. | 180,000 | 7,032,600 |
32,175,850 | ||
HEALTH CARE EQUIPMENT AND SUPPLIES — 1.8% | ||
Cutera, Inc.(1) | 400,000 | 2,848,000 |
ICU Medical, Inc.(1) | 150,000 | 5,520,000 |
Utah Medical Products, Inc. | 150,000 | 3,952,500 |
Young Innovations, Inc.(2) | 640,000 | 18,240,000 |
30,560,500 | ||
HEALTH CARE PROVIDERS AND SERVICES — 4.4% | ||
AMERIGROUP Corp.(1) | 40,000 | 1,560,400 |
Amsurg Corp.(1) | 175,000 | 3,937,500 |
Assisted Living Concepts, Inc., Class A | 155,000 | 1,963,850 |
Centene Corp.(1) | 105,000 | 3,010,350 |
Chemed Corp. | 90,000 | 4,946,400 |
HealthSouth Corp.(1) | 320,000 | 4,777,600 |
Healthspring, Inc.(1) | 100,000 | 3,646,000 |
LifePoint Hospitals, Inc.(1) | 215,000 | 7,877,600 |
Lincare Holdings, Inc. | 355,000 | 7,987,500 |
Magellan Health Services, Inc.(1) | 105,000 | 5,071,500 |
National Healthcare Corp. | 172,190 | 5,561,737 |
Owens & Minor, Inc. | 320,000 | 9,113,600 |
PSS World Medical, Inc.(1) | 210,000 | 4,134,900 |
U.S. Physical Therapy, Inc. | 105,000 | 1,944,600 |
VCA Antech, Inc.(1) | 530,000 | 8,469,400 |
74,002,937 | ||
HOTELS, RESTAURANTS AND LEISURE — 1.8% | ||
Bally Technologies, Inc.(1) | 230,000 | 6,205,400 |
Bob Evans Farms, Inc. | 177,460 | 5,061,159 |
CEC Entertainment, Inc. | 150,000 | 4,270,500 |
Jack in the Box, Inc.(1) | 145,000 | 2,888,400 |
Vail Resorts, Inc. | 80,000 | 3,023,200 |
WMS Industries, Inc.(1) | 470,000 | 8,267,300 |
29,715,959 | ||
HOUSEHOLD DURABLES — 0.5% | ||
CSS Industries, Inc. | 235,000 | 3,919,800 |
Helen of Troy Ltd.(1) | 74,720 | 1,876,966 |
M.D.C. Holdings, Inc. | 125,000 | 2,117,500 |
7,914,266 | ||
INDUSTRIAL CONGLOMERATES — 0.2% | ||
Tredegar Corp. | 240,000 | 3,559,200 |
INSURANCE — 5.2% | ||
Alterra Capital Holdings Ltd. | 360,000 | 6,829,200 |
American Equity Investment Life Holding Co. | 300,000 | 2,625,000 |
Arthur J. Gallagher & Co. | 165,000 | 4,339,500 |
Aspen Insurance Holdings Ltd. | 585,000 | 13,478,400 |
Baldwin & Lyons, Inc., Class B | 250,000 | 5,342,500 |
Hanover Insurance Group, Inc. (The) | 130,000 | 4,615,000 |
HCC Insurance Holdings, Inc. | 975,000 | 26,373,750 |
Platinum Underwriters Holdings Ltd. | 215,000 | 6,611,250 |
Primerica, Inc. | 285,000 | 6,144,600 |
ProAssurance Corp. | 90,000 | 6,481,800 |
United Fire & Casualty Co. | 250,000 | 4,422,500 |
87,263,500 | ||
IT SERVICES — 2.6% | ||
DST Systems, Inc. | 415,000 | 18,189,450 |
Euronet Worldwide, Inc.(1) | 165,000 | 2,597,100 |
NeuStar, Inc., Class A(1) | 375,000 | 9,427,500 |
Total System Services, Inc. | 800,000 | 13,544,000 |
43,758,050 | ||
LEISURE EQUIPMENT AND PRODUCTS† | ||
Arctic Cat, Inc.(1) | 10,909 | 158,071 |
LIFE SCIENCES TOOLS AND SERVICES — 0.2% | ||
Pharmaceutical Product Development, Inc. | 125,000 | 3,207,500 |
MACHINERY — 2.4% | ||
Actuant Corp., Class A | 130,000 | 2,567,500 |
Altra Holdings, Inc.(1) | 529,400 | 6,125,158 |
Barnes Group, Inc. | 185,000 | 3,561,250 |
Briggs & Stratton Corp. | 430,000 | 5,809,300 |
Douglas Dynamics, Inc. | 190,000 | 2,428,200 |
FreightCar America, Inc.(1) | 200,000 | 2,882,000 |
Kaydon Corp. | 300,000 | 8,604,000 |
Mueller Industries, Inc., Class A | 135,000 | 5,209,650 |
Oshkosh Corp.(1) | 200,000 | 3,148,000 |
40,335,058 | ||
MARINE — 0.3% | ||
Diana Shipping, Inc.(1) | 700,000 | 5,194,000 |
MEDIA — 1.5% | ||
E.W. Scripps Co. (The), Class A(1) | 965,434 | 6,758,038 |
Entercom Communications Corp., Class A(1) | 840,000 | 4,410,000 |
10
Shares | Value |
Entravision Communications Corp., Class A(1) | 2,675,000 | $2,728,500 |
Gannett Co., Inc. | 450,000 | 4,288,500 |
Harte-Hanks, Inc. | 400,000 | 3,392,000 |
LIN TV Corp., Class A(1) | 1,440,000 | 3,139,200 |
24,716,238 | ||
METALS AND MINING — 1.2% | ||
Century Aluminum Co.(1) | 200,000 | 1,788,000 |
Hecla Mining Co.(1) | 1,225,000 | 6,566,000 |
RTI International Metals, Inc.(1) | 175,000 | 4,081,000 |
Thompson Creek Metals Co., Inc.(1) | 950,000 | 5,766,500 |
Worthington Industries, Inc. | 150,000 | 2,095,500 |
20,297,000 | ||
MULTI-UTILITIES — 1.6% | ||
Avista Corp. | 295,000 | 7,035,750 |
Black Hills Corp. | 265,000 | 8,119,600 |
MDU Resources Group, Inc. | 135,000 | 2,590,650 |
NorthWestern Corp. | 135,000 | 4,311,900 |
Vectren Corp. | 190,000 | 5,145,200 |
27,203,100 | ||
MULTILINE RETAIL — 0.6% | ||
Big Lots, Inc.(1) | 200,000 | 6,966,000 |
Fred’s, Inc., Class A | 315,000 | 3,357,900 |
10,323,900 | ||
OFFICE ELECTRONICS — 0.3% | ||
Zebra Technologies Corp., Class A(1) | 170,000 | 5,259,800 |
OIL, GAS AND CONSUMABLE FUELS — 2.7% | ||
Bill Barrett Corp.(1) | 65,000 | 2,355,600 |
BP Prudhoe Bay Royalty Trust | 66,376 | 6,992,712 |
Comstock Resources, Inc.(1) | 305,000 | 4,715,300 |
Forest Oil Corp.(1) | 210,000 | 3,024,000 |
Hugoton Royalty Trust | 120,000 | 2,550,000 |
Nordic American Tanker Shipping Ltd. | 186,863 | 2,634,768 |
Overseas Shipholding Group, Inc. | 180,000 | 2,473,200 |
Patriot Coal Corp.(1) | 600,000 | 5,076,000 |
Penn Virginia Corp. | 1,165,000 | 6,489,050 |
Petroleum Development Corp.(1) | 125,079 | 2,425,282 |
Swift Energy Co.(1) | 245,000 | 5,963,300 |
Vaalco Energy, Inc.(1) | 151,138 | 740,482 |
45,439,694 | ||
PAPER AND FOREST PRODUCTS — 0.6% | ||
Buckeye Technologies, Inc. | 35,000 | 843,850 |
Clearwater Paper Corp.(1) | 175,000 | 5,946,500 |
KapStone Paper and Packaging Corp.(1) | 290,000 | 4,028,100 |
10,818,450 | ||
PERSONAL PRODUCTS — 0.3% | ||
Inter Parfums, Inc. | 126,958 | 1,961,501 |
Nu Skin Enterprises, Inc., Class A | 40,000 | 1,620,800 |
Prestige Brands Holdings, Inc.(1) | 220,000 | 1,991,000 |
5,573,301 | ||
PHARMACEUTICALS — 1.5% | ||
Impax Laboratories, Inc.(1) | 205,000 | 3,671,550 |
Medicis Pharmaceutical Corp., Class A | 185,000 | 6,748,800 |
Par Pharmaceutical Cos., Inc.(1) | 290,000 | 7,719,800 |
ViroPharma, Inc.(1) | 380,000 | 6,866,600 |
25,006,750 | ||
PROFESSIONAL SERVICES — 1.1% | ||
CDI Corp. | 415,000 | 4,432,200 |
Heidrick & Struggles International, Inc. | 340,000 | 5,593,000 |
Kforce, Inc.(1) | 445,000 | 4,365,450 |
On Assignment, Inc.(1) | 635,000 | 4,489,450 |
18,880,100 | ||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 7.2% | ||
American Campus Communities, Inc. | 130,000 | 4,837,300 |
Associated Estates Realty Corp. | 335,000 | 5,179,100 |
BioMed Realty Trust, Inc. | 215,000 | 3,562,550 |
Campus Crest Communities, Inc. | 380,000 | 4,134,400 |
CBL & Associates Properties, Inc. | 260,000 | 2,953,600 |
Chimera Investment Corp. | 2,575,000 | 7,132,750 |
CommonWealth REIT | 220,000 | 4,173,400 |
CreXus Investment Corp. | 280,000 | 2,486,400 |
DCT Industrial Trust, Inc. | 450,000 | 1,975,500 |
DiamondRock Hospitality Co. | 500,000 | 3,495,000 |
