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: | 09-30-2013 |
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMIANNUAL REPORT | SEPTEMBER 30, 2013 |
Equity Income Fund
Table of Contents |
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 | 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.
President’s Letter |
Jonathan Thomas
Dear Investor:
Thank you for reviewing this semiannual report for the six months ended September 30, 2013. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information.
For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com.
Bond Yields and Stock Indices Soared Together Until September
U.S. government bond yields and stock indices traced roughly parallel upward paths during most of the six months ended September 30, 2013. The 10-year U.S. Treasury yield began the period at 1.85%, compressed in large part by the scale of the Federal Reserve’s (the Fed’s) bond-buying program ($85 billion of quantitative easing, or QE, each month).
Hints from the Fed that it might taper QE by year end sent bond yields soaring from early May to early September. The 10-year Treasury yield reached 3.00% on September 5, its first time at that level since July 2011, before finishing the reporting period at 2.61%. Bond yields generally declined in September on weaker-than-expected economic data, the Fed’s announcement that it would delay tapering, and uncertainty caused by the impending partial shutdown of the U.S. government.
Even with the September rally, bonds significantly underperformed stocks for the full reporting period. The 10-year Treasury note and the Barclays U.S. Aggregate Bond Index (representing the broad taxable U.S. bond market) returned –5.20% and –1.77%, respectively. By contrast, the S&P 500 Index gained 8.31% as the U.S. economy showed signs of attaining sustainable growth, fueled in part by Fed stimulus. Improvements in the housing and job markets helped trigger optimism, though their absolute numbers still fell short of pre-2008 levels.
Full recovery from 2008 remains a distant goal. Economic growth is still subpar compared with past recoveries, hampered further by the fiscal sequester and partial government shutdown. Faced with these challenges, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios—as appropriate—for meeting financial goals. We appreciate your continued trust in us in this uncertain environment.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
Don Pratt
Dear Fellow Shareholders,
This is my last letter to shareholders as the funds’ Chairman, as I will retire at the end of 2013.
My personal thanks go to the independent directors that elected me to the Board and subsequently to the Chairman position, and with whom I have worked to reorganize the Board’s committee structure and annually improve our governance processes. Throughout my tenure, the Board has addressed its responsibilities to shareholders diligently in committee work, the annual contract review, and the execution of our oversight responsibilities. I expect that it will continue to do so well into the future.
Thanks also to the American Century Investments management team led by Jonathan Thomas. Its transparency, candor, and open communication with the Board is most appreciated. I have served on more than 20 boards and this is the most productive and enjoyable relationship with management I have experienced.
Finally, thanks to the many shareholders who have written with questions, comments, and suggestions. Each was heard and addressed and enabled the board to better represent your interests. Keep communicating with us so that the Board can continue to be aware of your interests, concerns, and questions. My best wishes to Jim Olson, my successor as Chairman, and the other independent directors who continue to serve on your behalf.
And remember, as the firm’s founder Jim Stowers, Jr. so often observed, “The best is yet to be.”
Best regards,
Don Pratt
Performance |
Total Returns as of September 30, 2013 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | TWEIX | 4.17% | 13.18% | 8.09% | 7.59% | 10.63% | 8/1/94 |
Russell 3000 Value Index | — | 7.50% | 22.67% | 8.88% | 8.08% | 9.64%(2) | — |
S&P 500 Index | — | 8.31% | 19.34% | 10.01% | 7.56% | 9.08%(2) | — |
Institutional Class | ACIIX | 4.15% | 13.39% | 8.30% | 7.80% | 8.09% | 7/8/98 |
A Class(3) No sales charge* With sales charge* | TWEAX
| 4.04% -1.98% | 12.90% 6.36% | 7.82% 6.55% | 7.32% 6.68% | 8.73% 8.35% | 3/7/97
|
B Class No sales charge* With sales charge* | AEKBX
| 3.65% -1.35% | 12.07% 8.07% | 7.04% 6.89% | — — | 3.09% 3.09% | 9/28/07
|
C Class No sales charge* With sales charge* | AEYIX
| 3.65% 2.65% | 12.09% 12.09% | 7.02% 7.02% | 6.54% 6.54% | 6.07% 6.07% | 7/13/01
|
R Class | AEURX | 3.92% | 12.66% | 7.57% | 7.04% | 6.93% | 8/29/03 |
R6 Class | AEUDX | — | — | — | — | -1.70%(1) | 7/26/13 |
* | 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 to 0.00% after the sixth year. 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 | R6 Class |
0.94% | 0.74% | 1.19% | 1.94% | 1.94% | 1.44% | 0.59% |
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.
Fund Characteristics |
SEPTEMBER 30, 2013 | |
Top Ten Holdings | % of net assets |
Johnson & Johnson | 5.0% |
Wells Fargo & Co. (Convertible) | 4.8% |
Occidental Petroleum Corp. | 4.5% |
Exxon Mobil Corp. | 3.3% |
United Parcel Service, Inc., Class B | 2.6% |
Northern Trust Corp. | 2.6% |
Intel Corp. (Convertible) | 2.5% |
Stanley Black & Decker, Inc. (Convertible) | 2.4% |
PNC Financial Services Group, Inc. (The) | 2.4% |
Chevron Corp. | 2.3% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 13.6% |
Commercial Banks | 10.7% |
Pharmaceuticals | 9.1% |
Semiconductors and Semiconductor Equipment | 6.8% |
Diversified Financial Services | 5.2% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 72.9% |
Convertible Preferred Stocks | 10.9% |
Convertible Bonds | 10.9% |
Preferred Stocks | 2.7% |
Exchange-Traded Funds | 0.3% |
Total Equity Exposure | 97.7% |
Temporary Cash Investments | 2.6% |
Other Assets and Liabilities | (0.3)% |
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013 (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. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning 4/1/13 | Ending 9/30/13 | Expenses Paid During Period(1) 4/1/13 – 9/30/13 | Annualized | |
Actual | ||||
Investor Class | $1,000 | $1,041.70 | $4.76 | 0.93% |
Institutional Class | $1,000 | $1,041.50 | $3.74 | 0.73% |
A Class | $1,000 | $1,040.40 | $6.04 | 1.18% |
B Class | $1,000 | $1,036.50 | $9.85 | 1.93% |
C Class | $1,000 | $1,036.50 | $9.85 | 1.93% |
R Class | $1,000 | $1,039.20 | $7.31 | 1.43% |
R6 Class | $1,000 | $983.00(2) | $1.06(3) | 0.58% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.41 | $4.71 | 0.93% |
Institutional Class | $1,000 | $1,021.41 | $3.70 | 0.73% |
A Class | $1,000 | $1,019.15 | $5.97 | 1.18% |
B Class | $1,000 | $1,015.39 | $9.75 | 1.93% |
C Class | $1,000 | $1,015.39 | $9.75 | 1.93% |
R Class | $1,000 | $1,017.90 | $7.23 | 1.43% |
R6 Class | $1,000 | $1,022.16(4) | $2.94(4) | 0.58% |
(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 365, to reflect the one-half year period. |
(2) | Ending account value based on actual return from July 26, 2013 (commencement of sale) through September 30, 2013. |
(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 67, the number of days in the period from July 26, 2013 (commencement of sale) through September 30, 2013, divided by 365, 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 the 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. |
Schedule of Investments |
SEPTEMBER 30, 2013 (UNAUDITED)
Shares/ Principal Amount | Value | |||||
Common Stocks — 72.9% | ||||||
AEROSPACE AND DEFENSE — 0.5% | ||||||
Rockwell Collins, Inc. | 698,756 | $ 47,417,582 | ||||
AIR FREIGHT AND LOGISTICS — 2.6% | ||||||
United Parcel Service, Inc., Class B | 2,999,995 | 274,109,543 | ||||
AUTOMOBILES — 0.3% | ||||||
Honda Motor Co., Ltd. | 699,000 | 26,560,507 | ||||
BEVERAGES — 2.6% | ||||||
Dr Pepper Snapple Group, Inc. | 999,071 | 44,778,362 | ||||
PepsiCo, Inc. | 2,859,065 | 227,295,668 | ||||
272,074,030 | ||||||
CAPITAL MARKETS — 2.8% | ||||||
Goldman Sachs Group, Inc. (The) | 127,181 | 20,121,306 | ||||
Northern Trust Corp. | 4,999,283 | 271,911,002 | ||||
292,032,308 | ||||||
CHEMICALS — 1.2% | ||||||
Mosaic Co. (The) | 1,974,700 | 84,951,594 | ||||
Potash Corp. of Saskatchewan, Inc. | 1,299,100 | 40,635,848 | ||||
125,587,442 | ||||||
COMMERCIAL BANKS — 5.4% | ||||||
Comerica, Inc. | 999,962 | 39,308,506 | ||||
Commerce Bancshares, Inc. | 2,399,455 | 105,120,124 | ||||
KeyCorp | 11,999,100 | 136,789,740 | ||||
PNC Financial Services Group, Inc. (The) | 3,399,759 | 246,312,540 | ||||
SunTrust Banks, Inc. | 999,777 | 32,412,770 | ||||
559,943,680 | ||||||
COMMERCIAL SERVICES AND SUPPLIES — 3.8% | ||||||
ADT Corp. (The) | 1,997,541 | 81,220,017 | ||||
Republic Services, Inc. | 3,099,941 | 103,414,032 | ||||
Tyco International Ltd. | 3,699,982 | 129,425,370 | ||||
Waste Management, Inc. | 1,992,638 | 82,176,391 | ||||
396,235,810 | ||||||
COMMUNICATIONS EQUIPMENT — 1.1% | ||||||
Cisco Systems, Inc. | 4,999,900 | 117,097,658 | ||||
DIVERSIFIED FINANCIAL SERVICES — 0.9% | ||||||
JPMorgan Chase & Co. | 1,899,667 | 98,193,787 | ||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.9% | ||||||
AT&T, Inc. | 4,599,046 | 155,539,736 | ||||
CenturyLink, Inc. | 4,599,455 | 144,330,898 | ||||
299,870,634 | ||||||
ELECTRICAL EQUIPMENT — 0.4% | ||||||
ABB Ltd. | 1,599,578 | 37,833,774 | ||||
FOOD AND STAPLES RETAILING — 1.8% | ||||||
Sysco Corp. | 5,293,448 | 168,490,450 | ||||
Wal-Mart Stores, Inc. | 299,078 | 22,119,809 | ||||
190,610,259 | ||||||
GAS UTILITIES — 3.1% | ||||||
AGL Resources, Inc. | 2,960,838 | 136,287,373 | ||||
Piedmont Natural Gas Co., Inc. | 2,398,688 | 78,868,862 | ||||
WGL Holdings, Inc.(1) | 2,516,617 | 107,484,712 | ||||
322,640,947 | ||||||
HEALTH CARE EQUIPMENT AND SUPPLIES — 2.3% | ||||||
Becton Dickinson and Co. | 2,399,000 | 239,947,980 | ||||
HEALTH CARE PROVIDERS AND SERVICES — 1.0% | ||||||
Quest Diagnostics, Inc. | 1,698,700 | 104,962,673 | ||||
HOTELS, RESTAURANTS AND LEISURE — 0.2% | ||||||
Carnival Corp. | 598,100 | 19,521,984 | ||||
HOUSEHOLD PRODUCTS — 2.2% | ||||||
Procter & Gamble Co. (The) | 2,999,890 | 226,761,685 | ||||
INDUSTRIAL CONGLOMERATES — 0.8% | ||||||
General Electric Co. | 1,997,300 | 47,715,497 | ||||
Koninklijke Philips Electronics NV | 997,788 | 32,167,115 | ||||
79,882,612 | ||||||
INSURANCE — 4.3% | ||||||
Allstate Corp. (The) | 1,599,152 | 80,837,134 | ||||
Chubb Corp. (The) | 1,399,335 | 124,904,642 | ||||
Marsh & McLennan Cos., Inc. | 5,099,980 | 222,104,129 | ||||
MetLife, Inc. | 566,921 | 26,616,941 | ||||
454,462,846 | ||||||
LEISURE EQUIPMENT AND PRODUCTS — 0.4% | ||||||
Hasbro, Inc. | 997,600 | 47,026,864 | ||||
LIFE SCIENCES TOOLS AND SERVICES — 0.8% | ||||||
Agilent Technologies, Inc. | 1,696,170 | 86,928,712 | ||||
MACHINERY — 0.1% | ||||||
Atlas Copco AB B Shares | 332,800 | 8,792,917 | ||||
METALS AND MINING — 0.3% | ||||||
Newmont Mining Corp. | 998,200 | 28,049,420 | ||||
MULTI-UTILITIES — 2.9% | ||||||
Consolidated Edison, Inc. | 3,799,878 | 209,525,273 | ||||
PG&E Corp. | 2,399,810 | 98,200,225 | ||||
307,725,498 |
Shares/ Principal Amount | Value |
OIL, GAS AND CONSUMABLE FUELS — 13.6% | ||||||
Chevron Corp. | 1,999,792 | $242,974,728 | ||||
El Paso Pipeline Partners LP | 1,073,042 | 45,303,833 | ||||
Exxon Mobil Corp. | 3,999,482 | 344,115,431 | ||||
Occidental Petroleum Corp. | 4,999,000 | 467,606,460 | ||||
Royal Dutch Shell plc, Class A | 499,747 | 16,482,903 | ||||
Spectra Energy Partners LP | 1,883,015 | 82,626,698 | ||||
Total SA | 3,798,225 | 220,412,973 | ||||
1,419,523,026 | ||||||
PHARMACEUTICALS — 9.1% | ||||||
Bristol-Myers Squibb Co. | 499,329 | 23,108,946 | ||||
Eli Lilly & Co. | 1,399,588 | 70,441,264 | ||||
Johnson & Johnson | 5,999,380 | 520,086,252 | ||||
Merck & Co., Inc. | 3,898,531 | 185,609,061 | ||||
Pfizer, Inc. | 4,999,779 | 143,543,655 | ||||
Teva Pharmaceutical Industries Ltd. ADR | 298,600 | 11,281,108 | ||||
954,070,286 | ||||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.8% | ||||||
Annaly Capital Management, Inc. | 4,998,200 | 57,879,156 | ||||
Rayonier, Inc. | 497,786 | 27,701,791 | ||||
85,580,947 | ||||||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 3.2% | ||||||
Applied Materials, Inc. | 6,998,102 | 122,746,709 | ||||
Intel Corp. | 9,399,600 | 215,438,832 | ||||
338,185,541 | ||||||
SOFTWARE — 0.7% | ||||||
Microsoft Corp. | 2,199,214 | 73,255,818 | ||||
THRIFTS AND MORTGAGE FINANCE — 0.8% | ||||||
Capitol Federal Financial, Inc.(1) | 6,999,769 | 87,007,129 | ||||
TOTAL COMMON STOCKS (Cost $6,283,043,417) | 7,621,893,899 | |||||
Convertible Preferred Stocks — 10.9% | ||||||
COMMERCIAL BANKS — 4.8% | ||||||
Wells Fargo & Co., 7.50% | 443,310 | 504,269,558 | ||||
DIVERSIFIED FINANCIAL SERVICES — 2.1% | ||||||
Bank of America Corp., 7.25% | 200,277 | 216,299,160 | ||||
ELECTRIC UTILITIES — 0.5% | ||||||
NextEra Energy, Inc., 5.80%, 9/1/16 | 1,137,926 | 55,075,619 | ||||
FOOD PRODUCTS — 0.1% | ||||||
Post Holdings, Inc., 3.75%(2) | 151,049 | 15,728,732 | ||||
INSURANCE — 0.3% | ||||||
MetLife, Inc., 5.00%, 3/26/14 | 1,025,461 | 29,389,712 | ||||
MACHINERY — 2.4% | ||||||
Stanley Black & Decker, Inc., 4.75%, 11/17/15 | 1,820,285 | 249,397,248 | ||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.7% | ||||||
Health Care REIT, Inc., 6.50% | 1,199,993 | 69,059,597 | ||||
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $1,060,317,841) | 1,139,219,626 | |||||
Convertible Bonds — 10.9% | ||||||
AEROSPACE AND DEFENSE — 0.8% | ||||||
L-3 Communications Holdings, Inc., 3.00%, 8/1/35 | $73,673,000 | 80,579,844 | ||||
CAPITAL MARKETS — 0.7% | ||||||
Janus Capital Group, Inc., 3.25%, 7/15/14 | 24,448,000 | 24,936,960 | ||||
Janus Capital Group, Inc., 0.75%, 7/15/18 | 41,539,000 | 43,589,988 | ||||
68,526,948 | ||||||
HEALTH CARE EQUIPMENT AND SUPPLIES — 1.8% | ||||||
Hologic, Inc., 2.00%, 12/15/13(3) | 186,246,000 | 186,828,950 | ||||
HEALTH CARE PROVIDERS AND SERVICES — 1.9% | ||||||
Deutsche Bank AG, (convertible into Quest Diagnostics, Inc.), 4.85%, 1/22/14(2)(4) | 139,200 | 8,532,960 | ||||
LifePoint Hospitals, Inc., 3.50%, 5/15/14 | 172,566,000 | 182,488,545 | ||||
WellPoint, Inc., 2.75%, 10/15/42(2) | 8,044,000 | 10,281,237 | ||||
201,302,742 | ||||||
HOTELS, RESTAURANTS AND LEISURE — 1.6% | ||||||
International Game Technology, 3.25%, 5/1/14 | 154,927,000 | 171,581,653 | ||||
LIFE SCIENCES TOOLS AND SERVICES — 0.2% | ||||||
UBS AG, (convertible into Agilent Technologies, Inc.), 3.80%, 12/24/13(2)(4) | 390,000 | 18,659,550 | ||||
MULTILINE RETAIL — 0.3% | ||||||
Citigroup, Inc., (convertible into Target Corp.), 5.75%, 2/27/14(2)(4) | 481,000 | 30,649,320 |
Shares/ Principal Amount | Value |
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 3.6% | ||||||
Intel Corp., 2.95%, 12/15/35 | $236,889,000 | $257,024,565 | ||||
Microchip Technology, Inc., 2.125%, 12/15/37 | 76,974,000 | 120,993,506 | ||||
378,018,071 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $1,086,146,011) | 1,136,147,078 | |||||
Preferred Stocks — 2.7% | ||||||
COMMERCIAL BANKS — 0.5% | ||||||
U.S. Bancorp, 6.00% | 1,899,584 | 51,174,793 | ||||
DIVERSIFIED FINANCIAL SERVICES — 2.2% | ||||||
Citigroup, Inc., 5.95% | 143,458,000 | 133,953,908 | ||||
General Electric Capital Corp., 6.25% | 100,600,000 | 102,018,158 | ||||
235,972,066 | ||||||
TOTAL PREFERRED STOCKS (Cost $299,901,432) | 287,146,859 | |||||
Exchange-Traded Funds — 0.3% | ||||||
iShares Russell 1000 Value Index Fund (Cost $34,684,504) | 399,500 | 34,436,900 |
Shares/ Principal Amount | Value | |||||
Temporary Cash Investments — 2.6% | ||||||
Federal Farm Credit Discount Notes, 0.01%, 10/1/13(5) | $25,000,000 | $ 25,000,000 | ||||
Federal Home Loan Bank Discount Notes, | 50,000,000 | 50,000,000 | ||||
Repurchase Agreement, Bank of America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 1.375%, 9/30/18, valued at $37,814,341), in a joint trading account at 0.03%, dated 9/30/13, due 10/1/13 (Delivery value $37,087,084) | 37,087,053 | |||||
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 5/15/30, valued at $45,313,949), in a joint trading account at 0.01%, dated 9/30/13, due 10/1/13 (Delivery value $44,504,475) | 44,504,463 | |||||
Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 1.75%, 5/15/22, valued at $45,400,933), in a joint trading account at 0.02%, dated 9/30/13, due 10/1/13 (Delivery value $44,504,488) | 44,504,463 | |||||
SSgA U.S. Government Money Market Fund | 68,543,920 | 68,543,920 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $269,639,899) | 269,639,899 | |||||
TOTAL INVESTMENT SECURITIES — 100.3% (Cost $9,033,733,104) | 10,488,484,261 | |||||
OTHER ASSETS AND LIABILITIES — (0.3)% | (31,890,499 | ) | ||||
TOTAL NET ASSETS — 100.0% | $10,456,593,762 |
Forward Foreign Currency Exchange Contracts | ||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Gain (Loss) | ||||
USD | 36,819,735 | CAD | 37,957,465 | JPMorgan Chase Bank N.A. | 10/31/13 | $ (3,399) | ||
USD | 34,434,860 | CHF | 31,412,513 | Credit Suisse AG | 10/31/13 | (308,149) | ||
USD | 241,163,161 | EUR | 178,302,321 | UBS AG | 10/31/13 | (70,451) | ||
USD | 24,750,890 | JPY | 2,440,908,000 | Credit Suisse AG | 10/31/13 | (85,603) | ||
USD | 8,114,117 | SEK | 51,906,816 | JPMorgan Chase Bank N.A. | 10/31/13 | 42,835 | ||
$(424,767) |
Notes to Schedule of Investments
ADR = American Depositary Receipt
CAD = Canadian Dollar
CHF = Swiss Franc
EUR = Euro
JPY = Japanese Yen
SEK = Swedish Krona
USD = United States Dollar
(1) | Affiliated Company: the fund’s holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. |
(2) | 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 $83,851,799, which represented 0.8% of total net assets. |
(3) | Coupon rate adjusts periodically based upon a predetermined schedule. Interest reset date is indicated. Rate shown is effective at the period end. |
(4) | Equity-linked debt security. The aggregated value of these securities at the period end was $57,841,830, which represented 0.6% of total net assets. |
(5) | The rate indicated is the yield to maturity at purchase. |
See Notes to Financial Statements.
Statement of Assets and Liabilities |
SEPTEMBER 30, 2013 (UNAUDITED) | |||
Assets | |||
Investment securities — unaffiliated, at value (cost of $8,884,207,271) | $10,293,992,420 | ||
Investment securities — affiliated, at value (cost of $149,525,833) | 194,491,841 | ||
Total investment securities, at value (cost of $9,033,733,104) | 10,488,484,261 | ||
Foreign currency holdings, at value (cost of $5,279,830) | 5,250,758 | ||
Receivable for investments sold | 5,960,748 | ||
Receivable for capital shares sold | 6,596,112 | ||
Unrealized gain on forward foreign currency exchange contracts | 42,835 | ||
Dividends and interest receivable | 31,574,495 | ||
10,537,909,209 | |||
Liabilities | |||
Payable for investments purchased | 57,460,186 | ||
Payable for capital shares redeemed | 14,610,528 | ||
Unrealized loss on forward foreign currency exchange contracts | 467,602 | ||
Accrued management fees | 7,724,257 | ||
Distribution and service fees payable | 1,052,874 | ||
81,315,447 | |||
Net Assets | $10,456,593,762 | ||
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $8,529,404,604 | ||
Undistributed net investment income | 12,206,468 | ||
Undistributed net realized gain | 460,677,386 | ||
Net unrealized appreciation | 1,454,305,304 | ||
$10,456,593,762 |
Net assets | Shares outstanding | Net asset value per share | |
Investor Class, $0.01 Par Value | $5,492,344,241 | 629,944,557 | $8.72 |
Institutional Class, $0.01 Par Value | $1,536,266,515 | 176,121,196 | $8.72 |
A Class, $0.01 Par Value | $2,745,538,581 | 314,896,640 | $8.72* |
B Class, $0.01 Par Value | $7,251,978 | 830,730 | $8.73 |
C Class, $0.01 Par Value | $498,024,079 | 57,111,897 | $8.72 |
R Class, $0.01 Par Value | $177,143,804 | 20,364,171 | $8.70 |
R6 Class, $0.01 Par Value | $24,564 | 2,815 | $8.73 |
*Maximum offering price $9.25 (net asset value divided by 0.9425).
See Notes to Financial Statements.
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (including $5,227,379 from affiliates and net of foreign taxes withheld of $394,177) | $158,542,046 | ||
Interest | 18,514,871 | ||
177,056,917 | |||
Expenses: | |||
Management fees | 47,332,696 | ||
Distribution and service fees: | |||
A Class | 3,413,898 | ||
B Class | 36,944 | ||
C Class | 2,450,093 | ||
R Class | 456,487 | ||
Directors’ fees and expenses | 287,858 | ||
Other expenses | 162 | ||
53,978,138 | |||
Net investment income (loss) | 123,078,779 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions (including $5,302,387 from affiliates) | 398,264,652 | ||
Foreign currency transactions | (11,264,859 | ) | |
386,999,793 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (87,391,709 | ) | |
Translation of assets and liabilities in foreign currencies | (2,046,832 | ) | |
(89,438,541 | ) | ||
Net realized and unrealized gain (loss) | 297,561,252 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $420,640,031 |
See Notes to Financial Statements.
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) AND YEAR ENDED MARCH 31, 2013 | |||||
Increase (Decrease) in Net Assets | September 30, 2013 | March 31, 2013 | |||
Operations | |||||
Net investment income (loss) | $123,078,779 | $248,585,110 | |||
Net realized gain (loss) | 386,999,793 | 611,716,511 | |||
Change in net unrealized appreciation (depreciation) | (89,438,541 | ) | 460,422,440 | ||
Net increase (decrease) in net assets resulting from operations | 420,640,031 | 1,320,724,061 | |||
Distributions to Shareholders | |||||
From net investment income: | |||||
Investor Class | (65,198,847 | ) | (141,411,242 | ) | |
Institutional Class | (19,820,948 | ) | (39,268,857 | ) | |
A Class | (28,630,289 | ) | (60,626,082 | ) | |
B Class | (49,356 | ) | (125,779 | ) | |
C Class | (3,318,151 | ) | (7,713,146 | ) | |
R Class | (1,675,540 | ) | (3,904,523 | ) | |
R6 Class | (161 | ) | — | ||
From net realized gains: | |||||
Investor Class | — | (54,375,647 | ) | ||
Institutional Class | — | (14,101,988 | ) | ||
A Class | — | (25,558,607 | ) | ||
B Class | — | (75,975 | ) | ||
C Class | — | (4,635,644 | ) | ||
R Class | — | (1,808,569 | ) | ||
Decrease in net assets from distributions | (118,693,292 | ) | (353,606,059 | ) | |
Capital Share Transactions | |||||
Net increase (decrease) in net assets from capital share transactions | (164,244,030 | ) | (495,740,206 | ) | |
Net increase (decrease) in net assets | 137,702,709 | 471,377,796 | |||
Net Assets | |||||
Beginning of period | 10,318,891,053 | 9,847,513,257 | |||
End of period | $10,456,593,762 | $10,318,891,053 | |||
Undistributed net investment income | $12,206,468 | $7,820,981 |
See Notes to Financial Statements.
Notes to Financial Statements |
SEPTEMBER 30, 2013 (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 to provide current income. Capital appreciation is a secondary objective.
The fund offers the Investor Class, the Institutional Class, the A Class, the B Class, the C Class, the R Class and the R6 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 and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees. Sale of the R6 Class commenced on July 26, 2013.
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.
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. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Equity-Linked Debt and Linked-Equity Securities — The fund may invest in hybrid equity securities, which usually convert into common stock at a date predetermined by the issuer. These securities generally offer a higher dividend yield than that of the common stock to which the security is linked. These instruments are issued by a company other than the one to which the security is linked and carry the credit of the issuer, not that of the underlying common stock. The securities’ appreciation is limited based on a predetermined final cap price at the date of the conversion. Risks of investing in these securities include, but are not limited to, a set time to capture the yield advantage, limited appreciation potential, decline in value of the underlying stock, and failure of the issuer to pay dividends or to deliver common stock at maturity.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund’s tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
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 annual management fee schedule ranges from 0.60% to 0.80% for the Institutional Class and 0.45% to 0.65% for the R6 Class. The effective annual management fee for each class for the period ended September 30, 2013 was 0.93% for the Investor Class, A Class, B Class, C Class and R Class, 0.73% for the Institutional Class and 0.58% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, 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, 2013 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 corporation’s investment advisor, ACIM, the corporation’s distributor, ACIS, and the corporation’s transfer agent, American Century Services, LLC are wholly owned, directly or indirectly, by ACC.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2013 were $3,471,602,630 and $3,494,924,545, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2013(1) | Year ended March 31, 2013 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Investor Class/Shares Authorized | 3,000,000,000 | 3,000,000,000 | ||||||||||
Sold | 43,374,104 | $378,108,961 | 76,024,391 | $ 597,947,028 | ||||||||
Issued in reinvestment of distributions | 6,747,734 | 58,668,684 | 22,338,077 | 174,877,435 | ||||||||
Redeemed | (69,948,908 | ) | (610,531,889 | ) | (146,334,035 | ) | (1,151,473,579 | ) | ||||
(19,827,070 | ) | (173,754,244 | ) | (47,971,567 | ) | (378,649,116 | ) | |||||
Institutional Class/Shares Authorized | 800,000,000 | 800,000,000 | ||||||||||
Sold | 16,077,267 | 140,324,648 | 46,181,538 | 363,530,803 | ||||||||
Issued in reinvestment of distributions | 2,101,171 | 18,268,854 | 6,053,770 | 47,472,340 | ||||||||
Redeemed | (22,321,468 | ) | (194,715,393 | ) | (43,198,213 | ) | (341,038,687 | ) | ||||
(4,143,030 | ) | (36,121,891 | ) | 9,037,095 | 69,964,456 | |||||||
A Class/Shares Authorized | 1,000,000,000 | 1,000,000,000 | ||||||||||
Sold | 35,854,021 | 312,977,101 | 46,885,114 | 369,627,808 | ||||||||
Issued in reinvestment of distributions | 3,159,013 | 27,466,505 | 10,511,256 | 82,265,889 | ||||||||
Redeemed | (34,782,448 | ) | (303,155,288 | ) | (73,599,329 | ) | (577,844,321 | ) | ||||
4,230,586 | 37,288,318 | (16,202,959 | ) | (125,950,624 | ) | |||||||
B Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||||
Sold | 32,088 | 281,111 | 20,835 | 162,686 | ||||||||
Issued in reinvestment of distributions | 4,884 | 42,512 | 21,391 | 167,245 | ||||||||
Redeemed | (67,347 | ) | (587,705 | ) | (183,461 | ) | (1,448,864 | ) | ||||
(30,375 | ) | (264,082 | ) | (141,235 | ) | (1,118,933 | ) | |||||
C Class/Shares Authorized | 250,000,000 | 250,000,000 | ||||||||||
Sold | 5,567,731 | 48,623,206 | 2,928,355 | 23,068,339 | ||||||||
Issued in reinvestment of distributions | 295,484 | 2,569,152 | 1,199,209 | 9,371,585 | ||||||||
Redeemed | (3,977,601 | ) | (34,614,136 | ) | (9,937,584 | ) | (78,010,192 | ) | ||||
1,885,614 | 16,578,222 | (5,810,020 | ) | (45,570,268 | ) | |||||||
R Class/Shares Authorized | 100,000,000 | 100,000,000 | ||||||||||
Sold | 1,779,639 | 15,491,669 | 3,519,932 | 27,523,237 | ||||||||
Issued in reinvestment of distributions | 186,693 | 1,619,417 | 709,461 | 5,535,436 | ||||||||
Redeemed | (2,881,713 | ) | (25,106,600 | ) | (6,031,434 | ) | (47,474,394 | ) | ||||
(915,381 | ) | (7,995,514 | ) | (1,802,041 | ) | (14,415,721 | ) | |||||
R6 Class/Shares Authorized | 50,000,000 | N/A | ||||||||||
Sold | 2,797 | 25,000 | ||||||||||
Issued in reinvestment of distributions | 18 | 161 | ||||||||||
2,815 | 25,161 | |||||||||||
Net increase (decrease) | (18,796,841 | ) | $(164,244,030 | ) | (62,890,727 | ) | $(495,740,206 | ) |
(1) | July 26, 2013 (commencement of sale) through September 30, 2013 for the R6 Class. |
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, 2013 follows:
March 31, 2013 | September 30, 2013 | ||||||
Company | Share | Purchase | Sales | Realized | Dividend | Share | Market |
Capitol Federal Financial, Inc. | 9,582,659 | $2,444,015 | $33,279,202 | $1,012,986 | $1,248,782 | 6,999,769 | $ 87,007,129 |
Piedmont Natural Gas Co., Inc.(1) | 3,799,512 | 5,504,561 | 50,058,664 | 3,902,293 | 1,852,039 | 2,398,688 | (1) |
WGL Holdings, Inc. | 2,580,517 | 1,452,253 | 3,859,655 | 387,108 | 2,126,558 | 2,516,617 | 107,484,712 |
$9,400,829 | $87,197,521 | $5,302,387 | $5,227,379 | $194,491,841 |
(1) | Company was not an affiliate at September 30, 2013. |
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 | $7,279,643,710 | $ 342,250,189 | — |
Convertible Preferred Stocks | — | 1,139,219,626 | — |
Convertible Bonds | — | 1,136,147,078 | — |
Preferred Stocks | — | 287,146,859 | — |
Exchange-Traded Funds | 34,436,900 | — | — |
Temporary Cash Investments | 68,543,920 | 201,095,979 | — |
Total Value of Investment Securities | $7,382,624,530 | $3,105,859,731 | — |
Other Financial Instruments | |||
Total Unrealized Gain (Loss) on Forward Foreign | — | $(424,767) | — |
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 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, 2013, is disclosed on the Statement of Assets and Liabilities as an asset of $42,835 in unrealized gain on forward foreign currency exchange contracts and a liability of $467,602 in unrealized loss on forward foreign currency exchange contracts. For the six months ended September 30, 2013, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(11,190,097) in net realized gain (loss) on foreign currency transactions and $(2,092,417) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
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, 2013, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $9,192,063,287 |
Gross tax appreciation of investments | $1,395,236,239 |
Gross tax depreciation of investments | (98,815,265) |
Net tax appreciation (depreciation) of investments | $1,296,420,974 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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 | Net Income | Net | Total From Investment Operations | Net Income | Net | Total Distributions | Net Asset Value, | Total | Operating Expenses | Net Income | Portfolio Turnover | Net Assets, (in thousands) | |
Investor Class | |||||||||||||
2013(3) | $8.47 | 0.11 | 0.24 | 0.35 | (0.10) | — | (0.10) | $8.72 | 4.17% | 0.93%(4) | 2.42%(4) | 34% | $5,492,344 |
2013 | $7.69 | 0.21 | 0.86 | 1.07 | (0.21) | (0.08) | (0.29) | $8.47 | 14.33% | 0.93% | 2.63% | 83% | $5,504,359 |
2012 | $7.43 | 0.20 | 0.25 | 0.45 | (0.19) | — | (0.19) | $7.69 | 6.24% | 0.95% | 2.69% | 115% | $5,363,783 |
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 |
Institutional Class | |||||||||||||
2013(3) | $8.47 | 0.11 | 0.25 | 0.36 | (0.11) | — | (0.11) | $8.72 | 4.15% | 0.73%(4) | 2.62%(4) | 34% | $1,536,267 |
2013 | $7.69 | 0.22 | 0.87 | 1.09 | (0.23) | (0.08) | (0.31) | $8.47 | 14.69% | 0.73% | 2.83% | 83% | $1,527,723 |
2012 | $7.44 | 0.21 | 0.24 | 0.45 | (0.20) | — | (0.20) | $7.69 | 6.31% | 0.75% | 2.89% | 115% | $1,316,758 |
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 |
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 | Net Income | Net | Total From Investment Operations | Net Income | Net | Total Distributions | Net Asset Value, | Total | Operating Expenses | Net Income | Portfolio Turnover | Net Assets, (in thousands) | |
A Class | |||||||||||||
2013(3) | $8.47 | 0.09 | 0.25 | 0.34 | (0.09) | — | (0.09) | $8.72 | 4.04% | 1.18%(4) | 2.17%(4) | 34% | $2,745,539 |
2013 | $7.69 | 0.19 | 0.86 | 1.05 | (0.19) | (0.08) | (0.27) | $8.47 | 14.05% | 1.18% | 2.38% | 83% | $2,631,737 |
2012 | $7.43 | 0.18 | 0.25 | 0.43 | (0.17) | — | (0.17) | $7.69 | 5.98% | 1.20% | 2.44% | 115% | $2,512,840 |
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 |
B Class | |||||||||||||
2013(3) | $8.48 | 0.06 | 0.25 | 0.31 | (0.06) | — | (0.06) | $8.73 | 3.65% | 1.93%(4) | 1.42%(4) | 34% | $7,252 |
2013 | $7.70 | 0.13 | 0.86 | 0.99 | (0.13) | (0.08) | (0.21) | $8.48 | 13.20% | 1.93% | 1.63% | 83% | $7,304 |
2012 | $7.44 | 0.12 | 0.26 | 0.38 | (0.12) | — | (0.12) | $7.70 | 5.18% | 1.95% | 1.69% | 115% | $7,716 |
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 |
C Class | |||||||||||||
2013(3) | $8.47 | 0.06 | 0.25 | 0.31 | (0.06) | — | (0.06) | $8.72 | 3.65% | 1.93%(4) | 1.42%(4) | 34% | $498,024 |
2013 | $7.69 | 0.13 | 0.86 | 0.99 | (0.13) | (0.08) | (0.21) | $8.47 | 13.21% | 1.93% | 1.63% | 83% | $467,913 |
2012 | $7.44 | 0.12 | 0.25 | 0.37 | (0.12) | — | (0.12) | $7.69 | 5.05% | 1.95% | 1.69% | 115% | $469,355 |
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 |
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 | Net Income | Net | Total From Investment Operations | Net Income | Net | Total Distributions | Net Asset Value, | Total | Operating Expenses | Net Income | Portfolio Turnover | Net Assets, (in thousands) | |
R Class | |||||||||||||
2013(3) | $8.45 | 0.08 | 0.25 | 0.33 | (0.08) | — | (0.08) | $8.70 | 3.92% | 1.43%(4) | 1.92%(4) | 34% | $177,144 |
2013 | $7.67 | 0.17 | 0.86 | 1.03 | (0.17) | (0.08) | (0.25) | $8.45 | 13.81% | 1.43% | 2.13% | 83% | $179,855 |
2012 | $7.42 | 0.16 | 0.24 | 0.40 | (0.15) | — | (0.15) | $7.67 | 5.59% | 1.45% | 2.19% | 115% | $177,061 |
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 |
R6 Class | |||||||||||||
2013(5) | $8.94 | 0.05 | (0.20) | (0.15) | (0.06) | — | (0.06) | $8.73 | (1.70)% | 0.58%(4) | 3.21%(4) | 34%(6) | $25 |
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, 2013 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through September 30, 2013 (unaudited). |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2013. |
See Notes to Financial Statements.
