ck0000757928-20230930
February
1, 2024
American
Century Investments
Statement
of Additional Information
American
Century Target Maturities Trust
Zero
Coupon 2025 Fund
Investor
Class (BTTRX)
Advisor
Class (ACTVX)
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statement of additional information adds to the discussion in the fund’s
prospectus dated February 1, 2024 but is not a prospectus. The statement
of additional information should be read in conjunction with the fund’s
current prospectus. If you would like a copy of the prospectus, please
contact us at the address or telephone numbers listed on the back cover or
visit American Century Investments’ website at
americancentury.com. |
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This
statement of additional information incorporates by reference
certain
information that appears in the fund’s annual report,
which is
delivered to all investors. You may obtain a free copy
of the fund’s
annual report by calling 1-800-345-2021. |
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©2024
American Century Proprietary Holdings, Inc. All rights reserved.
Table
of Contents
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| The
Fund’s History |
2 |
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| Fund
Investment Guidelines |
2 |
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| Fund
Investments and Risks |
2 |
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| Investment
Strategies and Risks |
2 |
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| Investment
Policies |
6 |
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| Temporary
Defensive Measures |
8 |
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| Portfolio
Turnover |
8 |
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| Disclosure
of Portfolio Holdings |
8 |
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| Management |
12 |
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| Board
of Trustees |
12 |
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| Officers |
17 |
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| Code
of Ethics |
18 |
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| Proxy
Voting Policies |
18 |
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| The
Funds’ Principal Shareholders |
18 |
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| Service
Providers |
18 |
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| Investment
Advisor |
18 |
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| Portfolio
Managers |
20 |
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| Transfer
Agent and Administrator |
22 |
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| Sub-Administrator |
23 |
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| Distributor |
23 |
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| Custodian
Bank |
23 |
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| Securities
Lending Agent |
23 |
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| Independent
Registered Public Accounting Firm |
23 |
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| Brokerage
Allocation |
23 |
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| Regular
Broker-Dealers |
24 |
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| Information
About Fund Shares |
25 |
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| Fund
Liquidations |
25 |
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| Multiple
Class Structure |
25 |
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| Valuation
of a Fund’s Securities |
27 |
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| Taxes |
27 |
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| Federal
Income Tax |
27 |
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| State
and Local Taxes |
28 |
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| Financial
Statements |
29 |
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| Appendix
A – Principal Shareholders |
A-1 |
| Appendix
B – Payments to Dealers |
B-1 |
| Appendix
C – Buying and Selling Fund Shares |
C-1 |
| Appendix
D – Explanation of Fixed-Income Securities Ratings |
D-1 |
| Appendix
E – Proxy Voting Policies |
E-1 |
The
Fund’s History
American
Century Target Maturities Trust is a registered open-end management investment
company that was organized as a Massachusetts business trust on March 25, 1985.
Until January 1997, it was known as Benham Target Maturities Trust. Throughout
this statement of additional information we refer to American Century Target
Maturities Trust as the trust.
The
fund described in this statement of additional information is a separate series
of the trust and operates for many purposes as if it were an independent
company. The fund has its own investment objective, strategy, management team,
assets, and tax identification and stock registration number.
Effective
November 1, 2010, Target 2025 Fund was renamed Zero Coupon 2025
Fund.
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| Fund |
Ticker
Symbol |
Inception
Date |
| Zero
Coupon 2025 Fund |
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| Investor
Class |
BTTRX |
02/15/1996 |
| Advisor
Class |
ACTVX |
06/01/1998 |
Fund
Investment Guidelines
This
section explains the extent to which the fund’s advisor, American Century
Investment Management, Inc. (ACIM), can use various investment vehicles and
strategies in managing the fund’s assets. Descriptions of the investment
techniques and risks associated with each appear in the section, Investment
Strategies and Risks,
below. In the case of the fund’s principal investment strategies, these
descriptions elaborate upon the discussion contained in the
prospectus.
The
fund is diversified as defined in the Investment Company Act of 1940 (the
Investment Company Act). Diversified means that, with respect to 75% of its
total assets, the fund will not invest more than 5% of its total assets in the
securities of a single issuer or own more than 10% of the outstanding voting
securities of a single issuer (other than U.S. government securities and
securities of other investment companies).
To
meet federal tax requirements for qualification as a regulated investment
company, the fund must limit its investments so that at the close of each
quarter of its taxable year
(1)no
more than 25% of its total assets are invested in the securities of a single
issuer (other than the U.S. government or a regulated investment company),
and
(2)with
respect to at least 50% of its total assets, no more than 5% of its total assets
are invested in the securities of a single issuer (other than the U.S.
government or a regulated investment company) and it does not own more than 10%
of the outstanding voting securities of a single issuer.