First Potomac Realty Trust | 270,000 | 3,366,900 |
Government Properties Income Trust | 380,000 | 8,173,800 |
Hatteras Financial Corp. | 140,000 | 3,522,400 |
Healthcare Realty Trust, Inc. | 160,000 | 2,696,000 |
Hersha Hospitality Trust | 825,000 | 2,854,500 |
Highwoods Properties, Inc. | 110,000 | 3,108,600 |
Inland Real Estate Corp. | 185,526 | 1,354,340 |
Kilroy Realty Corp. | 125,000 | 3,912,500 |
LaSalle Hotel Properties | 190,000 | 3,648,000 |
Mack-Cali Realty Corp. | 70,000 | 1,872,500 |
11
Shares | Value |
Medical Properties Trust, Inc. | 270,000 | $2,416,500 |
MFA Financial, Inc. | 895,000 | 6,282,900 |
National Health Investors, Inc. | 40,000 | 1,685,200 |
National Retail Properties, Inc. | 280,000 | 7,523,600 |
Omega Healthcare Investors, Inc. | 110,000 | 1,752,300 |
PS Business Parks, Inc. | 95,000 | 4,706,300 |
RLJ Lodging Trust | 505,000 | 6,448,850 |
Sabra Health Care REIT, Inc. | 320,000 | 3,052,800 |
Saul Centers, Inc. | 55,000 | 1,859,550 |
Urstadt Biddle Properties, Inc., Class A | 220,000 | 3,513,400 |
Washington Real Estate Investment Trust | 160,000 | 4,508,800 |
Winthrop Realty Trust | 360,000 | 3,128,400 |
121,318,140 | ||
ROAD AND RAIL — 0.5% | ||
Arkansas Best Corp. | 75,000 | 1,211,250 |
Old Dominion Freight Line, Inc.(1) | 65,000 | 1,883,050 |
Werner Enterprises, Inc. | 225,000 | 4,686,750 |
7,781,050 | ||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 2.4% | ||
Cymer, Inc.(1) | 115,000 | 4,275,700 |
Formfactor, Inc.(1) | 410,000 | 2,554,300 |
Intersil Corp., Class A | 465,000 | 4,784,850 |
MKS Instruments, Inc. | 105,000 | 2,279,550 |
Novellus Systems, Inc.(1) | 215,000 | 5,860,900 |
Semtech Corp.(1) | 155,000 | 3,270,500 |
Spansion, Inc., Class A(1) | 800,000 | 9,776,000 |
Standard Microsystems Corp.(1) | 375,000 | 7,275,000 |
40,076,800 | ||
SOFTWARE — 2.6% | ||
Cadence Design Systems, Inc.(1) | 185,000 | 1,709,400 |
Compuware Corp.(1) | 460,000 | 3,523,600 |
JDA Software Group, Inc.(1) | 160,000 | 3,750,400 |
Quest Software, Inc.(1) | 1,750,000 | 27,790,000 |
Synopsys, Inc.(1) | 135,000 | 3,288,600 |
Websense, Inc.(1) | 195,000 | 3,373,500 |
43,435,500 | ||
SPECIALTY RETAIL — 3.3% | ||
American Eagle Outfitters, Inc. | 210,000 | 2,461,200 |
Cabela’s, Inc.(1) | 200,000 | 4,098,000 |
Collective Brands, Inc.(1) | 200,000 | 2,592,000 |
Destination Maternity Corp. | 295,000 | 3,796,650 |
Finish Line, Inc. (The), Class A | 150,000 | 2,998,500 |
Genesco, Inc.(1) | 55,000 | 2,834,150 |
Lithia Motors, Inc., Class A | 290,000 | 4,170,200 |
Men’s Wearhouse, Inc. (The) | 120,000 | 3,129,600 |
Penske Automotive Group, Inc. | 310,000 | 4,960,000 |
PEP Boys-Manny Moe & Jack | 275,000 | 2,714,250 |
RadioShack Corp. | 677,150 | 7,868,484 |
Rent-A-Center, Inc. | 125,000 | 3,431,250 |
Stage Stores, Inc. | 175,000 | 2,427,250 |
Williams-Sonoma, Inc. | 265,000 | 8,159,350 |
55,640,884 | ||
TEXTILES, APPAREL AND LUXURY GOODS — 1.0% | ||
Columbia Sportswear Co. | 140,000 | 6,496,000 |
Culp, Inc.(1) | 380,000 | 3,211,000 |
Wolverine World Wide, Inc. | 200,000 | 6,650,000 |
16,357,000 | ||
THRIFTS AND MORTGAGE FINANCE — 3.0% | ||
BankUnited, Inc. | 560,000 | 11,625,600 |
Brookline Bancorp., Inc. | 465,000 | 3,585,150 |
Capitol Federal Financial, Inc. | 1,090,000 | 11,510,400 |
First Niagara Financial Group, Inc. | 535,000 | 4,895,250 |
Flushing Financial Corp. | 240,000 | 2,592,000 |
Kaiser Federal Financial Group, Inc. | 295,000 | 3,481,000 |
Oritani Financial Corp. | 200,000 | 2,572,000 |
Provident Financial Services, Inc. | 425,000 | 4,568,750 |
Washington Federal, Inc. | 480,000 | 6,115,200 |
50,945,350 | ||
TOBACCO — 0.1% | ||
Universal Corp. | 70,000 | 2,510,200 |
TRADING COMPANIES AND DISTRIBUTORS — 0.6% | ||
Applied Industrial Technologies, Inc. | 155,000 | 4,209,800 |
Lawson Products, Inc. | 285,000 | 3,853,200 |
WESCO International, Inc.(1) | 70,000 | 2,348,500 |
10,411,500 | ||
WATER UTILITIES — 0.3% | ||
Artesian Resources Corp., Class A | 270,000 | 4,727,700 |
TOTAL COMMON STOCKS(Cost $1,722,062,907) | 1,567,657,263 |
12
Shares | Value |
Convertible Preferred Stocks — 2.4% | ||
INSURANCE — 1.4% | ||
Aspen Insurance Holdings Ltd., Series AHL, 5.625% | 460,000 | $23,000,000 |
LEISURE EQUIPMENT AND PRODUCTS — 0.2% | ||
Callaway Golf Co., Series B, 7.50% | 42,030 | 3,929,805 |
MEDIA — 0.1% | ||
LodgeNet Interactive Corp., 10.00%(3) | 3,321 | 2,324,700 |
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.4% | ||
Entertainment Properties Trust, Series E, 9.00% | 140,000 | 3,689,000 |
Lexington Realty Trust, Series C, 6.50% | 70,000 | 2,918,125 |
6,607,125 | ||
TOBACCO — 0.3% | ||
Universal Corp., 6.75% | 5,604 | 5,267,760 |
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $41,255,941) | 41,129,390 | |
Exchange-Traded Funds — 1.7% | ||
iShares Russell 2000 Index Fund | 75,000 | 4,818,750 |
iShares S&P SmallCap 600 Index Fund | 395,000 | 23,107,500 |
TOTAL EXCHANGE-TRADED FUNDS(Cost $30,467,171) | 27,926,250 | |
Preferred Stocks — 0.9% | ||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.9% | ||
DuPont Fabros Technology, Inc., Series A, 7.875% | 130,000 | 3,324,100 |
Inland Real Estate Corp., Series A, 8.125% | 106,133 | 2,653,325 |
National Retail Properties, Inc., Series C, 7.375% | 270,000 | 6,763,500 |
PS Business Parks, Inc., Series O, 7.375% | 109,008 | 2,725,200 |
TOTAL PREFERRED STOCKS(Cost $14,827,334) | 15,466,125 | |
Temporary Cash Investments — 1.6% | ||
Repurchase Agreement, Bank America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 0.25%, 9/15/14, valued at $8,371,252), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11, (Delivery value $8,203,627) | $8,203,620 | |
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 3.50%, 2/15/39, valued at $7,204,734), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11, (Delivery value $7,031,681) | 7,031,675 | |
SSgA U.S. Government Money Market Fund | 11,174,691 | 11,174,691 |
TOTAL TEMPORARY CASH INVESTMENTS (Cost $26,409,986) | 26,409,986 | |
TOTAL INVESTMENT SECURITIES — 99.2% (Cost $1,835,023,339) | 1,678,589,014 | |
OTHER ASSETS AND LIABILITIES — 0.8% | 14,169,028 | |
TOTAL NET ASSETS — 100.0% | $1,692,758,042 |
Notes to Schedule of Investments
†Category is less than 0.05% of total net assets.
(1) | Non-income producing. |
(2) | Affiliated Company: the fund’s holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. |
(3) | Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of these securities at the period end was $2,324,700, which represented 0.1% of total net assets. |
See Notes to Financial Statements.