Approval of Management Agreement |
At a meeting held on June 20, 2013, 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 directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, 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.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided 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; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | 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. |
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:
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, 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, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund 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.
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.
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund’s investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the “About Us” page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
Notes |
Notes |
Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 |
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.
©2013 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-79777 1311
SEMIANNUAL REPORT | SEPTEMBER 30, 2013 |
Large Company Value Fund
Table of Contents |
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.
President’s Letter |
Jonathan Thomas
Dear Investor:
Thank you for reviewing this semiannual report for the six months ended September 30, 2013. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information.
For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com.
Bond Yields and Stock Indices Soared Together Until September
U.S. government bond yields and stock indices traced roughly parallel upward paths during most of the six months ended September 30, 2013. The 10-year U.S. Treasury yield began the period at 1.85%, compressed in large part by the scale of the Federal Reserve’s (the Fed’s) bond-buying program ($85 billion of quantitative easing, or QE, each month).
Hints from the Fed that it might taper QE by year end sent bond yields soaring from early May to early September. The 10-year Treasury yield reached 3.00% on September 5, its first time at that level since July 2011, before finishing the reporting period at 2.61%. Bond yields generally declined in September on weaker-than-expected economic data, the Fed’s announcement that it would delay tapering, and uncertainty caused by the impending partial shutdown of the U.S. government.
Even with the September rally, bonds significantly underperformed stocks for the full reporting period. The 10-year Treasury note and the Barclays U.S. Aggregate Bond Index (representing the broad taxable U.S. bond market) returned –5.20% and –1.77%, respectively. By contrast, the S&P 500 Index gained 8.31% as the U.S. economy showed signs of attaining sustainable growth, fueled in part by Fed stimulus. Improvements in the housing and job markets helped trigger optimism, though their absolute numbers still fell short of pre-2008 levels.
Full recovery from 2008 remains a distant goal. Economic growth is still subpar compared with past recoveries, hampered further by the fiscal sequester and partial government shutdown. Faced with these challenges, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios—as appropriate—for meeting financial goals. We appreciate your continued trust in us in this uncertain environment.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
Don Pratt
Dear Fellow Shareholders,
This is my last letter to shareholders as the funds’ Chairman, as I will retire at the end of 2013.
My personal thanks go to the independent directors that elected me to the Board and subsequently to the Chairman position, and with whom I have worked to reorganize the Board’s committee structure and annually improve our governance processes. Throughout my tenure, the Board has addressed its responsibilities to shareholders diligently in committee work, the annual contract review, and the execution of our oversight responsibilities. I expect that it will continue to do so well into the future.
Thanks also to the American Century Investments management team led by Jonathan Thomas. Its transparency, candor, and open communication with the Board is most appreciated. I have served on more than 20 boards and this is the most productive and enjoyable relationship with management I have experienced.
Finally, thanks to the many shareholders who have written with questions, comments, and suggestions. Each was heard and addressed and enabled the board to better represent your interests. Keep communicating with us so that the Board can continue to be aware of your interests, concerns, and questions. My best wishes to Jim Olson, my successor as Chairman, and the other independent directors who continue to serve on your behalf.
And remember, as the firm’s founder Jim Stowers, Jr. so often observed, “The best is yet to be.”
Best regards,
Don Pratt
Performance |
Total Returns as of September 30, 2013 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ALVIX | 8.48% | 20.58% | 8.34% | 6.69% | 5.28% | 7/30/99 |
Russell 1000 Value Index | — | 7.27% | 22.30% | 8.86% | 7.98% | 5.20% | — |
S&P 500 Index | — | 8.31% | 19.34% | 10.01% | 7.56% | 3.59% | — |
Institutional Class | ALVSX | 8.43% | 20.62% | 8.56% | 6.90% | 5.41% | 8/10/01 |
A Class(2) No sales charge* With sales charge* | ALPAX
| 8.20% 2.01% | 20.13% 13.27% | 8.04% 6.78% | 6.41% 5.79% | 5.90% 5.41% | 10/26/00
|
B Class No sales charge* With sales charge* | ALBVX
| 7.91% 2.91% | 19.36% 15.36% | 7.25% 7.09% | 5.66% 5.66% | 6.68% 6.68% | 1/31/03
|
C Class No sales charge* With sales charge* | ALPCX
| 7.94% 6.94% | 19.42% 19.42% | 7.27% 7.27% | 5.65% 5.65% | 4.74% 4.74% | 11/7/01
|
R Class | ALVRX | 8.21% | 19.81% | 7.80% | 6.16% | 5.98% | 8/29/03 |
R6 Class | ALVDX | — | — | — | — | -2.23%(1) | 7/26/13 |
* | 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 to 0.00% after the sixth year. 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 | Institutional Class | A Class | B Class | C Class | R Class | R6 Class |
0.87% | 0.67% | 1.12% | 1.87% | 1.87% | 1.37% | 0.52% |
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.
Fund Characteristics |
SEPTEMBER 30, 2013 | |
Top Ten Holdings | % of net assets |
Exxon Mobil Corp. | 4.8% |
Chevron Corp. | 3.7% |
General Electric Co. | 3.4% |
JPMorgan Chase & Co. | 3.4% |
Johnson & Johnson | 3.1% |
Wells Fargo & Co. | 2.9% |
Pfizer, Inc. | 2.8% |
Cisco Systems, Inc. | 2.6% |
Procter & Gamble Co. (The) | 2.6% |
Citigroup, Inc. | 2.5% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 13.4% |
Diversified Financial Services | 8.9% |
Pharmaceuticals | 8.3% |
Insurance | 6.8% |
Commercial Banks | 6.2% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 98.5% |
Temporary Cash Investments | 1.4% |
Other Assets and Liabilities | 0.1% |
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013 (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. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | Annualized | |
Actual | ||||
Investor Class | $1,000 | $1,084.80 | $4.49 | 0.86% |
Institutional Class | $1,000 | $1,084.30 | $3.45 | 0.66% |
A Class | $1,000 | $1,082.00 | $5.79 | 1.11% |
B Class | $1,000 | $1,079.10 | $9.69 | 1.86% |
C Class | $1,000 | $1,079.40 | $9.70 | 1.86% |
R Class | $1,000 | $1,082.10 | $7.10 | 1.36% |
R6 Class | $1,000 | $977.70(2) | $0.91(3) | 0.50% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.76 | $4.36 | 0.86% |
Institutional Class | $1,000 | $1,021.76 | $3.35 | 0.66% |
A Class | $1,000 | $1,019.50 | $5.62 | 1.11% |
B Class | $1,000 | $1,015.74 | $9.40 | 1.86% |
C Class | $1,000 | $1,015.74 | $9.40 | 1.86% |
R Class | $1,000 | $1,018.25 | $6.88 | 1.36% |
R6 Class | $1,000 | $1,022.56(4) | $2.54(4) | 0.50% |
(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 365, to reflect the one-half year period. |
(2) | Ending account value based on actual return from July 26, 2013 (commencement of sale) through September 30, 2013. |
(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 67, the number of days in the period from July 26, 2013 (commencement of sale) through September 30, 2013, divided by 365, 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 the 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. |
Schedule of Investments |
SEPTEMBER 30, 2013 (UNAUDITED)
Shares | Value | |||||
Common Stocks — 98.5% | ||||||
AEROSPACE AND DEFENSE — 2.1% | ||||||
General Dynamics Corp. | 50,900 | $ 4,454,768 | ||||
Honeywell International, Inc. | 28,800 | 2,391,552 | ||||
Raytheon Co. | 50,300 | 3,876,621 | ||||
Textron, Inc. | 115,100 | 3,177,911 | ||||
13,900,852 | ||||||
AIRLINES — 0.4% | ||||||
Southwest Airlines Co. | 197,700 | 2,878,512 | ||||
AUTO COMPONENTS — 0.2% | ||||||
Autoliv, Inc. | 17,200 | 1,503,108 | ||||
AUTOMOBILES — 1.3% | ||||||
Ford Motor Co. | 504,300 | 8,507,541 | ||||
BEVERAGES — 0.4% | ||||||
PepsiCo, Inc. | 30,300 | 2,408,850 | ||||
BIOTECHNOLOGY — 0.5% | ||||||
Amgen, Inc. | 17,800 | 1,992,532 | ||||
Gilead Sciences, Inc.(1) | 21,600 | 1,357,344 | ||||
3,349,876 | ||||||
CAPITAL MARKETS — 4.2% | ||||||
Ameriprise Financial, Inc. | 70,100 | 6,384,708 | ||||
Bank of New York Mellon Corp. (The) | 134,800 | 4,069,612 | ||||
BlackRock, Inc. | 23,600 | 6,386,632 | ||||
Goldman Sachs Group, Inc. (The) | 56,000 | 8,859,760 | ||||
Morgan Stanley | 90,500 | 2,438,975 | ||||
28,139,687 | ||||||
CHEMICALS — 0.8% | ||||||
E.I. du Pont de Nemours & Co. | 18,600 | 1,089,216 | ||||
LyondellBasell Industries NV, Class A | 61,215 | 4,482,774 | ||||
5,571,990 | ||||||
COMMERCIAL BANKS — 6.2% | ||||||
KeyCorp | 157,600 | 1,796,640 | ||||
PNC Financial Services Group, Inc. (The) | 127,700 | 9,251,865 | ||||
U.S. Bancorp | 302,000 | 11,047,160 | ||||
Wells Fargo & Co. | 476,000 | 19,668,320 | ||||
41,763,985 | ||||||
COMMERCIAL SERVICES AND SUPPLIES — 0.9% | ||||||
ADT Corp. (The) | 90,400 | 3,675,664 | ||||
Tyco International Ltd. | 70,100 | 2,452,098 | ||||
6,127,762 | ||||||
COMMUNICATIONS EQUIPMENT — 3.7% | ||||||
Cisco Systems, Inc. | 756,200 | 17,710,204 | ||||
F5 Networks, Inc.(1) | 7,800 | 668,928 | ||||
QUALCOMM, Inc. | 100,100 | 6,742,736 | ||||
25,121,868 | ||||||
COMPUTERS AND PERIPHERALS — 1.5% | ||||||
Apple, Inc. | 9,900 | 4,719,825 | ||||
NetApp, Inc. | 118,900 | 5,067,518 | ||||
9,787,343 | ||||||
CONSUMER FINANCE — 0.8% | ||||||
Capital One Financial Corp. | 81,900 | 5,629,806 | ||||
CONTAINERS AND PACKAGING — 0.2% | ||||||
Avery Dennison Corp. | 26,500 | 1,153,280 | ||||
DIVERSIFIED FINANCIAL SERVICES — 8.9% | ||||||
Bank of America Corp. | 640,600 | 8,840,280 | ||||
Berkshire Hathaway, Inc., Class B(1) | 100,800 | 11,441,808 | ||||
Citigroup, Inc. | 340,700 | 16,527,357 | ||||
JPMorgan Chase & Co. | 445,100 | 23,007,219 | ||||
59,816,664 | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.4% | ||||||
AT&T, Inc. | 324,700 | 10,981,354 | ||||
CenturyLink, Inc. | 126,500 | 3,969,570 | ||||
Verizon Communications, Inc. | 20,500 | 956,530 | ||||
15,907,454 | ||||||
ELECTRIC UTILITIES — 3.0% | ||||||
American Electric Power Co., Inc. | 86,800 | 3,762,780 | ||||
NV Energy, Inc. | 149,700 | 3,534,417 | ||||
Pinnacle West Capital Corp. | 69,200 | 3,788,008 | ||||
PPL Corp. | 140,100 | 4,256,238 | ||||
Xcel Energy, Inc. | 174,500 | 4,817,945 | ||||
20,159,388 | ||||||
ELECTRICAL EQUIPMENT — 0.9% | ||||||
Eaton Corp. plc | 87,500 | 6,023,500 | ||||
ENERGY EQUIPMENT AND SERVICES — 2.8% | ||||||
Baker Hughes, Inc. | 87,400 | 4,291,340 | ||||
National Oilwell Varco, Inc. | 115,000 | 8,982,650 | ||||
Schlumberger Ltd. | 62,900 | 5,557,844 | ||||
18,831,834 | ||||||
FOOD AND STAPLES RETAILING — 2.4% | ||||||
CVS Caremark Corp. | 136,300 | 7,735,025 | ||||
Kroger Co. (The) | 70,600 | 2,848,004 | ||||
Wal-Mart Stores, Inc. | 74,700 | 5,524,812 | ||||
16,107,841 |
Shares | Value |
FOOD PRODUCTS — 0.4% | ||||||
Mondelez International, Inc. Class A | 74,800 | $ 2,350,216 | ||||
HEALTH CARE EQUIPMENT AND SUPPLIES — 2.9% | ||||||
Abbott Laboratories | 254,900 | 8,460,131 | ||||
Medtronic, Inc. | 200,900 | 10,697,925 | ||||
19,158,056 | ||||||
HEALTH CARE PROVIDERS AND SERVICES — 2.2% | ||||||
Aetna, Inc. | 77,100 | 4,935,942 | ||||
Premier, Inc., Class A(1) | 39,589 | 1,254,971 | ||||
Quest Diagnostics, Inc. | 48,900 | 3,021,531 | ||||
WellPoint, Inc. | 69,400 | 5,802,534 | ||||
15,014,978 | ||||||
HOTELS, RESTAURANTS AND LEISURE — 0.6% | ||||||
Carnival Corp. | 124,400 | 4,060,416 | ||||
HOUSEHOLD PRODUCTS — 2.6% | ||||||
Procter & Gamble Co. (The) | 232,700 | 17,589,793 | ||||
INDUSTRIAL CONGLOMERATES — 3.4% | ||||||
General Electric Co. | 967,600 | 23,115,964 | ||||
INSURANCE — 6.8% | ||||||
Allstate Corp. (The) | 141,800 | 7,167,990 | ||||
American International Group, Inc. | 139,000 | 6,759,570 | ||||
Chubb Corp. (The) | 33,000 | 2,945,580 | ||||
Loews Corp. | 92,400 | 4,318,776 | ||||
MetLife, Inc. | 181,900 | 8,540,205 | ||||
Principal Financial Group, Inc. | 77,900 | 3,335,678 | ||||
Prudential Financial, Inc. | 78,300 | 6,105,834 | ||||
Travelers Cos., Inc. (The) | 79,200 | 6,713,784 | ||||
45,887,417 | ||||||
MACHINERY — 1.6% | ||||||
Caterpillar, Inc. | 34,500 | 2,876,265 | ||||
Ingersoll-Rand plc | 54,600 | �� | 3,545,724 | |||
PACCAR, Inc. | 79,100 | 4,402,706 | ||||
10,824,695 | ||||||
MEDIA — 3.0% | ||||||
CBS Corp., Class B | 53,400 | 2,945,544 | ||||
Comcast Corp., Class A | 127,500 | 5,756,625 | ||||
Time Warner Cable, Inc. | 29,100 | 3,247,560 | ||||
Time Warner, Inc. | 127,100 | 8,364,451 | ||||
20,314,180 | ||||||
METALS AND MINING — 1.1% | ||||||
Freeport-McMoRan Copper & Gold, Inc. | 229,900 | 7,605,092 | ||||
MULTI-UTILITIES — 0.5% | ||||||
PG&E Corp. | 84,900 | 3,474,108 | ||||
MULTILINE RETAIL — 1.6% | ||||||
Macy’s, Inc. | 113,800 | 4,924,126 | ||||
Target Corp. | 95,300 | 6,097,294 | ||||
11,021,420 | ||||||
OIL, GAS AND CONSUMABLE FUELS — 13.4% | ||||||
Apache Corp. | 93,800 | 7,986,132 | ||||
Chevron Corp. | 205,000 | 24,907,500 | ||||
Exxon Mobil Corp. | 375,900 | 32,342,436 | ||||
Marathon Petroleum Corp. | 33,600 | 2,161,152 | ||||
Occidental Petroleum Corp. | 119,100 | 11,140,614 | ||||
Royal Dutch Shell plc, Class A | 145,800 | 4,808,848 | ||||
Total SA ADR | 113,900 | 6,597,088 | ||||
89,943,770 | ||||||
PAPER AND FOREST PRODUCTS — 0.6% | ||||||
International Paper Co. | 93,700 | 4,197,760 | ||||
PHARMACEUTICALS — 8.3% | ||||||
Johnson & Johnson | 238,300 | 20,658,227 | ||||
Merck & Co., Inc. | 344,400 | 16,396,884 | ||||
Pfizer, Inc. | 665,000 | 19,092,150 | ||||
56,147,261 | ||||||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 2.8% | ||||||
Applied Materials, Inc. | 208,600 | 3,658,844 | ||||
Intel Corp. | 525,000 | 12,033,000 | ||||
Microchip Technology, Inc. | 77,000 | 3,102,330 | ||||
18,794,174 | ||||||
SOFTWARE — 2.3% | ||||||
Microsoft Corp. | 235,100 | 7,831,181 | ||||
Oracle Corp. | 230,200 | 7,635,734 | ||||
15,466,915 | ||||||
SPECIALTY RETAIL — 0.4% | ||||||
Lowe’s Cos., Inc. | 62,000 | 2,951,820 | ||||
TOBACCO — 0.4% | ||||||
Altria Group, Inc. | 68,000 | 2,335,800 | ||||
TOTAL COMMON STOCKS (Cost $449,116,163) | 662,944,976 | |||||
Temporary Cash Investments — 1.4% | ||||||
Repurchase Agreement, Bank of America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 1.375%, 9/30/18, valued at $1,823,312), in a joint trading account at 0.03%, dated 9/30/13, due 10/1/13 (Delivery value $1,788,245) | 1,788,244 | |||||
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 5/15/30, valued at $2,184,924), in a joint trading account at 0.01%, dated 9/30/13, due 10/1/13 (Delivery value $2,145,894) | 2,145,893 |
Shares | Value |
Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 1.75%, 5/15/22, valued at $2,189,118), in a joint trading account at 0.02%, dated 9/30/13, due 10/1/13 (Delivery value $2,145,894) | $2,145,893 | |||||
SSgA U.S. Government Money Market Fund | 3,305,132 | 3,305,132 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $9,385,162) | 9,385,162 | |||||
TOTAL INVESTMENT SECURITIES — 99.9% (Cost $458,501,325) | 672,330,138 | |||||
OTHER ASSETS AND LIABILITIES — 0.1% | 851,933 | |||||
TOTAL NET ASSETS — 100.0% | $673,182,071 |
Forward Foreign Currency Exchange Contracts | ||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Gain (Loss) | ||
USD | 10,213,151 | EUR | 7,551,023 | UBS AG | 10/31/13 | $(2,983) |
Notes to Schedule of Investments
ADR = American Depositary Receipt
EUR = Euro
USD = United States Dollar
(1) | Non-income producing. |
See Notes to Financial Statements.
Statement of Assets and Liabilities |
SEPTEMBER 30, 2013 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $458,501,325) | $672,330,138 | ||
Foreign currency holdings, at value (cost of $63,850) | 63,850 | ||
Receivable for investments sold | 1,224,820 | ||
Receivable for capital shares sold | 1,875,150 | ||
Dividends and interest receivable | 1,113,755 | ||
676,607,713 | |||
Liabilities | |||
Payable for investments purchased | 2,481,765 | ||
Payable for capital shares redeemed | 452,263 | ||
Unrealized loss on forward foreign currency exchange contracts | 2,983 | ||
Accrued management fees | 462,439 | ||
Distribution and service fees payable | 26,192 | ||
3,425,642 | |||
Net Assets | $673,182,071 | ||
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $820,302,160 | ||
Undistributed net investment income | 280,749 | ||
Accumulated net realized loss | (361,226,668 | ) | |
Net unrealized appreciation | 213,825,830 | ||
$673,182,071 |
Net assets | Shares outstanding | Net asset value per share | |
Investor Class, $0.01 Par Value | $521,918,734 | 70,170,539 | $7.44 |
Institutional Class, $0.01 Par Value | $62,680,993 | 8,423,050 | $7.44 |
A Class, $0.01 Par Value | $72,006,074 | 9,687,005 | $7.43* |
B Class, $0.01 Par Value | $1,034,980 | 138,731 | $7.46 |
C Class, $0.01 Par Value | $9,486,771 | 1,275,820 | $7.44 |
R Class, $0.01 Par Value | $6,030,063 | 810,615 | $7.44 |
R6 Class, $0.01 Par Value | $24,456 | 3,285 | $7.44 |
*Maximum offering price $7.88 (net asset value divided by 0.9425).
See Notes to Financial Statements.
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $36,807) | $8,528,460 | ||
Interest | 784 | ||
8,529,244 | |||
Expenses: | |||
Management fees | 2,773,546 | ||
Distribution and service fees: | |||
A Class | 90,091 | ||
B Class | 5,872 | ||
C Class | 47,053 | ||
R Class | 15,227 | ||
Directors’ fees and expenses | 15,044 | ||
2,946,833 | |||
Net investment income (loss) | 5,582,411 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 32,619,231 | ||
Foreign currency transactions | (507,864 | ) | |
32,111,367 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 15,040,412 | ||
Translation of assets and liabilities in foreign currencies | (51,203 | ) | |
14,989,209 | |||
Net realized and unrealized gain (loss) | 47,100,576 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $52,682,987 |
See Notes to Financial Statements.
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) AND YEAR ENDED MARCH 31, 2013 | |||||
Increase (Decrease) in Net Assets | September 30, 2013 | March 31, 2013 | |||
Operations | |||||
Net investment income (loss) | $5,582,411 | $10,842,484 | |||
Net realized gain (loss) | 32,111,367 | 59,176,143 | |||
Change in net unrealized appreciation (depreciation) | 14,989,209 | 15,079,455 | |||
Net increase (decrease) in net assets resulting from operations | 52,682,987 | 85,098,082 | |||
Distributions to Shareholders | |||||
From net investment income: | |||||
Investor Class | (4,584,586 | ) | (8,590,787 | ) | |
Institutional Class | (619,763 | ) | (1,149,076 | ) | |
A Class | (553,813 | ) | (1,141,948 | ) | |
B Class | (4,323 | ) | (17,721 | ) | |
C Class | (37,162 | ) | (81,259 | ) | |
R Class | (38,873 | ) | (79,284 | ) | |
R6 Class | (131 | ) | — | ||
Decrease in net assets from distributions | (5,838,651 | ) | (11,060,075 | ) | |
Capital Share Transactions | |||||
Net increase (decrease) in net assets from capital share transactions | (3,575,220 | ) | (169,707,552 | ) | |
Net increase (decrease) in net assets | 43,269,116 | (95,669,545 | ) | ||
Net Assets | |||||
Beginning of period | 629,912,955 | 725,582,500 | |||
End of period | $673,182,071 | $629,912,955 | |||
Undistributed net investment income | $280,749 | $536,989 |
See Notes to Financial Statements.
Notes to Financial Statements |
SEPTEMBER 30, 2013 (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 offers the Investor Class, the Institutional Class, the A Class, the B Class, the C Class, the R Class and the R6 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 and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees. Sale of the R6 Class commenced on July 26, 2013.
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.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund’s tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
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 annual management fee schedule ranges from 0.50% to 0.70% for the Institutional Class and 0.35% to 0.55% for the R6 Class. The effective annual management fee for each class for the period ended September 30, 2013 was 0.85% for the Investor Class, A Class, B Class, C Class and R Class, 0.65% for the Institutional Class and 0.50% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, 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, 2013 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 corporation’s investment advisor, ACIM, the corporation’s distributor, ACIS, and the corporation’s transfer agent, American Century Services, LLC are wholly owned, directly or indirectly, by ACC. Various funds issued by American Century Asset Allocation Portfolios, Inc. and American Century Strategic Asset Allocations, Inc. own, in aggregate, 42% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2013 were $97,571,163 and $104,459,899, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended | Year ended March 31, 2013 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Investor Class/Shares Authorized | 600,000,000 | 600,000,000 | ||||||||||
Sold | 3,971,554 | $29,088,951 | 17,796,988 | $107,954,199 | ||||||||
Issued in reinvestment of distributions | 610,671 | 4,516,219 | 1,360,766 | 8,440,559 | ||||||||
Redeemed | (4,793,437 | ) | (34,966,617 | ) | (39,663,157 | ) | (239,958,023 | ) | ||||
(211,212 | ) | (1,361,447 | ) | (20,505,403 | ) | (123,563,265 | ) | |||||
Institutional Class/Shares Authorized | 200,000,000 | 200,000,000 | ||||||||||
Sold | 1,086,324 | 7,797,614 | 1,860,479 | 11,285,205 | ||||||||
Issued in reinvestment of distributions | 83,281 | 615,883 | 183,862 | 1,139,231 | ||||||||
Redeemed | (1,024,358 | ) | (7,522,746 | ) | (6,511,040 | ) | (39,753,880 | ) | ||||
145,247 | 890,751 | (4,466,699 | ) | (27,329,444 | ) | |||||||
A Class/Shares Authorized | 100,000,000 | 100,000,000 | ||||||||||
Sold | 833,146 | 6,127,610 | 1,604,715 | 9,988,929 | ||||||||
Issued in reinvestment of distributions | 71,402 | 528,030 | 173,666 | 1,072,692 | ||||||||
Redeemed | (1,231,189 | ) | (9,001,839 | ) | (4,162,961 | ) | (25,682,192 | ) | ||||
(326,641 | ) | (2,346,199 | ) | (2,384,580 | ) | (14,620,571 | ) | |||||
B Class/Shares Authorized | 5,000,000 | 5,000,000 | ||||||||||
Sold | 3,867 | 28,555 | 2,377 | 15,039 | ||||||||
Issued in reinvestment of distributions | 480 | 3,560 | 2,622 | 15,943 | ||||||||
Redeemed | (67,755 | ) | (489,303 | ) | (253,285 | ) | (1,560,479 | ) | ||||
(63,408 | ) | (457,188 | ) | (248,286 | ) | (1,529,497 | ) | |||||
C Class/Shares Authorized | 20,000,000 | 20,000,000 | ||||||||||
Sold | 82,168 | 601,751 | 74,159 | 474,622 | ||||||||
Issued in reinvestment of distributions | 2,747 | 20,324 | 6,805 | 41,763 | ||||||||
Redeemed | (104,098 | ) | (754,741 | ) | (300,903 | ) | (1,870,403 | ) | ||||
(19,183 | ) | (132,666 | ) | (219,939 | ) | (1,354,018 | ) | |||||
R Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||||
Sold | 103,383 | 762,129 | 146,869 | 930,011 | ||||||||
Issued in reinvestment of distributions | 4,599 | 33,995 | 11,416 | 70,262 | ||||||||
Redeemed | (134,060 | ) | (989,726 | ) | (380,427 | ) | (2,311,030 | ) | ||||
(26,078 | ) | (193,602 | ) | (222,142 | ) | (1,310,757 | ) | |||||
R6 Class/Shares Authorized | 50,000,000 | N/A | ||||||||||
Sold | 3,268 | 25,000 | ||||||||||
Issued in reinvestment of distributions | 17 | 131 | ||||||||||
3,285 | 25,131 | |||||||||||
Net increase (decrease) | (497,990 | ) | $(3,575,220 | ) | (28,047,049 | ) | $(169,707,552 | ) |
(1) | July 26, 2013 (commencement of sale) through September 30, 2013 for the R6 Class. |
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 | $658,136,128 | $ 4,808,848 | — |
Temporary Cash Investments | 3,305,132 | 6,080,030 | — |
Total Value of Investment Securities | $661,441,260 | $10,888,878 | — |
Other Financial Instruments | |||
Total Unrealized Gain (Loss) on Forward Foreign Currency Exchange Contracts | — | $(2,983) | — |
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 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, 2013, is disclosed on the Statement of Assets and Liabilities as a liability of $2,983 in unrealized loss on forward foreign currency exchange contracts. For the six months ended September 30, 2013, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(509,606) in net realized gain (loss) on foreign currency transactions and $(50,644) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
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, 2013, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $486,733,148 |
Gross tax appreciation of investments | $186,650,645 |
Gross tax depreciation of investments | (1,053,655) |
Net tax appreciation (depreciation) of investments | $185,596,990 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2013, the fund had accumulated short-term capital losses of $(363,173,003), 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 $(61,095,903) and $(302,077,100) expire in 2017 and 2018, respectively.
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 | Net | Net Realized | Total From | Net | Net | Total | Net Asset | Total | Operating | Net | Portfolio | Net Assets, | |
Investor Class | |||||||||||||
2013(3) | $6.92 | 0.06 | 0.53 | 0.59 | (0.07) | — | (0.07) | $7.44 | 8.48% | 0.86%(4) | 1.71%(4) | 15% | $521,919 |
2013 | $6.09 | 0.12 | 0.83 | 0.95 | (0.12) | — | (0.12) | $6.92 | 15.85% | 0.87% | 1.87% | 33% | $487,161 |
2012 | $5.80 | 0.10 | 0.29 | 0.39 | (0.10) | — | (0.10) | $6.09 | 6.91% | 0.87% | 1.84% | 56% | $553,916 |
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 |
Institutional Class | |||||||||||||
2013(3) | $6.93 | 0.07 | 0.51 | 0.58 | (0.07) | — | (0.07) | $7.44 | 8.43% | 0.66%(4) | 1.91%(4) | 15% | $62,681 |
2013 | $6.10 | 0.13 | 0.83 | 0.96 | (0.13) | — | (0.13) | $6.93 | 16.05% | 0.67% | 2.07% | 33% | $57,325 |
2012 | $5.80 | 0.11 | 0.30 | 0.41 | (0.11) | — | (0.11) | $6.10 | 7.29% | 0.67% | 2.04% | 56% | $77,706 |
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 |
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 | Net | Net Realized | Total From | Net | Net | Total | Net Asset | Total | Operating | Net | Portfolio | Net Assets, | |
A Class | |||||||||||||
2013(3) | $6.92 | 0.05 | 0.52 | 0.57 | (0.06) | — | (0.06) | $7.43 | 8.20% | 1.11%(4) | 1.46%(4) | 15% | $72,006 |
2013 | $6.09 | 0.10 | 0.84 | 0.94 | (0.11) | — | (0.11) | $6.92 | 15.57% | 1.12% | 1.62% | 33% | $69,270 |
2012 | $5.79 | 0.09 | 0.30 | 0.39 | (0.09) | — | (0.09) | $6.09 | 6.83% | 1.12% | 1.59% | 56% | $75,521 |
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 |
B Class | |||||||||||||
2013(3) | $6.94 | 0.03 | 0.52 | 0.55 | (0.03) | — | (0.03) | $7.46 | 7.91% | 1.86%(4) | 0.71%(4) | 15% | $1,035 |
2013 | $6.11 | 0.05 | 0.84 | 0.89 | (0.06) | — | (0.06) | $6.94 | 14.67% | 1.87% | 0.87% | 33% | $1,404 |
2012 | $5.81 | 0.05 | 0.29 | 0.34 | (0.04) | — | (0.04) | $6.11 | 6.01% | 1.87% | 0.84% | 56% | $2,753 |
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 |
C Class | |||||||||||||
2013(3) | $6.92 | 0.03 | 0.52 | 0.55 | (0.03) | — | (0.03) | $7.44 | 7.94% | 1.86%(4) | 0.71%(4) | 15% | $9,487 |
2013 | $6.09 | 0.05 | 0.84 | 0.89 | (0.06) | — | (0.06) | $6.92 | 14.72% | 1.87% | 0.87% | 33% | $8,961 |
2012 | $5.80 | 0.05 | 0.28 | 0.33 | (0.04) | — | (0.04) | $6.09 | 5.85% | 1.87% | 0.84% | 56% | $9,232 |
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 |
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 | Net | Net Realized | Total From | Net | Net | Total | Net Asset | Total | Operating | Net | Portfolio | Net Assets, | |
R Class | |||||||||||||
2013(3) | $6.92 | 0.04 | 0.53 | 0.57 | (0.05) | — | (0.05) | $7.44 | 8.21% | 1.36%(4) | 1.21%(4) | 15% | $6,030 |
2013 | $6.10 | 0.08 | 0.83 | 0.91 | (0.09) | — | (0.09) | $6.92 | 15.10% | 1.37% | 1.37% | 33% | $5,792 |
2012 | $5.80 | 0.07 | 0.30 | 0.37 | (0.07) | — | (0.07) | $6.10 | 6.55% | 1.37% | 1.34% | 56% | $6,454 |
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 |
R6 Class | |||||||||||||
2013(5) | $7.65 | 0.03 | (0.20) | (0.17) | (0.04) | — | (0.04) | $7.44 | (2.23)% | 0.50%(4) | 2.16%(4) | 15%(6) | $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 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, 2013 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through September 30, 2013 (unaudited). |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2013. |
See Notes to Financial Statements.
Approval of Management Agreement |
At a meeting held on June 20, 2013, 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 directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, 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.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided 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; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | 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. |
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:
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, 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, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund 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.
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.
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund’s investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the “About Us” page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
Notes |
Notes |
Notes |
Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 |
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.
©2013 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-79778 1311
SEMIANNUAL REPORT | SEPTEMBER 30, 2013 |
Market Neutral Value Fund
Table of Contents |
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 | 13 |
Statement of Operations | 14 |
Statement of Changes in Net Assets | 15 |
Notes to Financial Statements | 16 |
Financial Highlights | 22 |
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.
President’s Letter |
Jonathan Thomas
Dear Investor:
Thank you for reviewing this semiannual report for the six months ended September 30, 2013. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information.
For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com.
Bond Yields and Stock Indices Soared Together Until September
U.S. government bond yields and stock indices traced roughly parallel upward paths during most of the six months ended September 30, 2013. The 10-year U.S. Treasury yield began the period at 1.85%, compressed in large part by the scale of the Federal Reserve’s (the Fed’s) bond-buying program ($85 billion of quantitative easing, or QE, each month).
Hints from the Fed that it might taper QE by year end sent bond yields soaring from early May to early September. The 10-year Treasury yield reached 3.00% on September 5, its first time at that level since July 2011, before finishing the reporting period at 2.61%. Bond yields generally declined in September on weaker-than-expected economic data, the Fed’s announcement that it would delay tapering, and uncertainty caused by the impending partial shutdown of the U.S. government.