Unless
otherwise noted, the investment restrictions described below and in the fund’s
prospectus are measured at the time of the transaction in the security. If
market action affecting fund securities (including, but not limited to,
appreciation, depreciation or a credit rating event) causes the fund to exceed
an investment restriction, the advisor is not required to take immediate action.
Under normal market conditions, however, the advisor’s policies and procedures
indicate that the advisor will not make any purchases that will make the fund
further outside the investment restriction.
Fund
Investments and Risks
Investment
Strategies and Risks
This
section describes investment vehicles and techniques the portfolio managers can
use in managing the fund’s assets. It also details the risks associated with
each, because each investment vehicle and technique contributes to the fund’s
overall risk profile.
Cash
Management
The
fund may invest in U.S. government agency overnight discount notes or any money
market fund, including those managed by the advisor, provided that the
investment is consistent with the fund’s investment policies and
restrictions.
In
order to meet anticipated redemptions, anticipated purchases of additional
securities for the fund’s portfolio, or, in some cases, for temporary defensive
purposes, the fund may invest a portion of its assets in money market and other
short-term securities issued or guaranteed by the U.S. government and its
agencies and instrumentalities.
Coupon-Bearing
U.S. Treasury Securities
U.S.
Treasury bills, notes and bonds are direct obligations of the U.S. Treasury.
Historically, they have involved no risk of loss of principal if held to
maturity. Between issuance and maturity, however, the prices of these securities
change in response to changes in market interest rates. Coupon-bearing
securities generate current interest payments, and part of the fund’s return may
come from reinvesting interest earned on these securities.
Cyber
Security Risk
As
the fund increasingly relies on technology and information systems to operate,
it becomes susceptible to operational risks linked to security breaches in those
information systems. Both calculated attacks and unintentional events can cause
failures in the fund’s information systems. Cyber attacks can include acquiring
unauthorized access to information systems, usually through hacking or the use
of malicious software, for purposes of stealing assets or confidential
information, corrupting data, or disrupting fund operations. Cyber attacks can
also occur without direct access to information systems, for example by making
network services unavailable to intended users. Cyber security failures by, or
breaches of the information systems of, the advisor, distributors,
broker-dealers, other service providers (including, but not limited to, index
providers, fund accountants, custodians, transfer agents and administrators), or
the issuers of securities the fund invests in may also cause disruptions and
impact the fund’s business operations. Breaches in information security may
result in financial losses, interference with the fund’s ability to calculate
NAV, impediments to trading, inability of fund shareholders to transact
business, violations of applicable privacy and other laws, regulatory fines,
penalties, reputational damage, reimbursement or other compensation costs, or
additional compliance costs. Additionally, the fund may incur substantial costs
to prevent future cyber incidents. The fund has a business continuity plan in
the event of, and risk management systems to help prevent, such cyber attacks,
but these plans and systems have limitations including the possibility that
certain risks have not been identified. Moreover, the fund does not control the
cyber security plans and systems of our service providers and other third party
business partners. The fund and its shareholders could be negatively impacted as
a result.
LIBOR
Transition Risk
The
London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate intended to
be representative of the rate at which major international banks who are members
of the British Bankers Association lend to one another over short-terms.
Following manipulation allegations, the Financial Conduct Authority, the United
Kingdom’s financial regulatory body, announced a plan to phase out the use
of LIBOR. The transition process to a replacement rate or rates may
lead to increased volatility or illiquidity in markets for instruments that
currently rely on LIBOR. The transition may also result in a change in the value
of certain instruments the fund holds or a change in the cost of temporary
borrowing for the fund. When LIBOR is discontinued, the LIBOR replacement rate
may be lower than market expectations, which could have an adverse impact on the
value of preferred and debt-securities with floating or fixed-to-floating rate
coupons. The transition away from LIBOR could result in losses to the fund.
Loans
of Portfolio Securities
In
order to realize additional income, the fund may lend its portfolio securities.
Such loans may not exceed one-third of the fund’s total assets valued at market,
however, this limitation does not apply to purchases of debt securities in
accordance with the fund’s investment objectives, policies and limitations, or
to repurchase agreements with respect to portfolio securities.
Cash
received from the borrower as collateral through loan transactions may be
invested in other eligible securities. Investing this cash subjects that
investment to market appreciation or depreciation. If a borrower defaults on a
securities loan because of insolvency or other reasons, the lending fund could
experience delays or costs in recovering the securities it loaned; if the value
of the loaned securities increased over the value of the collateral, the fund
could suffer a loss. To minimize the risk of default on securities loans, the
advisor adheres to guidelines prescribed by the Board of Trustees governing
lending of securities. These guidelines strictly govern:
(1)the
type and amount of collateral that must be received by the fund;
(2)the
circumstances under which additions to that collateral must be made by
borrowers;
(3)the
return to be received by the fund on the loaned securities;
(4)the
limitations on the percentage of fund assets on loan; and
(5)the
credit standards applied in evaluating potential borrowers of portfolio
securities.