13
SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities - unaffiliated, at value (cost of $1,820,876,650) | $1,660,349,014 | |||
Investment securities - affiliated, at value (cost of $14,146,689) | 18,240,000 | |||
Total investments securities, at value (cost of $1,835,023,339) | 1,678,589,014 | |||
Receivable for investments sold | 45,783,025 | |||
Receivable for capital shares sold | 24,000,559 | |||
Dividends and interest receivable | 4,093,833 | |||
1,752,466,431 | ||||
Liabilities | ||||
Payable for investments purchased | 30,479,523 | |||
Payable for capital shares redeemed | 27,405,350 | |||
Accrued management fees | 1,742,908 | |||
Distribution and service fees payable | 80,608 | |||
59,708,389 | ||||
Net Assets | $1,692,758,042 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $1,781,924,995 | |||
Undistributed net investment income | 2,950,886 | |||
Undistributed net realized gain | 64,316,486 | |||
Net unrealized depreciation | (156,434,325 | ) | ||
$1,692,758,042 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $779,324,769 | 106,621,321 | $7.31 | |||||||||
Institutional Class, $0.01 Par Value | $542,966,425 | 73,990,840 | $7.34 | |||||||||
A Class, $0.01 Par Value | $367,685,471 | 50,512,868 | $7.28 | * | ||||||||
C Class, $0.01 Par Value | $56,044 | 7,722 | $7.26 | |||||||||
R Class, $0.01 Par Value | $2,725,333 | 373,785 | $7.29 |
*Maximum offering price $7.72 (net asset value divided by 0.9425)
See Notes to Financial Statements.
14
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (including $123,850 from affiliates) | $24,004,686 | |||
Interest | 5,781 | |||
24,010,467 | ||||
Expenses: | ||||
Management fees | 12,856,528 | |||
Distribution and service fees: | ||||
A Class | 582,098 | |||
C Class | 299 | |||
R Class | 10,063 | |||
Directors’ fees and expenses | 57,038 | |||
13,506,026 | ||||
Net investment income (loss) | 10,504,441 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on investment transactions (including $321,371 from affiliates) | 42,075,929 | |||
Change in net unrealized appreciation (depreciation) on investments | (580,303,105 | ) | ||
Net realized and unrealized gain (loss) | (538,227,176 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(527,722,735 | ) |
See Notes to Financial Statements.
15
SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) AND YEAR ENDED MARCH 31, 2011 | ||||||||
Increase (Decrease) in Net Assets | September 30, 2011 | March 31, 2011 | ||||||
Operations | ||||||||
Net investment income (loss) | $10,504,441 | $22,244,660 | ||||||
Net realized gain (loss) | 42,075,929 | 286,958,789 | ||||||
Change in net unrealized appreciation (depreciation) | (580,303,105 | ) | 79,895,526 | |||||
Net increase (decrease) in net assets resulting from operations | (527,722,735 | ) | 389,098,975 | |||||
Distributions to Shareholders | ||||||||
From net investment income: | ||||||||
Investor Class | (3,307,010 | ) | (6,926,961 | ) | ||||
Institutional Class | (3,281,934 | ) | (6,428,297 | ) | ||||
A Class | (1,140,301 | ) | (2,495,132 | ) | ||||
C Class | (53 | ) | (42 | ) | ||||
R Class | (6,024 | ) | (9,025 | ) | ||||
Decrease in net assets from distributions | (7,735,322 | ) | (15,859,457 | ) | ||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions | (252,253,399 | ) | 132,084,281 | |||||
Net increase (decrease) in net assets | (787,711,456 | ) | 505,323,799 | |||||
Net Assets | ||||||||
Beginning of period | 2,480,469,498 | 1,975,145,699 | ||||||
End of period | $1,692,758,042 | $2,480,469,498 | ||||||
Undistributed net investment income | $2,950,886 | $181,767 |
See Notes to Financial Statements.
16
SEPTEMBER 30, 2011 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Small Cap Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund pursues its objectives by investing in stocks of smaller market capitalization companies that management believes to be undervalued at the time of purchase.
The fund is authorized to issue the Investor Class, the Institutional Class, the A Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost.
17
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund estimates the components of distributions received that may be considered nontaxable distributions or capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Business Development Companies — The fund may invest in securities of closed-end investment companies that have elected to be treated as a business development company under the 1940 Act. A business development company operates similar to an exchange-traded fund and represents a portfolio of securities. The fund may purchase a business development company to gain exposure to the securities in the underlying portfolio. The risks of owning a business development company generally reflect the risks of owning the underlying securities. Business development companies have expenses that reduce their value.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
18
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
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 1.00% to 1.25% for the Investor Class, A Class, C Class and R Class. The Institutional Class is 0.20% less at each point within the range. The effective annual management fee for each class for the six months ended September 30, 2011 was 1.22% for the Investor Class, A Class, C Class, and R Class and 1.02% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the 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 American Century Investment Services, Inc. (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 six months ended September 30, 2011 are detailed in the Statement of Operations.
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.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC.
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a securities lending agreement with JPMorgan Chase Bank (JPMCB) and a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMCB was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
19
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2011 were $1,297,818,232 and $1,382,823,783, respectively.
For the six months ended September 30, 2011, the fund incurred net realized losses of $(462,516) from redemptions in kind. A redemption in kind occurs when a fund delivers securities from its portfolio in lieu of cash as payment to a redeeming shareholder.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2011 | Year ended March 31, 2011 | ||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||
Investor Class/Shares Authorized | 500,000,000 | 500,000,000 | |||||||||||||
Sold | 9,646,077 | $83,263,085 | 34,957,443 | $291,161,149 | |||||||||||
Issued in reinvestment of distributions | 391,542 | 3,044,271 | 775,767 | 6,541,679 | |||||||||||
Redeemed | (19,127,910 | ) | (163,500,971 | ) | (30,451,138 | ) | (252,735,029 | ) | |||||||
(9,090,291 | ) | (77,193,615 | ) | 5,282,072 | 44,967,799 | ||||||||||
Institutional Class/Shares Authorized | 300,000,000 | 270,000,000 | |||||||||||||
Sold | 14,195,982 | 118,950,667 | 28,024,318 | 234,934,340 | |||||||||||
Issued in reinvestment of distributions | 372,715 | 2,994,119 | 661,970 | 5,582,538 | |||||||||||
Redeemed | (31,126,837 | ) | (259,004,101 | ) | (19,435,931 | ) | (161,546,370 | ) | |||||||
(16,558,140 | ) | (137,059,315 | ) | 9,250,357 | 78,970,508 | ||||||||||
A Class/Shares Authorized | 200,000,000 | 190,000,000 | |||||||||||||
Sold | 4,423,568 | 37,894,485 | 11,642,949 | 96,129,611 | |||||||||||
Issued in reinvestment of distributions | 147,836 | 1,130,948 | 235,973 | 2,000,259 | |||||||||||
Redeemed | (8,818,444 | ) | (75,615,553 | ) | (11,441,531 | ) | (94,285,463 | ) | |||||||
(4,247,040 | ) | (36,590,120 | ) | 437,391 | 3,844,407 | ||||||||||
C Class/Shares Authorized | 5,000,000 | 5,000,000 | |||||||||||||
Sold | 1,575 | 13,830 | 2,965 | 26,617 | |||||||||||
Issued in reinvestment of distributions | 7 | 53 | 5 | 42 | |||||||||||
Redeemed | (82 | ) | (751 | ) | (37 | ) | (330 | ) | |||||||
1,500 | 13,132 | 2,933 | 26,329 | ||||||||||||
R Class/Shares Authorized | 5,000,000 | 5,000,000 | |||||||||||||
Sold | 85,251 | 717,569 | 545,619 | 4,514,218 | |||||||||||
Issued in reinvestment of distributions | 787 | 6,024 | 1,005 | 9,025 | |||||||||||
Redeemed | (234,282 | ) | (2,147,074 | ) | (27,884 | ) | (248,005 | ) | |||||||
(148,244 | ) | (1,423,481 | ) | 518,740 | 4,275,238 | ||||||||||
Net increase (decrease) | (30,042,215 | ) | $(252,253,399 | ) | 15,491,493 | $132,084,281 |
20
6. Affiliated Company Transactions
If a fund’s holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2011 follows:
March 31, 2011 | September 30, 2011 | ||||||
Company | Share Balance | Purchase Cost | Sales Cost | Realized Gain (Loss) | Dividend Income | Share Balance | Market Value |
Utah Medical Products, Inc. | 170,000 | $14,796 | $580,896 | $(24,087) | $72,850 | 150,000 | (1) |
Young Innovations, Inc. | 625,000 | 2,311,664 | 1,776,582 | 345,458 | 51,000 | 640,000 | $18,240,000 |
$2,326,460 | $2,357,478 | $321,371 | $123,850 | $18,240,000 |
(1) | Company was not an affiliate at September 30, 2011. |
7. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||||||
Investment Securities | ||||||||||||
Common Stocks | $1,567,657,263 | — | — | |||||||||
Convertible Preferred Stocks | — | $41,129,390 | — | |||||||||
Exchange-Traded Funds | 27,926,250 | — | — | |||||||||
Preferred Stocks | — | 15,466,125 | — | |||||||||
Temporary Cash Investments | 11,174,691 | 15,235,295 | — | |||||||||
Total Value of Investment Securities | $1,606,758,204 | $71,830,810 | — |
21
8. Risk Factors
The fund generally invests in smaller companies which may be more volatile, and subject to greater short-term risk than those of larger companies.