Even with the September rally, bonds significantly underperformed stocks for the full reporting period. The 10-year Treasury note and the Barclays U.S. Aggregate Bond Index (representing the broad taxable U.S. bond market) returned –5.20% and –1.77%, respectively. By contrast, the S&P 500 Index gained 8.31% as the U.S. economy showed signs of attaining sustainable growth, fueled in part by Fed stimulus. Improvements in the housing and job markets helped trigger optimism, though their absolute numbers still fell short of pre-2008 levels.
Full recovery from 2008 remains a distant goal. Economic growth is still subpar compared with past recoveries, hampered further by the fiscal sequester and partial government shutdown. Faced with these challenges, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios—as appropriate—for meeting financial goals. We appreciate your continued trust in us in this uncertain environment.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
Don Pratt
Dear Fellow Shareholders,
This is my last letter to shareholders as the funds’ Chairman, as I will retire at the end of 2013.
My personal thanks go to the independent directors that elected me to the Board and subsequently to the Chairman position, and with whom I have worked to reorganize the Board’s committee structure and annually improve our governance processes. Throughout my tenure, the Board has addressed its responsibilities to shareholders diligently in committee work, the annual contract review, and the execution of our oversight responsibilities. I expect that it will continue to do so well into the future.
Thanks also to the American Century Investments management team led by Jonathan Thomas. Its transparency, candor, and open communication with the Board is most appreciated. I have served on more than 20 boards and this is the most productive and enjoyable relationship with management I have experienced.
Finally, thanks to the many shareholders who have written with questions, comments, and suggestions. Each was heard and addressed and enabled the board to better represent your interests. Keep communicating with us so that the Board can continue to be aware of your interests, concerns, and questions. My best wishes to Jim Olson, my successor as Chairman, and the other independent directors who continue to serve on your behalf.
And remember, as the firm’s founder Jim Stowers, Jr. so often observed, “The best is yet to be.”
Best regards,
Don Pratt
Performance |
Total Returns as of September 30, 2013 | |||||
Average Annual Returns | |||||
Ticker Symbol | 6 months(1) | 1 year | Since Inception | Inception Date | |
Investor Class | ACVVX | 1.95%(2) | 2.72%(2) | 4.08%(2) | 10/31/11 |
Barclays U.S. 1-3 Month Treasury Bill Index | — | 0.02% | 0.06% | 0.06% | — |
Institutional Class | ACVKX | 2.04%(2) | 2.92%(2) | 4.28%(2) | 10/31/11 |
A Class No sales charge* With sales charge* | ACVQX
| 1.86%(2) -3.97%(2) | 2.54%(2) -3.37%(2) | 3.82%(2) 0.66%(2) | 10/31/11
|
C Class No sales charge* With sales charge* | ACVHX
| 1.49%(2) 0.49%(2) | 1.77%(2) 1.77%(2) | 3.05%(2) 3.05%(2) | 10/31/11
|
R Class | ACVWX | 1.67%(2) | 2.25%(2) | 3.57%(2) | 10/31/11 |
* | 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. |
(2) | Returns would have been lower if a portion of the management fee had not been waived. |
Total Annual Fund Operating Expenses | ||||
Investor Class | Institutional Class | A Class | C Class | R Class |
5.06% | 4.86% | 5.31% | 6.06% | 5.56% |
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’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. In addition, its investment approach may involve higher price volatility and short sales risk. 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 do not.
Fund Characteristics |
SEPTEMBER 30, 2013 | |
Top Ten Long Holdings | % of net assets |
HEICO Corp., Class A | 4.50% |
Royal Dutch Shell plc, Class A, ADR | 4.01% |
Hubbell, Inc., Class A | 3.45% |
iShares Russell 1000 Value Index Fund | 2.80% |
Unilever NV ADR | 2.46% |
PNC Financial Services Group, Inc. (The) | 1.96% |
Occidental Petroleum Corp. | 1.94% |
Westar Energy, Inc. | 1.91% |
Target Corp. | 1.87% |
Hillshire Brands Co. | 1.67% |
Top Ten Short Holdings | % of net assets |
HEICO Corp. | (4.49)% |
Royal Dutch Shell plc, Class B, ADR | (4.01)% |
Utilities Select Sector SPDR Fund | (3.97)% |
Hubbell, Inc., Class B | (3.46)% |
Unilever plc ADR | (2.68)% |
iShares Russell 1000 Growth Index Fund | (2.47)% |
ConocoPhillips | (1.94)% |
Deere & Co. | (1.90)% |
Prudential Financial, Inc. | (1.87)% |
Industrial Select Sector SPDR Fund | (1.78)% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 57.7% |
Foreign Common Stocks* | 8.4% |
Exchange-Traded Funds | 4.0% |
Convertible Bonds | 1.2% |
Convertible Preferred Stocks | 1.1% |
Domestic Common Stocks Sold Short | (52.6)% |
Foreign Common Stocks Sold Short* | (8.4)% |
Exchange-Traded Funds Sold Short | (11.4)% |
Temporary Cash Investments | 35.1% |
Other Assets and Liabilities** | 64.9% |
* | Includes depository shares, dual listed securities and foreign ordinary shares. |
** | Amount relates primarily to deposits with broker for securities sold short at period end. |
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013.
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. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning 4/1/13 | Ending 9/30/13 | Expenses Paid During Period(1) 4/1/13 - 9/30/13 | Annualized | |
Actual | ||||
Investor Class | $1,000 | $1,019.50 | $22.78 | 4.50% |
Investor Class | $1,000 | $1,019.50(2) | $24.30 | 4.80% |
Institutional Class | $1,000 | $1,020.40 | $21.78 | 4.30% |
Institutional Class | $1,000 | $1,020.40(2) | $23.30 | 4.60% |
A Class (after waiver) | $1,000 | $1,018.60 | $24.04 | 4.75% |
A Class (before waiver) | $1,000 | $1,018.60(2) | $25.55 | 5.05% |
C Class (after waiver) | $1,000 | $1,014.90 | $27.78 | 5.50% |
C Class (before waiver) | $1,000 | $1,014.90(2) | $29.30 | 5.80% |
R Class (after waiver) | $1,000 | $1,016.70 | $25.28 | 5.00% |
R Class (before waiver) | $1,000 | $1,016.70(2) | $26.79 | 5.30% |
Hypothetical | ||||
Investor Class | $1,000 | $1,002.51 | $22.59 | 4.50% |
Investor Class | $1,000 | $1,001.00 | $24.08 | 4.80% |
Institutional Class | $1,000 | $1,003.51 | $21.60 | 4.30% |
Institutional Class | $1,000 | $1,002.01 | $23.09 | 4.60% |
A Class (after waiver) | $1,000 | $1,001.25 | $23.83 | 4.75% |
A Class (before waiver) | $1,000 | $999.75 | $25.32 | 5.05% |
C Class (after waiver) | $1,000 | $997.49 | $27.54 | 5.50% |
C Class (before waiver) | $1,000 | $995.99 | $29.02 | 5.80% |
R Class (after waiver) | $1,000 | $1,000.00 | $25.07 | 5.00% |
R Class (before waiver) | $1,000 | $998.50 | $26.55 | 5.30% |
(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 365, to reflect the one-half year period. |
(2) | Ending account value assumes the return earned after waiver and would have been lower if a portion of the management fee had not been waived. |
Schedule of Investments |
SEPTEMBER 30, 2013 (UNAUDITED)
Shares | Value | |||||
Common Stocks — 66.1% | ||||||
AEROSPACE AND DEFENSE — 7.1% | ||||||
General Dynamics Corp.(1) | 1,401 | $122,616 | ||||
HEICO Corp., Class A(1) | 38,105 | 1,910,585 | ||||
Raytheon Co.(1) | 3,120 | 240,458 | ||||
Rockwell Collins, Inc.(1) | 1,122 | 76,139 | ||||
Textron, Inc.(1) | 23,440 | 647,178 | ||||
2,996,976 | ||||||
AIR FREIGHT AND LOGISTICS — 1.4% | ||||||
United Parcel Service, Inc., Class B(1) | 6,386 | 583,489 | ||||
AUTOMOBILES — 0.3% | ||||||
Honda Motor Co. Ltd. ADR(1) | 1,368 | 52,175 | ||||
Toyota Motor Corp. ADR(1) | 465 | 59,534 | ||||
111,709 | ||||||
BEVERAGES — 1.3% | ||||||
Dr Pepper Snapple Group, Inc.(1) | 6,833 | 306,255 | ||||
PepsiCo, Inc.(1) | 3,010 | 239,295 | ||||
545,550 | ||||||
CAPITAL MARKETS — 2.1% | ||||||
Franklin Resources, Inc.(1) | 5,090 | 257,299 | ||||
Northern Trust Corp.(1) | 9,662 | 525,516 | ||||
T. Rowe Price Group, Inc.(1) | 1,560 | 112,211 | ||||
895,026 | ||||||
CHEMICALS — 1.0% | ||||||
Mosaic Co. (The)(1) | 10,087 | 433,943 | ||||
COMMERCIAL BANKS — 2.6% | ||||||
KeyCorp(1) | 22,809 | 260,023 | ||||
PNC Financial Services Group, Inc. (The)(1) | 11,489 | 832,378 | ||||
1,092,401 | ||||||
COMMERCIAL SERVICES AND SUPPLIES — 2.8% | ||||||
ADT Corp. (The)(1) | 13,852 | 563,222 | ||||
Republic Services, Inc.(1) | 17,313 | 577,562 | ||||
Tyco International Ltd.(1) | 1,467 | 51,316 | ||||
1,192,100 | ||||||
CONTAINERS AND PACKAGING — 0.5% | ||||||
Bemis Co., Inc.(1) | 5,961 | 232,539 | ||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.9% | ||||||
CenturyLink, Inc.(1) | 7,903 | 247,996 | ||||
tw telecom, inc., Class A(1)(2) | 4,410 | 131,705 | ||||
379,701 | ||||||
ELECTRIC UTILITIES — 3.9% | ||||||
Empire District Electric Co. (The)(1) | 4,480 | 97,037 | ||||
Great Plains Energy, Inc.(1) | 2,640 | 58,608 | ||||
Portland General Electric Co.(1) | 1,591 | 44,914 | ||||
Westar Energy, Inc.(1) | 26,498 | 812,164 | ||||
Xcel Energy, Inc.(1) | 23,373 | 645,328 | ||||
1,658,051 | ||||||
ELECTRICAL EQUIPMENT — 4.6% | ||||||
ABB Ltd. ADR(1) | 11,505 | 271,403 | ||||
Brady Corp., Class A(1) | 7,810 | 238,205 | ||||
Hubbell, Inc., Class A(1) | 15,571 | 1,466,788 | ||||
1,976,396 | ||||||
ENERGY EQUIPMENT AND SERVICES — 0.5% | ||||||
Cameron International Corp.(1)(2) | 3,870 | 225,892 | ||||
FOOD AND STAPLES RETAILING — 1.1% | ||||||
Sysco Corp.(1) | 14,708 | 468,156 | ||||
FOOD PRODUCTS — 4.4% | ||||||
General Mills, Inc.(1) | 2,455 | 117,643 | ||||
Hillshire Brands Co.(1) | 23,050 | 708,557 | ||||
Unilever NV ADR(1) | 27,676 | 1,043,939 | ||||
1,870,139 | ||||||
GAS UTILITIES — 1.6% | ||||||
Laclede Group, Inc. (The)(1) | 10,259 | 461,655 | ||||
Southwest Gas Corp.(1) | 4,720 | 236,000 | ||||
697,655 | ||||||
HEALTH CARE EQUIPMENT AND SUPPLIES — 0.9% | ||||||
CareFusion Corp.(1)(2) | 5,870 | 216,603 | ||||
Stryker Corp.(1) | 2,353 | 159,039 | ||||
375,642 | ||||||
HEALTH CARE PROVIDERS AND SERVICES — 2.2% | ||||||
LifePoint Hospitals, Inc.(1)(2) | 6,460 | 301,230 | ||||
Premier, Inc., Class A(2) | 916 | 29,037 | ||||
Quest Diagnostics, Inc.(1) | 10,004 | 618,147 | ||||
948,414 | ||||||
HOTELS, RESTAURANTS AND LEISURE — 1.0% | ||||||
Carnival Corp.(1) | 12,446 | 406,237 | ||||
HOUSEHOLD DURABLES — 1.2% | ||||||
Lennar Corp., Class B(1) | 18,544 | 531,286 | ||||
HOUSEHOLD PRODUCTS — 0.7% | ||||||
Procter & Gamble Co. (The)(1) | 4,117 | 311,204 | ||||
INDUSTRIAL CONGLOMERATES — 0.5% | ||||||
Koninklijke Philips Electronics NV(1) | 6,439 | 207,658 |
Shares | Value |
INSURANCE — 3.2% | ||||||
Chubb Corp. (The)(1) | 1,775 | $ 158,437 | ||||
Crawford & Co., Class A(1) | 56,298 | 413,227 | ||||
MetLife, Inc.(1) | 9,981 | 468,608 | ||||
Reinsurance Group of America, Inc.(1) | 4,910 | 328,921 | ||||
1,369,193 | ||||||
INTERNET AND CATALOG RETAIL — 0.1% | ||||||
Expedia, Inc.(1) | 1,060 | 54,897 | ||||
LEISURE EQUIPMENT AND PRODUCTS — 1.1% | ||||||
Hasbro, Inc.(1) | 9,723 | 458,342 | ||||
LIFE SCIENCES TOOLS AND SERVICES — 1.0% | ||||||
Agilent Technologies, Inc.(1) | 8,267 | 423,684 | ||||
MACHINERY — 0.6% | ||||||
Woodward, Inc.(1) | 2,424 | 98,972 | ||||
Xylem, Inc.(1) | 5,900 | 164,787 | ||||
263,759 | ||||||
METALS AND MINING — 0.7% | ||||||
Nucor Corp.(1) | 5,710 | 279,904 | ||||
MULTI-UTILITIES — 0.4% | ||||||
PG&E Corp.(1) | 3,675 | 150,381 | ||||
MULTILINE RETAIL — 2.0% | ||||||
Nordstrom, Inc.(1) | 630 | 35,406 | ||||
Target Corp.(1) | 12,430 | 795,271 | ||||
830,677 | ||||||
OIL, GAS AND CONSUMABLE FUELS — 6.8% | ||||||
Occidental Petroleum Corp.(1) | 8,797 | 822,871 | ||||
Royal Dutch Shell plc, Class A, ADR(1) | 25,920 | 1,702,426 | ||||
Tallgrass Energy Partners LP(1) | 5,079 | 118,341 | ||||
Williams Partners LP(1) | 4,441 | 234,840 | ||||
2,878,478 | ||||||
PHARMACEUTICALS — 1.0% | ||||||
Johnson & Johnson(1) | 3,799 | 329,335 | ||||
Mallinckrodt plc(1)(2) | 1,830 | 80,685 | ||||
410,020 | ||||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 1.4% | ||||||
Annaly Capital Management, Inc.(1) | 20,400 | 236,232 | ||||
Corrections Corp. of America(1) | 3,728 | 128,802 | ||||
Piedmont Office Realty Trust, Inc., Class A(1) | 12,600 | 218,736 | ||||
583,770 |
Shares/ Principal Amount | Value | |||||
ROAD AND RAIL — 1.0% | ||||||
Heartland Express, Inc.(1) | 7,949 | $ 112,796 | ||||
Union Pacific Corp. | 1,960 | 304,467 | ||||
417,263 | ||||||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 0.7% | ||||||
Intel Corp.(1) | 12,300 | 281,916 | ||||
SOFTWARE — 0.7% | ||||||
Microsoft Corp.(1) | 9,310 | 310,116 | ||||
SPECIALTY RETAIL — 0.2% | ||||||
Bed Bath & Beyond, Inc.(1)(2) | 1,067 | 82,543 | ||||
TRADING COMPANIES AND DISTRIBUTORS — 0.8% | ||||||
Rush Enterprises, Inc., Class B(1)(2) | 15,804 | 359,857 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 1.8% | ||||||
Telephone & Data Systems, Inc.(1) | 18,218 | 538,342 | ||||
Vodafone Group plc ADR(1) | 6,840 | 240,631 | ||||
778,973 | ||||||
TOTAL COMMON STOCKS (Cost $26,829,149) | 28,073,937 | |||||
Exchange-Traded Funds — 4.0% | ||||||
Alerian MLP ETF(1) | 19,120 | 336,321 | ||||
iShares Russell 1000 Value Index Fund(1) | 13,779 | 1,187,750 | ||||
iShares Russell Midcap Value Index Fund | 451 | 27,466 | ||||
Market Vectors Gold Miners(1) | 6,150 | 154,119 | ||||
TOTAL EXCHANGE-TRADED FUNDS (Cost $1,616,039) | 1,705,656 | |||||
Convertible Bonds — 1.2% | ||||||
PAPER AND FOREST PRODUCTS — 1.2% | ||||||
Rayonier TRS Holdings, Inc., 4.50%, 8/15/15(1) (Cost $468,023) | $292,000 | 495,123 | ||||
Convertible Preferred Stocks — 1.1% | ||||||
ELECTRIC UTILITIES — 1.1% | ||||||
NextEra Energy, Inc., 5.80%, 9/1/16(1)(Cost $485,077) | 9,951 | 481,628 |
Shares | Value | |||||
Temporary Cash Investments — 35.1% | ||||||
Repurchase Agreement, Bank of America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 1.375%, 9/30/18, valued at $2,898,071), in a joint trading account at 0.03%, dated 9/30/13, due 10/1/13 (Delivery value $2,842,333) | $ 2,842,331 | |||||
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 5/15/30, valued at $3,472,837), in a joint trading account at 0.01%, dated 9/30/13, due 10/1/13 (Delivery value $3,410,799) | 3,410,798 | |||||
Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 1.75%, 5/15/22, valued at $3,479,503), in a joint trading account at 0.02%, dated 9/30/13, due 10/1/13 (Delivery value $3,410,800) | 3,410,798 | |||||
SSgA U.S. Government Money Market Fund | 5,253,710 | 5,253,710 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $14,917,637) | 14,917,637 | |||||
TOTAL INVESTMENT SECURITIES BEFORE SECURITIES SOLD SHORT — 107.5% (Cost $44,315,925) | 45,673,981 | |||||
Securities Sold Short — (72.4)% | ||||||
Common Stocks Sold Short — (61.0)% | ||||||
AEROSPACE AND DEFENSE — (5.5)% | ||||||
HEICO Corp. | (28,164 | ) | (1,907,829 | ) | ||
Honeywell International, Inc. | (2,423 | ) | (201,206 | ) | ||
Lockheed Martin Corp. | (1,890 | ) | (241,070 | ) | ||
(2,350,105 | ) | |||||
AIR FREIGHT AND LOGISTICS — (0.7)% | ||||||
FedEx Corp. | (2,760 | ) | (314,944 | ) | ||
AUTOMOBILES — (0.3)% | ||||||
General Motors Co. | (3,040 | ) | (109,349 | ) | ||
BEVERAGES — (1.3)% | ||||||
Coca-Cola Co. (The) | (14,375 | ) | (544,525 | ) | ||
BIOTECHNOLOGY — (0.6)% | ||||||
Amgen, Inc. | (2,151 | ) | (240,783 | ) | ||
CAPITAL MARKETS — (2.1)% | ||||||
Ameriprise Financial, Inc. | (2,710 | ) | (246,827 | ) | ||
Bank of New York Mellon Corp. (The) | (17,321 | ) | (522,921 | ) | ||
BlackRock, Inc. | (440 | ) | (119,073 | ) | ||
(888,821 | ) | |||||
COMMERCIAL BANKS — (1.4)% | ||||||
Fifth Third Bancorp. | (32,142 | ) | (579,842 | ) | ||
COMMERCIAL SERVICES AND SUPPLIES — (1.4)% | ||||||
Waste Management, Inc. | (14,080 | ) | (580,659 | ) | ||
COMPUTERS AND PERIPHERALS — (1.4)% | ||||||
Hewlett-Packard Co. | (28,190 | ) | (591,426 | ) | ||
DIVERSIFIED FINANCIAL SERVICES — (1.6)% | ||||||
Berkshire Hathaway, Inc., Class B | (1,414 | ) | (160,503 | ) | ||
JPMorgan Chase & Co. | (9,820 | ) | (507,596 | ) | ||
(668,099 | ) | |||||
DIVERSIFIED TELECOMMUNICATION SERVICES — (1.5)% | ||||||
AT&T, Inc. | (7,110 | ) | (240,460 | ) | ||
Windstream Holdings, Inc. | (47,326 | ) | (378,608 | ) | ||
(619,068 | ) | |||||
ELECTRIC UTILITIES — (2.3)% | ||||||
Duke Energy Corp. | (9,607 | ) | (641,555 | ) | ||
Southern Co. (The) | (8,672 | ) | (357,113 | ) | ||
(998,668 | ) | |||||
ELECTRICAL EQUIPMENT — (3.8)% | ||||||
Eaton Corp. plc | (1,435 | ) | (98,785 | ) | ||
Emerson Electric Co. | (775 | ) | (50,142 | ) | ||
Hubbell, Inc., Class B | (14,036 | ) | (1,470,131 | ) | ||
(1,619,058 | ) | |||||
ENERGY EQUIPMENT AND SERVICES — (0.5)% | ||||||
Halliburton Co. | (4,670 | ) | (224,860 | ) | ||
FOOD PRODUCTS — (4.6)% | ||||||
Kellogg Co. | (2,011 | ) | (118,106 | ) | ||
Tyson Foods, Inc., Class A | (25,220 | ) | (713,222 | ) | ||
Unilever plc ADR | (29,509 | ) | (1,138,457 | ) | ||
(1,969,785 | ) | |||||
GAS UTILITIES — (0.6)% | ||||||
AGL Resources, Inc. | (5,140 | ) | (236,594 | ) | ||
HEALTH CARE EQUIPMENT AND SUPPLIES — (0.5)% | ||||||
Covidien plc | (3,560 | ) | (216,946 | ) | ||
HEALTH CARE PROVIDERS AND SERVICES — (2.2)% | ||||||
HCA Holdings, Inc. | (7,061 | ) | (301,858 | ) | ||
Laboratory Corp. of America Holdings | (6,259 | ) | (620,517 | ) | ||
(922,375 | ) | |||||
HOTELS, RESTAURANTS AND LEISURE — (2.1)% | ||||||
Carnival plc ADR | (6,674 | ) | (226,315 | ) | ||
Darden Restaurants, Inc. | (1,180 | ) | (54,622 | ) | ||
McDonald’s Corp. | (4,350 | ) | (418,514 | ) | ||
Royal Caribbean Cruises Ltd. | (4,675 | ) | (178,959 | ) | ||
(878,410 | ) | |||||
HOUSEHOLD DURABLES — (1.2)% | ||||||
Lennar Corp., Class A | (15,000 | ) | (531,000 | ) |
Shares | Value |
HOUSEHOLD PRODUCTS — (0.5)% | ||||||
Kimberly-Clark Corp. | (2,267 | ) | $(213,597 | ) | ||
INSURANCE — (2.8)% | ||||||
Crawford & Co., Class B | (42,790 | ) | (415,063 | ) | ||
Prudential Financial, Inc. | (10,203 | ) | (795,630 | ) | ||
(1,210,693 | ) | |||||
INTERNET AND CATALOG RETAIL — (0.1)% | ||||||
priceline.com, Inc. | (60 | ) | (60,657 | ) | ||
IT SERVICES — (0.1)% | ||||||
Paychex, Inc. | (730 | ) | (29,667 | ) | ||
LEISURE EQUIPMENT AND PRODUCTS — (1.1)% | ||||||
Mattel, Inc. | (11,075 | ) | (463,599 | ) | ||
LIFE SCIENCES TOOLS AND SERVICES — (0.6)% | ||||||
Thermo Fisher Scientific, Inc. | (2,752 | ) | (253,597 | ) | ||
MACHINERY — (3.8)% | ||||||
Caterpillar, Inc. | (7,934 | ) | (661,457 | ) | ||
Deere & Co. | (9,941 | ) | (809,098 | ) | ||
Pentair Ltd. | (2,540 | ) | (164,948 | ) | ||
(1,635,503 | ) | |||||
METALS AND MINING — (0.7)% | ||||||
BHP Billiton Ltd. ADR | (4,220 | ) | (280,630 | ) | ||
MULTILINE RETAIL — (2.2)% | ||||||
Kohl’s Corp. | (3,720 | ) | (192,510 | ) | ||
Macy’s, Inc. | (2,811 | ) | (121,632 | ) | ||
Sears Holdings Corp. | (10,315 | ) | (615,187 | ) | ||
(929,329 | ) | |||||
OIL, GAS AND CONSUMABLE FUELS — (7.6)% | ||||||
ConocoPhillips | (11,833 | ) | (822,512 | ) | ||
Kinder Morgan Energy Partners LP | (2,940 | ) | (234,700 | ) | ||
Kinder Morgan Management LLC | (4,490 | ) | (336,570 | ) | ||
Plains All American Pipeline LP | (2,220 | ) | (116,905 | ) | ||
Royal Dutch Shell plc, Class B, ADR | (24,734 | ) | (1,702,936 | ) | ||
(3,213,623 | ) | |||||
PAPER AND FOREST PRODUCTS — (0.5)% | ||||||
International Paper Co. | (5,127 | ) | (229,690 | ) | ||
REAL ESTATE INVESTMENT TRUSTS (REITs) — (1.7)% | ||||||
Boston Properties, Inc. | (2,070 | ) | (221,283 | ) | ||
Rayonier, Inc. | (8,907 | ) | (495,675 | ) | ||
(716,958 | ) | |||||
ROAD AND RAIL — (1.6)% | ||||||
CSX Corp. | (10,445 | ) | (268,854 | ) | ||
Norfolk Southern Corp. | (3,930 | ) | (303,985 | ) | ||
Werner Enterprises, Inc. | (4,778 | ) | (111,471 | ) | ||
(684,310 | ) | |||||
TRADING COMPANIES AND DISTRIBUTORS — (0.8)% | ||||||
Rush Enterprises, Inc., Class A | (13,660 | ) | (362,127 | ) | ||
WIRELESS TELECOMMUNICATION SERVICES — (1.3)% | ||||||
United States Cellular Corp. | (11,924 | ) | (542,900 | ) | ||
TOTAL COMMON STOCKS SOLD SHORT (Proceeds $25,193,995) | (25,912,197 | ) | ||||
Exchange-Traded Funds Sold Short — (11.4)% | ||||||
Consumer Discretionary Select Sector SPDR Fund | (6,150 | ) | (372,875 | ) | ||
DNP Select Income Fund, Inc. | (6,200 | ) | (59,582 | ) | ||
Industrial Select Sector SPDR Fund | (16,303 | ) | (755,970 | ) | ||
iShares Dow Jones US Medical Devices Index Fund | (2,951 | ) | (249,920 | ) | ||
iShares Russell 1000 Growth Index Fund | (13,427 | ) | (1,049,991 | ) | ||
Market Vectors Pharmaceutical ETF | (1,620 | ) | (77,501 | ) | ||
SPDR Gold Shares | (1,190 | ) | (152,522 | ) | ||
Utilities Select Sector SPDR Fund | (45,200 | ) | (1,688,220 | ) | ||
Vanguard REIT ETF | (6,903 | ) | (456,703 | ) | ||
TOTAL EXCHANGE-TRADED FUNDS SOLD SHORT (Proceeds $4,825,319) | (4,863,284 | ) | ||||
TOTAL SECURITIES SOLD SHORT — (72.4)% (Proceeds $30,019,314) | (30,775,481 | ) | ||||
OTHER ASSETS AND LIABILITIES(3) — 64.9% | 27,575,941 | |||||
TOTAL NET ASSETS — 100.0% | $42,474,441 |
Forward Foreign Currency Exchange Contracts | ||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Gain (Loss) | ||||||||
USD | 6,475 | CHF | 5,853 | Credit Suisse AG | 10/31/13 | $ 2 | ||||||
USD | 152,920 | CHF | 139,498 | Credit Suisse AG | 10/31/13 | (1,368 | ) | |||||
USD | 85,584 | CHF | 77,941 | Credit Suisse AG | 10/31/13 | (620 | ) | |||||
USD | 50,063 | EUR | 37,024 | UBS AG | 10/31/13 | (28 | ) | |||||
USD | 4,627 | EUR | 3,420 | UBS AG | 10/31/13 | — | ||||||
USD | 130,495 | EUR | 96,481 | UBS AG | 10/31/13 | (38 | ) | |||||
USD | 5,247 | JPY | 514,844 | Credit Suisse AG | 10/31/13 | 9 | ||||||
USD | 88,722 | JPY | 8,749,631 | Credit Suisse AG | 10/31/13 | (307 | ) | |||||
USD | 2,673 | JPY | 264,312 | Credit Suisse AG | 10/31/13 | (17 | ) | |||||
$(2,367 | ) |
Notes to Schedule of Investments
ADR = American Depositary Receipt
CHF = Swiss Franc
EUR = Euro
JPY = Japanese Yen
USD = United States Dollar
(1) | Security, or a portion thereof, has been pledged at the custodian bank or with a broker for collateral requirements on securities sold short. At the period end, the aggregate value of securities pledged was $22,555,536. |
(2) | Non-income producing. |
(3) | Amount relates primarily to deposits with broker for securities sold short at period end. |
See Notes to Financial Statements.
Statement of Assets and Liabilities |
SEPTEMBER 30, 2013 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $34,651,998) | $36,010,054 | ||
Repurchase agreements, at value (cost of $9,663,927) | 9,663,927 | ||
Total investment securities, at value (cost of $44,315,925) | 45,673,981 | ||
Deposits with broker for securities sold short | 24,956,028 | ||
Receivable for investments sold | 7,417,337 | ||
Receivable for capital shares sold | 2,533,006 | ||
Unrealized gain on forward foreign currency exchange contracts | 11 | ||
Dividends and interest receivable | 48,485 | ||
80,628,848 | |||
Liabilities | |||
Securities sold short, at value (proceeds of $30,019,314) | 30,775,481 | ||
Payable for investments purchased | 7,243,933 | ||
Payable for capital shares redeemed | 68,386 | ||
Unrealized loss on forward foreign currency exchange contracts | 2,378 | ||
Accrued management fees | 37,719 | ||
Distribution and service fees payable | 4,604 | ||
Dividend expense payable on securities sold short | 21,906 | ||
38,154,407 | |||
Net Assets | $42,474,441 | ||
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $41,977,911 | ||
Accumulated net investment loss | (262,432 | ) | |
Undistributed net realized gain | 159,440 | ||
Net unrealized appreciation | 599,522 | ||
$42,474,441 |
Net assets | Shares outstanding | Net asset value per share | |
Investor Class, $0.01 Par Value | $30,694,689 | 2,937,459 | $10.45 |
Institutional Class, $0.01 Par Value | $433,572 | 41,323 | $10.49 |
A Class, $0.01 Par Value | $6,808,896 | 654,472 | $10.40* |
C Class, $0.01 Par Value | $4,109,485 | 400,991 | $10.25 |
R Class, $0.01 Par Value | $427,799 | 41,333 | $10.35 |
*Maximum offering price $11.03 (net asset value divided by 0.9425).
See Notes to Financial Statements.
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $1,922) | $194,966 | ||
Interest | 2,972 | ||
197,938 | |||
Expenses: | |||
Dividend expense on securities sold short | 252,976 | ||
Broker fees and charges on securities sold short | 31,741 | ||
Management fees | 186,518 | ||
Distribution and service fees: | |||
A Class | 5,658 | ||
C Class | 11,132 | ||
R Class | 1,057 | ||
Directors’ fees and expenses | 500 | ||
489,582 | |||
Fees waived | (29,518 | ) | |
460,064 | |||
Net investment income (loss) | (262,126 | ) | |
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 1,284,078 | ||
Securities sold short transactions | (977,738 | ) | |
Foreign currency transactions | (6,867 | ) | |
299,473 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 540,313 | ||
Securities sold short | (130,111 | ) | |
Translation of assets and liabilities in foreign currencies | (3,611 | ) | |
406,591 | |||
Net realized and unrealized gain (loss) | 706,064 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $443,938 |
See Notes to Financial Statements.
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) AND YEAR ENDED MARCH 31, 2013 | ||||||
Increase (Decrease) in Net Assets | September 30, 2013 | March 31, 2013 | ||||
Operations | ||||||
Net investment income (loss) | $(262,126 | ) | $(177,519 | ) | ||
Net realized gain (loss) | 299,473 | 241,090 | ||||
Change in net unrealized appreciation (depreciation) | 406,591 | 94,900 | ||||
Net increase (decrease) in net assets resulting from operations | 443,938 | 158,471 | ||||
Distributions to Shareholders | ||||||
From net realized gains: | ||||||
Investor Class | — | (156,486 | ) | |||
Institutional Class | — | (13,536 | ) | |||
A Class | — | (30,858 | ) | |||
C Class | — | (18,244 | ) | |||
R Class | — | (13,536 | ) | |||
Decrease in net assets from distributions | — | (232,660 | ) | |||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions | 29,594,797 | 7,723,594 | ||||
Net increase (decrease) in net assets | 30,038,735 | 7,649,405 | ||||
Net Assets | ||||||
Beginning of period | 12,435,706 | 4,786,301 | ||||
End of period | $42,474,441 | $12,435,706 | ||||
Accumulated net investment loss | $(262,432 | ) | $(306 | ) |
See Notes to Financial Statements.
Notes to Financial Statements |
SEPTEMBER 30, 2013 (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. Market Neutral 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, independent of equity market conditions.
The fund offers 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 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.
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. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Securities Sold Short — The fund enters into short sales, which is selling securities it does not own, as part of its normal investment activities. Upon selling a security short, the fund will segregate cash, cash equivalents or other appropriate liquid securities in at least an amount equal to the current market value of the securities sold short until the fund replaces the borrowed security. Interest earned on segregated cash for securities sold short is reflected as interest income. The fund is required to pay any dividends or interest due on securities sold short. Such dividends and interest are recorded as an expense. The fund may pay fees or charges on the assets borrowed for securities sold short. Liabilities for securities sold short are valued daily and changes in value are recorded as change in net unrealized appreciation (depreciation) on securities sold short. The fund records realized gain (loss) on a security sold short when it is terminated by the fund and includes as a component of net realized gain (loss) on securities sold short transactions.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively. Net realized and unrealized foreign currency exchange gains or losses related to securities sold short are a component of net realized gain (loss) on securities sold short transactions and change in net unrealized appreciation (depreciation) on securities sold short, respectively.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investments, including, but not limited to, futures contracts and short sales. American Century Investment Management, Inc. (ACIM) (the investment advisor) monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for margin requirements on futures contracts and short sales.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement.
ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund’s tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, expenses on securities sold short, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The annual management fee is 1.90% for the Investor Class, A Class, C Class and R Class and 1.70% for the Institutional Class. During the six months ended September 30, 2013, the investment advisor voluntarily agreed to waive 0.30% of its management fee. The investment advisor expects the fee waiver to continue through July 31, 2014, and cannot terminate it without the approval of the Board of Directors. The total amount of the waiver for each class for the six months ended September 30, 2013 was $18,112, $642, $6,789, $3,340 and $635 for the Investor Class, Institutional Class, A Class, C Class and R Class, respectively. The effective annual management fee after waiver for each class for the six months ended September 30, 2013 was 1.60% for the Investor Class, A Class, C Class and R Class and 1.40% 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, 2013 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 corporation’s investment advisor, ACIM, the corporation’s distributor, ACIS, and the corporation’s transfer agent, American Century Services, LLC are wholly owned, directly or indirectly, by ACC.