In
addition, the guidelines require that the fund have the option to terminate any
loan of a portfolio security at any time and set requirements for recovery of
securities from borrowers.
Managing
to the Target Year
Anticipated
Value at Maturity
The
maturity values of zero-coupon bonds are specified at the time the bonds are
issued, and this feature, combined with the ability to calculate yield to
maturity, has made these instruments popular investment vehicles for investors
seeking reliable investments to meet long-term financial goals.
To
provide a comparable investment opportunity while allowing investors the
flexibility to purchase or redeem shares each day the fund is open for business,
each fund consists primarily of zero-coupon bonds but is actively managed to
accommodate shareholder activity and to take advantage of perceived market
opportunities. Because of this active management approach, the portfolio
managers do not guarantee that a certain price per share will be attained by the
time the fund is liquidated. Instead, the portfolio managers attempt to track
the price behavior of a directly held zero-coupon U.S. Treasury security
by:
(1)Maintaining
a weighted average maturity within the fund’s target maturity year;
(2)Investing
at least 90% of assets in securities that mature within one year of the fund’s
target maturity year;
(3)Investing
a substantial portion of assets in Treasury STRIPS (the most liquid Treasury
zero and in their equivalents);
(4)Under
normal conditions, maintaining a cash balance of less than 1%;
(5)Executing
portfolio transactions necessary to accommodate net shareholder purchases or
redemptions on a daily basis; and
(6)Whenever
feasible, contacting several U.S. government securities dealers for each
intended transaction in an effort to obtain the best price on each
transaction.
These
measures enable the portfolio managers to calculate an anticipated value at
maturity (AVM) for the fund that approximates the price per share the fund will
achieve by its weighted average maturity date. The AVM calculation is as
follows:
where
NAV = the fund’s current price per share, T = the fund’s weighted average term
to maturity in years, and AGR = the fund’s anticipated growth rate.
This
calculation assumes that the shareholder will reinvest all dividend and capital
gain distributions (if any). It also assumes an expense ratio and a portfolio
composition that remain constant for the life of the fund. Because fund expenses
and composition do not remain constant, the portfolio managers calculate AVM for
the fund each day the fund is open for business.
In
addition to the measures described above, which the advisor believes are
adequate to ensure close correspondence between the price behavior of the fund
and the price behavior of directly held zero-coupon bonds with comparable
maturities, the fund has made an undertaking to the Securities and Exchange
Commission (SEC) that the fund will invest at least 90% of its net assets in
zero-coupon bonds until it is within four years of its target maturity year and
at least 80% of its net assets in zero-coupon securities while the fund is
within two to four years of its target maturity year. This undertaking may be
revoked if the market supply of zero-coupon securities diminishes unexpectedly,
although it will not be revoked without prior consultation with the SEC. In
addition, the advisor has undertaken that any coupon-bearing bond purchased on
behalf of the fund will have a duration that falls within the fund’s target
maturity year.
Anticipated
Growth Rate
The
portfolio managers also calculate an anticipated growth rate (AGR) for the fund
each day the fund is open for business. AGR calculated on the date of purchase
is the annualized rate of growth an investor may expect from that purchase date
to the fund’s target maturity date. As is the case with calculations of AVM, the
AGR calculation assumes that the investor will reinvest all dividends and
capital gain distributions (if any) and that the fund’s expense ratio and
portfolio composition will remain constant. The fund’s AGR changes from day to
day primarily because of changes in interest rates and, to a lesser extent,
changes in portfolio composition and other factors that affect the value of the
fund’s investments.
The
advisor expects that shareholders who hold their shares until the fund’s
weighted average maturity date and who reinvest all dividends and capital gain
distributions, if any, will realize an investment return and maturity value that
do not differ substantially from the AGR and AVM calculated on the day his or
her shares were purchased.
As
a demonstration of how the fund has behaved over time, the following table shows
the AGR and AVM for the Investor Class of the fund as of September 30 for each
of the past five years.
The
AVM for the Advisor Class of the fund will differ from that of the Investor
Class, depending on the expenses of that class.
The
fund’s share prices and growth rates are not guaranteed by the trust or any of
its affiliates. There is no guarantee that the fund’s AVMs and AGRs will
fluctuate in the same manner in the future as they have in the
past.