The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
9. Federal Tax Information
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 September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $1,906,090,213 | |||
Gross tax appreciation of investments | $80,060,913 | |||
Gross tax depreciation of investments | (307,562,112 | ) | ||
Net tax appreciation (depreciation) of investments | $(227,501,199 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period.
22
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses(3) | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |
Investor Class | |||||||||||||
2011(4) | $9.48 | 0.04 | (2.18) | (2.14) | (0.03) | — | (0.03) | $7.31 | (22.59)% | 1.23%(5) | 0.93%(5) | 59% | $779,325 |
2011 | $8.02 | 0.09 | 1.43 | 1.52 | (0.06) | — | (0.06) | $9.48 | 19.06% | 1.24% | 1.03% | 99% | $1,096,617 |
2010 | $4.70 | 0.11 | 3.33 | 3.44 | (0.12) | — | (0.12) | $8.02 | 73.93% | 1.25% | 1.60% | 104% | $885,942 |
2009 | $7.02 | 0.12 | (2.31) | (2.19) | (0.11) | (0.02) | (0.13) | $4.70 | (31.69)% | 1.25% | 1.93% | 192% | $419,206 |
2008 | $10.01 | 0.09 | (1.16) | (1.07) | (0.09) | (1.83) | (1.92) | $7.02 | (12.22)% | 1.26% | 1.01% | 123% | $732,968 |
2007 | $10.45 | 0.06 | 0.87 | 0.93 | (0.04) | (1.33) | (1.37) | $10.01 | 9.38% | 1.25% | 0.57% | 121% | $1,261,392 |
Institutional Class | |||||||||||||
2011(4) | $9.52 | 0.05 | (2.19) | (2.14) | (0.04) | — | (0.04) | $7.34 | (22.49)% | 1.03%(5) | 1.13%(5) | 59% | $542,966 |
2011 | $8.05 | 0.10 | 1.44 | 1.54 | (0.07) | — | (0.07) | $9.52 | 19.30% | 1.04% | 1.23% | 99% | $861,881 |
2010 | $4.71 | 0.12 | 3.35 | 3.47 | (0.13) | — | (0.13) | $8.05 | 74.47% | 1.05% | 1.80% | 104% | $654,738 |
2009 | $7.04 | 0.13 | (2.32) | (2.19) | (0.12) | (0.02) | (0.14) | $4.71 | (31.61)% | 1.05% | 2.13% | 192% | $258,902 |
2008 | $10.03 | 0.11 | (1.17) | (1.06) | (0.10) | (1.83) | (1.93) | $7.04 | (12.05)% | 1.06% | 1.21% | 123% | $370,422 |
2007 | $10.47 | 0.08 | 0.87 | 0.95 | (0.06) | (1.33) | (1.39) | $10.03 | 9.52% | 1.05% | 0.77% | 121% | $443,173 |
23
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses(3) | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) |
A Class(6) | |||||||||||||
2011(4) | $9.44 | 0.03 | (2.17) | (2.14) | (0.02) | — | (0.02) | $7.28 | (22.65)% | 1.48%(5) | 0.68%(5) | 59% | $367,685 |
2011 | $8.00 | 0.06 | 1.43 | 1.49 | (0.05) | — | (0.05) | $9.44 | 18.63% | 1.49% | 0.78% | 99% | $516,974 |
2010 | $4.69 | 0.09 | 3.32 | 3.41 | (0.10) | — | (0.10) | $8.00 | 73.53% | 1.50% | 1.35% | 104% | $434,413 |
2009 | $7.00 | 0.10 | (2.30) | (2.20) | (0.09) | (0.02) | (0.11) | $4.69 | (31.82)% | 1.50% | 1.68% | 192% | $215,068 |
2008 | $10.00 | 0.07 | (1.17) | (1.10) | (0.07) | (1.83) | (1.90) | $7.00 | (12.51)% | 1.51% | 0.76% | 123% | $286,227 |
2007 | $10.45 | 0.03 | 0.87 | 0.90 | (0.02) | (1.33) | (1.35) | $10.00 | 9.10% | 1.50% | 0.32% | 121% | $434,182 |
C Class | |||||||||||||
2011(4) | $9.43 | —(7) | (2.16) | (2.16) | (0.01) | — | (0.01) | $7.26 | (22.94)% | 2.23%(5) | (0.07)%(5) | 59% | $56 |
2011 | $8.01 | 0.01 | 1.42 | 1.43 | (0.01) | — | (0.01) | $9.43 | 17.85% | 2.24% | 0.03% | 99% | $59 |
2010(8) | $7.60 | —(7) | 0.41 | 0.41 | — | — | — | $8.01 | 5.39% | 2.25%(5) | 0.72%(5) | 104%(9) | $26 |
R Class | |||||||||||||
2011(4) | $9.46 | 0.02 | (2.17) | (2.15) | (0.02) | — | (0.02) | $7.29 | (22.76)% | 1.73%(5) | 0.43%(5) | 59% | $2,725 |
2011 | $8.02 | 0.06 | 1.41 | 1.47 | (0.03) | — | (0.03) | $9.46 | 18.36% | 1.73% | 0.54% | 99% | $4,939 |
2010(8) | $7.60 | 0.01 | 0.41 | 0.42 | — | — | — | $8.02 | 5.53% | 1.75%(5) | 1.22%(5) | 104%(9) | $26 |
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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) | Six months ended September 30, 2011 (unaudited). |
(5) | Annualized. |
(6) | Prior to March 1, 2010, the A Class was referred to as the Advisor Class. |
(7) | Per-share amount was less than $0.005. |
(8) | March 1, 2010 (commencement of sale) through March 31, 2010. |
(9) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2010. |
See Notes to Financial Statements.
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At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
● | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
● | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
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Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
● | constructing and designing the Fund |
● | portfolio research and security selection |
● | initial capitalization/funding |
● | securities trading |
● | Fund administration |
● | custody of Fund assets |
● | daily valuation of the Fund’s portfolio |
● | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
● | legal services |
● | regulatory and portfolio compliance |
● | financial reporting |
● | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified,
27
the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance section of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
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Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
29
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent directors, taking into account all of the factors discussed above and the information provided by the Advisor and others, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
30
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73675 1111
SEMIANNUAL REPORT SEPTEMBER 30, 2011
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Value Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Performance | 4 |
Fund Characteristics | 5 |
Shareholder Fee Example | 6 |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 11 |
Statement of Operations | 12 |
Statement of Changes in Net Assets | 13 |
Notes to Financial Statements | 14 |
Financial Highlights | 21 |
Approval of Management Agreement | 24 |
Additional Information | 29 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Dear Investor:
Thank you for reviewing our semiannual report for the six months ended September 30, 2011. This report offers a macroeconomic and financial market overview of the period, followed by fund performance, a schedule of fund investments, and other financial information.
For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site. Also, the fund’s annual report, dated March 31, 2012, will provide additional market perspective and portfolio commentary from our portfolio management team.
Macroeconomic and Financial Market Overview
This reporting period differed dramatically from the six months that preceded it. As the period covered by this report opened in April 2011, U.S. stocks were approaching the crest of an eight-month rally, originating back in late August 2010, which pushed the broad market approximately 30% higher. At the same time, the 10-year U.S. Treasury yield climbed above 3.50%, responding to global growth and inflation pressures.
All of that changed during the late spring and summer of 2011. High fuel prices, declining U.S. home values, elevated U.S. unemployment rates, natural disasters, a near-default on U.S. government debt, a U.S. debt rating downgrade, and a resurgence of the European sovereign debt crisis ebbed the economic tide globally and in the U.S.
Investors’ risk tolerance reversed as recession fears re-emerged. A full-blown flight to safety ensued by mid-summer, sending U.S. Treasury yields to record lows, boosting the U.S. dollar, and undermining stock prices, both domestically and abroad. By September 30, the financial markets had priced in recessionary expectations.
Fundamental signs of economic resilience remained, however, particularly in corporate earnings, with potentially more monetary and fiscal stimuli on the way. The Federal Reserve resurrected “Operation Twist,” an attempt to further lower long-term interest rates, and the Obama administration worked to implement job-creation legislation.
We don’t think there will be a double-dip recession, but we do believe we face another period of slow, sub-par economic growth. We appreciate your continued trust in us during these uncertain times.
Sincerely,
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Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
The board of directors of the fund was pleased at the announcement of a new strategic partner for the investment advisor to the American Century Investments funds. Canadian Imperial Bank of Commerce (CIBC), a leading Canadian financial institution, purchased the 41 percent economic interest in American Century Companies, the parent corporation of the advisor, previously held by JPMorgan Chase & Co. Based in Toronto, CIBC provides a full range of retail and wholesale banking services to almost 11 million clients through approximately 1,100 branches and offices in Canada, the U.S. and around the world. This transaction will benefit fund shareholders by bolstering the financial strength of the advisor and providing a strategic partner to help support its growth initiative to broaden non-U.S. distribution of its products and services.
The board also has been briefed throughout the year on the impact on fund performance of the European banking crisis, the U.S. deficit reduction debates, and the pace of economic growth. While the performance of all funds has been affected, the majority of American Century Investments funds overseen by the board are exceeding their benchmarks for the one-, three-, five-, and ten-year periods ended September 30, 2011. This is commendable performance, particularly in these challenging market conditions.
We are completing another year of board oversight on your behalf. We appreciate any comments you would like to share with the board. Send them to me at dhpratt@fundboardchair.com. Thank you for your continued investment in American Century Investments funds.