4. Investment Transactions
Purchases and sales of investment securities and securities sold short, excluding short-term investments, for the six months ended September 30, 2013 were $62,720,159 and $63,407,020, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2013 | Year ended March 31, 2013 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Investor Class/Shares Authorized | 50,000,000 | 100,000,000 | ||||||||||
Sold | 2,368,001 | $24,599,455 | 611,135 | $6,294,241 | ||||||||
Issued in reinvestment of distributions | — | — | 10,002 | 102,124 | ||||||||
Redeemed | (232,157 | ) | (2,400,073 | ) | (121,705 | ) | (1,250,450 | ) | ||||
2,135,844 | 22,199,382 | 499,432 | 5,145,915 | |||||||||
Institutional Class/Shares Authorized | 5,000,000 | 50,000,000 | ||||||||||
Issued in reinvestment of distributions | — | — | 1,323 | 13,536 | ||||||||
A Class/Shares Authorized | 5,000,000 | 50,000,000 | ||||||||||
Sold | 659,358 | 6,762,453 | 188,275 | 1,926,247 | ||||||||
Issued in reinvestment of distributions | — | — | 3,031 | 30,858 | ||||||||
Redeemed | (226,670 | ) | (2,320,416 | ) | (11,438 | ) | (116,976 | ) | ||||
432,688 | 4,442,037 | 179,868 | 1,840,129 | |||||||||
C Class/Shares Authorized | 5,000,000 | 50,000,000 | ||||||||||
Sold | 309,901 | 3,146,079 | 68,167 | 692,234 | ||||||||
Issued in reinvestment of distributions | — | — | 1,808 | 18,244 | ||||||||
Redeemed | (18,885 | ) | (192,701 | ) | — | — | ||||||
291,016 | 2,953,378 | 69,975 | 710,478 | |||||||||
R Class/Shares Authorized | 5,000,000 | 50,000,000 | ||||||||||
Issued in reinvestment of distributions | — | — | 1,333 | 13,536 | ||||||||
Net increase (decrease) | 2,859,548 | $29,594,797 | 751,931 | $7,723,594 |
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 | $24,496,171 | — | — |
Foreign Common Stocks | 3,577,766 | — | — |
Exchange-Traded Funds | 1,705,656 | — | — |
Convertible Bonds | — | $495,123 | — |
Convertible Preferred Stocks | — | 481,628 | — |
Temporary Cash Investments | 5,253,710 | 9,663,927 | — |
Total Value of Investment Securities | $35,033,303 | $10,640,678 | — |
Securities Sold Short | |||
Domestic Common Stocks | $(22,346,913) | — | — |
Foreign Common Stocks | (3,565,284) | — | — |
Exchange-Traded Funds | (4,863,284) | — | — |
Total Value of Securities Sold Short | $(30,775,481) | — | — |
Other Financial Instruments | |||
Total Unrealized Gain (Loss) on Forward | — | $(2,367) | — |
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 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, 2013, is disclosed on the Statement of Assets and Liabilities as an asset of $11 in unrealized gain on forward foreign currency exchange contracts and a liability of $2,378 in unrealized loss on forward foreign currency exchange contracts. For the six months ended September 30, 2013, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(6,867) in net realized gain (loss) on foreign currency transactions and $(3,611) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
8. Risk Factors
The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
The fund is subject to short sales risk. If the market price of a security increases after the fund borrows the security, the fund may suffer a loss when it replaces the borrowed security at the higher price. Any loss will be increased by the amount of compensation, interest or dividends, and transaction costs the fund must pay to the lender of the borrowed security.
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
9. Federal Tax Information
The 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, 2013, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $44,626,813 |
Gross tax appreciation of investments | $1,287,943 |
Gross tax depreciation of investments | (240,775) |
Net tax appreciation (depreciation) of investments | $1,047,168 |
Net tax appreciation (depreciation) on securities sold short | $(1,405,006) |
Net tax appreciation (depreciation) | $(357,838) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||||||||||||
Per-Share Data | Ratios and Supplemental Data | |||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | |||||||||||||
Net | Net | Net | Total From | Distributions From Net | Net | Total | Operating | Operating | Operating | Net Income | Net Income (before expense waiver) | Portfolio | Net | |
Investor Class | ||||||||||||||
2013(4) | $10.25 | (0.13) | 0.33 | 0.20 | — | $10.45 | 1.95% | 4.50%(5) | 4.80%(5) | 1.61%(5) | (2.49)%(5) | (2.79)%(5) | 378% | $30,695 |
2013 | $10.32 | (0.25) | 0.52 | 0.27 | (0.34) | $10.25 | 2.61% | 4.74% | 5.04% | 1.60% | (2.46)% | (2.76)% | 588% | $8,214 |
2012(6) | $10.00 | (0.11) | 0.43 | 0.32 | — | $10.32 | 3.20% | 4.92%(5) | 5.22%(5) | 1.61%(5) | (2.49)%(5) | (2.79)%(5) | 292% | $3,118 |
Institutional Class | ||||||||||||||
2013(4) | $10.28 | (0.12) | 0.33 | 0.21 | — | $10.49 | 2.04% | 4.30%(5) | 4.60%(5) | 1.41%(5) | (2.29)%(5) | (2.59)%(5) | 378% | $434 |
2013 | $10.33 | (0.24) | 0.53 | 0.29 | (0.34) | $10.28 | 2.81% | 4.54% | 4.84% | 1.40% | (2.26)% | (2.56)% | 588% | $425 |
2012(6) | $10.00 | (0.09) | 0.42 | 0.33 | — | $10.33 | 3.30% | 4.72%(5) | 5.02%(5) | 1.41%(5) | (2.29)%(5) | (2.59)%(5) | 292% | $413 |
A Class | ||||||||||||||
2013(4) | $10.21 | (0.15) | 0.34 | 0.19 | — | $10.40 | 1.86% | 4.75%(5) | 5.05%(5) | 1.86%(5) | (2.74)%(5) | (3.04)%(5) | 378% | $6,809 |
2013 | $10.31 | (0.28) | 0.52 | 0.24 | (0.34) | $10.21 | 2.32% | 4.99% | 5.29% | 1.85% | (2.71)% | (3.01)% | 588% | $2,265 |
2012(6) | $10.00 | (0.11) | 0.42 | 0.31 | — | $10.31 | 3.10% | 5.17%(5) | 5.47%(5) | 1.86%(5) | (2.74)%(5) | (3.04)%(5) | 292% | $432 |
C Class | ||||||||||||||
2013(4) | $10.10 | (0.17) | 0.32 | 0.15 | — | $10.25 | 1.49% | 5.50%(5) | 5.80%(5) | 2.61%(5) | (3.49)%(5) | (3.79)%(5) | 378% | $4,109 |
2013 | $10.28 | (0.35) | 0.51 | 0.16 | (0.34) | $10.10 | 1.54% | 5.74% | 6.04% | 2.60% | (3.46)% | (3.76)% | 588% | $1,111 |
2012(6) | $10.00 | (0.14) | 0.42 | 0.28 | — | $10.28 | 2.80% | 5.92%(5) | 6.22%(5) | 2.61%(5) | (3.49)%(5) | (3.79)%(5) | 292% | $411 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||||||||||||
Per-Share Data | Ratios and Supplemental Data | |||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | |||||||||||||
Net | Net | Net | Total From | Distributions From Net | Net | Total | Operating | Operating | Operating | Net Income | Net Income (before expense waiver) | Portfolio | Net | |
R Class | ||||||||||||||
2013(4) | $10.17 | (0.15) | 0.33 | 0.18 | — | $10.35 | 1.67% | 5.00%(5) | 5.30%(5) | 2.11%(5) | (2.99)%(5) | (3.29)%(5) | 378% | $428 |
2013 | $10.30 | (0.31) | 0.52 | 0.21 | (0.34) | $10.17 | 2.13% | 5.24% | 5.54% | 2.10% | (2.96)% | (3.26)% | 588% | $421 |
2012(6) | $10.00 | (0.12) | 0.42 | 0.30 | — | $10.30 | 3.00% | 5.42%(5) | 5.72%(5) | 2.11%(5) | (2.99)%(5) | (3.29)%(5) | 292% | $412 |
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, 2013 (unaudited). |
(5) | Annualized. |
(6) | October 31, 2011 (fund inception) through March 31, 2012. |
See Notes to Financial Statements.
Approval of Management Agreement |
At a meeting held on June 20, 2013, 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 directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, 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.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided 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; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | 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. |
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:
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, 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, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund 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.
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.
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund’s investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the “About Us” page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
Notes |
Notes |
Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 |
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.
©2013 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-79779 1311
SEMIANNUAL REPORT | SEPTEMBER 30, 2013 |
Mid Cap Value Fund
Table of Contents |
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.
President’s Letter |
Jonathan Thomas
Dear Investor:
Thank you for reviewing this semiannual report for the six months ended September 30, 2013. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information.
For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com.
Bond Yields and Stock Indices Soared Together Until September
U.S. government bond yields and stock indices traced roughly parallel upward paths during most of the six months ended September 30, 2013. The 10-year U.S. Treasury yield began the period at 1.85%, compressed in large part by the scale of the Federal Reserve’s (the Fed’s) bond-buying program ($85 billion of quantitative easing, or QE, each month).
Hints from the Fed that it might taper QE by year end sent bond yields soaring from early May to early September. The 10-year Treasury yield reached 3.00% on September 5, its first time at that level since July 2011, before finishing the reporting period at 2.61%. Bond yields generally declined in September on weaker-than-expected economic data, the Fed’s announcement that it would delay tapering, and uncertainty caused by the impending partial shutdown of the U.S. government.
Even with the September rally, bonds significantly underperformed stocks for the full reporting period. The 10-year Treasury note and the Barclays U.S. Aggregate Bond Index (representing the broad taxable U.S. bond market) returned –5.20% and –1.77%, respectively. By contrast, the S&P 500 Index gained 8.31% as the U.S. economy showed signs of attaining sustainable growth, fueled in part by Fed stimulus. Improvements in the housing and job markets helped trigger optimism, though their absolute numbers still fell short of pre-2008 levels.
Full recovery from 2008 remains a distant goal. Economic growth is still subpar compared with past recoveries, hampered further by the fiscal sequester and partial government shutdown. Faced with these challenges, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios—as appropriate—for meeting financial goals. We appreciate your continued trust in us in this uncertain environment.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
Don Pratt
Dear Fellow Shareholders,
This is my last letter to shareholders as the funds’ Chairman, as I will retire at the end of 2013.
My personal thanks go to the independent directors that elected me to the Board and subsequently to the Chairman position, and with whom I have worked to reorganize the Board’s committee structure and annually improve our governance processes. Throughout my tenure, the Board has addressed its responsibilities to shareholders diligently in committee work, the annual contract review, and the execution of our oversight responsibilities. I expect that it will continue to do so well into the future.
Thanks also to the American Century Investments management team led by Jonathan Thomas. Its transparency, candor, and open communication with the Board is most appreciated. I have served on more than 20 boards and this is the most productive and enjoyable relationship with management I have experienced.
Finally, thanks to the many shareholders who have written with questions, comments, and suggestions. Each was heard and addressed and enabled the board to better represent your interests. Keep communicating with us so that the Board can continue to be aware of your interests, concerns, and questions. My best wishes to Jim Olson, my successor as Chairman, and the other independent directors who continue to serve on your behalf.
And remember, as the firm’s founder Jim Stowers, Jr. so often observed, “The best is yet to be.”
Best regards,
Don Pratt
Performance |
Total Returns as of September 30, 2013 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | Since Inception | Inception Date | |
Investor Class | ACMVX | 7.89% | 24.64% | 11.93% | 10.03% | 3/31/04 |
Russell Midcap Value Index | — | 7.64% | 27.77% | 11.86% | 9.31% | — |
Institutional Class | AVUAX | 8.00% | 24.88% | 12.15% | 10.53% | 8/2/04 |
A Class(2) No sales charge* With sales charge* | ACLAX
| 7.76% 1.53% | 24.36% 17.22% | 11.64% 10.32% | 9.16% 8.42% | 1/13/05
|
C Class No sales charge* With sales charge* | ACCLX
| 7.31% 6.31% | 23.40% 23.40% | — — | 13.41% 13.41% | 3/1/10
|
R Class | AMVRX | 7.63% | 24.01% | 11.37% | 8.00% | 7/29/05 |
R6 Class | AMDVX | — | — | — | -0.31%(1) | 7/26/13 |
* | 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 | R6 Class |
1.01% | 0.81% | 1.26% | 2.01% | 1.51% | 0.66% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. 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 does not.
Fund Characteristics |
SEPTEMBER 30, 2013 | |
Top Ten Holdings | % of net assets |
iShares Russell Midcap Value Index Fund | 3.3% |
Republic Services, Inc. | 3.3% |
Northern Trust Corp. | 2.8% |
Imperial Oil Ltd. | 2.6% |
ADT Corp. (The) | 1.8% |
Sysco Corp. | 1.6% |
Westar Energy, Inc. | 1.4% |
Great Plains Energy, Inc. | 1.3% |
LifePoint Hospitals, Inc. | 1.3% |
Teradyne, Inc. | 1.3% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 7.5% |
Insurance | 7.2% |
Commercial Services and Supplies | 6.7% |
Health Care Equipment and Supplies | 6.5% |
Electric Utilities | 5.6% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 88.7% |
Foreign Common Stocks* | 5.3% |
Exchange-Traded Funds | 3.3% |
Total Equity Exposure | 97.3% |
Temporary Cash Investments | 2.6% |
Other Assets and Liabilities | 0.1% |
* Includes depositary shares, dual listed securities and foreign ordinary shares.
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013 (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. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning 4/1/13 | Ending 9/30/13 | Expenses Paid During Period(1) 4/1/13 – 9/30/13 | Annualized | |
Actual | ||||
Investor Class | $1,000 | $1,078.90 | $5.21 | 1.00% |
Institutional Class | $1,000 | $1,080.00 | $4.17 | 0.80% |
A Class | $1,000 | $1,077.60 | $6.51 | 1.25% |
C Class | $1,000 | $1,073.10 | $10.39 | 2.00% |
R Class | $1,000 | $1,076.30 | $7.81 | 1.50% |
R6 Class | $1,000 | $996.90(2) | $1.19(3) | 0.65% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.06 | $5.06 | 1.00% |
Institutional Class | $1,000 | $1,021.06 | $4.05 | 0.80% |
A Class | $1,000 | $1,018.80 | $6.33 | 1.25% |
C Class | $1,000 | $1,015.04 | $10.10 | 2.00% |
R Class | $1,000 | $1,017.55 | $7.59 | 1.50% |
R6 Class | $1,000 | $1,021.81(4) | $3.29(4) | 0.65% |
(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 365, to reflect the one-half year period. |
(2) | Ending account value based on actual return from July 26, 2013 (commencement of sale) through September 30, 2013. |
(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 67, the number of days in the period from July 26, 2013 (commencement of sale) through September 30, 2013, divided by 365, 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 the 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. |
Schedule of Investments |
SEPTEMBER 30, 2013 (UNAUDITED)
Shares | Value | |||||
Common Stocks — 94.0% | ||||||
AEROSPACE AND DEFENSE — 3.3% | ||||||
General Dynamics Corp. | 457,334 | $40,025,872 | ||||
Northrop Grumman Corp. | 298,906 | 28,473,786 | ||||
Raytheon Co. | 494,335 | 38,098,398 | ||||
Textron, Inc. | 1,500,090 | 41,417,485 | ||||
148,015,541 | ||||||
AIRLINES — 1.1% | ||||||
Southwest Airlines Co. | 3,380,510 | 49,220,226 | ||||
AUTO COMPONENTS — 0.5% | ||||||
Autoliv, Inc. | 249,746 | 21,825,303 | ||||
BEVERAGES — 0.9% | ||||||
Dr Pepper Snapple Group, Inc. | 952,188 | 42,677,066 | ||||
CAPITAL MARKETS — 4.9% | ||||||
Charles Schwab Corp. (The) | 567,013 | 11,986,655 | ||||
Franklin Resources, Inc. | 890,164 | 44,997,790 | ||||
LPL Financial Holdings, Inc. | 777,725 | 29,794,645 | ||||
Northern Trust Corp. | 2,293,813 | 124,760,489 | ||||
State Street Corp. | 134,168 | 8,821,546 | ||||
220,361,125 | ||||||
COMMERCIAL BANKS — 5.0% | ||||||
Comerica, Inc. | 623,870 | 24,524,330 | �� | |||
Commerce Bancshares, Inc. | 918,125 | 40,223,056 | ||||
Cullen/Frost Bankers, Inc. | 399,709 | 28,199,470 | ||||
KeyCorp | 1,202,449 | 13,707,919 | ||||
PNC Financial Services Group, Inc. (The) | 730,861 | 52,950,879 | ||||
SunTrust Banks, Inc. | 974,717 | 31,600,325 | ||||
Westamerica Bancorp. | 664,632 | 33,058,796 | ||||
224,264,775 | ||||||
COMMERCIAL SERVICES AND SUPPLIES — 6.7% | ||||||
ADT Corp. (The) | 2,029,596 | 82,523,374 | ||||
Republic Services, Inc. | 4,452,037 | 148,519,954 | ||||
Tyco International Ltd. | 1,429,639 | 50,008,772 | ||||
Waste Management, Inc. | 543,703 | 22,422,312 | ||||
303,474,412 | ||||||
COMPUTERS AND PERIPHERALS — 1.0% | ||||||
SanDisk Corp. | 236,373 | 14,066,557 | ||||
Western Digital Corp. | 485,645 | 30,789,893 | ||||
44,856,450 | ||||||
CONTAINERS AND PACKAGING — 1.2% | ||||||
Bemis Co., Inc. | 712,675 | 27,801,452 | ||||
Sonoco Products Co. | 685,110 | 26,678,183 | ||||
54,479,635 | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.6% | ||||||
CenturyLink, Inc. | 1,449,113 | 45,473,166 | ||||
tw telecom, inc., Class A(1) | 949,567 | 28,358,818 | ||||
73,831,984 | ||||||
ELECTRIC UTILITIES — 5.6% | ||||||
Empire District Electric Co. (The) | 1,191,004 | 25,797,147 | ||||
Great Plains Energy, Inc. | 2,667,168 | 59,211,129 | ||||
IDACORP, Inc. | 235,483 | 11,397,377 | ||||
Northeast Utilities | 556,612 | 22,960,245 | ||||
Portland General Electric Co. | 895,864 | 25,290,241 | ||||
Westar Energy, Inc. | 2,009,428 | 61,588,968 | ||||
Xcel Energy, Inc. | 1,677,875 | 46,326,129 | ||||
252,571,236 | ||||||
ELECTRICAL EQUIPMENT — 1.5% | ||||||
ABB Ltd. ADR | 1,190,698 | 28,088,566 | ||||
Brady Corp., Class A | 523,503 | 15,966,841 | ||||
Regal-Beloit Corp. | 346,128 | 23,512,475 | ||||
67,567,882 | ||||||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 0.7% | ||||||
Molex, Inc., Class A | 136,741 | 5,234,445 | ||||
TE Connectivity Ltd. | 515,160 | 26,674,985 | ||||
31,909,430 | ||||||
ENERGY EQUIPMENT AND SERVICES — 1.0% | ||||||
Cameron International Corp.(1) | 323,320 | 18,872,188 | ||||
Helmerich & Payne, Inc. | 397,083 | 27,378,873 | ||||
46,251,061 | ||||||
FOOD AND STAPLES RETAILING — 1.6% | ||||||
Sysco Corp. | 2,230,596 | 70,999,871 | ||||
FOOD PRODUCTS — 4.0% | ||||||
ConAgra Foods, Inc. | 838,868 | 25,451,255 | ||||
General Mills, Inc. | 419,628 | 20,108,574 | ||||
Hillshire Brands Co. | 1,855,254 | 57,030,508 | ||||
Kellogg Co. | 383,109 | 22,499,991 | ||||
Kraft Foods Group, Inc. | 427,890 | 22,438,552 | ||||
Mondelez International, Inc. Class A | 1,001,881 | 31,479,101 | ||||
179,007,981 | ||||||
GAS UTILITIES — 1.7% | ||||||
AGL Resources, Inc. | 493,086 | 22,696,749 | ||||
Laclede Group, Inc. (The) | 778,327 | 35,024,715 | ||||
Southwest Gas Corp. | 376,786 | 18,839,300 | ||||
76,560,764 |
Shares | Value |
HEALTH CARE EQUIPMENT AND SUPPLIES — 6.5% | ||||||
Becton Dickinson and Co. | 275,596 | $27,565,112 | ||||
Boston Scientific Corp.(1) | 2,378,491 | 27,923,484 | ||||
CareFusion Corp.(1) | 1,517,538 | 55,997,152 | ||||
Medtronic, Inc. | 801,350 | 42,671,888 | ||||
STERIS Corp. | 496,635 | 21,335,440 | ||||
Stryker Corp. | 776,982 | 52,516,213 | ||||
Varian Medical Systems, Inc.(1) | 221,220 | 16,531,771 | ||||
Zimmer Holdings, Inc. | 582,252 | 47,826,179 | ||||
292,367,239 | ||||||
HEALTH CARE PROVIDERS AND SERVICES — 3.9% | ||||||
CIGNA Corp. | 238,732 | 18,348,941 | ||||
Humana, Inc. | 278,999 | 26,038,977 | ||||
LifePoint Hospitals, Inc.(1) | 1,261,371 | 58,817,730 | ||||
Patterson Cos., Inc. | 742,841 | 29,862,208 | ||||
Quest Diagnostics, Inc. | 708,703 | 43,790,758 | ||||
176,858,614 | ||||||
HOTELS, RESTAURANTS AND LEISURE — 2.1% | ||||||
Carnival Corp. | 1,254,897 | 40,959,838 | ||||
CEC Entertainment, Inc. | 477,281 | 21,888,107 | ||||
International Game Technology | 1,684,867 | 31,894,532 | ||||
94,742,477 | ||||||
INDUSTRIAL CONGLOMERATES — 1.0% | ||||||
Koninklijke Philips Electronics NV | 1,442,384 | 46,500,190 | ||||
INSURANCE — 7.2% | ||||||
ACE Ltd. | 503,592 | 47,116,068 | ||||
Allstate Corp. (The) | 604,290 | 30,546,860 | ||||
Aon plc | 135,856 | 10,113,121 | ||||
Chubb Corp. (The) | 449,116 | 40,088,094 | ||||
HCC Insurance Holdings, Inc. | 830,086 | 36,374,369 | ||||
Marsh & McLennan Cos., Inc. | 839,973 | 36,580,824 | ||||
Reinsurance Group of America, Inc. | 698,552 | 46,795,998 | ||||
Symetra Financial Corp. | 1,024,895 | 18,263,629 | ||||
Travelers Cos., Inc. (The) | 418,620 | 35,486,417 | ||||
Unum Group | 817,871 | 24,895,993 | ||||
326,261,373 | ||||||
LEISURE EQUIPMENT AND PRODUCTS — 0.3% | ||||||
Hasbro, Inc. | 336,105 | 15,843,990 | ||||
LIFE SCIENCES TOOLS AND SERVICES — 1.5% | ||||||
Agilent Technologies, Inc. | 912,752 | 46,778,540 | ||||
Bio-Rad Laboratories, Inc. Class A(1) | 160,120 | 18,823,707 | ||||
65,602,247 | ||||||
MACHINERY — 0.7% | ||||||
Kaydon Corp. | 149,604 | 5,313,934 | ||||
Xylem, Inc. | 929,436 | 25,959,148 | ||||
31,273,082 | ||||||
METALS AND MINING — 1.8% | ||||||
Newmont Mining Corp. | 1,599,403 | 44,943,224 | ||||
Nucor Corp. | 754,546 | 36,987,845 | ||||
81,931,069 | ||||||
MULTI-UTILITIES — 2.4% | ||||||
Consolidated Edison, Inc. | 822,880 | 45,373,603 | ||||
NorthWestern Corp. | 531,280 | 23,865,098 | ||||
PG&E Corp. | 909,411 | 37,213,098 | ||||
106,451,799 | ||||||
MULTILINE RETAIL — 0.9% | ||||||
Target Corp. | 618,451 | 39,568,495 | ||||
OIL, GAS AND CONSUMABLE FUELS — 7.5% | ||||||
Apache Corp. | 622,862 | 53,030,470 | ||||
Devon Energy Corp. | 799,422 | 46,174,615 | ||||
Imperial Oil Ltd. | 2,713,756 | 119,162,355 | ||||
Murphy Oil Corp. | 544,521 | 32,845,507 | ||||
Peabody Energy Corp. | 397,435 | 6,855,754 | ||||
Southwestern Energy Co.(1) | 1,249,694 | 45,463,868 | ||||
Williams Partners LP | 686,762 | 36,315,974 | ||||
339,848,543 | ||||||
PHARMACEUTICALS — 1.6% | ||||||
Hospira, Inc.(1) | 999,904 | 39,216,235 | ||||
Mallinckrodt plc(1) | 785,837 | 34,647,553 | ||||
73,863,788 | ||||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 4.9% | ||||||
American Tower Corp. | 620,184 | 45,974,240 | ||||
Annaly Capital Management, Inc. | 3,798,054 | 43,981,465 | ||||
Boston Properties, Inc. | 103,460 | 11,059,874 | ||||
Corrections Corp. of America | 1,386,284 | 47,896,112 | ||||
Federal Realty Investment Trust | 221,595 | 22,480,813 | ||||
Piedmont Office Realty Trust, Inc., Class A | 3,011,269 | 52,275,630 | ||||
223,668,134 | ||||||
ROAD AND RAIL — 1.0% | ||||||
Heartland Express, Inc. | 3,139,924 | 44,555,522 | ||||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 4.8% | ||||||
Analog Devices, Inc. | 280,779 | 13,210,652 | ||||
Applied Materials, Inc. | 3,215,612 | 56,401,835 | ||||
Avago Technologies Ltd. | 586,850 | 25,304,972 | ||||
KLA-Tencor Corp. | 311,904 | 18,979,358 |
Shares | Value |
Maxim Integrated Products, Inc. | 828,918 | $24,701,756 | ||||
Microchip Technology, Inc. | 524,249 | 21,121,992 | ||||
Teradyne, Inc.(1) | 3,462,642 | 57,202,846 | ||||
216,923,411 | ||||||
SPECIALTY RETAIL — 1.5% | ||||||
Bed Bath & Beyond, Inc.(1) | 139,292 | 10,775,629 | ||||
Lowe’s Cos., Inc. | 1,165,570 | 55,492,788 | ||||
66,268,417 | ||||||
TEXTILES, APPAREL AND LUXURY GOODS — 0.3% | ||||||
Coach, Inc. | 252,660 | 13,777,550 | ||||
THRIFTS AND MORTGAGE FINANCE — 1.3% | ||||||
Capitol Federal Financial, Inc. | 972,388 | 12,086,783 | ||||
People’s United Financial, Inc. | 3,171,725 | 45,609,405 | ||||
57,696,188 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.5% | ||||||
Rogers Communications, Inc., Class B | 541,482 | 23,282,596 | ||||
TOTAL COMMON STOCKS(Cost $3,650,402,830) | 4,245,159,466 | |||||
Exchange-Traded Funds — 3.3% | ||||||
iShares Russell Midcap Value Index Fund (Cost $124,766,575) | 2,488,423 | 151,544,961 | ||||
Temporary Cash Investments — 2.6% | ||||||
Repurchase Agreement, Bank of America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 1.375%, 9/30/18, valued at $22,665,381), in a joint trading account at 0.03%, dated 9/30/13, due 10/1/13 (Delivery value $22,229,474) | 22,229,455 | |||||
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 5/15/30, valued at $27,160,540), in a joint trading account at 0.01%, dated 9/30/13, due 10/1/13 (Delivery value $26,675,352) | 26,675,345 | |||||
Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 1.75%, 5/15/22, valued at $27,212,677), in a joint trading account at 0.02%, dated 9/30/13, due 10/1/13 (Delivery value $26,675,360) | 26,675,345 | |||||
SSgA U.S. Government Money Market Fund | 41,083,774 | 41,083,774 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $116,663,919) | 116,663,919 | |||||
TOTAL INVESTMENT SECURITIES — 99.9% (Cost $3,891,833,324) | 4,513,368,346 | |||||
OTHER ASSETS AND LIABILITIES — 0.1% | 2,790,472 | |||||
TOTAL NET ASSETS — 100.0% | $4,516,158,818 |
Forward Foreign Currency Exchange Contracts | ||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Gain (Loss) | ||||||||
USD | 119,313,455 | CAD | 123,000,241 | JPMorgan Chase Bank N.A. | 10/31/13 | $(11,015 | ) | |||||
USD | 24,032,489 | CHF | 21,923,157 | Credit Suisse AG | 10/31/13 | (215,061 | ) | |||||
USD | 40,818,180 | EUR | 30,178,640 | UBS AG | 10/31/13 | (11,924 | ) | |||||
$(238,000 | ) |
Notes to Schedule of Investments
ADR = American Depositary Receipt
CAD = Canadian Dollar
CHF = Swiss Franc
EUR = Euro
USD = United States Dollar
(1) | Non-income producing. |
See Notes to Financial Statements.
Statement of Assets and Liabilities |
SEPTEMBER 30, 2013 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $3,891,833,324) | $4,513,368,346 | ||
Foreign currency holdings, at value (cost of $17) | 15 | ||
Receivable for investments sold | 40,053,437 | ||
Receivable for capital shares sold | 12,642,613 | ||
Dividends and interest receivable | 10,159,691 | ||
4,576,224,102 | |||
Liabilities | |||
Payable for investments purchased | 46,242,569 | ||
Payable for capital shares redeemed | 9,808,157 | ||
Unrealized loss on forward foreign currency exchange contracts | 238,000 | ||
Accrued management fees | 3,562,196 | ||
Distribution and service fees payable | 214,362 | ||
60,065,284 | |||
Net Assets | $4,516,158,818 | ||
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $3,697,151,688 | ||
Undistributed net investment income | 9,394,501 | ||
Undistributed net realized gain | 188,308,736 | ||
Net unrealized appreciation | 621,303,893 | ||
$4,516,158,818 |
Net assets | Shares outstanding | Net asset value per share | |
Investor Class, $0.01 Par Value | $3,066,807,639 | 197,121,118 | $15.56 |
Institutional Class, $0.01 Par Value | $630,445,177 | 40,509,915 | $15.56 |
A Class, $0.01 Par Value | $671,727,774 | 43,193,627 | $15.55* |
C Class, $0.01 Par Value | $49,823,671 | 3,212,305 | $15.51 |
R Class, $0.01 Par Value | $96,135,960 | 6,186,837 | $15.54 |
R6 Class, $0.01 Par Value | $1,218,597 | 78,329 | $15.56 |
*Maximum offering price $16.50 (net asset value divided by 0.9425).
See Notes to Financial Statements.
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $145,411) | $52,967,176 | ||
Interest | 7,200 | ||
52,974,376 | |||
Expenses: | |||
Management fees | 19,503,435 | ||
Distribution and service fees: | |||
A Class | 715,408 | ||
C Class | 206,251 | ||
R Class | 213,599 | ||
Directors’ fees and expenses | 90,237 | ||
20,728,930 | |||
Net investment income (loss) | 32,245,446 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 169,737,376 | ||
Foreign currency transactions | (2,637,461 | ) | |
167,099,915 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 94,199,494 | ||
Translation of assets and liabilities in foreign currencies | 174,120 | ||
94,373,614 | |||
Net realized and unrealized gain (loss) | 261,473,529 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $293,718,975 |
See Notes to Financial Statements.
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) AND YEAR ENDED MARCH 31, 2013 | |||||
Increase (Decrease) in Net Assets | September 30, 2013 | March 31, 2013 | |||
Operations | |||||
Net investment income (loss) | $32,245,446 | $43,424,108 | |||
Net realized gain (loss) | 167,099,915 | 85,580,417 | |||
Change in net unrealized appreciation (depreciation) | 94,373,614 | 364,765,746 | |||
Net increase (decrease) in net assets resulting from operations | 293,718,975 | 493,770,271 | |||
Distributions to Shareholders | |||||
From net investment income: | |||||
Investor Class | (20,827,416 | ) | (34,962,608 | ) | |
Institutional Class | (4,395,995 | ) | (6,611,740 | ) | |
A Class | (3,552,694 | ) | (6,056,843 | ) | |
C Class | (96,430 | ) | (200,163 | ) | |
R Class | (421,703 | ) | (807,304 | ) | |
R6 Class | (6,023 | ) | — | ||
From net realized gains: | |||||
Investor Class | — | (46,600,724 | ) | ||
Institutional Class | — | (8,214,430 | ) | ||
A Class | — | (9,216,413 | ) | ||
C Class | — | (526,325 | ) | ||
R Class | — | (1,403,611 | ) | ||
Decrease in net assets from distributions | (29,300,261 | ) | (114,600,161 | ) | |
Capital Share Transactions | |||||
Net increase (decrease) in net assets from capital share transactions | 777,589,352 | 835,399,876 | |||
Net increase (decrease) in net assets | 1,042,008,066 | 1,214,569,986 | |||
Net Assets | |||||
Beginning of period | 3,474,150,752 | 2,259,580,766 | |||
End of period | $4,516,158,818 | $3,474,150,752 | |||
Undistributed net investment income | $9,394,501 | $6,449,316 |
See Notes to Financial Statements.
Notes to Financial Statements |
SEPTEMBER 30, 2013 (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 offers the Investor Class, the Institutional Class, the A Class, the C Class, the R Class and the R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees. Sale of the R6 Class commenced on July 26, 2013.
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.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund’s tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
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, 0.80% for the Institutional Class and 0.65% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay 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, 2013 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 corporation’s investment advisor, ACIM, the corporation’s distributor, ACIS, and the corporation’s transfer agent, American Century Services, LLC are wholly owned, directly or indirectly, by ACC.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2013 were $1,940,347,536 and $1,173,026,455, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2013(1) | Year ended March 31, 2013 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Investor Class/Shares Authorized | 550,000,000 | 500,000,000 | ||||||||||
Sold | 44,729,795 | $677,772,265 | 67,480,262 | $888,777,355 | ||||||||
Issued in reinvestment of distributions | 1,324,263 | 20,047,513 | 6,187,913 | 79,352,207 | ||||||||
Redeemed | (18,193,404 | ) | (276,062,401 | ) | (30,017,729 | ) | (392,179,745 | ) | ||||
27,860,654 | 421,757,377 | 43,650,446 | 575,949,817 | |||||||||
Institutional Class/Shares Authorized | 150,000,000 | 100,000,000 | ||||||||||
Sold | 14,364,557 | 218,860,448 | 12,919,904 | 168,871,444 | ||||||||
Issued in reinvestment of distributions | 235,318 | 3,568,035 | 933,914 | 12,000,298 | ||||||||
Redeemed | (3,116,331 | ) | (47,200,514 | ) | (5,198,351 | ) | (68,083,664 | ) | ||||
11,483,544 | 175,227,969 | 8,655,467 | 112,788,078 | |||||||||
A Class/Shares Authorized | 150,000,000 | 100,000,000 | ||||||||||
Sold | 14,916,875 | 227,108,062 | 16,033,412 | 210,717,951 | ||||||||
Issued in reinvestment of distributions | 224,469 | 3,393,110 | 1,153,941 | 14,768,108 | ||||||||
Redeemed | (5,581,292 | ) | (84,242,112 | ) | (8,174,174 | ) | (106,477,452 | ) | ||||
9,560,052 | 146,259,060 | 9,013,179 | 119,008,607 | |||||||||
C Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||||
Sold | 1,201,184 | 18,099,185 | 1,172,247 | 15,546,220 | ||||||||
Issued in reinvestment of distributions | 5,272 | 78,549 | 47,511 | 607,390 | ||||||||
Redeemed | (162,165 | ) | (2,438,297 | ) | (238,735 | ) | (3,101,170 | ) | ||||
1,044,291 | 15,739,437 | 981,023 | 13,052,440 | |||||||||
R Class/Shares Authorized | 15,000,000 | 15,000,000 | ||||||||||
Sold | 1,720,412 | 26,006,616 | 2,141,562 | 28,095,307 | ||||||||
Issued in reinvestment of distributions | 27,831 | 419,308 | 172,787 | 2,208,311 | ||||||||
Redeemed | (593,213 | ) | (8,995,614 | ) | (1,208,392 | ) | (15,702,684 | ) | ||||
1,155,030 | 17,430,310 | 1,105,957 | 14,600,934 | |||||||||
R6 Class/Shares Authorized | 50,000,000 | N/A | ||||||||||
Sold | 118,209 | 1,799,371 | ||||||||||
Issued in reinvestment of distributions | 388 | 6,023 | ||||||||||
Redeemed | (40,268 | ) | (630,195 | ) | ||||||||
78,329 | 1,175,199 | |||||||||||
Net increase (decrease) | 51,181,900 | $777,589,352 | 63,406,072 | $835,399,876 |
(1) | July 26, 2013 (commencement of sale) through September 30, 2013 for the R6 Class. |
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 | $4,006,300,456 | — | — |
Foreign Common Stocks | 49,913,869 | $188,945,141 | — |
Exchange-Traded Funds | 151,544,961 | — | — |
Temporary Cash Investments | 41,083,774 | 75,580,145 | — |
Total Value of Investment Securities | $4,248,843,060 | $264,525,286 | — |
Other Financial Instruments | |||
Total Unrealized Gain (Loss) on Forward Foreign | — | $(238,000) | — |
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 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, 2013, is disclosed on the Statement of Assets and Liabilities as a liability of $238,000 in unrealized loss on forward foreign currency exchange contracts. For the six months ended September 30, 2013, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(2,753,980) in net realized gain (loss) on foreign currency transactions and $170,983 in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
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, 2013, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $3,947,628,695 |
Gross tax appreciation of investments | $603,239,645 |
Gross tax depreciation of investments | (37,499,994) |
Net tax appreciation (depreciation) of investments | $565,739,651 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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 | Net Income | Net | Total From Investment Operations | Net | Net | Total Distributions | Net Asset Value, | Total | Operating Expenses | Net Income | Portfolio Turnover | Net Assets, (in thousands) | |
Investor Class | |||||||||||||
2013(3) | $14.53 | 0.12 | 1.02 | 1.14 | (0.11) | — | (0.11) | $15.56 | 7.89% | 1.00%(4) | 1.64%(4) | 30% | $3,066,808 |
2013 | $12.86 | 0.22 | 2.02 | 2.24 | (0.25) | (0.32) | (0.57) | $14.53 | 18.11% | 1.00% | 1.69% | 61% | $2,459,353 |
2012 | $13.13 | 0.22 | 0.28 | 0.50 | (0.16) | (0.61) | (0.77) | $12.86 | 4.48% | 1.01% | 1.80% | 82% | $1,615,365 |
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 |
Institutional Class | |||||||||||||
2013(3) | $14.53 | 0.14 | 1.02 | 1.16 | (0.13) | — | (0.13) | $15.56 | 8.00% | 0.80%(4) | 1.84%(4) | 30% | $630,445 |
2013 | $12.86 | 0.25 | 2.02 | 2.27 | (0.28) | (0.32) | (0.60) | $14.53 | 18.34% | 0.80% | 1.89% | 61% | $421,877 |
2012 | $13.14 | 0.25 | 0.27 | 0.52 | (0.19) | (0.61) | (0.80) | $12.86 | 4.60% | 0.81% | 2.00% | 82% | $262,032 |
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 |
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 | Net Income | Net | Total From Investment Operations | Net | Net | Total Distributions | Net Asset Value, | Total | Operating Expenses | Net Income | Portfolio Turnover | Net Assets, (in thousands) | |
A Class(5) | |||||||||||||
2013(3) | $14.52 | 0.11 | 1.01 | 1.12 | (0.09) | — | (0.09) | $15.55 | 7.76% | 1.25%(4) | 1.39%(4) | 30% | $671,728 |
2013 | $12.86 | 0.19 | 2.01 | 2.20 | (0.22) | (0.32) | (0.54) | $14.52 | 17.83% | 1.25% | 1.44% | 61% | $488,491 |
2012 | $13.13 | 0.19 | 0.29 | 0.48 | (0.14) | (0.61) | (0.75) | $12.86 | 4.19% | 1.26% | 1.55% | 82% | $316,497 |
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 |
C Class | |||||||||||||
2013(3) | $14.49 | 0.05 | 1.01 | 1.06 | (0.04) | — | (0.04) | $15.51 | 7.31% | 2.00%(4) | 0.64%(4) | 30% | $49,824 |
2013 | $12.84 | 0.09 | 2.02 | 2.11 | (0.14) | (0.32) | (0.46) | $14.49 | 16.96% | 2.00% | 0.69% | 61% | $31,407 |
2012 | $13.14 | 0.11 | 0.27 | 0.38 | (0.07) | (0.61) | (0.68) | $12.84 | 3.41% | 2.01% | 0.80% | 82% | $15,242 |
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 | |||||||||||||
2013(3) | $14.51 | 0.09 | 1.01 | 1.10 | (0.07) | — | (0.07) | $15.54 | 7.63% | 1.50%(4) | 1.14%(4) | 30% | $96,136 |
2013 | $12.85 | 0.15 | 2.02 | 2.17 | (0.19) | (0.32) | (0.51) | $14.51 | 17.49% | 1.50% | 1.19% | 61% | $73,023 |
2012 | $13.14 | 0.16 | 0.28 | 0.44 | (0.12) | (0.61) | (0.73) | $12.85 | 3.91% | 1.51% | 1.30% | 82% | $50,444 |
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 |
R6 Class | |||||||||||||
2013(8) | $15.66 | 0.07 | (0.12) | (0.05) | (0.05) | — | (0.05) | $15.56 | (0.31)% | 0.65%(4) | 2.49%(4) | 30%(9) | $1,219 |
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, 2013 (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. |
(8) | July 26, 2013 (commencement of sale) through September 30, 2013 (unaudited). |
(9) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2013. |
See Notes to Financial Statements.
Approval of Management Agreement |
At a meeting held on June 20, 2013, 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 directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, 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.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided 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; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | 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. |
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:
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, 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, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund 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.
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.
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund’s investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the “About Us” page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
Notes |
Notes |
Notes |
Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 |
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.
©2013 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-79780 1311
SEMIANNUAL REPORT | SEPTEMBER 30, 2013 |
NT Large Company Value Fund
Table of Contents |
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.
President’s Letter |
Jonathan Thomas
Dear Investor:
Thank you for reviewing this semiannual report for the six months ended September 30, 2013. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information.
For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com.
Bond Yields and Stock Indices Soared Together Until September
U.S. government bond yields and stock indices traced roughly parallel upward paths during most of the six months ended September 30, 2013. The 10-year U.S. Treasury yield began the period at 1.85%, compressed in large part by the scale of the Federal Reserve’s (the Fed’s) bond-buying program ($85 billion of quantitative easing, or QE, each month).
Hints from the Fed that it might taper QE by year end sent bond yields soaring from early May to early September. The 10-year Treasury yield reached 3.00% on September 5, its first time at that level since July 2011, before finishing the reporting period at 2.61%. Bond yields generally declined in September on weaker-than-expected economic data, the Fed’s announcement that it would delay tapering, and uncertainty caused by the impending partial shutdown of the U.S. government.
Even with the September rally, bonds significantly underperformed stocks for the full reporting period. The 10-year Treasury note and the Barclays U.S. Aggregate Bond Index (representing the broad taxable U.S. bond market) returned –5.20% and –1.77%, respectively. By contrast, the S&P 500 Index gained 8.31% as the U.S. economy showed signs of attaining sustainable growth, fueled in part by Fed stimulus. Improvements in the housing and job markets helped trigger optimism, though their absolute numbers still fell short of pre-2008 levels.
Full recovery from 2008 remains a distant goal. Economic growth is still subpar compared with past recoveries, hampered further by the fiscal sequester and partial government shutdown. Faced with these challenges, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios—as appropriate—for meeting financial goals. We appreciate your continued trust in us in this uncertain environment.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
Don Pratt
Dear Fellow Shareholders,
This is my last letter to shareholders as the funds’ Chairman, as I will retire at the end of 2013.
My personal thanks go to the independent directors that elected me to the Board and subsequently to the Chairman position, and with whom I have worked to reorganize the Board’s committee structure and annually improve our governance processes. Throughout my tenure, the Board has addressed its responsibilities to shareholders diligently in committee work, the annual contract review, and the execution of our oversight responsibilities. I expect that it will continue to do so well into the future.
Thanks also to the American Century Investments management team led by Jonathan Thomas. Its transparency, candor, and open communication with the Board is most appreciated. I have served on more than 20 boards and this is the most productive and enjoyable relationship with management I have experienced.
Finally, thanks to the many shareholders who have written with questions, comments, and suggestions. Each was heard and addressed and enabled the board to better represent your interests. Keep communicating with us so that the Board can continue to be aware of your interests, concerns, and questions. My best wishes to Jim Olson, my successor as Chairman, and the other independent directors who continue to serve on your behalf.
And remember, as the firm’s founder Jim Stowers, Jr. so often observed, “The best is yet to be.”
Best regards,
Don Pratt
Performance |
Total Returns as of September 30, 2013 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | Since Inception | Inception Date | |
Institutional Class | ACLLX | 8.51% | 20.63% | 8.39% | 3.98% | 5/12/06 |
Russell 1000 Value Index | — | 7.27% | 22.30% | 8.86% | 4.75% | — |
S&P 500 Index | — | 8.31% | 19.34% | 10.01% | 5.88% | — |
R6 Class | ACDLX | — | — | — | -2.19%(1) | 7/26/13 |
(1) | Total returns for periods less than one year are not annualized. |
Total Annual Fund Operating Expenses | |
Institutional Class | R6 Class |
0.67% | 0.52% |
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 Institutional 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.
Fund Characteristics |
SEPTEMBER 30, 2013 | |
Top Ten Holdings | % of net assets |
Exxon Mobil Corp. | 4.8% |
Chevron Corp. | 3.7% |
JPMorgan Chase & Co. | 3.4% |
General Electric Co. | 3.4% |
Johnson & Johnson | 3.0% |
Wells Fargo & Co. | 2.9% |
Pfizer, Inc. | 2.8% |
Cisco Systems, Inc. | 2.6% |
Procter & Gamble Co. (The) | 2.6% |
Citigroup, Inc. | 2.5% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 13.4% |
Diversified Financial Services | 8.9% |
Pharmaceuticals | 8.3% |
Insurance | 6.8% |
Commercial Banks | 6.2% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 98.2% |
Exchange-Traded Funds | 0.4% |
Total Equity Exposure | 98.6% |
Temporary Cash Investments | 2.0% |
Other Assets and Liabilities | (0.6)% |
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013 (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. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning 4/1/13 | Ending 9/30/13 | Expenses Paid During Period(1) 4/1/13 – 9/30/13 | Annualized | |
Actual | ||||
Institutional Class | $1,000 | $1,085.10 | $3.45 | 0.66% |
R6 Class | $1,000 | $978.10(2) | $0.91(3) | 0.50% |
Hypothetical | ||||
Institutional Class | $1,000 | $1,021.76 | $3.35 | 0.66% |
R6 Class | $1,000 | $1,022.56(4) | $2.54(4) | 0.50% |
(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 365, to reflect the one-half year period. |
(2) | Ending account value based on actual return from July 26, 2013 (commencement of sale) through September 30, 2013. |
(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 67, the number of days in the period from July 26, 2013 (commencement of sale) through September 30, 2013, divided by 365, 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 the 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. |
Schedule of Investments |
SEPTEMBER 30, 2013 (UNAUDITED)
Shares | Value | |||||
Common Stocks — 98.2% | ||||||
AEROSPACE AND DEFENSE — 2.1% | ||||||
General Dynamics Corp. | 80,600 | $ 7,054,112 | ||||
Honeywell International, Inc. | 46,000 | 3,819,840 | ||||
Raytheon Co. | 80,300 | 6,188,721 | ||||
Textron, Inc. | 187,300 | 5,171,353 | ||||
22,234,026 | ||||||
AIRLINES — 0.4% | ||||||
Southwest Airlines Co. | 322,500 | 4,695,600 | ||||
AUTO COMPONENTS — 0.2% | ||||||
Autoliv, Inc. | 27,000 | 2,359,530 | ||||
AUTOMOBILES — 1.3% | ||||||
Ford Motor Co. | 799,900 | 13,494,313 | ||||
BEVERAGES — 0.4% | ||||||
PepsiCo, Inc. | 48,800 | 3,879,600 | ||||
BIOTECHNOLOGY — 0.5% | ||||||
Amgen, Inc. | 28,400 | 3,179,096 | ||||
Gilead Sciences, Inc.(1) | 34,200 | 2,149,128 | ||||
5,328,224 | ||||||
CAPITAL MARKETS — 4.2% | ||||||
Ameriprise Financial, Inc. | 110,800 | 10,091,664 | ||||
Bank of New York Mellon Corp. (The) | 213,800 | 6,454,622 | ||||
BlackRock, Inc. | 37,800 | 10,229,436 | ||||
Goldman Sachs Group, Inc. (The) | 90,300 | 14,286,363 | ||||
Morgan Stanley | 142,100 | 3,829,595 | ||||
44,891,680 | ||||||
CHEMICALS — 0.8% | ||||||
E.I. du Pont de Nemours & Co. | 28,500 | 1,668,960 | ||||
LyondellBasell Industries NV, Class A | 97,700 | 7,154,571 | ||||
8,823,531 | ||||||
COMMERCIAL BANKS — 6.2% | ||||||
KeyCorp | 258,700 | 2,949,180 | ||||
PNC Financial Services Group, Inc. (The) | 203,900 | 14,772,555 | ||||
U.S. Bancorp | 485,700 | 17,766,906 | ||||
Wells Fargo & Co. | 760,100 | 31,407,332 | ||||
66,895,973 | ||||||
COMMERCIAL SERVICES AND SUPPLIES — 0.9% | ||||||
ADT Corp. (The) | 144,700 | 5,883,502 | ||||
Tyco International Ltd. | 117,100 | 4,096,158 | ||||
9,979,660 | ||||||
COMMUNICATIONS EQUIPMENT — 3.7% | ||||||
Cisco Systems, Inc. | 1,207,600 | 28,281,992 | ||||
F5 Networks, Inc.(1) | 12,400 | 1,063,424 | ||||
QUALCOMM, Inc. | 159,900 | 10,770,864 | ||||
40,116,280 | ||||||
COMPUTERS AND PERIPHERALS — 1.4% | ||||||
Apple, Inc. | 15,500 | 7,389,625 | ||||
NetApp, Inc. | 188,200 | 8,021,084 | ||||
15,410,709 | ||||||
CONSUMER FINANCE — 0.8% | ||||||
Capital One Financial Corp. | 130,700 | 8,984,318 | ||||
CONTAINERS AND PACKAGING — 0.2% | ||||||
Avery Dennison Corp. | 44,400 | 1,932,288 | ||||
DIVERSIFIED FINANCIAL SERVICES — 8.9% | ||||||
Bank of America Corp. | 1,020,900 | 14,088,420 | ||||
Berkshire Hathaway, Inc., Class B(1) | 161,100 | 18,286,461 | ||||
Citigroup, Inc. | 548,600 | 26,612,586 | ||||
JPMorgan Chase & Co. | 710,000 | 36,699,900 | ||||
95,687,367 | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.4% | ||||||
AT&T, Inc. | 519,800 | 17,579,636 | ||||
CenturyLink, Inc. | 202,500 | 6,354,450 | ||||
Verizon Communications, Inc. | 32,300 | 1,507,118 | ||||
25,441,204 | ||||||
ELECTRIC UTILITIES — 3.0% | ||||||
American Electric Power Co., Inc. | 137,300 | 5,951,955 | ||||
NV Energy, Inc. | 237,400 | 5,605,014 | ||||
Pinnacle West Capital Corp. | 111,300 | 6,092,562 | ||||
PPL Corp. | 225,000 | 6,835,500 | ||||
Xcel Energy, Inc. | 282,700 | 7,805,347 | ||||
32,290,378 | ||||||
ELECTRICAL EQUIPMENT — 0.9% | ||||||
Eaton Corp. plc | 141,500 | 9,740,860 | ||||
ENERGY EQUIPMENT AND SERVICES — 2.8% | ||||||
Baker Hughes, Inc. | 138,600 | 6,805,260 | ||||
National Oilwell Varco, Inc. | 185,100 | 14,458,161 | ||||
Schlumberger Ltd. | 100,400 | 8,871,344 | ||||
30,134,765 | ||||||
FOOD AND STAPLES RETAILING — 2.4% | ||||||
CVS Caremark Corp. | 219,600 | 12,462,300 | ||||
Kroger Co. (The) | 111,600 | 4,501,944 | ||||
Wal-Mart Stores, Inc. | 118,800 | 8,786,448 | ||||
25,750,692 |
Shares | Value |
FOOD PRODUCTS — 0.4% | ||||||
Mondelez International, Inc. Class A | 118,200 | $ 3,713,844 | ||||
HEALTH CARE EQUIPMENT AND SUPPLIES — 2.9% | ||||||
Abbott Laboratories | 407,400 | 13,521,606 | ||||
Medtronic, Inc. | 321,600 | 17,125,200 | ||||
30,646,806 | ||||||
HEALTH CARE PROVIDERS AND SERVICES — 2.2% | ||||||
Aetna, Inc. | 122,000 | 7,810,440 | ||||
Premier, Inc., Class A(1) | 63,013 | 1,997,512 | ||||
Quest Diagnostics, Inc. | 77,600 | 4,794,904 | ||||
WellPoint, Inc. | 109,700 | 9,172,017 | ||||
23,774,873 | ||||||
HOTELS, RESTAURANTS AND LEISURE — 0.6% | ||||||
Carnival Corp. | 196,600 | 6,417,024 | ||||
HOUSEHOLD PRODUCTS — 2.6% | ||||||
Procter & Gamble Co. (The) | 371,600 | 28,089,244 | ||||
INDUSTRIAL CONGLOMERATES — 3.4% | ||||||
General Electric Co. | 1,532,200 | 36,604,258 | ||||
INSURANCE — 6.8% | ||||||
Allstate Corp. (The) | 228,500 | 11,550,675 | ||||
American International Group, Inc. | 222,000 | 10,795,860 | ||||
Chubb Corp. (The) | 52,900 | 4,721,854 | ||||
Loews Corp. | 146,100 | 6,828,714 | ||||
MetLife, Inc. | 290,500 | 13,638,975 | ||||
Principal Financial Group, Inc. | 123,200 | 5,275,424 | ||||
Prudential Financial, Inc. | 123,700 | 9,646,126 | ||||
Travelers Cos., Inc. (The) | 127,800 | 10,833,606 | ||||
73,291,234 | ||||||
MACHINERY — 1.6% | ||||||
Caterpillar, Inc. | 55,300 | 4,610,361 | ||||
Ingersoll-Rand plc | 88,900 | 5,773,166 | ||||
PACCAR, Inc. | 125,500 | 6,985,330 | ||||
17,368,857 | ||||||
MEDIA — 3.0% | ||||||
CBS Corp., Class B | 84,400 | 4,655,504 | ||||
Comcast Corp., Class A | 204,800 | 9,246,720 | ||||
Time Warner Cable, Inc. | 46,500 | 5,189,400 | ||||
Time Warner, Inc. | 203,000 | 13,359,430 | ||||
32,451,054 | ||||||
METALS AND MINING — 1.1% | ||||||
Freeport-McMoRan Copper & Gold, Inc. | 367,100 | 12,143,668 | ||||
MULTI-UTILITIES — 0.5% | ||||||
PG&E Corp. | 136,600 | 5,589,672 |
MULTILINE RETAIL — 1.7% | ||||||
Macy’s, Inc. | 186,600 | 8,074,182 | ||||
Target Corp. | 150,700 | 9,641,786 | ||||
17,715,968 | ||||||
OIL, GAS AND CONSUMABLE FUELS — 13.4% | ||||||
Apache Corp. | 148,800 | 12,668,832 | ||||
Chevron Corp. | 328,100 | 39,864,150 | ||||
Exxon Mobil Corp. | 601,500 | 51,753,060 | ||||
Marathon Petroleum Corp. | 54,400 | 3,499,008 | ||||
Occidental Petroleum Corp. | 192,300 | 17,987,742 | ||||
Royal Dutch Shell plc, Class A | 229,500 | 7,569,482 | ||||
Total SA ADR | 183,000 | 10,599,360 | ||||
143,941,634 | ||||||
PAPER AND FOREST PRODUCTS — 0.6% | ||||||
International Paper Co. | 152,200 | 6,818,560 | ||||
PHARMACEUTICALS — 8.3% | ||||||
Johnson & Johnson | 377,100 | 32,690,799 | ||||
Merck & Co., Inc. | 550,500 | 26,209,305 | ||||
Pfizer, Inc. | 1,062,500 | 30,504,375 | ||||
89,404,479 | ||||||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 2.8% | ||||||
Applied Materials, Inc. | 329,900 | 5,786,446 | ||||
Intel Corp. | 839,200 | 19,234,464 | ||||
Microchip Technology, Inc. | 127,100 | 5,120,859 | ||||
30,141,769 | ||||||
SOFTWARE — 2.3% | ||||||
Microsoft Corp. | 378,100 | 12,594,511 | ||||
Oracle Corp. | 374,000 | 12,405,580 | ||||
25,000,091 | ||||||
SPECIALTY RETAIL — 0.5% | ||||||
Lowe’s Cos., Inc. | 99,100 | 4,718,152 | ||||
TOTAL COMMON STOCKS (Cost $808,417,789) | 1,055,902,185 | |||||
Exchange-Traded Funds — 0.4% | ||||||
SPDR S&P 500 ETF Trust (Cost $2,408,105) | 22,200 | 3,731,820 | ||||
Temporary Cash Investments — 2.0% | ||||||
Repurchase Agreement, Bank of America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 1.375%, 9/30/18, valued at $4,206,285), in a joint trading account at 0.03%, dated 9/30/13, due 10/1/13 (Delivery value $4,125,388) | 4,125,385 | |||||
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 5/15/30, valued at $5,040,505), in a joint trading account at 0.01%, dated 9/30/13, due 10/1/13 (Delivery value $4,950,463) | 4,950,462 |
Shares | Value |
Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 1.75%, 5/15/22, valued at $5,050,181), in a joint trading account at 0.02%, dated 9/30/13, due 10/1/13 (Delivery value $4,950,465) | $ 4,950,462 | |||||
SSgA U.S. Government Money Market Fund | 7,624,639 | 7,624,639 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $21,650,948) | 21,650,948 | |||||
TOTAL INVESTMENT SECURITIES — 100.6% (Cost $832,476,842) | 1,081,284,953 | |||||
OTHER ASSETS AND LIABILITIES — (0.6)% | (6,107,762 | ) | ||||
TOTAL NET ASSETS — 100.0% | $1,075,177,191 |
Forward Foreign Currency Exchange Contracts | ||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Gain (Loss) | ||||||||
USD | 16,076,924 | EUR | 11,886,363 | UBS AG | 10/31/13 | $(4,697 | ) | |||||
USD | 407,793 | EUR | 301,401 | UBS AG | 10/31/13 | 13 | ||||||
$(4,684 | ) |
Notes to Schedule of Investments
ADR = American Depositary Receipt
EUR = Euro
USD = United States Dollar
(1) | Non-income producing. |
See Notes to Financial Statements.
Statement of Assets and Liabilities |
SEPTEMBER 30, 2013 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $832,476,842) | $1,081,284,953 | ||
Foreign currency holdings, at value (cost of $98,377) | 98,378 | ||
Receivable for investments sold | 1,466,293 | ||
Receivable for capital shares sold | 450,450 | ||
Unrealized gain on forward foreign currency exchange contracts | 13 | ||
Dividends and interest receivable | 1,456,225 | ||
1,084,756,312 | |||
Liabilities | |||
Payable for investments purchased | 9,000,893 | ||
Unrealized loss on forward foreign currency exchange contracts | 4,697 | ||
Accrued management fees | 573,531 | ||
9,579,121 | |||
Net Assets | $1,075,177,191 | ||
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ 816,193,290 | ||
Undistributed net investment income | 582,679 | ||
Undistributed net realized gain | 9,597,794 | ||
Net unrealized appreciation | 248,803,428 | ||
$1,075,177,191 |
Net assets | Shares outstanding | Net asset value per share | |
Institutional Class, $0.01 Par Value | $1,075,117,133 | 95,756,767 | $11.23 |
R6 Class, $0.01 Par Value | $60,058 | 5,348 | $11.23 |
See Notes to Financial Statements.
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $58,869) | $13,009,256 | ||
Interest | 1,487 | ||
13,010,743 | |||
Expenses: | |||
Management fees | 3,344,122 | ||
Directors’ fees and expenses | 19,887 | ||
Other expenses | 584 | ||
3,364,593 | |||
Net investment income (loss) | 9,646,150 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 28,298,030 | ||
Foreign currency transactions | (780,830 | ) | |
27,517,200 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 43,995,343 | ||
Translation of assets and liabilities in foreign currencies | (75,991 | ) | |
43,919,352 | |||
Net realized and unrealized gain (loss) | 71,436,552 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $81,082,702 |
See Notes to Financial Statements.
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) AND YEAR ENDED MARCH 31, 2013 | |||||
Increase (Decrease) in Net Assets | September 30, 2013 | March 31, 2013 | |||
Operations | |||||
Net investment income (loss) | $ 9,646,150 | $ 15,385,480 | |||
Net realized gain (loss) | 27,517,200 | 14,161,871 | |||
Change in net unrealized appreciation (depreciation) | 43,919,352 | 93,549,748 | |||
Net increase (decrease) in net assets resulting from operations | 81,082,702 | 123,097,099 | |||
Distributions to Shareholders | |||||
From net investment income: | |||||
Institutional Class | (9,968,495 | ) | (15,210,513 | ) | |
R6 Class | (288 | ) | — | ||
From net realized gains: | |||||
Institutional Class | — | (9,326,338 | ) | ||
Decrease in net assets from distributions | (9,968,783 | ) | (24,536,851 | ) | |
Capital Share Transactions | |||||
Net increase (decrease) in net assets from capital share transactions | 62,162,626 | 174,696,501 | |||
Net increase (decrease) in net assets | 133,276,545 | 273,256,749 | |||
Net Assets | |||||
Beginning of period | 941,900,646 | 668,643,897 | |||
End of period | $1,075,177,191 | $941,900,646 | |||
Undistributed net investment income | $582,679 | $905,312 |
See Notes to Financial Statements.
Notes to Financial Statements |
SEPTEMBER 30, 2013 (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 is not permitted to invest in securities issued by companies assigned the Global Industry Classification Standard for the tobacco industry.
The fund offers the Institutional Class and the R6 Class, which have different fees and expenses. The difference in the fee structures between the classes is not the result of any difference in advisory or custodial fees or other expenses related to management of the fund’s assets, which do not vary by class. The fund’s R6 Class shares are available for purchase exclusively by certain American Century Investments funds of funds that are offered only through employer-sponsored retirement plans where a financial intermediary provides retirement recordkeeping services to plan participants. Because financial intermediaries do not receive any service, distribution or administrative fees for offering such funds of funds, American Century Investment Management, Inc. (ACIM) (the investment advisor) is able to charge the R6 Class a lower unified management fee. Sale of the R6 Class commenced on July 26, 2013.
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.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund’s tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
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 Large Company Value Fund, one fund in a series issued by the corporation. The annual management fee schedule ranges from 0.50% to 0.70% for the Institutional Class and 0.35% to 0.55% for the R6 Class. The effective annual management fee for each class for the period ended September 30, 2013 was 0.65% for the Institutional Class and 0.50% for the R6 Class.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation’s distributor, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC are wholly owned, directly or indirectly, by ACC. Various funds issued by American Century Asset Allocation Portfolios, Inc. own, in aggregate, 100% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2013 were $215,223,727 and $159,299,995, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2013(1) | Year ended March 31, 2013 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Institutional Class/Shares Authorized | 500,000,000 | 205,000,000 | ||||||||||
Sold | 7,358,893 | $81,525,852 | 26,521,184 | $250,774,299 | ||||||||
Issued in reinvestment of distributions | 892,832 | 9,968,495 | 2,590,318 | 24,536,851 | ||||||||
Redeemed | (2,648,378 | ) | (29,393,214 | ) | (10,797,729 | ) | (100,614,649 | ) | ||||
5,603,347 | 62,101,133 | 18,313,773 | 174,696,501 | |||||||||
R6 Class/Shares Authorized | 50,000,000 | N/A | ||||||||||
Sold | 5,323 | 61,205 | ||||||||||
Issued in reinvestment of distributions | 25 | 288 | ||||||||||
5,348 | 61,493 | |||||||||||
Net increase (decrease) | 5,608,695 | $62,162,626 | 18,313,773 | $174,696,501 |
(1) | July 26, 2013 (commencement of sale) through September 30, 2013 for the R6 Class. |
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 | $1,048,332,703 | $7,569,482 | — |
Exchange-Traded Funds | 3,731,820 | — | — |
Temporary Cash Investments | 7,624,639 | 14,026,309 | — |
Total Value of Investment Securities | $1,059,689,162 | $21,595,791 | — |
Other Financial Instruments | |||
Total Unrealized Gain (Loss) on Forward | — | $(4,684) | — |
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 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, 2013, is disclosed on the Statement of Assets and Liabilities as an asset of $13 in unrealized gain on forward foreign currency exchange contracts and a liability of $4,697 in unrealized loss on forward foreign currency exchange contracts. For the six months ended September 30, 2013, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(782,174) in net realized gain (loss) on foreign currency transactions and $(75,187) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
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, 2013, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $852,358,474 |
Gross tax appreciation of investments | $231,299,118 |
Gross tax depreciation of investments | (2,372,639) |
Net tax appreciation (depreciation) of investments | $228,926,479 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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 | Net | Net | Total From Investment Operations | Net Income | Net | Total Distributions | Net Asset Value, | Total | Operating Expenses | Net Income | Portfolio | Net Assets, (in thousands) | |
Institutional Class | |||||||||||||
2013(3) | $10.45 | 0.10 | 0.79 | 0.89 | (0.11) | — | (0.11) | $11.23 | 8.51% | 0.66%(4) | 1.89%(4) | 16% | $1,075,117 |
2013 | $9.31 | 0.19 | 1.25 | 1.44 | (0.19) | (0.11) | (0.30) | $10.45 | 15.87% | 0.67% | 2.03% | 37% | $941,901 |
2012 | $8.86 | 0.17 | 0.44 | 0.61 | (0.16) | — | (0.16) | $9.31 | 7.07% | 0.67% | 2.02% | 47% | $668,644 |
2011 | $8.02 | 0.14 | 0.83 | 0.97 | (0.13) | — | (0.13) | $8.86 | 12.24% | 0.66% | 1.70% | 38% | $481,887 |
2010 | $5.55 | 0.14 | 2.47 | 2.61 | (0.14) | — | (0.14) | $8.02 | 47.28% | 0.64% | 1.99% | 23% | $308,035 |
2009 | $9.71 | 0.20 | (4.16) | (3.96) | (0.20) | — | (0.20) | $5.55 | (41.22)% | 0.63% | 2.82% | 26% | $152,678 |
R6 Class | |||||||||||||
2013(5) | $11.54 | 0.04 | (0.29) | (0.25) | (0.06) | — | (0.06) | $11.23 | (2.19)% | 0.50%(4) | 2.07%(4) | 16%(6) | $60 |
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, 2013 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through September 30, 2013 (unaudited). |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2013. |
See Notes to Financial Statements.
Approval of Management Agreement |
At a meeting held on June 20, 2013, 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 directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, 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.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided 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; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | 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. |
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:
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, 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, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund 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.
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.
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund’s investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the “About Us” page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available upon request by calling 1-800-345-2021.
Notes |
Notes |
Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 |
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.
©2013 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-79798 1311
SEMIANNUAL REPORT | SEPTEMBER 30, 2013 |
NT Mid Cap Value Fund
Table of Contents |
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 | 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.
President’s Letter |
Jonathan Thomas
Dear Investor:
Thank you for reviewing this semiannual report for the six months ended September 30, 2013. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information.
For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com.
Bond Yields and Stock Indices Soared Together Until September
U.S. government bond yields and stock indices traced roughly parallel upward paths during most of the six months ended September 30, 2013. The 10-year U.S. Treasury yield began the period at 1.85%, compressed in large part by the scale of the Federal Reserve’s (the Fed’s) bond-buying program ($85 billion of quantitative easing, or QE, each month).
Hints from the Fed that it might taper QE by year end sent bond yields soaring from early May to early September. The 10-year Treasury yield reached 3.00% on September 5, its first time at that level since July 2011, before finishing the reporting period at 2.61%. Bond yields generally declined in September on weaker-than-expected economic data, the Fed’s announcement that it would delay tapering, and uncertainty caused by the impending partial shutdown of the U.S. government.
Even with the September rally, bonds significantly underperformed stocks for the full reporting period. The 10-year Treasury note and the Barclays U.S. Aggregate Bond Index (representing the broad taxable U.S. bond market) returned –5.20% and –1.77%, respectively. By contrast, the S&P 500 Index gained 8.31% as the U.S. economy showed signs of attaining sustainable growth, fueled in part by Fed stimulus. Improvements in the housing and job markets helped trigger optimism, though their absolute numbers still fell short of pre-2008 levels.
Full recovery from 2008 remains a distant goal. Economic growth is still subpar compared with past recoveries, hampered further by the fiscal sequester and partial government shutdown. Faced with these challenges, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios—as appropriate—for meeting financial goals. We appreciate your continued trust in us in this uncertain environment.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
Don Pratt
Dear Fellow Shareholders,
This is my last letter to shareholders as the funds’ Chairman, as I will retire at the end of 2013.
My personal thanks go to the independent directors that elected me to the Board and subsequently to the Chairman position, and with whom I have worked to reorganize the Board’s committee structure and annually improve our governance processes. Throughout my tenure, the Board has addressed its responsibilities to shareholders diligently in committee work, the annual contract review, and the execution of our oversight responsibilities. I expect that it will continue to do so well into the future.
Thanks also to the American Century Investments management team led by Jonathan Thomas. Its transparency, candor, and open communication with the Board is most appreciated. I have served on more than 20 boards and this is the most productive and enjoyable relationship with management I have experienced.
Finally, thanks to the many shareholders who have written with questions, comments, and suggestions. Each was heard and addressed and enabled the board to better represent your interests. Keep communicating with us so that the Board can continue to be aware of your interests, concerns, and questions. My best wishes to Jim Olson, my successor as Chairman, and the other independent directors who continue to serve on your behalf.
And remember, as the firm’s founder Jim Stowers, Jr. so often observed, “The best is yet to be.”
Best regards,
Don Pratt
Performance |
Total Returns as of September 30, 2013 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | Since Inception | Inception Date | |
Institutional Class | ACLMX | 8.06% | 25.08% | 12.40% | 8.55% | 5/12/06 |
Russell Midcap Value Index | — | 7.64% | 27.77% | 11.86% | 6.83% | — |
R6 Class | ACDSX | — | — | — | -0.38%(1) | 7/26/13 |
(1) | Total returns for periods less than one year are not annualized. |
Total Annual Fund Operating Expenses | |
Institutional Class | R6 Class |
0.81% | 0.66% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. 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 Institutional 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.
Fund Characteristics |
September 30, 2013 | |
Top Ten Holdings | % of net assets |
iShares Russell Midcap Value Index Fund | 3.4% |
Republic Services, Inc. | 3.3% |
Northern Trust Corp. | 2.8% |
Imperial Oil Ltd. | 2.7% |
ADT Corp. (The) | 1.8% |
Sysco Corp. | 1.6% |
Westar Energy, Inc. | 1.4% |
Great Plains Energy, Inc. | 1.3% |
LifePoint Hospitals, Inc. | 1.3% |
Hillshire Brands Co. | 1.3% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 7.6% |
Insurance | 7.3% |
Commercial Services and Supplies | 6.7% |
Health Care Equipment and Supplies | 6.6% |
Electric Utilities | 5.6% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 89.3% |
Foreign Common Stocks* | 5.3% |
Exchange-Traded Funds | 3.4% |
Total Equity Exposure | 98.0% |
Temporary Cash Investments | 1.8% |
Other Assets and Liabilities | 0.2% |
* Includes depositary shares, dual listed securities and foreign ordinary shares.