Best regards,
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Don Pratt
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Total Returns as of September 30, 2011 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | TWVLX | -14.35% | -1.93% | -2.00% | 4.37% | 8.24% | 9/1/93 |
Russell 3000 Value Index | — | -17.20% | -2.22% | -3.50% | 3.58% | 7.41%(2) | — |
S&P 500 Index | — | -13.78% | 1.14% | -1.18% | 2.82% | 7.09%(2) | — |
Lipper Multi-Cap Value Funds Index | — | -20.27% | -5.49% | -3.91% | 3.00% | 6.41%(2) | — |
Institutional Class | AVLIX | -14.40% | -1.73% | -1.83% | 4.55% | 5.11% | 7/31/97 |
A Class(3) No sales charge* With sales charge* | TWADX | -14.63% -19.48% | -2.19% -7.81% | -2.28% -3.42% | 4.09% 3.48% | 6.17% 5.75% | 10/2/96 |
B Class No sales charge* With sales charge* | ACBVX | -14.81% -19.81% | -2.82% -6.82% | -2.97% -3.20% | — — | 4.53% 4.53% | 1/31/03 |
C Class No sales charge* With sales charge* | ACLCX | -14.91% -15.76% | -2.84% -2.84% | -2.97% -2.97% | 3.33% 3.33% | 2.32% 2.32% | 6/4/01 |
R Class | AVURX | -14.57% | -2.43% | -2.48% | — | -0.27% | 7/29/05 |
* | 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%. B Class shares redeemed within six years of purchase are subject to a CDSC that declines from 5.00% during the first year after purchase to 0.00% the sixth year after purchase. 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. |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Since 8/31/93, the date nearest the Investor Class’s inception for which data are available. |
(3) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | |||||
Investor Class | Institutional Class | A Class | B Class | C Class | R Class |
1.01% | 0.81% | 1.26% | 2.01% | 2.01% | 1.51% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
4
SEPTEMBER 30, 2011 | |
Top Ten Holdings | % of net assets |
Total SA | 3.0% |
Pfizer, Inc. | 2.8% |
AT&T, Inc. | 2.8% |
JPMorgan Chase & Co. | 2.8% |
General Electric Co. | 2.8% |
Johnson & Johnson | 2.7% |
Northern Trust Corp. | 2.6% |
Procter & Gamble Co. (The) | 2.5% |
Chevron Corp. | 2.2% |
Merck & Co., Inc. | 2.1% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 11.3% |
Pharmaceuticals | 9.1% |
Insurance | 7.1% |
Commercial Banks | 5.8% |
Capital Markets | 5.6% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 86.7% |
Foreign Common Stocks* | 8.8% |
Total Common Stocks | 95.5% |
Temporary Cash Investments | 4.2% |
Other Assets and Liabilities | 0.3% |
*Includes depositary shares, dual listed securities and foreign ordinary shares.
5
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 April 1, 2011 to September 30, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
6
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 4/1/11 | Ending Account Value 9/30/11 | Expenses Paid During Period(1) 4/1/11 – 9/30/11 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $856.50 | $4.69 | 1.01% |
Institutional Class | $1,000 | $856.00 | $3.76 | 0.81% |
A Class | $1,000 | $853.70 | $5.84 | 1.26% |
B Class | $1,000 | $851.90 | $9.31 | 2.01% |
C Class | $1,000 | $850.90 | $9.30 | 2.01% |
R Class | $1,000 | $854.30 | $7.00 | 1.51% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.95 | $5.10 | 1.01% |
Institutional Class | $1,000 | $1,020.95 | $4.09 | 0.81% |
A Class | $1,000 | $1,018.70 | $6.36 | 1.26% |
B Class | $1,000 | $1,014.95 | $10.13 | 2.01% |
C Class | $1,000 | $1,014.95 | $10.13 | 2.01% |
R Class | $1,000 | $1,017.45 | $7.62 | 1.51% |
(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 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
7
Shares | Value | |
Common Stocks — 95.5% | ||
AEROSPACE AND DEFENSE — 0.8% | ||
General Dynamics Corp. | 66,100 | $ 3,760,429 |
Huntington Ingalls Industries, Inc.(1) | 192,540 | 4,684,498 |
Raytheon Co. | 193,320 | 7,900,989 |
16,345,916 | ||
AIR FREIGHT AND LOGISTICS — 0.3% | ||
United Parcel Service, Inc., Class B | 76,360 | 4,822,134 |
AIRLINES — 0.7% | ||
Southwest Airlines Co. | 1,616,330 | 12,995,293 |
AUTOMOBILES — 1.6% | ||
General Motors Co.(1) | 435,470 | 8,787,785 |
Honda Motor Co., Ltd. | 226,800 | 6,649,772 |
Toyota Motor Corp. | 476,100 | 16,275,211 |
31,712,768 | ||
BEVERAGES — 0.8% | ||
Dr Pepper Snapple Group, Inc. | 291,660 | 11,310,575 |
PepsiCo, Inc. | 78,820 | 4,878,958 |
16,189,533 | ||
CAPITAL MARKETS — 5.6% | ||
Charles Schwab Corp. (The) | 1,694,880 | 19,101,298 |
Franklin Resources, Inc. | 66,250 | 6,336,150 |
Goldman Sachs Group, Inc. (The) | 181,430 | 17,154,206 |
Northern Trust Corp. | 1,404,840 | 49,141,303 |
State Street Corp. | 495,110 | 15,922,738 |
107,655,695 | ||
COMMERCIAL BANKS — 5.8% | ||
BB&T Corp. | 237,570 | 5,067,368 |
Comerica, Inc. | 802,300 | 18,428,831 |
Commerce Bancshares, Inc. | 252,810 | 8,785,147 |
PNC Financial Services Group, Inc. | 306,740 | 14,781,801 |
U.S. Bancorp. | 1,327,230 | 31,242,994 |
Wells Fargo & Co. | 1,340,880 | 32,342,026 |
110,648,167 | ||
COMMERCIAL SERVICES AND SUPPLIES — 3.1% | ||
Avery Dennison Corp. | 329,360 | 8,260,349 |
Republic Services, Inc. | 1,264,590 | 35,484,395 |
Waste Management, Inc. | 486,680 | 15,846,301 |
59,591,045 | ||
COMMUNICATIONS EQUIPMENT — 1.5% | ||
Cisco Systems, Inc. | 1,874,220 | 29,031,668 |
COMPUTERS AND PERIPHERALS — 2.6% | ||
Diebold, Inc. | 515,550 | 14,182,780 |
Hewlett-Packard Co. | 990,000 | 22,225,500 |
QLogic Corp.(1) | 649,730 | 8,238,576 |
Seagate Technology plc | 474,920 | 4,882,178 |
49,529,034 | ||
CONSTRUCTION MATERIALS — 0.2% | ||
Martin Marietta Materials, Inc. | 57,220 | 3,617,448 |
CONTAINERS AND PACKAGING — 0.5% | ||
Bemis Co., Inc. | 359,490 | 10,536,652 |
DIVERSIFIED FINANCIAL SERVICES — 2.8% | ||
JPMorgan Chase & Co. | 1,769,280 | 53,290,714 |
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.7% | ||
AT&T, Inc. | 1,888,630 | 53,863,728 |
CenturyLink, Inc. | 276,850 | 9,169,272 |
Verizon Communications, Inc. | 198,540 | 7,306,272 |
70,339,272 | ||
ELECTRIC UTILITIES — 2.4% | ||
Great Plains Energy, Inc. | 280,600 | 5,415,580 |
NV Energy, Inc. | 568,320 | 8,359,987 |
Westar Energy, Inc. | 1,237,940 | 32,706,375 |
46,481,942 | ||
ELECTRICAL EQUIPMENT — 1.0% | ||
Emerson Electric Co. | 165,350 | 6,830,608 |
Hubbell, Inc., Class B | 97,080 | 4,809,343 |
Thomas & Betts Corp.(1) | 180,570 | 7,206,549 |
18,846,500 | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 0.3% | ||
Molex, Inc. | 316,840 | 6,454,031 |
ENERGY EQUIPMENT AND SERVICES — 0.2% | ||
Schlumberger Ltd. | 65,080 | 3,887,228 |
FOOD AND STAPLES RETAILING — 2.5% | ||
CVS Caremark Corp. | 514,250 | 17,268,515 |
SYSCO Corp. | 373,160 | 9,664,844 |
Wal-Mart Stores, Inc. | 420,260 | 21,811,494 |
48,744,853 | ||
FOOD PRODUCTS — 2.9% | ||
Campbell Soup Co. | 120,350 | 3,895,730 |
ConAgra Foods, Inc. | 175,750 | 4,256,665 |
Kraft Foods, Inc., Class A | 983,160 | 33,014,513 |
Ralcorp Holdings, Inc.(1) | 129,990 | 9,971,533 |
Unilever NV CVA | 127,930 | 4,052,056 |
55,190,497 |
8
Shares | Value |
HEALTH CARE EQUIPMENT AND SUPPLIES — 3.9% | ||
Becton, Dickinson and Co. | 68,710 | $ 5,037,817 |
Boston Scientific Corp.(1) | 2,692,600 | 15,913,266 |
CareFusion Corp.(1) | 846,600 | 20,276,070 |
Medtronic, Inc. | 443,090 | 14,728,312 |