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013 (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. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning 4/1/13 | Ending 9/30/13 | Expenses Paid During Period(1) 4/1/13 - 9/30/13 | Annualized | |
Actual | ||||
Institutional Class | $1,000 | $1,080.60 | $4.17 | 0.80% |
R6 Class | $1,000 | $996.20(2) | $1.19(3) | 0.65% |
Hypothetical | ||||
Institutional Class | $1,000 | $1,021.06 | $4.05 | 0.80% |
R6 Class | $1,000 | $1,021.81(4) | $3.29(4) | 0.65% |
(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 365, to reflect the one-half year period. |
(2) | Ending account value based on actual return from July 26, 2013 (commencement of sale) through September 30, 2013. |
(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 67, the number of days in the period from July 26, 2013 (commencement of sale) through September 30, 2013, divided by 365, 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 the 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. |
Schedule of Investments |
SEPTEMBER 30, 2013 (UNAUDITED)
Shares | Value | |||||
Common Stocks — 94.6% | ||||||
AEROSPACE AND DEFENSE — 3.3% | ||||||
General Dynamics Corp. | 49,443 | $4,327,251 | ||||
Northrop Grumman Corp. | 32,482 | 3,094,235 | ||||
Raytheon Co. | 55,154 | 4,250,719 | ||||
Textron, Inc. | 161,260 | 4,452,389 | ||||
16,124,594 | ||||||
AIRLINES — 1.1% | ||||||
Southwest Airlines Co. | 363,348 | 5,290,347 | ||||
AUTO COMPONENTS — 0.5% | ||||||
Autoliv, Inc. | 28,210 | 2,465,272 | ||||
BEVERAGES — 0.9% | ||||||
Dr Pepper Snapple Group, Inc. | 102,855 | 4,609,961 | ||||
CAPITAL MARKETS — 4.9% | ||||||
Charles Schwab Corp. (The) | 60,929 | 1,288,039 | ||||
Franklin Resources, Inc. | 95,607 | 4,832,934 | ||||
LPL Financial Holdings, Inc. | 83,658 | 3,204,938 | ||||
Northern Trust Corp. | 246,569 | 13,410,888 | ||||
State Street Corp. | 14,423 | 948,312 | ||||
23,685,111 | ||||||
COMMERCIAL BANKS — 5.0% | ||||||
Comerica, Inc. | 67,072 | 2,636,600 | ||||
Commerce Bancshares, Inc. | 98,701 | 4,324,091 | ||||
Cullen/Frost Bankers, Inc. | 42,973 | 3,031,745 | ||||
KeyCorp | 124,951 | 1,424,441 | ||||
PNC Financial Services Group, Inc. (The) | 78,504 | 5,687,615 | ||||
SunTrust Banks, Inc. | 104,808 | 3,397,875 | ||||
Westamerica Bancorp. | 73,509 | 3,656,338 | ||||
24,158,705 | ||||||
COMMERCIAL SERVICES AND SUPPLIES — 6.7% | ||||||
ADT Corp. (The) | 217,998 | 8,863,799 | ||||
Republic Services, Inc. | 477,116 | 15,916,590 | ||||
Tyco International Ltd. | 157,411 | 5,506,237 | ||||
Waste Management, Inc. | 58,089 | 2,395,590 | ||||
32,682,216 | ||||||
COMPUTERS AND PERIPHERALS — 1.0% | ||||||
SanDisk Corp. | 25,543 | 1,520,064 | ||||
Western Digital Corp. | 53,385 | 3,384,609 | ||||
4,904,673 | ||||||
CONTAINERS AND PACKAGING — 1.3% | ||||||
Bemis Co., Inc. | 78,558 | 3,064,548 | ||||
Sonoco Products Co. | 77,297 | 3,009,945 | ||||
6,074,493 | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.6% | ||||||
CenturyLink, Inc. | 155,764 | 4,887,874 | ||||
tw telecom, inc., Class A(1) | 103,615 | 3,094,462 | ||||
7,982,336 | ||||||
ELECTRIC UTILITIES — 5.6% | ||||||
Empire District Electric Co. (The) | 130,261 | 2,821,453 | ||||
Great Plains Energy, Inc. | 287,877 | 6,390,869 | ||||
IDACORP, Inc. | 26,515 | 1,283,326 | ||||
Northeast Utilities | 59,859 | 2,469,184 | ||||
Portland General Electric Co. | 96,307 | 2,718,747 | ||||
Westar Energy, Inc. | 215,975 | 6,619,634 | ||||
Xcel Energy, Inc. | 180,221 | 4,975,902 | ||||
27,279,115 | ||||||
ELECTRICAL EQUIPMENT — 1.5% | ||||||
ABB Ltd. ADR | 128,734 | 3,036,835 | ||||
Brady Corp., Class A | 54,916 | 1,674,938 | ||||
Regal-Beloit Corp. | 38,016 | 2,582,427 | ||||
7,294,200 | ||||||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 0.7% | ||||||
Molex, Inc., Class A | 14,699 | 562,678 | ||||
TE Connectivity Ltd. | 55,695 | 2,883,887 | ||||
3,446,565 | ||||||
ENERGY EQUIPMENT AND SERVICES — 1.0% | ||||||
Cameron International Corp.(1) | 35,510 | 2,072,719 | ||||
Helmerich & Payne, Inc. | 42,682 | 2,942,924 | ||||
5,015,643 | ||||||
FOOD AND STAPLES RETAILING — 1.6% | ||||||
Sysco Corp. | 239,783 | 7,632,293 | ||||
FOOD PRODUCTS — 4.0% | ||||||
ConAgra Foods, Inc. | 89,029 | 2,701,140 | ||||
General Mills, Inc. | 46,407 | 2,223,823 | ||||
Hillshire Brands Co. | 199,367 | 6,128,542 | ||||
Kellogg Co. | 41,184 | 2,418,736 | ||||
Kraft Foods Group, Inc. | 45,840 | 2,403,850 | ||||
Mondelez International, Inc. Class A | 107,003 | 3,362,034 | ||||
19,238,125 | ||||||
GAS UTILITIES — 1.7% | ||||||
AGL Resources, Inc. | 53,299 | 2,453,353 | ||||
Laclede Group, Inc. (The) | 83,701 | 3,766,545 | ||||
Southwest Gas Corp. | 40,422 | 2,021,100 | ||||
8,240,998 |
Shares | Value |
HEALTH CARE EQUIPMENT AND SUPPLIES — 6.6% | ||||||
Becton Dickinson and Co. | 31,316 | $3,132,226 | ||||
Boston Scientific Corp.(1) | 267,122 | 3,136,012 | ||||
CareFusion Corp.(1) | 163,000 | 6,014,700 | ||||
Medtronic, Inc. | 86,067 | 4,583,068 | ||||
STERIS Corp. | 55,419 | 2,380,800 | ||||
Stryker Corp. | 85,269 | 5,763,332 | ||||
Varian Medical Systems, Inc.(1) | 23,760 | 1,775,585 | ||||
Zimmer Holdings, Inc. | 62,586 | 5,140,814 | ||||
31,926,537 | ||||||
HEALTH CARE PROVIDERS AND SERVICES — 4.0% | ||||||
CIGNA Corp. | 27,514 | 2,114,726 | ||||
Humana, Inc. | 30,142 | 2,813,153 | ||||
LifePoint Hospitals, Inc.(1) | 135,631 | 6,324,474 | ||||
Patterson Cos., Inc. | 81,550 | 3,278,310 | ||||
Quest Diagnostics, Inc. | 76,208 | 4,708,892 | ||||
19,239,555 | ||||||
HOTELS, RESTAURANTS AND LEISURE — 2.1% | ||||||
Carnival Corp. | 134,890 | 4,402,809 | ||||
CEC Entertainment, Inc. | 51,516 | 2,362,524 | ||||
International Game Technology | 178,555 | 3,380,046 | ||||
10,145,379 | ||||||
INDUSTRIAL CONGLOMERATES — 1.0% | ||||||
Koninklijke Philips Electronics NV | 155,036 | 4,998,117 | ||||
INSURANCE — 7.3% | ||||||
ACE Ltd. | 54,635 | 5,111,650 | ||||
Allstate Corp. (The) | 64,322 | 3,251,477 | ||||
Aon plc | 14,689 | 1,093,449 | ||||
Chubb Corp. (The) | 49,741 | 4,439,882 | ||||
HCC Insurance Holdings, Inc. | 88,142 | 3,862,382 | ||||
Marsh & McLennan Cos., Inc. | 93,309 | 4,063,607 | ||||
Reinsurance Group of America, Inc. | 74,509 | 4,991,358 | ||||
Symetra Financial Corp. | 112,813 | 2,010,328 | ||||
Travelers Cos., Inc. (The) | 46,788 | 3,966,219 | ||||
Unum Group | 86,754 | 2,640,792 | ||||
35,431,144 | ||||||
LEISURE EQUIPMENT AND PRODUCTS — 0.3% | ||||||
Hasbro, Inc. | 35,624 | 1,679,315 | ||||
LIFE SCIENCES TOOLS AND SERVICES — 1.4% | ||||||
Agilent Technologies, Inc. | 98,111 | 5,028,189 | ||||
Bio-Rad Laboratories, Inc. Class A(1) | 16,790 | 1,973,832 | ||||
7,002,021 | ||||||
MACHINERY — 0.7% | ||||||
Kaydon Corp. | 16,076 | 571,020 | ||||
Xylem, Inc. | 99,898 | 2,790,151 | ||||
3,361,171 | ||||||
METALS AND MINING — 1.8% | ||||||
Newmont Mining Corp. | 171,874 | 4,829,659 | ||||
Nucor Corp. | 81,578 | 3,998,954 | ||||
8,828,613 | ||||||
MULTI-UTILITIES — 2.4% | ||||||
Consolidated Edison, Inc. | 87,570 | 4,828,610 | ||||
NorthWestern Corp. | 57,110 | 2,565,381 | ||||
PG&E Corp. | 98,875 | 4,045,965 | ||||
11,439,956 | ||||||
MULTILINE RETAIL — 0.9% | ||||||
Target Corp. | 66,483 | 4,253,582 | ||||
OIL, GAS AND CONSUMABLE FUELS — 7.6% | ||||||
Apache Corp. | 66,895 | 5,695,440 | ||||
Devon Energy Corp. | 85,083 | 4,914,394 | ||||
Imperial Oil Ltd. | 294,154 | 12,916,446 | ||||
Murphy Oil Corp. | 59,231 | 3,572,814 | ||||
Peabody Energy Corp. | 45,798 | 790,016 | ||||
Southwestern Energy Co.(1) | 134,329 | 4,886,889 | ||||
Williams Partners LP | 76,332 | 4,036,436 | ||||
36,812,435 | ||||||
PHARMACEUTICALS — 1.7% | ||||||
Hospira, Inc.(1) | 112,081 | 4,395,817 | ||||
Mallinckrodt plc(1) | 83,786 | 3,694,124 | ||||
8,089,941 | ||||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 5.0% | ||||||
American Tower Corp. | 67,537 | 5,006,518 | ||||
Annaly Capital Management, Inc. | 408,253 | 4,727,570 | ||||
Boston Properties, Inc. | 11,250 | 1,202,625 | ||||
Corrections Corp. of America | 149,014 | 5,148,434 | ||||
Federal Realty Investment Trust | 23,979 | 2,432,669 | ||||
Piedmont Office Realty Trust, Inc., Class A | 321,944 | 5,588,948 | ||||
24,106,764 | ||||||
ROAD AND RAIL — 1.0% | ||||||
Heartland Express, Inc. | 339,480 | 4,817,221 | ||||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 4.8% | ||||||
Analog Devices, Inc. | 32,408 | 1,524,796 | ||||
Applied Materials, Inc. | 345,627 | 6,062,298 | ||||
Avago Technologies Ltd. | 63,100 | 2,720,872 | ||||
KLA-Tencor Corp. | 33,740 | 2,053,079 |
Shares | Value |
Maxim Integrated Products, Inc. | 87,459 | $2,606,278 | ||||
Microchip Technology, Inc. | 58,521 | 2,357,811 | ||||
Teradyne, Inc.(1) | 369,208 | 6,099,316 | ||||
23,424,450 | ||||||
SPECIALTY RETAIL — 1.5% | ||||||
Bed Bath & Beyond, Inc.(1) | 14,971 | 1,158,157 | ||||
Lowe’s Cos., Inc. | 125,197 | 5,960,629 | ||||
7,118,786 | ||||||
TEXTILES, APPAREL AND LUXURY GOODS — 0.3% | ||||||
Coach, Inc. | 27,167 | 1,481,416 | ||||
THRIFTS AND MORTGAGE FINANCE — 1.3% | ||||||
Capitol Federal Financial, Inc. | 106,747 | 1,326,865 | ||||
People’s United Financial, Inc. | 340,909 | 4,902,272 | ||||
6,229,137 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.5% | ||||||
Rogers Communications, Inc., Class B | 57,360 | 2,466,360 | ||||
TOTAL COMMON STOCKS (Cost $385,534,753) | 458,976,547 | |||||
Exchange-Traded Funds — 3.4% | ||||||
iShares Russell Midcap Value Index Fund (Cost $13,196,113) | 269,020 | 16,383,318 | ||||
Temporary Cash Investments — 1.8% | ||||||
Repurchase Agreement, Bank of America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 1.375%, 9/30/18, valued at $1,726,808), in a joint trading account at 0.03%, dated 9/30/13, due 10/1/13 (Delivery value $1,693,597) | 1,693,596 | |||||
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 5/15/30, valued at $2,069,281), in a joint trading account at 0.01%, dated 9/30/13, due 10/1/13 (Delivery value $2,032,317) | 2,032,316 | |||||
Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 1.75%, 5/15/22, valued at $2,073,253), in a joint trading account at 0.02%, dated 9/30/13, due 10/1/13 (Delivery value $2,032,317) | 2,032,316 | |||||
SSgA U.S. Government Money Market Fund | 3,130,147 | 3,130,147 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $8,888,375) | 8,888,375 | |||||
TOTAL INVESTMENT SECURITIES — 99.8% (Cost $407,619,241) | 484,248,240 | |||||
OTHER ASSETS AND LIABILITIES — 0.2% | 1,143,286 | |||||
TOTAL NET ASSETS — 100.0% | $485,391,526 |
Forward Foreign Currency Exchange Contracts | ||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Gain (Loss) | ||||||||
USD | 12,925,692 | CAD | 13,325,096 | JPMorgan Chase Bank N.A. | 10/31/13 | $(1,193 | ) | |||||
USD | 2,598,307 | CHF | 2,370,253 | Credit Suisse AG | 10/31/13 | (23,252 | ) | |||||
USD | 4,387,380 | EUR | 3,243,779 | UBS AG | 10/31/13 | (1,282 | ) | |||||
$(25,727 | ) |
Notes to Schedule of Investments
ADR = American Depositary Receipt
CAD = Canadian Dollar
CHF = Swiss Franc
EUR = Euro
USD = United States Dollar
(1) | Non-income producing. |
See Notes to Financial Statements.
Statement of Assets and Liabilities |
SEPTEMBER 30, 2013 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $407,619,241) | $484,248,240 | ||
Receivable for investments sold | 4,649,841 | ||
Receivable for capital shares sold | 230,468 | ||
Dividends and interest receivable | 1,102,198 | ||
490,230,747 | |||
Liabilities | |||
Payable for investments purchased | 4,497,041 | ||
Unrealized loss on forward foreign currency exchange contracts | 25,727 | ||
Accrued management fees | 316,453 | ||
4,839,221 | |||
Net Assets | $485,391,526 | ||
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $380,224,826 | ||
Undistributed net investment income | 1,064,536 | ||
Undistributed net realized gain | 27,498,132 | ||
Net unrealized appreciation | 76,604,032 | ||
$485,391,526 |
Net assets | Shares outstanding | Net asset value per share | |
Institutional Class, $0.01 Par Value | $485,350,107 | 39,733,713 | $12.22 |
R6 Class, $0.01 Par Value | $41,419 | 3,391 | $12.21 |
See Notes to Financial Statements.
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $16,599) | $6,124,598 | ||
Interest | 758 | ||
6,125,356 | |||
Expenses: | |||
Management fees | 1,835,149 | ||
Directors’ fees and expenses | 8,946 | ||
1,844,095 | |||
Net investment income (loss) | 4,281,261 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 25,836,873 | ||
Foreign currency transactions | (287,429 | ) | |
25,549,444 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 5,213,107 | ||
Translation of assets and liabilities in foreign currencies | 25,082 | ||
5,238,189 | |||
Net realized and unrealized gain (loss) | 30,787,633 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $35,068,894 |
See Notes to Financial Statements.
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) AND YEAR ENDED MARCH 31, 2013 | ||||||
Increase (Decrease) in Net Assets | September 30, 2013 | March 31, 2013 | ||||
Operations | ||||||
Net investment income (loss) | $4,281,261 | $6,408,428 | ||||
Net realized gain (loss) | 25,549,444 | 12,279,259 | ||||
Change in net unrealized appreciation (depreciation) | 5,238,189 | 44,510,715 | ||||
Net increase (decrease) in net assets resulting from operations | 35,068,894 | 63,198,402 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Institutional Class | (4,103,616 | ) | (7,183,304 | ) | ||
R6 Class | (137 | ) | — | |||
From net realized gains: | ||||||
Institutional Class | — | (10,428,032 | ) | |||
Decrease in net assets from distributions | (4,103,753 | ) | (17,611,336 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions | 30,949,570 | 76,021,382 | ||||
Net increase (decrease) in net assets | 61,914,711 | 121,608,448 | ||||
Net Assets | ||||||
Beginning of period | 423,476,815 | 301,868,367 | ||||
End of period | $485,391,526 | $423,476,815 | ||||
Undistributed net investment income | $1,064,536 | $887,028 |
See Notes to Financial Statements.
Notes to Financial Statements |
SEPTEMBER 30, 2013 (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 is not permitted to invest in securities issued by companies assigned the Global Industry Classification Standard for the tobacco industry.
The fund offers the Institutional Class and the R6 Class, which have different fees and expenses. The difference in the fee structures between the classes is not the result of any difference in advisory or custodial fees or other expenses related to management of the fund’s assets, which do not vary by class. The fund’s R6 Class shares are available for purchase exclusively by certain American Century Investments funds of funds that are offered only through employer-sponsored retirement plans where a financial intermediary provides retirement recordkeeping services to plan participants. Because financial intermediaries do not receive any service, distribution or administrative fees for offering such funds of funds, American Century Investment Management, Inc. (ACIM) (the investment advisor) is able to charge the R6 Class a lower unified management fee. Sale of the R6 Class commenced on July 26, 2013.
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.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund’s tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The annual management fee is 0.80% for the Institutional Class and 0.65% for the R6 Class.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation’s distributor, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC are wholly owned, directly or indirectly, by ACC. Various funds issued by American Century Asset Allocation Portfolios, Inc. own, in aggregate, 100% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2013 were $187,740,004 and $161,659,943, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2013(1) | Year ended March 31, 2013 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Institutional Class/Shares Authorized | 150,000,000 | 150,000,000 | ||||||||||
Sold | 2,589,556 | $30,475,421 | 9,692,195 | $99,175,277 | ||||||||
Issued in reinvestment of distributions | 345,207 | 4,103,616 | 1,745,877 | 17,611,336 | ||||||||
Redeemed | (310,217 | ) | (3,671,089 | ) | (4,046,853 | ) | (40,765,231 | ) | ||||
2,624,546 | 30,907,948 | 7,391,219 | 76,021,382 | |||||||||
R6 Class/Shares Authorized | 50,000,000 | N/A | ||||||||||
Sold | 3,380 | 41,485 | ||||||||||
Issued in reinvestment of distributions | 11 | 137 | ||||||||||
3,391 | 41,622 | |||||||||||
Net increase (decrease) | 2,627,937 | $30,949,570 | 7,391,219 | $76,021,382 |
(1) | July 26, 2013 (commencement of sale) through September 30, 2013 for the R6 Class. |
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 | $433,093,517 | — | — |
Foreign Common Stocks | 5,502,107 | $20,380,923 | — |
Exchange-Traded Funds | 16,383,318 | — | — |
Temporary Cash Investments | 3,130,147 | 5,758,228 | — |
Total Value of Investment Securities | $458,109,089 | $26,139,151 | — |
Other Financial Instruments | |||
Total Unrealized Gain (Loss) on Forward | — | $(25,727) | — |
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 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, 2013, is disclosed on the Statement of Assets and Liabilities as a liability of $25,727 in unrealized loss on forward foreign currency exchange contracts. For the six months ended September 30, 2013, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(300,645) in net realized gain (loss) on foreign currency transactions and $24,759 in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
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, 2013, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $415,774,360 |
Gross tax appreciation of investments | $72,531,295 |
Gross tax depreciation of investments | (4,057,415) |
Net tax appreciation (depreciation) of investments | $68,473,880 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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 Asset Value, Beginning | Net Income | Net | Total From Investment Operations | Net | Net | Total | Net | Total | Operating | Net | Portfolio | Net Assets, | |
Institutional Class | |||||||||||||
2013(3) | $11.41 | 0.11 | 0.81 | 0.92 | (0.11) | — | (0.11) | $12.22 | 8.06% | 0.80%(4) | 1.87%(4) | 36% | $485,350 |
2013 | $10.16 | 0.19 | 1.59 | 1.78 | (0.22) | (0.31) | (0.53) | $11.41 | 18.32% | 0.80% | 1.89% | 71% | $423,477 |
2012 | $10.70 | 0.20 | 0.22 | 0.42 | (0.14) | (0.82) | (0.96) | $10.16 | 4.93% | 0.81% | 2.01% | 82% | $301,868 |
2011 | $9.73 | 0.23 | 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 | 3.45 | 3.62 | (0.14) | — | (0.14) | $9.73 | 58.29% | 0.80% | 1.98% | 143% | $137,729 |
2009 | $9.04 | 0.18 | (2.79) | (2.61) | (0.18) | — | (0.18) | $6.25 | (29.25)% | 0.80% | 2.36% | 181% | $67,933 |
R6 Class | |||||||||||||
2013(5) | $12.30 | 0.05 | (0.10) | (0.05) | (0.04) | — | (0.04) | $12.21 | (0.38)% | 0.65%(4) | 2.15%(4) | 36%(6) | $41 |
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, 2013 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through September 30, 2013 (unaudited). |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2013. |
See Notes to Financial Statements.
Approval of Management Agreement |
At a meeting held on June 20, 2013, 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 directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, 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.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided 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; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | 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. |
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:
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, 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, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund 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.
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.
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund’s investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the “About Us” page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available upon request by calling 1-800-345-2021.
Notes |
Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 |
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.
©2013 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-79799 1311
SEMIANNUAL REPORT | SEPTEMBER 30, 2013 |
Small Cap Value Fund
Table of Contents |
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 | 13 |
Statement of Operations | 14 |
Statement of Changes in Net Assets | 15 |
Notes to Financial Statements | 16 |
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.
President’s Letter |
Jonathan Thomas
Dear Investor:
Thank you for reviewing this semiannual report for the six months ended September 30, 2013. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information.
For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com.
Bond Yields and Stock Indices Soared Together Until September
U.S. government bond yields and stock indices traced roughly parallel upward paths during most of the six months ended September 30, 2013. The 10-year U.S. Treasury yield began the period at 1.85%, compressed in large part by the scale of the Federal Reserve’s (the Fed’s) bond-buying program ($85 billion of quantitative easing, or QE, each month).
Hints from the Fed that it might taper QE by year end sent bond yields soaring from early May to early September. The 10-year Treasury yield reached 3.00% on September 5, its first time at that level since July 2011, before finishing the reporting period at 2.61%. Bond yields generally declined in September on weaker-than-expected economic data, the Fed’s announcement that it would delay tapering, and uncertainty caused by the impending partial shutdown of the U.S. government.
Even with the September rally, bonds significantly underperformed stocks for the full reporting period. The 10-year Treasury note and the Barclays U.S. Aggregate Bond Index (representing the broad taxable U.S. bond market) returned –5.20% and –1.77%, respectively. By contrast, the S&P 500 Index gained 8.31% as the U.S. economy showed signs of attaining sustainable growth, fueled in part by Fed stimulus. Improvements in the housing and job markets helped trigger optimism, though their absolute numbers still fell short of pre-2008 levels.
Full recovery from 2008 remains a distant goal. Economic growth is still subpar compared with past recoveries, hampered further by the fiscal sequester and partial government shutdown. Faced with these challenges, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios—as appropriate—for meeting financial goals. We appreciate your continued trust in us in this uncertain environment.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
Don Pratt
Dear Fellow Shareholders,
This is my last letter to shareholders as the funds’ Chairman, as I will retire at the end of 2013.
My personal thanks go to the independent directors that elected me to the Board and subsequently to the Chairman position, and with whom I have worked to reorganize the Board’s committee structure and annually improve our governance processes. Throughout my tenure, the Board has addressed its responsibilities to shareholders diligently in committee work, the annual contract review, and the execution of our oversight responsibilities. I expect that it will continue to do so well into the future.
Thanks also to the American Century Investments management team led by Jonathan Thomas. Its transparency, candor, and open communication with the Board is most appreciated. I have served on more than 20 boards and this is the most productive and enjoyable relationship with management I have experienced.
Finally, thanks to the many shareholders who have written with questions, comments, and suggestions. Each was heard and addressed and enabled the board to better represent your interests. Keep communicating with us so that the Board can continue to be aware of your interests, concerns, and questions. My best wishes to Jim Olson, my successor as Chairman, and the other independent directors who continue to serve on your behalf.
And remember, as the firm’s founder Jim Stowers, Jr. so often observed, “The best is yet to be.”
Best regards,
Don Pratt
Performance |
Total Returns as of September 30, 2013 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ASVIX | 9.74% | 26.86% | 12.48% | 10.89% | 11.91% | 7/31/98 |
Russell 2000 Value Index | — | 10.25% | 27.04% | 9.13% | 9.28% | 8.85% | — |
Institutional Class | ACVIX | 9.80% | 27.23% | 12.71% | 11.11% | 12.60% | 10/26/98 |
A Class(2) No sales charge* With sales charge* | ACSCX
| 9.65% 3.38% | 26.56% 19.33% | 12.22% 10.89% | 10.62% 9.97% | 12.75% 12.26% | 12/31/99
|
C Class No sales charge* With sales charge* | ASVNX
| 9.24% 8.24% | 25.75% 25.75% | — — | — — | 12.57% 12.57% | 3/1/10
|
R Class | ASVRX | 9.49% | 26.37% | — | — | 13.15% | 3/1/10 |
R6 Class | ASVDX | — | — | — | — | 0.09%(1) | 7/26/13 |
* | 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 | R6 Class |
1.42% | 1.22% | 1.67% | 2.42% | 1.92% | 1.07% |
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.