Zimmer Holdings, Inc.(1) | 354,720 | 18,977,520 |
74,932,985 | ||
HEALTH CARE PROVIDERS AND SERVICES — 2.4% | ||
Aetna, Inc. | 209,940 | 7,631,319 |
CIGNA Corp. | 171,630 | 7,198,162 |
LifePoint Hospitals, Inc.(1) | 236,890 | 8,679,650 |
Quest Diagnostics, Inc. | 76,640 | 3,782,950 |
UnitedHealth Group, Inc. | 394,800 | 18,208,176 |
45,500,257 | ||
HOTELS, RESTAURANTS AND LEISURE — 1.3% | ||
International Game Technology | 345,240 | 5,016,337 |
International Speedway Corp., Class A | 524,400 | 11,977,296 |
Speedway Motorsports, Inc. | 642,370 | 7,759,830 |
24,753,463 | ||
HOUSEHOLD DURABLES — 1.0% | ||
Toll Brothers, Inc.(1) | 337,940 | 4,876,474 |
Whirlpool Corp. | 299,700 | 14,958,027 |
19,834,501 | ||
HOUSEHOLD PRODUCTS — 3.6% | ||
Clorox Co. | 66,810 | 4,431,507 |
Kimberly-Clark Corp. | 247,630 | 17,584,206 |
Procter & Gamble Co. (The) | 761,660 | 48,121,679 |
70,137,392 | ||
INDUSTRIAL CONGLOMERATES — 4.3% | ||
General Electric Co. | 3,485,720 | 53,122,373 |
Koninklijke Philips Electronics NV | 1,371,010 | 24,542,030 |
Tyco International Ltd. | 99,340 | 4,048,105 |
81,712,508 | ||
INSURANCE — 7.1% | ||
Allstate Corp. (The) | 864,240 | 20,473,846 |
Berkshire Hathaway, Inc. Class A(1) | 210 | 22,428,000 |
HCC Insurance Holdings, Inc. | 363,970 | 9,845,388 |
Marsh & McLennan Cos., Inc. | 786,710 | 20,879,283 |
MetLife, Inc. | 384,060 | 10,757,521 |
Prudential Financial, Inc. | 154,410 | 7,235,653 |
Torchmark Corp. | 195,240 | 6,806,066 |
Transatlantic Holdings, Inc. | 399,000 | 19,359,480 |
Travelers Cos., Inc. (The) | 395,610 | 19,278,075 |
137,063,312 | ||
IT SERVICES — 0.3% | ||
Visa, Inc., Class A | 66,650 | 5,713,238 |
METALS AND MINING — 0.9% | ||
Barrick Gold Corp. | 105,180 | 4,906,647 |
Freeport-McMoRan Copper & Gold, Inc. | 217,650 | 6,627,443 |
Newmont Mining Corp. | 86,080 | 5,414,432 |
16,948,522 | ||
MULTI-UTILITIES — 2.6% | ||
PG&E Corp. | 605,330 | 25,611,513 |
Xcel Energy, Inc. | 966,980 | 23,874,736 |
49,486,249 | ||
MULTILINE RETAIL — 1.0% | ||
Target Corp. | 391,080 | 19,178,563 |
OIL, GAS AND CONSUMABLE FUELS — 11.3% | ||
Apache Corp. | 62,070 | 4,980,497 |
BP plc | 774,580 | 4,645,858 |
BP plc ADR | 48,710 | 1,756,970 |
Chevron Corp. | 448,580 | 41,502,621 |
ConocoPhillips | 137,160 | 8,684,971 |
Devon Energy Corp. | 128,250 | 7,110,180 |
Exxon Mobil Corp. | 416,860 | 30,276,542 |
Imperial Oil Ltd. | 803,270 | 28,853,023 |
Murphy Oil Corp. | 199,860 | 8,825,818 |
Peabody Energy Corp. | 143,030 | 4,845,856 |
Total SA | 1,314,360 | 57,951,013 |
Ultra Petroleum Corp.(1) | 645,700 | 17,898,804 |
217,332,153 | ||
PHARMACEUTICALS — 9.1% | ||
Bristol-Myers Squibb Co. | 426,730 | 13,390,787 |
Eli Lilly & Co. | 399,960 | 14,786,521 |
Johnson & Johnson | 811,000 | 51,668,810 |
Merck & Co., Inc. | 1,210,060 | 39,581,063 |
Pfizer, Inc. | 3,104,080 | 54,880,135 |
174,307,316 | ||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.3% | ||
Weyerhaeuser Co. | 363,020 | 5,644,961 |
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 2.3% | ||
Applied Materials, Inc. | 1,373,540 | 14,216,139 |
Intel Corp. | 1,363,330 | 29,079,829 |
43,295,968 | ||
SOFTWARE — 0.2% | ||
Adobe Systems, Inc.(1) | 155,160 | 3,750,217 |
SPECIALTY RETAIL — 3.0% | ||
Lowe’s Cos., Inc. | 1,878,810 | 36,336,185 |
Staples, Inc. | 1,623,480 | 21,592,284 |
57,928,469 |
9
Shares | Value |
THRIFTS AND MORTGAGE FINANCE — 0.8% | ||
Hudson City Bancorp., Inc. | 2,726,990 | $ 15,434,763 |
WIRELESS TELECOMMUNICATION SERVICES — 0.8% | ||
American Tower Corp. Class A(1) | 90,470 | 4,867,286 |
Rogers Communications, Inc., Class B | 331,250 | 11,338,809 |
16,206,095 | ||
TOTAL COMMON STOCKS(Cost $1,980,205,155) | 1,835,071,322 | |
Temporary Cash Investments — 4.2% | ||
Repurchase Agreement, Bank America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 0.25%, 9/15/14, valued at $25,692,811), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $25,178,342) | 25,178,321 | |
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 3.50%, 2/15/39, valued at $22,112,567), in a joint trading account at 0.01%, dated 9/30/11, due 10/3/11 (Delivery value $21,581,436) | 21,581,418 | |
SSgA U.S. Government Money Market Fund | 34,430,294 | 34,430,294 |
TOTAL TEMPORARY CASH INVESTMENTS (Cost $81,190,033) | 81,190,033 | |
TOTAL INVESTMENT SECURITIES — 99.7% (Cost $2,061,395,188) | 1,916,261,355 | |
OTHER ASSETS AND LIABILITIES — 0.3% | 5,383,523 | |
TOTAL NET ASSETS — 100.0% | $1,921,644,878 |
Forward Foreign Currency Exchange Contracts | |||||
Contracts to Sell | Counterparty | Settlement Date | Value | Unrealized Gain (Loss) | |
30,934,319 | CAD for USD | UBS AG | 10/31/11 | $ 29,499,955 | $ 690,129 |
48,781,282 | EUR for USD | UBS AG | 10/31/11 | 65,341,543 | 1,033,196 |
3,141,925 | GBP for USD | Credit Suisse Securities | 10/31/11 | 4,898,207 | 15,272 |
1,344,621,600 | JPY for USD | Credit Suisse Securities | 10/31/11 | 17,439,566 | 134,889 |
$117,179,271 | $1,873,486 |
(Value on Settlement Date $119,052,757)
Futures Contracts | ||||
Contracts Purchased | Expiration Date | Underlying Face Amount at Value | Unrealized Gain (Loss) | |
601 | S&P 500 E-Mini Futures | December 2011 | $33,836,300 | $(1,963,431) |
Notes to Schedule of Investments
ADR = American Depositary Receipt
CAD = Canadian Dollar
CVA = Certificaten Van Aandelen
EUR = Euro
GBP = British Pound
JPY = Japanese Yen
USD = United States Dollar
(1) | Non-income producing. |
See Notes to Financial Statements.
10
SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Assets | ||||
Investment securities, at value (cost of $2,061,395,188) | $1,916,261,355 | |||
Foreign currency holdings, at value (cost of $200,176) | 197,249 | |||
Deposits with broker for futures contracts | 2,404,000 | |||
Receivable for investments sold | 15,325,162 | |||
Receivable for capital shares sold | 2,417,689 | |||
Unrealized gain on forward foreign currency exchange contracts | 1,873,486 | |||
Dividends and interest receivable | 4,522,748 | |||
1,943,001,689 | ||||
Liabilities | ||||
Payable for investments purchased | 18,047,823 | |||
Payable for capital shares redeemed | 800,762 | |||
Payable for variation margin on futures contracts | 910,515 | |||
Accrued management fees | 1,548,333 | |||
Distribution and service fees payable | 49,378 | |||
21,356,811 | ||||
Net Assets | $1,921,644,878 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $2,471,918,551 | |||
Undistributed net investment income | 2,232,166 | |||
Accumulated net realized loss | (407,267,047 | ) | ||
Net unrealized depreciation | (145,238,792 | ) | ||
$1,921,644,878 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $1,517,042,979 | 300,020,066 | $5.06 | |||||||||
Institutional Class, $0.01 Par Value | $196,279,873 | 38,774,957 | $5.06 | |||||||||
A Class, $0.01 Par Value | $183,348,647 | 36,273,211 | $5.05 | * | ||||||||
B Class, $0.01 Par Value | $2,134,878 | 422,989 | $5.05 | |||||||||
C Class, $0.01 Par Value | $6,563,673 | 1,310,766 | $5.01 | |||||||||
R Class, $0.01 Par Value | $16,274,828 | 3,218,529 | $5.06 |
*Maximum offering price $5.36 (net asset value divided by 0.9425)
See Notes to Financial Statements.