Fund Characteristics |
SEPTEMBER 30, 2013 | |
Top Ten Holdings | % of net assets |
BankUnited, Inc. | 1.4% |
American Science & Engineering, Inc. | 1.1% |
Entravision Communications Corp., Class A | 1.1% |
Berry Plastics Group, Inc. | 1.1% |
Multi-Color Corp. | 1.0% |
Tronox Ltd. Class A | 1.0% |
Innophos Holdings, Inc. | 0.8% |
VeriFone Systems, Inc. | 0.8% |
El Paso Electric Co. | 0.8% |
Riverbed Technology, Inc. | 0.8% |
Top Five Industries | % of net assets |
Commercial Banks | 12.9% |
Real Estate Investment Trusts (REITs) | 8.0% |
Insurance | 4.9% |
Machinery | 4.8% |
Specialty Retail | 4.2% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 97.2% |
Convertible Preferred Stocks | 0.8% |
Exchange-Traded Funds | 0.3% |
Total Equity Exposure | 98.3% |
Temporary Cash Investments | 1.5% |
Other Assets and Liabilities | 0.2% |
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013 (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. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning 4/1/13 | Ending 9/30/13 | Expenses Paid During Period(1) 4/1/13 - 9/30/13 | Annualized | |
Actual | ||||
Investor Class | $1,000 | $1,097.40 | $6.47 | 1.23% |
Institutional Class | $1,000 | $1,098.00 | $5.42 | 1.03% |
A Class | $1,000 | $1,096.50 | $7.78 | 1.48% |
C Class | $1,000 | $1,092.40 | $11.70 | 2.23% |
R Class | $1,000 | $1,094.90 | $9.09 | 1.73% |
R6 Class | $1,000 | $1,000.90(2) | $1.62(3) | 0.88% |
Hypothetical | ||||
Investor Class | $1,000 | $1,018.90 | $6.23 | 1.23% |
Institutional Class | $1,000 | $1,019.90 | $5.22 | 1.03% |
A Class | $1,000 | $1,017.65 | $7.49 | 1.48% |
C Class | $1,000 | $1,013.89 | $11.26 | 2.23% |
R Class | $1,000 | $1,016.40 | $8.74 | 1.73% |
R6 Class | $1,000 | $1,020.66(4) | $4.46(4) | 0.88% |
(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 365, to reflect the one-half year period. |
(2) | Ending account value based on actual return from July 26, 2013 (commencement of sale) through September 30, 2013. |
(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 67, the number of days in the period from July 26, 2013 (commencement of sale) through September 30, 2013, divided by 365, 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 the 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. |
Schedule of Investments |
SEPTEMBER 30, 2013 (UNAUDITED)
Shares | Value | |||||
Common Stocks — 97.2% | ||||||
AEROSPACE AND DEFENSE — 2.4% | ||||||
AAR Corp. | 195,000 | $5,329,350 | ||||
Aerovironment, Inc.(1) | 370,879 | 8,567,305 | ||||
American Science & Engineering, Inc.(2) | 410,000 | 24,727,100 | ||||
KEYW Holding Corp. (The)(1) | 765,000 | 10,289,250 | ||||
Moog, Inc., Class A(1) | 60,000 | 3,520,200 | ||||
52,433,205 | ||||||
AIRLINES — 0.8% | ||||||
Alaska Air Group, Inc. | 70,000 | 4,383,400 | ||||
JetBlue Airways Corp.(1) | 650,000 | 4,329,000 | ||||
Spirit Airlines, Inc.(1) | 255,000 | 8,738,850 | ||||
17,451,250 | ||||||
AUTO COMPONENTS — 0.9% | ||||||
Dana Holding Corp. | 384,962 | 8,792,532 | ||||
Superior Industries International, Inc. | 280,000 | 4,992,400 | ||||
Tower International, Inc.(1) | 235,000 | 4,697,650 | ||||
18,482,582 | ||||||
BUILDING PRODUCTS — 0.6% | ||||||
AO Smith Corp. | 120,000 | 5,424,000 | ||||
Quanex Building Products Corp. | 365,000 | 6,872,950 | ||||
12,296,950 | ||||||
CAPITAL MARKETS — 2.3% | ||||||
Calamos Asset Management, Inc., Class A | 190,000 | 1,898,100 | ||||
Evercore Partners, Inc., Class A | 90,000 | 4,430,700 | ||||
Fifth Street Finance Corp. | 415,000 | 4,270,350 | ||||
Janus Capital Group, Inc. | 475,000 | 4,042,250 | ||||
Manning & Napier, Inc. | 335,000 | 5,587,800 | ||||
PennantPark Investment Corp. | 550,000 | 6,193,000 | ||||
Solar Capital Ltd. | 355,000 | 7,870,350 | ||||
Stifel Financial Corp.(1) | 185,000 | 7,625,700 | ||||
Walter Investment Management Corp.(1) | 185,000 | 7,314,900 | ||||
49,233,150 | ||||||
CHEMICALS — 3.3% | ||||||
Chemtura Corp.(1) | 130,000 | 2,988,700 | ||||
Hawkins, Inc. | 180,000 | 6,793,200 | ||||
Innophos Holdings, Inc. | 345,000 | 18,209,100 | ||||
Kraton Performance Polymers, Inc.(1) | 225,000 | 4,407,750 | ||||
Kronos Worldwide, Inc. | 495,000 | 7,667,550 | ||||
Minerals Technologies, Inc. | 90,000 | 4,443,300 | ||||
Sensient Technologies Corp. | 100,000 | 4,789,000 | ||||
Tronox Ltd. Class A | 885,000 | 21,655,950 | ||||
70,954,550 | ||||||
COMMERCIAL BANKS — 12.9% | ||||||
American National Bankshares, Inc. | 335,000 | 7,772,000 | ||||
Bank of the Ozarks, Inc. | 250,000 | 11,997,500 | ||||
BankUnited, Inc. | 985,000 | 30,722,150 | ||||
Boston Private Financial Holdings, Inc. | 460,000 | 5,106,000 | ||||
Cathay General Bancorp. | 270,000 | 6,309,900 | ||||
Commerce Bancshares, Inc. | 195,000 | 8,542,950 | ||||
Cullen/Frost Bankers, Inc. | 60,000 | 4,233,000 | ||||
CVB Financial Corp. | 449,944 | 6,083,243 | ||||
F.N.B. Corp. | 400,000 | 4,852,000 | ||||
First Horizon National Corp. | 865,000 | 9,506,350 | ||||
First Interstate Bancsystem, Inc. | 430,000 | 10,384,500 | ||||
First Niagara Financial Group, Inc. | 1,035,000 | 10,732,950 | ||||
FirstMerit Corp. | 450,000 | 9,769,500 | ||||
Flushing Financial Corp. | 270,000 | 4,981,500 | ||||
Fulton Financial Corp. | 595,000 | 6,949,600 | ||||
Heritage Financial Corp. | 471,818 | 7,322,615 | ||||
Lakeland Financial Corp. | 275,000 | 8,978,750 | ||||
MB Financial, Inc. | 255,000 | 7,201,200 | ||||
National Bankshares, Inc. | 245,000 | 8,793,050 | ||||
OFG Bancorp | 735,000 | 11,899,650 | ||||
Old National Bancorp. | 230,000 | 3,266,000 | ||||
Pacific Continental Corp. | 425,100 | 5,573,061 | ||||
Park Sterling Corp. | 1,050,000 | 6,730,500 | ||||
Popular, Inc.(1) | 360,000 | 9,442,800 | ||||
PrivateBancorp, Inc. | 509,965 | 10,913,251 | ||||
Prosperity Bancshares, Inc. | 125,000 | 7,730,000 | ||||
Signature Bank(1) | 105,000 | 9,609,600 | ||||
Susquehanna Bancshares, Inc. | 545,000 | 6,839,750 | ||||
TCF Financial Corp. | 295,000 | 4,212,600 | ||||
Texas Capital Bancshares, Inc.(1) | 295,000 | 13,561,150 | ||||
ViewPoint Financial Group, Inc. | 545,000 | 11,265,150 | ||||
Washington Banking Co. | 370,000 | 5,202,200 | ||||
276,484,470 | ||||||
COMMERCIAL SERVICES AND SUPPLIES — 1.0% | ||||||
Multi-Color Corp. | 655,000 | 22,224,150 | ||||
COMMUNICATIONS EQUIPMENT — 0.8% | ||||||
Riverbed Technology, Inc.(1) | 1,135,000 | 16,559,650 |
Shares | Value |
CONSTRUCTION AND ENGINEERING — 1.2% | ||||||
EMCOR Group, Inc. | 110,000 | $4,304,300 | ||||
Granite Construction, Inc. | 175,000 | 5,355,000 | ||||
Great Lakes Dredge & Dock Corp. | 985,000 | 7,308,700 | ||||
URS Corp. | 165,000 | 8,868,750 | ||||
25,836,750 | ||||||
CONSTRUCTION MATERIALS — 0.2% | ||||||
Headwaters, Inc.(1) | 525,000 | 4,719,750 | ||||
CONTAINERS AND PACKAGING — 1.7% | ||||||
Berry Plastics Group, Inc.(1) | 1,135,000 | 22,665,950 | ||||
Graphic Packaging Holding Co.(1) | 1,060,000 | 9,073,600 | ||||
Silgan Holdings, Inc. | 115,000 | 5,405,000 | ||||
37,144,550 | ||||||
DIVERSIFIED CONSUMER SERVICES — 1.1% | ||||||
Sotheby’s | 180,000 | 8,843,400 | ||||
Steiner Leisure, Ltd.(1) | 260,000 | 15,191,800 | ||||
24,035,200 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.7% | ||||||
Compass Diversified Holdings | 330,000 | 5,880,600 | ||||
PHH Corp.(1) | 420,000 | 9,970,800 | ||||
15,851,400 | ||||||
ELECTRIC UTILITIES — 2.6% | ||||||
El Paso Electric Co. | 523,559 | 17,486,871 | ||||
Great Plains Energy, Inc. | 335,000 | 7,437,000 | ||||
IDACORP, Inc. | 175,000 | 8,470,000 | ||||
PNM Resources, Inc. | 217,677 | 4,926,030 | ||||
Portland General Electric Co. | 295,000 | 8,327,850 | ||||
UNS Energy Corp. | 180,000 | 8,391,600 | ||||
55,039,351 | ||||||
ELECTRICAL EQUIPMENT — 0.7% | ||||||
Generac Holdings, Inc. | 50,000 | 2,132,000 | ||||
GrafTech International Ltd.(1) | 1,485,000 | 12,548,250 | ||||
14,680,250 | ||||||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 3.2% | ||||||
Belden, Inc. | 45,000 | 2,882,250 | ||||
CDW Corp.(1) | 450,000 | 10,273,500 | ||||
FARO Technologies, Inc.(1) | 330,000 | 13,916,100 | ||||
FLIR Systems, Inc. | 360,000 | 11,304,000 | ||||
Ingram Micro, Inc. Class A(1) | 520,000 | 11,986,000 | ||||
Itron, Inc.(1) | 190,000 | 8,137,700 | ||||
TTM Technologies, Inc.(1) | 970,000 | 9,457,500 | ||||
67,957,050 | ||||||
ENERGY EQUIPMENT AND SERVICES — 1.8% | ||||||
Bristow Group, Inc. | 80,000 | 5,820,800 | ||||
Cal Dive International, Inc.(1) | 2,125,000 | 4,356,250 | ||||
Gulfmark Offshore, Inc. Class A | 95,000 | 4,834,550 | ||||
Hornbeck Offshore Services, Inc.(1) | 90,000 | 5,169,600 | ||||
Key Energy Services, Inc.(1) | 865,000 | 6,305,850 | ||||
McDermott International, Inc.(1) | 625,000 | 4,643,750 | ||||
Tetra Technologies, Inc.(1) | 680,000 | 8,520,400 | ||||
39,651,200 | ||||||
FOOD AND STAPLES RETAILING — 1.4% | ||||||
Rite Aid Corp.(1) | 2,965,000 | 14,113,400 | ||||
Village Super Market, Inc., Class A | 210,000 | 7,984,200 | ||||
Weis Markets, Inc. | 175,000 | 8,564,500 | ||||
30,662,100 | ||||||
FOOD PRODUCTS — 0.5% | ||||||
J&J Snack Foods Corp. | 50,724 | 4,094,441 | ||||
Snyders-Lance, Inc. | 115,000 | 3,317,750 | ||||
TreeHouse Foods, Inc.(1) | 55,000 | 3,675,650 | ||||
11,087,841 | ||||||
GAS UTILITIES — 0.4% | ||||||
Laclede Group, Inc. (The) | 105,000 | 4,725,000 | ||||
WGL Holdings, Inc. | 100,000 | 4,271,000 | ||||
8,996,000 | ||||||
HEALTH CARE EQUIPMENT AND SUPPLIES — 1.2% | ||||||
Hill-Rom Holdings, Inc. | 120,000 | 4,299,600 | ||||
Integra LifeSciences Holdings Corp.(1) | 110,000 | 4,427,500 | ||||
Orthofix International NV(1) | 355,000 | 7,405,300 | ||||
Utah Medical Products, Inc. | 160,000 | 9,510,400 | ||||
25,642,800 | ||||||
HEALTH CARE PROVIDERS AND SERVICES — 1.5% | ||||||
Air Methods Corp. | 260,000 | 11,076,000 | ||||
HealthSouth Corp. | 155,000 | 5,344,400 | ||||
National Healthcare Corp. | 90,000 | 4,254,300 | ||||
PharMerica Corp.(1) | 340,000 | 4,511,800 | ||||
Premier, Inc., Class A(1) | 63,058 | 1,998,939 | ||||
WellCare Health Plans, Inc.(1) | 85,000 | 5,927,900 | ||||
33,113,339 | ||||||
HOTELS, RESTAURANTS AND LEISURE — 2.7% | ||||||
Bally Technologies, Inc.(1) | 80,000 | 5,764,800 | ||||
CEC Entertainment, Inc. | 200,000 | 9,172,000 | ||||
ClubCorp Holdings, Inc.(1) | 360,000 | 5,518,800 | ||||
Del Frisco’s Restaurant Group, Inc.(1) | 350,000 | 7,059,500 | ||||
Orient-Express Hotels Ltd. Class A(1) | 715,000 | 9,280,700 | ||||
Red Robin Gourmet Burgers, Inc.(1) | 95,000 | 6,754,500 | ||||
Scientific Games Corp. Class A(1) | 840,000 | 13,582,800 | ||||
57,133,100 |
Shares | Value |
HOUSEHOLD DURABLES — 1.6% | ||||||
Cavco Industries, Inc.(1) | 240,000 | $13,668,000 | ||||
CSS Industries, Inc. | 155,000 | 3,721,550 | ||||
Helen of Troy Ltd.(1) | 95,000 | 4,199,000 | ||||
Libbey, Inc.(1) | 290,000 | 6,896,200 | ||||
M.D.C. Holdings, Inc. | 164,986 | 4,951,230 | ||||
33,435,980 | ||||||
HOUSEHOLD PRODUCTS — 0.7% | ||||||
Central Garden and Pet Co.(1) | 775,000 | 5,308,750 | ||||
Spectrum Brands Holdings, Inc. | 145,000 | 9,546,800 | ||||
14,855,550 | ||||||
INSURANCE — 4.9% | ||||||
American Equity Investment Life Holding Co. | 215,000 | 4,562,300 | ||||
Argo Group International Holdings Ltd. | 200,000 | 8,576,000 | ||||
Aspen Insurance Holdings Ltd. | 205,000 | 7,439,450 | ||||
Baldwin & Lyons, Inc., Class B | 395,000 | 9,630,100 | ||||
CNO Financial Group, Inc. | 760,000 | 10,944,000 | ||||
Endurance Specialty Holdings Ltd. | 205,000 | 11,012,600 | ||||
Hanover Insurance Group, Inc. (The) | 130,000 | 7,191,600 | ||||
HCC Insurance Holdings, Inc. | 215,000 | 9,421,300 | ||||
Infinity Property & Casualty Corp. | 140,000 | 9,044,000 | ||||
Platinum Underwriters Holdings Ltd. | 90,000 | 5,375,700 | ||||
Primerica, Inc. | 85,000 | 3,428,900 | ||||
Symetra Financial Corp. | 375,000 | 6,682,500 | ||||
United Fire Group, Inc. | 250,000 | 7,617,500 | ||||
Validus Holdings Ltd. | 130,000 | 4,807,400 | ||||
105,733,350 | ||||||
INTERNET AND CATALOG RETAIL — 0.4% | ||||||
Orbitz Worldwide, Inc.(1) | 465,000 | 4,477,950 | ||||
Shutterfly, Inc.(1) | 65,000 | 3,632,200 | ||||
8,110,150 | ||||||
IT SERVICES — 2.8% | ||||||
DST Systems, Inc. | 125,000 | 9,426,250 | ||||
EVERTEC, Inc. | 460,000 | 10,216,600 | ||||
Global Payments, Inc. | 115,000 | 5,874,200 | ||||
MoneyGram International, Inc.(1) | 385,000 | 7,538,300 | ||||
SYKES Enterprises, Inc.(1) | 550,000 | 9,850,500 | ||||
VeriFone Systems, Inc.(1) | 795,000 | 18,173,700 | ||||
61,079,550 | ||||||
LEISURE EQUIPMENT AND PRODUCTS — 0.4% | ||||||
Brunswick Corp. | 210,000 | 8,381,100 | ||||
MACHINERY — 4.8% | ||||||
Altra Holdings, Inc. | 475,000 | 12,782,250 | ||||
Barnes Group, Inc. | 200,000 | 6,984,000 | ||||
Briggs & Stratton Corp. | 475,000 | 9,557,000 | ||||
Dynamic Materials Corp. | 545,000 | 12,633,100 | ||||
FreightCar America, Inc. | 205,000 | 4,239,400 | ||||
Global Brass & Copper Holdings, Inc.(1) | 792,490 | 13,900,274 | ||||
Hardinge, Inc. | 345,000 | 5,330,250 | ||||
Kadant, Inc. | 190,000 | 6,382,100 | ||||
Kaydon Corp. | 185,000 | 6,571,200 | ||||
Kennametal, Inc. | 245,000 | 11,172,000 | ||||
Mueller Industries, Inc., Class A | 30,000 | 1,670,100 | ||||
Mueller Water Products, Inc. Class A | 540,000 | 4,314,600 | ||||
Rexnord Corp.(1) | 380,000 | 7,904,000 | ||||
103,440,274 | ||||||
MEDIA — 3.7% | ||||||
E.W. Scripps Co. (The), Class A(1) | 300,000 | 5,505,000 | ||||
Entercom Communications Corp., Class A(1) | 1,525,000 | 13,389,500 | ||||
Entravision Communications Corp., Class A | 3,850,000 | 22,715,000 | ||||
John Wiley & Sons, Inc., Class A | 105,000 | 5,007,450 | ||||
Journal Communications, Inc., Class A(1) | 805,000 | 6,882,750 | ||||
LIN Media LLC(1) | 490,000 | 9,942,100 | ||||
Media General, Inc. Class A(1) | 630,000 | 8,983,800 | ||||
Sinclair Broadcast Group, Inc., Class A | 220,000 | 7,374,400 | ||||
79,800,000 | ||||||
METALS AND MINING — 1.8% | ||||||
Century Aluminum Co.(1) | 645,000 | 5,192,250 | ||||
Compass Minerals International, Inc. | 145,000 | 11,059,150 | ||||
Haynes International, Inc. | 222,212 | 10,072,870 | ||||
Hecla Mining Co. | 1,265,000 | 3,972,100 | ||||
Horsehead Holding Corp.(1) | 585,000 | 7,289,100 | ||||
37,585,470 | ||||||
MULTI-UTILITIES — 0.7% | ||||||
Avista Corp. | 565,000 | 14,916,000 | ||||
OIL, GAS AND CONSUMABLE FUELS — 3.3% | ||||||
Alliance Resource Partners LP | 60,000 | 4,447,800 | ||||
Ardmore Shipping Corp.(1) | 569,971 | 6,919,448 | ||||
Delek US Holdings, Inc. | 320,000 | 6,748,800 | ||||
Energy XXI Bermuda Ltd. | 335,000 | 10,117,000 | ||||
Hugoton Royalty Trust | 520,709 | 3,889,696 |
Shares | Value |
Jones Energy, Inc.(1) | 465,000 | $7,630,650 | ||||
Pacific Coast Oil Trust | 615,000 | 9,895,350 | ||||
Scorpio Tankers, Inc. | 745,000 | 7,271,200 | ||||
Vaalco Energy, Inc.(1) | 1,025,000 | 5,719,500 | ||||
Western Refining, Inc. | 300,000 | 9,012,000 | ||||
71,651,444 | ||||||
PAPER AND FOREST PRODUCTS — 1.6% | ||||||
Boise Cascade Co.(1) | 345,000 | 9,297,750 | ||||
Clearwater Paper Corp.(1) | 200,000 | 9,554,000 | ||||
KapStone Paper and Packaging Corp. | 95,000 | 4,066,000 | ||||
P.H. Glatfelter Co. | 160,000 | 4,331,200 | ||||
Wausau Paper Corp. | 500,000 | 6,495,000 | ||||
33,743,950 | ||||||
PHARMACEUTICALS — 0.2% | ||||||
Impax Laboratories, Inc.(1) | 200,000 | 4,102,000 | ||||
PROFESSIONAL SERVICES — 1.1% | ||||||
CDI Corp. | 750,000 | 11,482,500 | ||||
Kforce, Inc. | 745,000 | 13,179,050 | ||||
24,661,550 | ||||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 8.0% | ||||||
American Campus Communities, Inc. | 250,000 | 8,537,500 | ||||
Apollo Commercial Real Estate Finance, Inc. | 405,000 | 6,184,350 | ||||
Armada Hoffler Properties, Inc. | 400,000 | 3,964,000 | ||||
Associated Estates Realty Corp. | 515,000 | 7,678,650 | ||||
Campus Crest Communities, Inc. | 845,000 | 9,126,000 | ||||
Capstead Mortgage Corp. | 225,000 | 2,648,250 | ||||
CBL & Associates Properties, Inc. | 265,000 | 5,061,500 | ||||
Chatham Lodging Trust | 422,248 | 7,541,349 | ||||
Chimera Investment Corp. | 875,000 | 2,660,000 | ||||
Colony Financial, Inc. | 155,000 | 3,096,900 | ||||
DiamondRock Hospitality Co. | 1,400,000 | 14,938,000 | ||||
Excel Trust, Inc. | 455,000 | 5,460,000 | ||||
Highwoods Properties, Inc. | 95,000 | 3,354,450 | ||||
LaSalle Hotel Properties | 475,000 | 13,547,000 | ||||
Mack-Cali Realty Corp. | 305,000 | 6,691,700 | ||||
Medical Properties Trust, Inc. | 355,000 | 4,320,350 | ||||
MFA Financial, Inc. | 940,000 | 7,003,000 | ||||
New Residential Investment Corp. | 625,000 | 4,137,500 | ||||
Pennsylvania Real Estate Investment Trust | 230,000 | 4,301,000 | ||||
PennyMac Mortgage Investment Trust | 195,000 | 4,422,600 | ||||
RLJ Lodging Trust | 180,000 | 4,228,200 | ||||
Rouse Properties, Inc. | 400,000 | 8,232,000 | ||||
Summit Hotel Properties, Inc. | 820,504 | 7,540,432 | ||||
Sunstone Hotel Investors, Inc. | 815,000 | 10,383,100 | ||||
Urstadt Biddle Properties, Inc., Class A | 470,000 | 9,343,600 | ||||
Washington Real Estate Investment Trust | 295,000 | 7,454,650 | ||||
171,856,081 | ||||||
ROAD AND RAIL — 1.4% | ||||||
Celadon Group, Inc. | 544,940 | 10,174,030 | ||||
Heartland Express, Inc. | 525,000 | 7,449,750 | ||||
Marten Transport Ltd. | 770,000 | 13,205,500 | ||||
30,829,280 | ||||||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 2.7% | ||||||
Cypress Semiconductor Corp. | 890,000 | 8,312,600 | ||||
Diodes, Inc.(1) | 155,000 | 3,797,500 | ||||
Intersil Corp., Class A | 875,000 | 9,826,250 | ||||
MKS Instruments, Inc. | 340,000 | 9,040,600 | ||||
Nanometrics, Inc.(1) | 845,000 | 13,621,400 | ||||
Spansion, Inc., Class A(1) | 1,290,000 | 13,016,100 | ||||
57,614,450 | ||||||
SOFTWARE — 2.4% | ||||||
AVG Technologies NV(1) | 220,000 | 5,266,800 | ||||
BroadSoft, Inc.(1) | 350,000 | 12,610,500 | ||||
Compuware Corp. | 785,000 | 8,792,000 | ||||
Covisint Corp.(1) | 164,509 | 2,104,070 | ||||
Mentor Graphics Corp. | 495,000 | 11,568,150 | ||||
NetScout Systems, Inc.(1) | 289,975 | 7,414,661 | ||||
PTC, Inc.(1) | 150,000 | 4,264,500 | ||||
52,020,681 | ||||||
SPECIALTY RETAIL — 4.2% | ||||||
Aeropostale, Inc.(1) | 435,000 | 4,089,000 | ||||
American Eagle Outfitters, Inc. | 255,000 | 3,567,450 | ||||
Asbury Automotive Group, Inc.(1) | 179,963 | 9,574,032 | ||||
Barnes & Noble, Inc.(1) | 175,000 | 2,264,500 | ||||
Chico’s FAS, Inc. | 405,000 | 6,747,300 | ||||
Conn’s, Inc.(1) | 285,000 | 14,261,400 | ||||
Destination Maternity Corp. | 290,000 | 9,222,000 | ||||
Genesco, Inc.(1) | 35,000 | 2,295,300 | ||||
Group 1 Automotive, Inc. | 55,000 | 4,272,400 | ||||
MarineMax, Inc.(1) | 660,000 | 8,052,000 |
Shares | Value |
OfficeMax, Inc. | 370,000 | $4,732,300 | ||||
Penske Automotive Group, Inc. | 310,000 | 13,246,300 | ||||
Rue21, Inc.(1) | 50,000 | 2,017,000 | ||||
Stage Stores, Inc. | 315,000 | 6,048,000 | ||||
90,388,982 | ||||||
TEXTILES, APPAREL AND LUXURY GOODS — 1.6% | ||||||
Culp, Inc.(2) | 580,000 | 10,851,800 | ||||
Movado Group, Inc. | 235,000 | 10,281,250 | ||||
Vera Bradley, Inc.(1) | 635,000 | 13,055,600 | ||||
34,188,650 | ||||||
THRIFTS AND MORTGAGE FINANCE — 1.9% | ||||||
Astoria Financial Corp. | 410,000 | 5,100,400 | ||||
Brookline Bancorp., Inc. | 420,000 | 3,952,200 | ||||
Capitol Federal Financial, Inc. | 345,000 | 4,288,350 | ||||
Dime Community Bancshares, Inc. | 310,000 | 5,161,500 | ||||
MGIC Investment Corp.(1) | 600,000 | 4,368,000 | ||||
Oritani Financial Corp. | 590,000 | 9,711,400 | ||||
Provident Financial Services, Inc. | 280,000 | 4,538,800 | ||||
Radian Group, Inc. | 305,000 | 4,248,650 | ||||
41,369,300 | ||||||
TRADING COMPANIES AND DISTRIBUTORS — 0.7% | ||||||
Applied Industrial Technologies, Inc. | 65,000 | 3,347,500 | ||||
Edgen Group, Inc.(1) | 275,000 | 2,090,000 | ||||
Kaman Corp. | 230,000 | 8,707,800 | ||||
14,145,300 | ||||||
TRANSPORTATION INFRASTRUCTURE — 0.2% | ||||||
Aegean Marine Petroleum Network, Inc. | 375,000 | 4,447,500 | ||||
WATER UTILITIES — 0.2% | ||||||
Artesian Resources Corp., Class A | 235,000 | 5,228,750 | ||||
TOTAL COMMON STOCKS (Cost $1,796,265,621) | 2,091,255,980 | |||||
Convertible Preferred Stocks — 0.8% | ||||||
HOUSEHOLD DURABLES — 0.4% | ||||||
Beazer Homes USA, Inc., 7.50%, 7/15/15 | 260,000 | 7,612,800 | ||||
LEISURE EQUIPMENT AND PRODUCTS — 0.2% | ||||||
Callaway Golf Co., Series B, 7.50% | 43,733 | 4,515,432 | ||||
TOBACCO — 0.2% | ||||||
Universal Corp., 6.75% | 4,058 | 4,766,629 | ||||
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $15,911,244) | 16,894,861 | |||||
Exchange-Traded Funds — 0.3% | ||||||
iShares Russell 2000 Value Index Fund (Cost $6,389,361) | 70,000 | $6,414,800 | ||||
Temporary Cash Investments — 1.5% | ||||||
Repurchase Agreement, Bank of America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 1.375%, 9/30/18, valued at $6,352,449), in a joint trading account at 0.03%, dated 9/30/13, due 10/1/13 (Delivery value $6,230,277) | 6,230,272 | |||||
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 5/15/30, valued at $7,612,312), in a joint trading account at 0.01%, dated 9/30/13, due 10/1/13 (Delivery value $7,476,328) | 7,476,326 | |||||
Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 1.75%, 5/15/22, valued at $7,626,925), in a joint trading account at 0.02%, dated 9/30/13, due 10/1/13 (Delivery value $7,476,330) | 7,476,326 | |||||
SSgA U.S. Government Money Market Fund | 11,514,942 | 11,514,942 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $32,697,866) | 32,697,866 | |||||
TOTAL INVESTMENT SECURITIES — 99.8% (Cost $1,851,264,092) | 2,147,263,507 | |||||
OTHER ASSETS AND LIABILITIES — 0.2% | 5,041,565 | |||||
TOTAL NET ASSETS — 100.0% | $2,152,305,072 |
Notes to Schedule of Investments
(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. |
See Notes to Financial Statements.
Statement of Assets and Liabilities |
SEPTEMBER 30, 2013 (UNAUDITED) | |||
Assets | |||
Investment securities - unaffiliated, at value (cost of $1,819,932,603) | $2,111,684,607 | ||
Investment securities - affiliated, at value (cost of $31,331,489) | 35,578,900 | ||
Total investment securities, at value (cost of $1,851,264,092) | 2,147,263,507 | ||
Cash | 34,967 | ||
Receivable for investments sold | 23,816,441 | ||
Receivable for capital shares sold | 851,351 | ||
Dividends and interest receivable | 2,611,272 | ||
2,174,577,538 | |||
Liabilities | |||
Payable for investments purchased | 16,662,470 | ||
Payable for capital shares redeemed | 3,529,560 | ||
Accrued management fees | 1,994,716 | ||
Distribution and service fees payable | 85,720 | ||
22,272,466 | |||
Net Assets | $2,152,305,072 | ||
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $1,579,683,786 | ||
Distributions in excess of net investment income | (455,353 | ) | |
Undistributed net realized gain | 277,077,224 | ||
Net unrealized appreciation | 295,999,415 | ||
$2,152,305,072 |
Net assets | Shares outstanding | Net asset value per share | |
Investor Class, $0.01 Par Value | $878,398,901 | 85,252,723 | $10.30 |
Institutional Class, $0.01 Par Value | $856,783,072 | 82,755,754 | $10.35 |
A Class, $0.01 Par Value | $413,113,106 | 40,295,953 | $10.25* |
C Class, $0.01 Par Value | $82,758 | 8,124 | $10.19 |
R Class, $0.01 Par Value | $3,902,223 | 380,067 | $10.27 |
R6 Class, $0.01 Par Value | $25,012 | 2,415 | $10.36 |
* Maximum offering price $10.88 (net asset value divided by 0.9425).
See Notes to Financial Statements.
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (including $549,260 from affiliates and net of foreign taxes withheld of $8,610) | $23,133,666 | ||
Interest | 3,915 | ||
23,137,581 | |||
Expenses: | |||
Management fees | 12,002,168 | ||
Distribution and service fees: | |||
A Class | 507,605 | ||
C Class | 410 | ||
R Class | 9,209 | ||
Directors’ fees and expenses | 49,402 | ||
Other expenses | 5,259 | ||
12,574,053 | |||
Net investment income (loss) | 10,563,528 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on investment transactions (including $21,469,561 from affiliates) | 211,183,525 | ||
Change in net unrealized appreciation (depreciation) on investments | (26,886,775 | ) | |
Net realized and unrealized gain (loss) | 184,296,750 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $194,860,278 |
See Notes to Financial Statements.
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) AND YEAR ENDED MARCH 31, 2013 | |||||
Increase (Decrease) in Net Assets | September 30, 2013 | March 31, 2013 | |||
Operations | |||||
Net investment income (loss) | $10,563,528 | $21,897,135 | |||
Net realized gain (loss) | 211,183,525 | 203,981,507 | |||
Change in net unrealized appreciation (depreciation) | (26,886,775 | ) | 48,797,395 | ||
Net increase (decrease) in net assets resulting from operations | 194,860,278 | 274,676,037 | |||
Distributions to Shareholders | |||||
From net investment income: | |||||
Investor Class | (6,030,985 | ) | (12,033,310 | ) | |
Institutional Class | (5,989,890 | ) | (9,921,426 | ) | |
A Class | (2,235,909 | ) | (4,516,484 | ) | |
C Class | (192 | ) | (326 | ) | |
R Class | (15,712 | ) | (28,561 | ) | |
R6 Class | (69 | ) | — | ||
From net realized gains: | |||||
Investor Class | — | (35,804,910 | ) | ||
Institutional Class | — | (26,044,402 | ) | ||
A Class | — | (17,595,422 | ) | ||
C Class | — | (2,775 | ) | ||
R Class | — | (144,686 | ) | ||
Decrease in net assets from distributions | (14,272,757 | ) | (106,092,302 | ) | |
Capital Share Transactions | |||||
Net increase (decrease) in net assets from capital share transactions | (49,153,767 | ) | (206,806,719 | ) | |
Net increase (decrease) in net assets | 131,433,754 | (38,222,984 | ) | ||
Net Assets | |||||
Beginning of period | 2,020,871,318 | 2,059,094,302 | |||
End of period | $2,152,305,072 | $2,020,871,318 | |||
Undistributed (distributions in excess of) net investment income | $(455,353 | ) | $3,253,876 |
See Notes to Financial Statements.
Notes to Financial Statements |
SEPTEMBER 30, 2013 (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 offers the Investor Class, the Institutional Class, the A Class, the C Class, the R Class and the R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees. Sale of the R6 Class commenced on July 26, 2013.
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.
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 long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund’s tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
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 annual management fee schedule ranges from 0.80% to 1.05% for the Institutional Class and 0.65% to 0.90% for the R6 Class. The effective annual management fee for each class for the period ended September 30, 2013 was 1.23% for the Investor Class, A Class, C Class, and R Class, 1.03% for the Institutional Class and 0.88% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay 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, 2013 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 corporation’s investment advisor, ACIM, the corporation’s distributor, ACIS, and the corporation’s transfer agent, American Century Services, LLC are wholly owned, directly or indirectly, by ACC.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2013 were $1,397,089,284 and $1,431,703,624, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2013(1) | Year ended March 31, 2013 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Investor Class/Shares Authorized | 420,000,000 | 500,000,000 | ||||||||||
Sold | 7,159,169 | $69,310,418 | 12,936,505 | $113,660,206 | ||||||||
Issued in reinvestment of distributions | 579,080 | 5,649,688 | 5,577,883 | 46,236,783 | ||||||||
Redeemed | (17,108,896 | ) | (167,411,165 | ) | (26,103,130 | ) | (225,019,354 | ) | ||||
(9,370,647 | ) | (92,451,059 | ) | (7,588,742 | ) | (65,122,365 | ) | |||||
Institutional Class/Shares Authorized | 300,000,000 | 300,000,000 | ||||||||||
Sold | 15,720,252 | 155,145,744 | 26,620,339 | 232,076,201 | ||||||||
Issued in reinvestment of distributions | 548,237 | 5,391,196 | 3,935,752 | 32,840,785 | ||||||||
Redeemed | (9,505,737 | ) | (93,863,881 | ) | (40,420,554 | ) | (340,602,277 | ) | ||||
6,762,752 | 66,673,059 | (9,864,463 | ) | (75,685,291 | ) | |||||||
A Class/Shares Authorized | 200,000,000 | 200,000,000 | ||||||||||
Sold | 2,431,782 | 23,452,163 | 4,704,292 | 39,938,635 | ||||||||
Issued in reinvestment of distributions | 228,660 | 2,215,192 | 2,674,469 | 22,034,798 | ||||||||
Redeemed | (5,063,453 | ) | (49,138,587 | ) | (15,186,260 | ) | (127,909,830 | ) | ||||
(2,403,011 | ) | (23,471,232 | ) | (7,807,499 | ) | (65,936,397 | ) | |||||
C Class/Shares Authorized | 5,000,000 | 5,000,000 | ||||||||||
Sold | 1,386 | 13,435 | 4,892 | 41,483 | ||||||||
Issued in reinvestment of distributions | 20 | 192 | 379 | 3,101 | ||||||||
Redeemed | (1,831 | ) | (18,216 | ) | (5,762 | ) | (48,469 | ) | ||||
(425 | ) | (4,589 | ) | (491 | ) | (3,885 | ) | |||||
R Class/Shares Authorized | 5,000,000 | 5,000,000 | ||||||||||
Sold | 41,520 | 415,526 | 42,059 | 358,998 | ||||||||
Issued in reinvestment of distributions | 1,626 | 15,712 | 21,005 | 173,247 | ||||||||
Redeemed | (36,406 | ) | (356,253 | ) | (68,019 | ) | (591,026 | ) | ||||
6,740 | 74,985 | (4,955 | ) | (58,781 | ) | |||||||
R6 Class/Shares Authorized | 50,000,000 | N/A | ||||||||||
Sold | 2,408 | 25,000 | ||||||||||
Issued in reinvestment of distributions | 7 | 69 | ||||||||||
2,415 | 25,069 | |||||||||||
Net increase (decrease) | (5,002,176 | ) | $(49,153,767 | ) | (25,266,150 | ) | $(206,806,719 | ) |
(1) | July 26, 2013 (commencement of sale) through September 30, 2013 for the R6 Class. |
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, 2013 follows:
March 31, 2013 | September 30, 2013 | ||||||||||||||||||||
Company | Share | Purchase Cost | Sales Cost | Realized | Dividend Income | Share Balance | Market | ||||||||||||||
American Science & Engineering, Inc. | 325,000 | $5,726,528 | $811,900 | $(73,682 | ) | $379,435 | 410,000 | $24,727,100 | |||||||||||||
Culp, Inc. | 440,000 | 2,793,202 | 336,861 | 23,825 | 42,800 | 580,000 | 10,851,800 | ||||||||||||||
Dynamic | 495,000 | 2,480,035 | 1,997,970 | 247,699 | 47,400 | 545,000 | (1 | ) | |||||||||||||
Entravision Communications Corp., Class A.(1) | 4,300,000 | 8,516,535 | 4,819,511 | 5,943,491 | — | 3,850,000 | (1 | ) | |||||||||||||
Utah Medical Products, Inc.(1) | 165,000 | 464,331 | 623,516 | 174,230 | 79,625 | 160,000 | (1 | ) | |||||||||||||
Websense, Inc.(1)(2) | 1,550,000 | 2,751,496 | 27,415,331 | 15,153,998 | — | — | — | ||||||||||||||
$22,732,127 | $36,005,089 | $21,469,561 | $549,260 | $35,578,900 |
(1) | Company was not an affiliate at September 30, 2013. |
(2) | Non-income producing. |
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 | $2,091,255,980 | — | — |
Convertible Preferred Stocks | — | $16,894,861 | — |
Exchange-Traded Funds | 6,414,800 | — | — |
Temporary Cash Investments | 11,514,942 | 21,182,924 | — |
Total Value of Investment Securities | $2,109,185,722 | $38,077,785 | — |
8. Risk Factors
The fund concentrates its investments in common stocks of small companies. Because of this, the fund may be subject to greater risk and market fluctuations than a fund investing in larger, more established companies.
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, 2013, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $1,881,434,268 |
Gross tax appreciation of investments | $313,125,439 |
Gross tax depreciation of investments | (47,296,200) |
Net tax appreciation (depreciation) of investments | $265,829,239 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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 | Net Income | Net | Total From Investment Operations | Net | Net | Total | Net Asset | Total | Operating | Net Income | Portfolio | Net Assets, | |
Investor Class | |||||||||||||
2013(4) | $9.45 | 0.05 | 0.87 | 0.92 | (0.07) | — | (0.07) | $10.30 | 9.74% | 1.23%(5) | 0.99%(5) | 68% | $878,399 |
2013 | $8.61 | 0.10 | 1.25 | 1.35 | (0.12) | (0.39) | (0.51) | $9.45 | 16.58% | 1.25% | 1.17% | 126% | $894,194 |
2012 | $9.48 | 0.10 | (0.30) | (0.20) | (0.07) | (0.60) | (0.67) | $8.61 | (1.39)% | 1.24% | 1.14% | 120% | $880,194 |
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 |
Institutional Class | |||||||||||||
2013(4) | $9.50 | 0.06 | 0.87 | 0.93 | (0.08) | — | (0.08) | $10.35 | 9.80% | 1.03%(5) | 1.19%(5) | 68% | $856,783 |
2013 | $8.65 | 0.12 | 1.26 | 1.38 | (0.14) | (0.39) | (0.53) | $9.50 | 16.89% | 1.05% | 1.37% | 126% | $721,572 |
2012 | $9.52 | 0.11 | (0.30) | (0.19) | (0.08) | (0.60) | (0.68) | $8.65 | (1.20)% | 1.04% | 1.34% | 120% | $742,867 |
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 |
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 | Net Income | Net | Total From Investment Operations | Net | Net | Total | Net Asset | Total | Operating | Net Income | Portfolio | Net Assets, | |
A Class(6) | |||||||||||||
2013(4) | $9.40 | 0.04 | 0.86 | 0.90 | (0.05) | – | (0.05) | $10.25 | 9.65% | 1.48%(5) | 0.74%(5) | 68% | $413,113 |
2013 | $8.57 | 0.08 | 1.24 | 1.32 | (0.10) | (0.39) | (0.49) | $9.40 | 16.19% | 1.50% | 0.92% | 126% | $401,510 |
2012 | $9.44 | 0.08 | (0.30) | (0.22) | (0.05) | (0.60) | (0.65) | $8.57 | (1.56)% | 1.49% | 0.89% | 120% | $432,711 |
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 |
C Class | |||||||||||||
2013(4) | $9.35 | —(7) | 0.86 | 0.86 | (0.02) | — | (0.02) | $10.19 | 9.24% | 2.23%(5) | (0.01)%(5) | 68% | $83 |
2013 | $8.53 | 0.01 | 1.24 | 1.25 | (0.04) | (0.39) | (0.43) | $9.35 | 15.35% | 2.25% | 0.17% | 126% | $80 |
2012 | $9.43 | 0.02 | (0.30) | (0.28) | (0.02) | (0.60) | (0.62) | $8.53 | (2.30)% | 2.24% | 0.14% | 120% | $77 |
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 | |||||||||||||
2013(4) | $9.42 | 0.02 | 0.87 | 0.89 | (0.04) | — | (0.04) | $10.27 | 9.49% | 1.73%(5) | 0.49%(5) | 68% | $3,902 |
2013 | $8.58 | 0.06 | 1.25 | 1.31 | (0.08) | (0.39) | (0.47) | $9.42 | 15.98% | 1.75% | 0.67% | 126% | $3,516 |
2012 | $9.46 | 0.05 | (0.29) | (0.24) | (0.04) | (0.60) | (0.64) | $8.58 | (1.80)% | 1.74% | 0.64% | 120% | $3,245 |
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 |
R6 Class | |||||||||||||
2013(10) | $10.38 | 0.02 | (0.01) | 0.01 | (0.03) | — | (0.03) | $10.36 | 0.09% | 0.88%(5) | 1.16%(5) | 68%(11) | $25 |
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, 2013 (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. |
(10) | July 26, 2013 (commencement of sale) through September 30, 2013 (unaudited). |
(11) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2013. |
See Notes to Financial Statements.
Approval of Management Agreement |
At a meeting held on June 20, 2013, 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 directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, 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.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided 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; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | 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. |
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:
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, 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, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund 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.
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.
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund’s investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the “About Us” page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
Notes |
Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 |
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.
©2013 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-79781 1311
SEMIANNUAL REPORT | SEPTEMBER 30, 2013 |
Value Fund
Table of Contents |
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.
President’s Letter |
Jonathan Thomas
Dear Investor:
Thank you for reviewing this semiannual report for the six months ended September 30, 2013. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information.
For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com.
Bond Yields and Stock Indices Soared Together Until September
U.S. government bond yields and stock indices traced roughly parallel upward paths during most of the six months ended September 30, 2013. The 10-year U.S. Treasury yield began the period at 1.85%, compressed in large part by the scale of the Federal Reserve’s (the Fed’s) bond-buying program ($85 billion of quantitative easing, or QE, each month).
Hints from the Fed that it might taper QE by year end sent bond yields soaring from early May to early September. The 10-year Treasury yield reached 3.00% on September 5, its first time at that level since July 2011, before finishing the reporting period at 2.61%. Bond yields generally declined in September on weaker-than-expected economic data, the Fed’s announcement that it would delay tapering, and uncertainty caused by the impending partial shutdown of the U.S. government.
Even with the September rally, bonds significantly underperformed stocks for the full reporting period. The 10-year Treasury note and the Barclays U.S. Aggregate Bond Index (representing the broad taxable U.S. bond market) returned –5.20% and –1.77%, respectively. By contrast, the S&P 500 Index gained 8.31% as the U.S. economy showed signs of attaining sustainable growth, fueled in part by Fed stimulus. Improvements in the housing and job markets helped trigger optimism, though their absolute numbers still fell short of pre-2008 levels.
Full recovery from 2008 remains a distant goal. Economic growth is still subpar compared with past recoveries, hampered further by the fiscal sequester and partial government shutdown. Faced with these challenges, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios—as appropriate—for meeting financial goals. We appreciate your continued trust in us in this uncertain environment.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
Don Pratt
Dear Fellow Shareholders,
This is my last letter to shareholders as the funds’ Chairman, as I will retire at the end of 2013.
My personal thanks go to the independent directors that elected me to the Board and subsequently to the Chairman position, and with whom I have worked to reorganize the Board’s committee structure and annually improve our governance processes. Throughout my tenure, the Board has addressed its responsibilities to shareholders diligently in committee work, the annual contract review, and the execution of our oversight responsibilities. I expect that it will continue to do so well into the future.
Thanks also to the American Century Investments management team led by Jonathan Thomas. Its transparency, candor, and open communication with the Board is most appreciated. I have served on more than 20 boards and this is the most productive and enjoyable relationship with management I have experienced.
Finally, thanks to the many shareholders who have written with questions, comments, and suggestions. Each was heard and addressed and enabled the board to better represent your interests. Keep communicating with us so that the Board can continue to be aware of your interests, concerns, and questions. My best wishes to Jim Olson, my successor as Chairman, and the other independent directors who continue to serve on your behalf.
And remember, as the firm’s founder Jim Stowers, Jr. so often observed, “The best is yet to be.”
Best regards,
Don Pratt
Performance |
Total Returns as of September 30, 2013 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | TWVLX | 7.70% | 21.65% | 9.33% | 7.76% | 9.75% | 9/1/93 |
Russell 3000 Value Index | — | 7.50% | 22.67% | 8.88% | 8.08% | 9.20%(2) | — |
S&P 500 Index | — | 8.31% | 19.34% | 10.01% | 7.56% | 8.72%(2) | — |
Institutional Class | AVLIX | 7.79% | 21.85% | 9.53% | 7.97% | 7.37% | 7/31/97 |
A Class(3) No sales charge* With sales charge* | TWADX
| 7.71% 1.56% | 21.36% 14.33% | 9.06% 7.77% | 7.50% 6.86% | 8.16% 7.78% | 10/2/96
|
B Class No sales charge* With sales charge* | ACBVX
| 7.19% 2.19% | 20.41% 16.41% | 8.23% 8.09% | 6.72% 6.72% | 7.81% 7.81% | 1/31/03
|
C Class No sales charge* With sales charge* | ACLCX
| 7.10% 6.10% | 20.41% 20.41% | 8.23% 8.23% | 6.72% 6.72% | 5.46% 5.46% | 6/4/01
|
R Class | AVURX | 7.58% | 21.07% | 8.79% | — | 5.17% | 7/29/05 |
R6 Class | AVUDX | — | — | — | — | -1.74%(1) | 7/26/13 |
* | 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 to 0.00% after the sixth year. 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 | R6 Class |
1.00% | 0.80% | 1.25% | 2.00% | 2.00% | 1.50% | 0.65% |
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.
Fund Characteristics |
SEPTEMBER 30, 2013 | |
Top Ten Holdings | % of net assets |
Exxon Mobil Corp. | 4.2% |
Pfizer, Inc. | 3.0% |
General Electric Co. | 3.0% |
Chevron Corp. | 2.8% |
Procter & Gamble Co. (The) | 2.5% |
Wells Fargo & Co. | 2.5% |
Imperial Oil Ltd. | 2.4% |
Northern Trust Corp. | 2.2% |
Republic Services, Inc. | 2.2% |
AT&T, Inc. | 2.1% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 18.0% |
Pharmaceuticals | 8.1% |
Commercial Banks | 6.4% |
Health Care Equipment and Supplies | 5.0% |
Capital Markets | 4.8% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 90.7% |
Foreign Common Stocks* | 6.7% |
Total Common Stocks | 97.4% |
Temporary Cash Investments | 2.8% |
Other Assets and Liabilities | (0.2)% |
*Includes depositary shares, dual listed securities and foreign ordinary shares.
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013 (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. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning 4/1/13 | Ending 9/30/13 | Expenses Paid During Period(1) 4/1/13 – 9/30/13 | Annualized | |
Actual | ||||
Investor Class | $1,000 | $1,077.00 | $5.15 | 0.99% |
Institutional Class | $1,000 | $1,077.90 | $4.12 | 0.79% |
A Class | $1,000 | $1,077.10 | $6.46 | 1.24% |
B Class | $1,000 | $1,071.90 | $10.34 | 1.99% |
C Class | $1,000 | $1,071.00 | $10.33 | 1.99% |
R Class | $1,000 | $1,075.80 | $7.75 | 1.49% |
R6 Class | $1,000 | $982.60(2) | $1.15(3) | 0.63% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.11 | $5.01 | 0.99% |
Institutional Class | $1,000 | $1,021.11 | $4.00 | 0.79% |
A Class | $1,000 | $1,018.85 | $6.28 | 1.24% |
B Class | $1,000 | $1,015.09 | $10.05 | 1.99% |
C Class | $1,000 | $1,015.09 | $10.05 | 1.99% |
R Class | $1,000 | $1,017.60 | $7.54 | 1.49% |
R6 Class | $1,000 | $1,021.91(4) | $3.19(4) | 0.63% |
(1) | Expenses are equal to the class’s annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. |
(2) | Ending account value based on actual return from July 26, 2013 (commencement of sale) through September 30, 2013. |
(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 67, the number of days in the period from July 26, 2013 (commencement of sale) through September 30, 2013, divided by 365, 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 the 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. |
Schedule of Investments |
SEPTEMBER 30, 2013 (UNAUDITED)
Shares | Value | |||||
Common Stocks — 97.4% | ||||||
AEROSPACE AND DEFENSE — 1.9% | ||||||
Boeing Co. (The) | 39,196 | $4,605,530 | ||||
General Dynamics Corp. | 233,861 | 20,467,515 | ||||
Northrop Grumman Corp. | 87,678 | 8,352,206 | ||||
Raytheon Co. | 165,406 | 12,747,840 | ||||
Textron, Inc. | 422,170 | 11,656,114 | ||||
57,829,205 | ||||||
AIR FREIGHT AND LOGISTICS — 0.3% | ||||||
United Parcel Service, Inc., Class B | 103,102 | 9,420,430 | ||||
AIRLINES — 1.0% | ||||||
Japan Airlines Co. Ltd. | 127,106 | 7,681,059 | ||||
Southwest Airlines Co. | 1,485,038 | 21,622,153 | ||||
29,303,212 | ||||||
AUTOMOBILES — 1.1% | ||||||
General Motors Co.(1) | 378,426 | 13,611,983 | ||||
Honda Motor Co., Ltd. | 298,400 | 11,338,563 | ||||
Toyota Motor Corp. | 137,900 | 8,796,307 | ||||
33,746,853 | ||||||
BEVERAGES — 0.7% | ||||||
Dr Pepper Snapple Group, Inc. | 446,308 | 20,003,525 | ||||
CAPITAL MARKETS — 4.8% | ||||||
Charles Schwab Corp. (The) | 882,245 | 18,650,659 | ||||
Franklin Resources, Inc. | 242,135 | 12,239,924 | ||||
Goldman Sachs Group, Inc. (The) | 141,994 | 22,464,871 | ||||
LPL Financial Holdings, Inc. | 413,790 | 15,852,295 | ||||
Northern Trust Corp. | 1,238,504 | 67,362,233 | ||||
State Street Corp. | 149,440 | 9,825,680 | ||||
146,395,662 | ||||||
COMMERCIAL BANKS — 6.4% | ||||||
Comerica, Inc. | 269,367 | 10,588,817 | ||||
Commerce Bancshares, Inc. | 298,615 | 13,082,323 | ||||
Cullen/Frost Bankers, Inc. | 202,686 | 14,299,497 | ||||
PNC Financial Services Group, Inc. (The) | 639,223 | 46,311,706 | ||||
U.S. Bancorp | 906,582 | 33,162,770 | ||||
Wells Fargo & Co. | 1,837,598 | 75,929,549 | ||||
193,374,662 | ||||||
COMMERCIAL SERVICES AND SUPPLIES — 4.7% | ||||||
ADT Corp. (The) | 577,012 | 23,461,308 | ||||
Republic Services, Inc. | 2,006,733 | 66,944,613 | ||||
Tyco International Ltd. | 779,652 | 27,272,227 | ||||
Waste Management, Inc. | 566,701 | 23,370,749 | ||||
141,048,897 | ||||||
COMMUNICATIONS EQUIPMENT — 1.9% | ||||||
Cisco Systems, Inc. | 2,036,254 | 47,689,069 | ||||
QUALCOMM, Inc. | 153,810 | 10,360,641 | ||||
58,049,710 | ||||||
COMPUTERS AND PERIPHERALS — 3.1% | ||||||
Apple, Inc. | 84,560 | 40,313,980 | ||||
Diebold, Inc. | 207,475 | 6,091,466 | ||||
EMC Corp. | 793,855 | 20,290,934 | ||||
Hewlett-Packard Co. | 533,225 | 11,187,060 | ||||
QLogic Corp.(1) | 701,718 | 7,676,795 | ||||
Seagate Technology plc | 213,280 | 9,328,867 | ||||
94,889,102 | ||||||
CONTAINERS AND PACKAGING — 0.6% | ||||||
Bemis Co., Inc. | 233,508 | 9,109,147 | ||||
Sonoco Products Co. | 259,060 | 10,087,796 | ||||
19,196,943 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 3.0% | ||||||
Berkshire Hathaway, Inc., Class A(1) | 189 | 32,207,490 | ||||
JPMorgan Chase & Co. | 1,152,911 | 59,593,970 | ||||
91,801,460 | ||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.6% | ||||||
AT&T, Inc. | 1,904,062 | 64,395,377 | ||||
CenturyLink, Inc. | 487,889 | 15,309,957 | ||||
79,705,334 | ||||||
ELECTRIC UTILITIES — 3.0% | ||||||
Great Plains Energy, Inc. | 1,271,186 | 28,220,329 | ||||
Southern Co. | 159,810 | 6,580,976 | ||||
Westar Energy, Inc. | 897,008 | 27,493,295 | ||||
Xcel Energy, Inc. | 1,061,835 | 29,317,265 | ||||
91,611,865 | ||||||
ELECTRICAL EQUIPMENT — 0.2% | ||||||
Emerson Electric Co. | 85,024 | 5,501,053 | ||||
ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS — 0.4% | ||||||
Molex, Inc. | 321,868 | 12,398,355 | ||||
ENERGY EQUIPMENT AND SERVICES — 0.2% | ||||||
Helmerich & Payne, Inc. | 74,620 | 5,145,049 | ||||
FOOD AND STAPLES RETAILING — 1.6% | ||||||
CVS Caremark Corp. | 149,019 | 8,456,828 | ||||
Sysco Corp. | 569,033 | 18,112,320 | ||||
Wal-Mart Stores, Inc. | 283,231 | 20,947,765 | ||||
47,516,913 | ||||||
FOOD PRODUCTS — 2.2% | ||||||
ConAgra Foods, Inc. | 279,530 | 8,480,940 | ||||
Hillshire Brands Co. | 494,351 | 15,196,350 | ||||
Kellogg Co. | 90,258 | 5,300,852 |
Shares | Value |
Mondelez International, Inc. Class A | 936,236 | $29,416,535 | ||||
Unilever CVA | 208,050 | 8,093,398 | ||||
66,488,075 | ||||||
GAS UTILITIES — 0.3% | ||||||
Laclede Group, Inc. (The) | 226,530 | 10,193,850 | ||||
HEALTH CARE EQUIPMENT AND SUPPLIES — 5.0% | ||||||
Becton Dickinson and Co. | 117,523 | 11,754,651 | ||||
Boston Scientific Corp.(1) | 1,523,776 | 17,889,130 | ||||
CareFusion Corp.(1) | 1,207,446 | 44,554,758 | ||||
Medtronic, Inc. | 652,025 | 34,720,331 | ||||
Stryker Corp. | 304,360 | 20,571,692 | ||||
Varian Medical Systems, Inc.(1) | 82,110 | 6,136,080 | ||||
Zimmer Holdings, Inc. | 195,772 | 16,080,712 | ||||
151,707,354 | ||||||
HEALTH CARE PROVIDERS AND SERVICES — 2.2% | ||||||
LifePoint Hospitals, Inc.(1) | 439,528 | 20,495,191 | ||||
Quest Diagnostics, Inc. | 128,260 | 7,925,185 | ||||
UnitedHealth Group, Inc. | 386,265 | 27,660,437 | ||||
WellPoint, Inc. | 120,010 | 10,034,036 | ||||
66,114,849 | ||||||
HOTELS, RESTAURANTS AND LEISURE — 1.7% | ||||||
Carnival Corp. | 561,153 | 18,316,034 | ||||
International Game Technology | 452,680 | 8,569,232 | ||||
International Speedway Corp., Class A | 477,233 | 15,414,626 | ||||
Speedway Motorsports, Inc. | 440,753 | 7,889,479 | ||||
50,189,371 | ||||||
HOUSEHOLD PRODUCTS — 2.5% | ||||||
Procter & Gamble Co. (The) | 1,021,749 | 77,234,007 | ||||
INDUSTRIAL CONGLOMERATES — 3.8% | ||||||
General Electric Co. | 3,775,797 | 90,203,790 | ||||
Koninklijke Philips Electronics NV | 786,590 | 25,358,424 | ||||
115,562,214 | ||||||
INSURANCE — 4.4% | ||||||
ACE Ltd. | 198,161 | 18,539,943 | ||||
Aflac, Inc. | 128,070 | 7,939,059 | ||||
Allstate Corp. (The) | 90,779 | 4,588,879 | ||||
Chubb Corp. (The) | 175,544 | 15,669,057 | ||||
HCC Insurance Holdings, Inc. | 253,689 | 11,116,652 | ||||
Marsh & McLennan Cos., Inc. | 325,325 | 14,167,904 | ||||
MetLife, Inc. | 494,228 | 23,204,005 | ||||
Reinsurance Group of America, Inc. | 251,263 | 16,832,108 | ||||
Travelers Cos., Inc. (The) | 143,847 | 12,193,910 | ||||
Unum Group | 257,654 | 7,842,988 | ||||
132,094,505 | ||||||
INTERNET AND CATALOG RETAIL — 0.2% | ||||||
Expedia, Inc. | 114,500 | 5,929,955 | ||||
LIFE SCIENCES TOOLS AND SERVICES — 0.2% | ||||||
Agilent Technologies, Inc. | 109,248 | 5,598,960 | ||||
MACHINERY — 0.2% | ||||||
Xylem, Inc. | 192,930 | 5,388,535 | ||||
MEDIA — 0.3% | ||||||
Walt Disney Co. (The) | 165,260 | 10,657,617 | ||||
METALS AND MINING — 0.6% | ||||||
Freeport-McMoRan Copper & Gold, Inc. | 331,708 | 10,972,901 | ||||
Newmont Mining Corp. | 214,905 | 6,038,830 | ||||
17,011,731 | ||||||
MULTI-UTILITIES — 1.2% | ||||||
PG&E Corp. | 889,870 | 36,413,480 | ||||
MULTILINE RETAIL — 0.6% | ||||||
Target Corp. | 289,213 | 18,503,848 | ||||
OIL, GAS AND CONSUMABLE FUELS — 18.0% | ||||||
Apache Corp. | 379,222 | 32,286,961 | ||||
Chevron Corp. | 702,197 | 85,316,935 | ||||
Devon Energy Corp. | 541,745 | 31,291,191 | ||||
Exxon Mobil Corp. | 1,465,406 | 126,083,532 | ||||
Imperial Oil Ltd. | 1,649,571 | 72,433,471 | ||||
Occidental Petroleum Corp. | 595,783 | 55,729,542 | ||||
Peabody Energy Corp. | 503,107 | 8,678,596 | ||||
Royal Dutch Shell plc, Class A | 241,990 | 7,981,434 | ||||
Southwestern Energy Co.(1) | 631,395 | 22,970,150 | ||||
Total SA | 991,531 | 57,539,060 | ||||
Ultra Petroleum Corp.(1) | 1,080,674 | 22,229,464 | ||||
Williams Partners LP | 421,758 | 22,302,563 | ||||
544,842,899 | ||||||
PHARMACEUTICALS — 8.1% | ||||||
Eli Lilly & Co. | 151,967 | 7,648,499 | ||||
Hospira, Inc.(1) | 437,728 | 17,167,692 | ||||
Johnson & Johnson | 703,349 | 60,973,325 | ||||
Mallinckrodt plc(1) | 244,990 | 10,801,609 | ||||
Merck & Co., Inc. | 1,239,957 | 59,034,353 | ||||
Pfizer, Inc. | 3,182,713 | 91,375,690 | ||||
247,001,168 | ||||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 1.9% | ||||||
Annaly Capital Management, Inc. | 1,451,758 | 16,811,358 | ||||
Corrections Corp. of America | 644,009 | 22,250,511 | ||||
Piedmont Office Realty Trust, Inc., Class A | 1,049,945 | 18,227,045 | ||||
57,288,914 |
Shares | Value |
ROAD AND RAIL — 0.8% | ||||||
Heartland Express, Inc. | 1,147,170 | $16,278,343 | ||||
Werner Enterprises, Inc. | 398,828 | 9,304,657 | ||||
25,583,000 | ||||||
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT — 3.2% | ||||||
Applied Materials, Inc. | 1,258,334 | 22,071,178 | ||||
Intel Corp. | 2,076,927 | 47,603,167 | ||||
Marvell Technology Group Ltd. | 511,456 | 5,881,744 | ||||
Maxim Integrated Products, Inc. | 305,940 | 9,117,012 | ||||
Teradyne, Inc.(1) | 701,260 | 11,584,815 | ||||
96,257,916 | ||||||
SOFTWARE — 0.9% | ||||||
Microsoft Corp. | 329,922 | 10,989,702 | ||||
NICE Systems Ltd. ADR | 116,790 | 4,831,602 | ||||
Oracle Corp. | 325,239 | 10,788,178 | ||||
26,609,482 | ||||||
SPECIALTY RETAIL — 1.0% | ||||||
Bed Bath & Beyond, Inc.(1) | 76,775 | 5,939,314 | ||||
Lowe’s Cos., Inc. | 512,644 | 24,406,981 | ||||
30,346,295 | ||||||
TEXTILES, APPAREL AND LUXURY GOODS — 0.2% | ||||||
Coach, Inc. | 110,328 | 6,016,186 | ||||
THRIFTS AND MORTGAGE FINANCE — 0.4% | ||||||
People’s United Financial, Inc. | 857,990 | 12,337,896 | ||||
TOTAL COMMON STOCKS (Cost $2,400,762,135) | 2,952,310,337 | |||||
Temporary Cash Investments — 2.8% | ||||||
Repurchase Agreement, Bank of America Merrill Lynch, (collateralized by various U.S. Treasury obligations, 1.375%, 9/30/18, valued at $16,509,681), in a joint trading account at 0.03%, dated 9/30/13, due 10/1/13 (Delivery value $16,192,161) | 16,192,148 | |||||
Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 5/15/30, valued at $19,783,998), in a joint trading account at 0.01%, dated 9/30/13, due 10/1/13 (Delivery value $19,430,583) | 19,430,578 | |||||
Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 1.75%, 5/15/22, valued at $19,821,975), in a joint trading account at 0.02%, dated 9/30/13, due 10/1/13 (Delivery value $19,430,589) | 19,430,578 | |||||
SSgA U.S. Government Money Market Fund | 29,926,377 | 29,926,377 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $84,979,681) | 84,979,681 | |||||
TOTAL INVESTMENT SECURITIES — 100.2% (Cost $2,485,741,816) | 3,037,290,018 | |||||
OTHER ASSETS AND LIABILITIES — (0.2)% | (5,116,939 | ) | ||||
TOTAL NET ASSETS — 100.0% | $3,032,173,079 |
Forward Foreign Currency Exchange Contracts
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Gain (Loss) | ||||||||
USD | 55,491,568 | CAD | 57,206,258 | JPMorgan Chase Bank N.A. | 10/31/13 | $(5,123 | ) | |||||
USD | 75,057,617 | EUR | 55,493,332 | UBS AG | 10/31/13 | (21,926 | ) | |||||
USD | 21,142,307 | JPY | 2,085,033,165 | Credit Suisse AG | 10/31/13 | (73,123 | ) | |||||
$(100,172 | ) |
Notes to Schedule of Investments
ADR = American Depositary Receipt
CAD = Canadian Dollar
CVA = Certificaten Van Aandelen
EUR = Euro
JPY = Japanese Yen
USD = United States Dollar
(1) | Non-income producing. |
See Notes to Financial Statements.
Statement of Assets and Liabilities |
SEPTEMBER 30, 2013 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $2,485,741,816) | $3,037,290,018 | ||
Foreign currency holdings, at value (cost of $978,980) | 978,017 | ||
Receivable for investments sold | 3,352,528 | ||
Receivable for capital shares sold | 2,072,779 | ||
Dividends and interest receivable | 6,379,509 | ||
3,050,072,851 | |||
Liabilities | |||
Payable for investments purchased | 10,116,788 | ||
Payable for capital shares redeemed | 5,242,009 | ||
Unrealized loss on forward foreign currency exchange contracts | 100,172 | ||
Accrued management fees | 2,343,973 | ||
Distribution and service fees payable | 96,830 | ||
17,899,772 | |||
Net Assets | $3,032,173,079 | ||
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $2,657,839,531 | ||
Undistributed net investment income | 4,169,019 | ||
Accumulated net realized loss | (181,288,696 | ) | |
Net unrealized appreciation | 551,453,225 | ||
$3,032,173,079 |
Net assets | Shares outstanding | Net asset value per share | |
Investor Class, $0.01 Par Value | $2,164,864,635 | 285,176,131 | $7.59 |
Institutional Class, $0.01 Par Value | $492,019,414 | 64,737,136 | $7.60 |
A Class, $0.01 Par Value | $325,193,318 | 42,862,703 | $7.59* |
B Class, $0.01 Par Value | $1,094,327 | 144,674 | $7.56 |
C Class, $0.01 Par Value | $22,081,745 | 2,942,921 | $7.50 |
R Class, $0.01 Par Value | $26,895,063 | 3,543,755 | $7.59 |
R6 Class, $0.01 Par Value | $24,577 | 3,232 | $7.60 |
*Maximum offering price $8.05 (net asset value divided by 0.9425).
See Notes to Financial Statements.
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $391,035) | $39,859,764 | ||
Interest | 6,664 | ||
39,866,428 | |||
Expenses: | |||
Management fees | 13,621,873 | ||
Distribution and service fees: | |||
A Class | 396,529 | ||
B Class | 6,307 | ||
C Class | 99,084 | ||
R Class | 72,179 | ||
Directors’ fees and expenses | 62,968 | ||
14,258,940 | |||
Net investment income (loss) | 25,607,488 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 133,882,531 | ||
Foreign currency transactions | (2,177,422 | ) | |
131,705,109 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 51,887,696 | ||
Translation of assets and liabilities in foreign currencies | (118,715 | ) | |
51,768,981 | |||
Net realized and unrealized gain (loss) | 183,474,090 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $209,081,578 |
See Notes to Financial Statements.
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) AND YEAR ENDED MARCH 31, 2013 | ||||||
Increase (Decrease) in Net Assets | September 30, 2013 | March 31, 2013 | ||||
Operations | ||||||
Net investment income (loss) | $25,607,488 | $36,055,327 | ||||
Net realized gain (loss) | 131,705,109 | 64,516,677 | ||||
Change in net unrealized appreciation (depreciation) | 51,768,981 | 242,102,942 | ||||
Net increase (decrease) in net assets resulting from operations | 209,081,578 | 342,674,946 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (18,451,450 | ) | (30,144,837 | ) | ||
Institutional Class | (4,458,047 | ) | (2,541,734 | ) | ||
A Class | (2,417,290 | ) | (3,675,451 | ) | ||
B Class | (4,718 | ) | (12,400 | ) | ||
C Class | (77,356 | ) | (92,780 | ) | ||
R Class | (198,374 | ) | (270,012 | ) | ||
R6 Class | (113 | ) | — | |||
Decrease in net assets from distributions | (25,607,348 | ) | (36,737,214 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions | 376,609,514 | (62,140,160 | ) | |||
Net increase (decrease) in net assets | 560,083,744 | 243,797,572 | ||||
Net Assets | ||||||
Beginning of period | 2,472,089,335 | 2,228,291,763 | ||||
End of period | $3,032,173,079 | $2,472,089,335 | ||||
Undistributed net investment income | $4,169,019 | $4,168,879 |
See Notes to Financial Statements.
Notes to Financial Statements |
SEPTEMBER 30, 2013 (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 offers the Investor Class, the Institutional Class, the A Class, the B Class, the C Class, the R Class and the R6 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 and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees. Sale of the R6 Class commenced on July 26, 2013.
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.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund’s tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
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 annual management fee schedule ranges from 0.65% to 0.80% for the Institutional Class and 0.50% to 0.65% for the R6 Class. The effective annual management fee for each class for the period ended September 30, 2013 was 0.98% for the Investor Class, A Class, B Class, C Class and R Class, 0.78% for the Institutional Class and 0.63% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, 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, 2013 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 corporation’s investment advisor, ACIM, the corporation’s distributor, ACIS, and the corporation’s transfer agent, American Century Services, LLC are wholly owned, directly or indirectly, by ACC.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2013 were $1,091,634,342 and $732,599,218, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2013(1) | Year ended March 31, 2013 | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Investor Class/Shares Authorized | 1,100,000,000 | 1,100,000,000 | ||||||||||
Sold | 34,274,008 | $256,703,766 | 45,160,547 | $286,129,344 | ||||||||
Issued in reinvestment of distributions | 2,237,639 | 16,788,243 | 4,183,505 | 26,164,018 | ||||||||
Redeemed | (26,450,020 | ) | (197,545,713 | ) | (65,081,757 | ) | (413,245,166 | ) | ||||
10,061,627 | 75,946,296 | (15,737,705 | ) | (100,951,804 | ) | |||||||
Institutional Class/Shares Authorized | 200,000,000 | 200,000,000 | ||||||||||
Sold | 47,350,136 | 344,406,590 | 8,355,624 | 53,741,297 | ||||||||
Issued in reinvestment of distributions | 591,824 | 4,444,249 | 401,091 | 2,530,758 | ||||||||
Redeemed | (7,497,619 | ) | (56,531,412 | ) | (4,682,274 | ) | (29,793,368 | ) | ||||
40,444,341 | 292,319,427 | 4,074,441 | 26,478,687 | |||||||||
A Class/Shares Authorized | 200,000,000 | 200,000,000 | ||||||||||
Sold | 5,234,357 | 39,042,308 | 8,794,969 | 55,446,285 | ||||||||
Issued in reinvestment of distributions | 307,130 | 2,300,693 | 559,708 | 3,499,387 | ||||||||
Redeemed | (4,216,788 | ) | (31,573,978 | ) | (8,899,559 | ) | (54,893,712 | ) | ||||
1,324,699 | 9,769,023 | 455,118 | 4,051,960 | |||||||||
B Class/Shares Authorized | 5,000,000 | 5,000,000 | ||||||||||
Sold | 8,283 | 63,141 | 19,606 | 126,608 | ||||||||
Issued in reinvestment of distributions | 543 | 4,041 | 1,804 | 10,971 | ||||||||
Redeemed | (79,166 | ) | (582,035 | ) | (174,133 | ) | (1,075,777 | ) | ||||
(70,340 | ) | (514,853 | ) | (152,723 | ) | (938,198 | ) | |||||
C Class/Shares Authorized | 15,000,000 | 15,000,000 | ||||||||||
Sold | 727,014 | 5,361,370 | 907,282 | 5,658,849 | ||||||||
Issued in reinvestment of distributions | 8,534 | 63,152 | 11,902 | 72,522 | ||||||||
Redeemed | (178,146 | ) | (1,310,753 | ) | (351,171 | ) | (2,176,508 | ) | ||||
557,402 | 4,113,769 | 568,013 | 3,554,863 | |||||||||
R Class/Shares Authorized | 15,000,000 | 15,000,000 | ||||||||||
Sold | 1,463,218 | 10,874,599 | 1,387,484 | 9,039,989 | ||||||||
Issued in reinvestment of distributions | 26,555 | �� | 198,374 | 43,254 | 270,012 | |||||||
Redeemed | (2,209,861 | ) | (16,122,234 | ) | (578,273 | ) | (3,645,669 | ) | ||||
(720,088 | ) | (5,049,261 | ) | 852,465 | 5,664,332 | |||||||
R6 Class/Shares Authorized | 50,000,000 | N/A | ||||||||||
Sold | 3,217 | 25,000 | ||||||||||
Issued in reinvestment of distributions | 15 | 113 | ||||||||||
3,232 | 25,113 | |||||||||||
Net increase (decrease) | 51,600,873 | $376,609,514 | (9,940,391 | ) | $(62,140,160 | ) |
(1) | July 26, 2013 (commencement of sale) through September 30, 2013 for the R6 Class. |
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 | $2,748,257,019 | — | — |
Foreign Common Stocks | 4,831,602 | $199,221,716 | — |
Temporary Cash Investments | 29,926,377 | 55,053,304 | — |
Total Value of Investment Securities | $2,783,014,998 | $254,275,020 | — |
Other Financial Instruments | |||
Total Unrealized Gain (Loss) on Forward Foreign | — | $(100,172) | — |
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 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, 2013, is disclosed on the Statement of Assets and Liabilities as a liability of $100,172 in unrealized loss on forward foreign currency exchange contracts. For the six months ended September 30, 2013, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(2,137,882) in net realized gain (loss) on foreign currency transactions and $(139,507) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
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, 2013, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $2,560,887,915 |
Gross tax appreciation of investments | $499,340,919 |
Gross tax depreciation of investments | (22,938,816) |
Net tax appreciation (depreciation) of investments | $476,402,103 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2013, the fund had accumulated short-term capital losses of $(234,191,643), 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 $(28,417,850) and $(205,773,793) expire in 2017 and 2018, respectively.
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||
Net Asset | Net Income | Net | Total From Investment Operations | Distributions From Net Income | Net Asset | Total | Operating Expenses | Net | Portfolio | Net Assets, | |
Investor Class | |||||||||||
2013(3) | $7.11 | 0.07 | 0.48 | 0.55 | (0.07) | $7.59 | 7.70% | 0.99%(4) | 1.79%(4) | 27% | $2,164,865 |
2013 | $6.23 | 0.10 | 0.89 | 0.99 | (0.11) | $7.11 | 16.08% | 1.00% | 1.65% | 48% | $1,955,536 |
2012 | $5.97 | 0.10 | 0.26 | 0.36 | (0.10) | $6.23 | 6.22% | 1.01% | 1.70% | 62% | $1,811,710 |
2011 | $5.40 | 0.11 | 0.57 | 0.68 | (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) | $5.40 | 44.84% | 1.00% | 1.97% | 62% | $1,274,063 |
2009 | $5.78 | 0.13 | (1.98) | (1.85) | (0.13) | $3.80 | (32.34)% | 1.00% | 2.63% | 91% | $975,772 |
Institutional Class | |||||||||||
2013(3) | $7.12 | 0.07 | 0.48 | 0.55 | (0.07) | $7.60 | 7.79% | 0.79%(4) | 1.99%(4) | 27% | $492,019 |
2013 | $6.24 | 0.12 | 0.88 | 1.00 | (0.12) | $7.12 | 16.29% | 0.80% | 1.85% | 48% | $172,891 |
2012 | $5.98 | 0.11 | 0.26 | 0.37 | (0.11) | $6.24 | 6.42% | 0.81% | 1.90% | 62% | $126,086 |
2011 | $5.41 | 0.12 | 0.57 | 0.69 | (0.12) | $5.98 | 13.05% | 0.81% | 2.25% | 76% | $225,950 |
2010 | $3.81 | 0.10 | 1.60 | 1.70 | (0.10) | $5.41 | 45.01% | 0.80% | 2.17% | 62% | $214,112 |
2009 | $5.79 | 0.14 | (1.98) | (1.84) | (0.14) | $3.81 | (32.14)% | 0.80% | 2.83% | 91% | $123,484 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||
Net Asset | Net Income | Net | Total From Investment Operations | Distributions From Net Income | Net Asset | Total | Operating Expenses | Net | Portfolio | Net Assets, | |
A Class | |||||||||||
2013(3) | $7.10 | 0.06 | 0.49 | 0.55 | (0.06) | $7.59 | 7.71% | 1.24%(4) | 1.54%(4) | 27% | $325,193 |
2013 | $6.23 | 0.09 | 0.87 | 0.96 | (0.09) | $7.10 | 15.64% | 1.25% | 1.40% | 48% | $295,085 |
2012 | $5.97 | 0.08 | 0.27 | 0.35 | (0.09) | $6.23 | 5.95% | 1.26% | 1.45% | 62% | $255,777 |
2011 | $5.40 | 0.10 | 0.57 | 0.67 | (0.10) | $5.97 | 12.57% | 1.26% | 1.80% | 76% | $214,896 |
2010 | $3.80 | 0.08 | 1.60 | 1.68 | (0.08) | $5.40 | 44.47% | 1.25% | 1.72% | 62% | $119,363 |
2009 | $5.78 | 0.12 | (1.98) | (1.86) | (0.12) | $3.80 | (32.51)% | 1.25% | 2.38% | 91% | $83,254 |
B Class | |||||||||||
2013(3) | $7.08 | 0.03 | 0.48 | 0.51 | (0.03) | $7.56 | 7.19% | 1.99%(4) | 0.79%(4) | 27% | $1,094 |
2013 | $6.21 | 0.04 | 0.88 | 0.92 | (0.05) | $7.08 | 14.86% | 2.00% | 0.65% | 48% | $1,523 |
2012 | $5.96 | 0.04 | 0.26 | 0.30 | (0.05) | $6.21 | 5.14% | 2.01% | 0.70% | 62% | $2,283 |
2011 | $5.39 | 0.06 | 0.57 | 0.63 | (0.06) | $5.96 | 11.87% | 2.01% | 1.05% | 76% | $2,916 |
2010 | $3.80 | 0.05 | 1.59 | 1.64 | (0.05) | $5.39 | 43.21% | 2.00% | 0.97% | 62% | $3,182 |
2009 | $5.78 | 0.08 | (1.97) | (1.89) | (0.09) | $3.80 | (33.01)% | 2.00% | 1.63% | 91% | $2,651 |
C Class | |||||||||||
2013(3) | $7.03 | 0.03 | 0.47 | 0.50 | (0.03) | $7.50 | 7.10% | 1.99%(4) | 0.79%(4) | 27% | $22,082 |
2013 | $6.16 | 0.04 | 0.88 | 0.92 | (0.05) | $7.03 | 14.98% | 2.00% | 0.65% | 48% | $16,761 |
2012 | $5.92 | 0.04 | 0.25 | 0.29 | (0.05) | $6.16 | 5.01% | 2.01% | 0.70% | 62% | $11,194 |
2011 | $5.35 | 0.06 | 0.57 | 0.63 | (0.06) | $5.92 | 11.96% | 2.01% | 1.05% | 76% | $7,659 |
2010 | $3.77 | 0.05 | 1.58 | 1.63 | (0.05) | $5.35 | 43.29% | 2.00% | 0.97% | 62% | $7,294 |
2009 | $5.74 | 0.08 | (1.96) | (1.88) | (0.09) | $3.77 | (33.06)% | 2.00% | 1.63% | 91% | $5,414 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||
Net Asset | Net Income | Net | Total From Investment Operations | Distributions From Net Income | Net Asset | Total | Operating Expenses | Net | Portfolio | Net Assets, | |
R Class | |||||||||||
2013(3) | $7.10 | 0.05 | 0.49 | 0.54 | (0.05) | $7.59 | 7.58% | 1.49%(4) | 1.29%(4) | 27% | $26,895 |
2013 | $6.23 | 0.07 | 0.88 | 0.95 | (0.08) | $7.10 | 15.35% | 1.50% | 1.15% | 48% | $30,293 |
2012 | $5.97 | 0.07 | 0.26 | 0.33 | (0.07) | $6.23 | 5.72% | 1.51% | 1.20% | 62% | $21,241 |
2011 | $5.40 | 0.07 | 0.58 | 0.65 | (0.08) | $5.97 | 12.29% | 1.51% | 1.55% | 76% | $17,470 |
2010 | $3.80 | 0.07 | 1.60 | 1.67 | (0.07) | $5.40 | 44.10% | 1.50% | 1.47% | 62% | $4,527 |
2009 | $5.78 | 0.11 | (1.98) | (1.87) | (0.11) | $3.80 | (32.67)% | 1.50% | 2.13% | 91% | $2,255 |
R6 Class | |||||||||||
2013(5) | $7.77 | 0.03 | (0.16) | (0.13) | (0.04) | $7.60 | (1.74)% | 0.63%(4) | 2.20%(4) | 27%(6) | $25 |
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, 2013 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through September 30, 2013 (unaudited). |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2013. |
See Notes to Financial Statements.
Approval of Management Agreement |
At a meeting held on June 20, 2013, 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 directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, 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.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided 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; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | 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. |
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:
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, 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, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund 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.
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.
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund’s investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the “About Us” page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
Notes |
Notes |
Notes |
Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 |
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.
©2013 American Century Proprietary Holdings, Inc. All rights reserved.
CL-SAN-79782 1311
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, 2013 | |||
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, 2013 |
By: | /s/ C. Jean Wade | ||
Name: | C. Jean Wade | ||
Title: | Vice President, Treasurer, and | ||
Chief Financial Officer | |||
(principal financial officer) | |||
Date: | November 29, 2013 |