11
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $644,000) | $28,729,022 | |||
Interest | 7,411 | |||
28,736,433 | ||||
Expenses: | ||||
Management fees | 10,099,311 | |||
Distribution and service fees: | ||||
A Class | 257,733 | |||
B Class | 13,162 | |||
C Class | 36,972 | |||
R Class | 43,663 | |||
Directors’ fees and expenses | 46,952 | |||
Other expenses | 1,533 | |||
10,499,326 | ||||
Net investment income (loss) | 18,237,107 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 40,870,894 | |||
Futures contract transactions | (339,354 | ) | ||
Foreign currency transactions | 2,311,651 | |||
42,843,191 | ||||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (373,976,514 | ) | ||
Futures contracts | (1,963,431 | ) | ||
Translation of assets and liabilities in foreign currencies | 1,975,379 | |||
(373,964,566 | ) | |||
Net realized and unrealized gain (loss) | (331,121,375 | ) | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $(312,884,268 | ) |
See Notes to Financial Statements.
12
SIX MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED) AND YEAR ENDED MARCH 31, 2011 | ||||||||
Increase (Decrease) in Net Assets | September 30, 2011 | March 31, 2011 | ||||||
Operations | ||||||||
Net investment income (loss) | $18,237,107 | $38,209,245 | ||||||
Net realized gain (loss) | 42,843,191 | 130,675,664 | ||||||
Change in net unrealized appreciation (depreciation) | (373,964,566 | ) | 108,354,740 | |||||
Net increase (decrease) in net assets resulting from operations | (312,884,268 | ) | 277,239,649 | |||||
Distributions to Shareholders | ||||||||
From net investment income: | ||||||||
Investor Class | (16,774,422 | ) | (30,338,911 | ) | ||||
Institutional Class | (2,460,801 | ) | (4,591,088 | ) | ||||
A Class | (1,855,739 | ) | (2,911,109 | ) | ||||
B Class | (13,762 | ) | (34,586 | ) | ||||
C Class | (39,478 | ) | (81,713 | ) | ||||
R Class | (137,556 | ) | (190,034 | ) | ||||
Decrease in net assets from distributions | (21,281,758 | ) | (38,147,441 | ) | ||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions | 118,517,787 | 275,659,606 | ||||||
Net increase (decrease) in net assets | (215,648,239 | ) | 514,751,814 | |||||
Net Assets | ||||||||
Beginning of period | 2,137,293,117 | 1,622,541,303 | ||||||
End of period | $1,921,644,878 | $2,137,293,117 | ||||||
Undistributed net investment income | $2,232,166 | $5,276,817 |
See Notes to Financial Statements.
13
SEPTEMBER 30, 2011 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund pursues its objectives by investing in stocks of companies with small, medium, and large market capitalization that management believes to be undervalued at the time of purchase.
The fund is authorized to issue the Investor Class, the Institutional Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are typically valued at the closing price on the exchange where primarily traded or as of the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate clearing corporation. Forward foreign currency exchange contracts are valued at the mean of the latest bid and asked prices of the forward currency rates as provided by an independent pricing service.
14
The value of investments initially expressed in foreign currencies is translated into U.S. dollars at prevailing exchange rates.
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. Accordingly, no provision has been made for federal or state income taxes.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
15
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
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 0.85% to 1.00% for the Investor Class, A Class, B Class, C Class and R Class. The Institutional Class is 0.20% less at each point within the range. The effective annual management fee for each class for the six months ended September 30, 2011 was 1.00% for the Investor Class, A Class, B Class, C Class and R Class and 0.80% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B 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 American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. The plans provide that the B Class and C Class will each 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 six months ended September 30, 2011 are detailed in the Statement of Operations.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC.
The fund was eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund had a securities lending agreement with JPMorgan Chase Bank (JPMCB) and a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMCB was a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
16
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2011 were $724,624,238 and $653,796,717, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2011 | Year ended March 31, 2011 | ||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||
Investor Class/Shares Authorized | 1,100,000,000 | 1,000,000,000 | |||||||||||||
Sold | 42,872,325 | $235,017,236 | 99,542,833 | $515,144,572 | |||||||||||
Issued in reinvestment of distributions | 2,900,719 | 16,156,178 | 5,240,675 | 28,242,944 | |||||||||||
Redeemed | (24,993,954 | ) | (141,404,760 | ) | (61,480,581 | ) | (334,981,493 | ) | |||||||
20,779,090 | 109,768,654 | 43,302,927 | 208,406,023 | ||||||||||||
Institutional Class/Shares Authorized | 200,000,000 | 125,000,000 | |||||||||||||
Sold | 3,942,278 | 22,641,399 | 6,984,266 | 38,504,311 | |||||||||||
Issued in reinvestment of distributions | 441,758 | 2,460,801 | 850,569 | 4,591,088 | |||||||||||
Redeemed | (3,384,749 | ) | (19,290,314 | ) | (9,672,208 | ) | (51,914,026 | ) | |||||||
999,287 | 5,811,886 | (1,837,373 | ) | (8,818,627 | ) | ||||||||||
A Class/Shares Authorized | 200,000,000 | 150,000,000 | |||||||||||||
Sold | 3,692,157 | 21,239,156 | 24,506,681 | 124,332,768 | |||||||||||
Issued in reinvestment of distributions | 329,236 | 1,836,408 | 318,542 | 1,710,118 | |||||||||||
Redeemed | (3,729,870 | ) | (21,556,275 | ) | (10,958,614 | ) | (59,753,401 | ) | |||||||
291,523 | 1,519,289 | 13,866,609 | 66,289,485 | ||||||||||||
B Class/Shares Authorized | 5,000,000 | 5,000,000 | |||||||||||||
Sold | 3,433 | 20,539 | 4,323 | 23,808 | |||||||||||
Issued in reinvestment of distributions | 2,181 | 12,304 | 5,849 | 31,168 | |||||||||||
Redeemed | (71,592 | ) | (399,439 | ) | (111,022 | ) | (614,783 | ) | |||||||
(65,978 | ) | (366,596 | ) | (100,850 | ) | (559,807 | ) | ||||||||
C Class/Shares Authorized | 15,000,000 | 5,000,000 | |||||||||||||
Sold | 104,573 | 594,400 | 246,108 | 1,331,424 | |||||||||||
Issued in reinvestment of distributions | 5,627 | 31,392 | 12,200 | 64,537 | |||||||||||
Redeemed | (93,925 | ) | (526,530 | ) | (326,335 | ) | (1,750,623 | ) | |||||||
16,275 | 99,262 | (68,027 | ) | (354,662 | ) | ||||||||||
R Class/Shares Authorized | 15,000,000 | 15,000,000 | |||||||||||||
Sold | 554,748 | 3,162,787 | 4,465,606 | 23,210,734 | |||||||||||
Issued in reinvestment of distributions | 24,612 | 137,556 | 35,129 | 190,034 | |||||||||||
Redeemed | (284,831 | ) | (1,615,051 | ) | (2,414,937 | ) | (12,703,574 | ) | |||||||
294,529 | 1,685,292 | 2,085,798 | 10,697,194 | ||||||||||||
Net increase (decrease) | 22,314,726 | $118,517,787 | 57,249,084 | $275,659,606 |
17
6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
● | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
● | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
● | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||||||
Investment Securities | ||||||||||||
Domestic Common Stocks | $1,665,169,650 | — | — | |||||||||
Foreign Common Stocks | 15,593,900 | $154,307,772 | — | |||||||||
Temporary Cash Investments | 34,430,294 | 46,759,739 | — | |||||||||
Total Value of Investment Securities | $1,715,193,844 | $201,067,511 | — | |||||||||
Other Financial Instruments | ||||||||||||
Forward Foreign Currency Exchange Contracts | — | $1,873,486 | — | |||||||||
Futures Contracts | $(1,963,431 | ) | — | — | ||||||||
Total Unrealized Gain (Loss) on Other Financial Instruments | $(1,963,431 | ) | $1,873,486 | — |
7. Derivative Instruments
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. During the period, the fund infrequently purchased equity price risk derivative instruments for temporary investment purposes.
18
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund’s exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, 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 risk of loss from non-performance by the counterparty may be reduced by the use of master netting agreements. The foreign currency risk derivative instruments held at period end as disclosed on the Schedule of Investments are indicative of the fund’s typical volume during the period.
Value of Derivative Instruments as of September 30, 2011 | |||||
Asset Derivatives | Liability Derivatives | ||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | |
Equity Price Risk | Receivable for variation margin on futures contracts | — | Payable for variation margin on futures contracts | $910,515 | |
Foreign Currency Risk | Unrealized gain on forward foreign currency exchange contracts | $1,873,486 | Unrealized loss on forward foreign currency exchange contracts | — | |
$1,873,486 | $910,515 |
Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended September 30, 2011 | |||||
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 | |
Equity Price Risk | Net realized gain (loss) on futures contract transactions | $(339,354) | Change in net unrealized appreciation (depreciation) on futures contracts | $(1,963,431) | |
Foreign Currency Risk | Net realized gain (loss) on foreign currency transactions | 2,253,881 | Change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies | 1,990,498 | |
$1,914,527 | $ 27,067 |
19
8. Risk Factors
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
9. Federal Tax Information
The 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 September 30, 2011, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $2,136,565,150 | |||
Gross tax appreciation of investments | $110,007,411 | �� | ||
Gross tax depreciation of investments | (330,311,206 | ) | ||
Net tax appreciation (depreciation) of investments | $(220,303,795 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2011, the fund had accumulated capital losses of $(377,550,163), which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers of $(171,776,370) and $(205,773,793) expire in 2017 and 2018, respectively.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused.
20
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |
Investor Class | |||||||||||||
2011(3) | $5.97 | 0.05 | (0.90) | (0.85) | (0.06) | — | (0.06) | $5.06 | (14.35)% | 1.01%(4) | 1.78%(4) | 32% | $1,517,043 |
2011 | $5.40 | 0.11 | 0.57 | 0.68 | (0.11) | — | (0.11) | $5.97 | 12.84% | 1.01% | 2.05% | 76% | $1,668,403 |
2010 | $3.80 | 0.09 | 1.60 | 1.69 | (0.09) | — | (0.09) | $5.40 | 44.84% | 1.00% | 1.97% | 62% | $1,274,063 |
2009 | $5.78 | 0.13 | (1.98) | (1.85) | (0.13) | — | (0.13) | $3.80 | (32.34)% | 1.00% | 2.63% | 91% | $975,772 |
2008 | $7.61 | 0.12 | (0.92) | (0.80) | (0.12) | (0.91) | (1.03) | $5.78 | (11.56)% | 1.00% | 1.65% | 152% | $1,707,366 |
2007 | $7.18 | 0.12 | 0.93 | 1.05 | (0.11) | (0.51) | (0.62) | $7.61 | 14.90% | 0.99% | 1.58% | 140% | $2,495,067 |
Institutional Class | |||||||||||||
2011(3) | $5.98 | 0.06 | (0.92) | (0.86) | (0.06) | — | (0.06) | $5.06 | (14.40)% | 0.81%(4) | 1.98%(4) | 32% | $196,280 |
2011 | $5.41 | 0.12 | 0.57 | 0.69 | (0.12) | — | (0.12) | $5.98 | 13.05% | 0.81% | 2.25% | 76% | $225,950 |
2010 | $3.81 | 0.10 | 1.60 | 1.70 | (0.10) | — | (0.10) | $5.41 | 45.01% | 0.80% | 2.17% | 62% | $214,112 |
2009 | $5.79 | 0.14 | (1.98) | (1.84) | (0.14) | — | (0.14) | $3.81 | (32.14)% | 0.80% | 2.83% | 91% | $123,484 |
2008 | $7.62 | 0.13 | (0.91) | (0.78) | (0.14) | (0.91) | (1.05) | $5.79 | (11.36)% | 0.80% | 1.85% | 152% | $307,769 |
2007 | $7.19 | 0.13 | 0.94 | 1.07 | (0.13) | (0.51) | (0.64) | $7.62 | 15.11% | 0.79% | 1.78% | 140% | $289,536 |
A Class(5) | |||||||||||||
2011(3) | $5.97 | 0.04 | (0.91) | (0.87) | (0.05) | — | (0.05) | $5.05 | (14.63)% | 1.26%(4) | 1.53%(4) | 32% | $183,349 |
2011 | $5.40 | 0.10 | 0.57 | 0.67 | (0.10) | — | (0.10) | $5.97 | 12.57% | 1.26% | 1.80% | 76% | $214,896 |
2010 | $3.80 | 0.08 | 1.60 | 1.68 | (0.08) | — | (0.08) | $5.40 | 44.47% | 1.25% | 1.72% | 62% | $119,363 |
2009 | $5.78 | 0.12 | (1.98) | (1.86) | (0.12) | — | (0.12) | $3.80 | (32.51)% | 1.25% | 2.38% | 91% | $83,254 |
2008 | $7.61 | 0.10 | (0.92) | (0.82) | (0.10) | (0.91) | (1.01) | $5.78 | (11.76)% | 1.25% | 1.40% | 152% | $191,739 |
2007 | $7.18 | 0.10 | 0.93 | 1.03 | (0.09) | (0.51) | (0.60) | $7.61 | 14.62% | 1.24% | 1.33% | 140% | $249,265 |
21
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) |
B Class | |||||||||||||
2011(3) | $5.96 | 0.02 | (0.90) | (0.88) | (0.03) | — | (0.03) | $5.05 | (14.81)% | 2.01%(4) | 0.78%(4) | 32% | $2,135 |
2011 | $5.39 | 0.06 | 0.57 | 0.63 | (0.06) | — | (0.06) | $5.96 | 11.87% | 2.01% | 1.05% | 76% | $2,916 |
2010 | $3.80 | 0.05 | 1.59 | 1.64 | (0.05) | — | (0.05) | $5.39 | 43.21% | 2.00% | 0.97% | 62% | $3,182 |
2009 | $5.78 | 0.08 | (1.97) | (1.89) | (0.09) | — | (0.09) | $3.80 | (33.01)% | 2.00% | 1.63% | 91% | $2,651 |
2008 | $7.61 | 0.05 | (0.92) | (0.87) | (0.05) | (0.91) | (0.96) | $5.78 | (12.41)% | 2.00% | 0.65% | 152% | $5,601 |
2007 | $7.18 | 0.04 | 0.94 | 0.98 | (0.04) | (0.51) | (0.55) | $7.61 | 13.78% | 1.99% | 0.58% | 140% | $7,740 |
C Class | |||||||||||||
2011(3) | $5.92 | 0.02 | (0.90) | (0.88) | (0.03) | — | (0.03) | $5.01 | (14.91)% | 2.01%(4) | 0.78%(4) | 32% | $6,564 |
2011 | $5.35 | 0.06 | 0.57 | 0.63 | (0.06) | — | (0.06) | $5.92 | 11.96% | 2.01% | 1.05% | 76% | $7,659 |
2010 | $3.77 | 0.05 | 1.58 | 1.63 | (0.05) | — | (0.05) | $5.35 | 43.29% | 2.00% | 0.97% | 62% | $7,294 |
2009 | $5.74 | 0.08 | (1.96) | (1.88) | (0.09) | — | (0.09) | $3.77 | (33.06)% | 2.00% | 1.63% | 91% | $5,414 |
2008 | $7.56 | 0.05 | (0.91) | (0.86) | (0.05) | (0.91) | (0.96) | $5.74 | (12.36)% | 2.00% | 0.65% | 152% | $11,532 |
2007 | $7.14 | 0.04 | 0.93 | 0.97 | (0.04) | (0.51) | (0.55) | $7.56 | 13.71% | 1.99% | 0.58% | 140% | $22,274 |
R Class | |||||||||||||
2011(3) | $5.97 | 0.04 | (0.91) | (0.87) | (0.04) | — | (0.04) | $5.06 | (14.57)% | 1.51%(4) | 1.28%(4) | 32% | $16,275 |
2011 | $5.40 | 0.07 | 0.58 | 0.65 | (0.08) | — | (0.08) | $5.97 | 12.29% | 1.51% | 1.55% | 76% | $17,470 |
2010 | $3.80 | 0.07 | 1.60 | 1.67 | (0.07) | — | (0.07) | $5.40 | 44.10% | 1.50% | 1.47% | 62% | $4,527 |
2009 | $5.78 | 0.11 | (1.98) | (1.87) | (0.11) | — | (0.11) | $3.80 | (32.67)% | 1.50% | 2.13% | 91% | $2,255 |
2008 | $7.61 | 0.09 | (0.92) | (0.83) | (0.09) | (0.91) | (1.00) | $5.78 | (11.98)% | 1.50% | 1.15% | 152% | $1,625 |
2007 | $7.18 | 0.08 | 0.94 | 1.02 | (0.08) | (0.51) | (0.59) | $7.61 | 14.34% | 1.49% | 1.08% | 140% | $331 |
22
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) | Six months ended September 30, 2011 (unaudited). |
(4) | Annualized. |
(5) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class. |
See Notes to Financial Statements.
23
At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
● | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
● | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
● | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
● | data comparing the cost of owning the Fund to the cost of owning similar funds; |
● | the Advisor’s compliance policies, procedures, and regulatory experience; |
● | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
● | data comparing services provided and charges to other investment management clients of the Advisor; and |
● | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
24
Nature, Extent and Quality of Services — Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
● | constructing and designing the Fund |
● | portfolio research and security selection |
● | initial capitalization/funding |
● | securities trading |
● | Fund administration |
● | custody of Fund assets |
● | daily valuation of the Fund’s portfolio |
● | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
● | legal services |
● | regulatory and portfolio compliance |
● | financial reporting |
● | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons.
25
The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance section of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
26
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
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Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent directors, taking into account all of the factors discussed above and the information provided by the Advisor and others, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
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Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-73676 1111
ITEM 2. CODE OF ETHICS.
Not applicable for semiannual report filings.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semiannual report filings.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semiannual report filings.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) | The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. |
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) | The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. |
(b) | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
ITEM 12. EXHIBITS.
(a)(1) | Not applicable for semiannual report filings. |
(a)(2) | Separate certifications by the registrant’s principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as EX-99.CERT. |
(a)(3) | Not applicable. |
(b) | A certification by the registrant’s chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as EX- 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. | |||
By: | /s/ Jonathan S. Thomas | |||
Name: | Jonathan S. Thomas | |||
Title: | President | |||
Date: | November 29, 2011 | |||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Jonathan S. Thomas | ||
Name: | Jonathan S. Thomas | ||
Title: | President | ||
(principal executive officer) | |||
Date: | November 29, 2011 |
By: | /s/ Robert J. Leach | ||
Name: | Robert J. Leach | ||
Title: | Vice President, Treasurer, and | ||
Chief Financial Officer | |||
(principal financial officer) | |||
Date: | November 29, 2011 |