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| Anticipated
Growth Rate |
9/30/2019 |
9/30/2020 |
9/30/2021 |
9/30/2022 |
9/30/2023 |
| Zero
Coupon 2025 |
1.31% |
0.002% |
0.46% |
3.76% |
4.64% |
| Anticipated
Value at Maturity |
9/30/2019 |
9/30/2020 |
9/30/2021 |
9/30/2022 |
9/30/2023 |
| Zero
Coupon 2025 |
$116.22 |
$116.15 |
$116.11 |
$116.14 |
$116.09 |
Other
Investment Companies
The
fund may invest in other investment companies, such as closed-end investment
companies, unit investment trusts, exchange traded funds (ETFs) and other
open-end investment companies, provided that the investment is consistent with
the fund’s investment policies and restrictions. Under the Investment Company
Act, a fund’s investment in such securities, subject to certain exceptions,
currently is limited to
•3%
of the total voting stock of any one investment company;
•5%
of the fund’s total assets with respect to any one investment company;
and
•10%
of a fund’s total assets in the aggregate.
Such
exceptions may include reliance on Rule 12d1-4 of the Investment Company Act.
Rule 12d1-4, subject to certain requirements, would permit the fund to invest in
affiliated investment companies (other American Century mutual funds and ETFs)
and unaffiliated investment companies in excess of the limitations described
above.
The
fund’s investments in other investment companies may include money market funds
managed by the advisor. Investments in money market funds are not subject to the
percentage limitations set forth above.
As
a shareholder of another investment company, the fund would bear, along with
other shareholders, its pro rata portion of the other investment company’s
expenses, including advisory fees. These expenses would be in addition to the
management fee that the fund bears directly in connection with its own
operations.
ETFs
are a type of fund bought and sold on a securities exchange. An ETF trades like
common stock and may be actively managed or index-based. The fund may purchase
an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market
while awaiting purchase of underlying securities, to gain exposure to specific
asset classes or sectors, or as a substitute for investing directly in
securities. The risks of owning an ETF generally reflect the risks of owning the
underlying securities. Additionally, because the price of ETF shares is based on
market price rather than net asset value (NAV), shares may trade at a price
greater than NAV (a premium) or less than NAV (a discount). The fund may also
incur brokerage commissions, as well as the cost of the bid/ask spread, when
purchasing or selling ETF shares.
Zero-Coupon
U.S. Treasury Securities and their Equivalents
Zero-coupon
U.S. Treasury securities (or zeros) are the unmatured interest coupons and
underlying principal portions of U.S. Treasury bonds. Unlike traditional U.S.
Treasury securities, these securities are sold at a discount to their face value
and all of the interest and principal is paid when the securities mature.
Originally, these securities were created by broker-dealers who bought Treasury
bonds and deposited these securities with a custodian bank. The broker-dealers
then sold receipts representing ownership interests in the coupons or principal
portions of the bonds. Some examples of zero-coupon securities sold through
custodial receipt programs are CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts) and generic TRs
(Treasury Receipts).
The
U.S. Treasury subsequently introduced a program called Separate Trading of
Registered Interest and Principal of Securities (STRIPS), through which it
exchanges eligible securities for their component parts and then allows the
component parts to trade in book-entry form. STRIPS are direct obligations of
the U.S. government and have the same credit risks as other U.S. Treasury
securities.
Zero-coupon
Treasury equivalent securities are government agency debt securities that are
ultimately backed by obligations of the U.S. Treasury and are considered by the
marketplace to be backed by the full faith and credit of the U.S. Treasury.
These securities are created by financial institutions (like broker-dealers) and
by U.S. government agencies. For example, the Resolution Funding Corporation
(REFCORP) issues bonds whose interest payments are guaranteed by the U.S.
Treasury and whose principal amounts are secured by zero-coupon U.S. Treasury
securities held in a separate custodial account at the Federal Reserve Bank of
New York. The principal amount and maturity date of REFCORP bonds are the same
as the par amount and maturity date of the corresponding zeros; upon maturity,
REFCORP bonds are repaid from the proceeds of the zeros. REFCORP zeros are the
unmatured coupons and principal portions of REFCORP bonds. Other examples of
zero-coupon Treasury equivalents include Federal Judiciary Office Building COPs,
Government Trust Certificates and securities issued by the Agency for
International Development (AID).
The
U.S. government may issue securities in zero-coupon form. These securities are
referred to as original issue zero-coupon securities.
Zero-Coupon
U.S. Government Agency Securities
A
number of U.S. government agencies and government-sponsored enterprises issue
debt securities. These agencies generally are created by Congress to fulfill a
specific need, such as providing credit to homebuyers or farmers. Among these
agencies are the Federal National Mortgage Association (Fannie Mae), the Federal
Home Loan Mortgage Corporation (Freddie Mac), the Financing Corporation, the
Federal Farm Credit Banks and the Tennessee Valley Authority.
Zero-coupon
U.S. government agency securities operate in all respects like zero-coupon
Treasury securities and their equivalents, except that they are created by
separating a U.S. government agency bond’s interest and principal payment
obligations. The final maturity value of a zero-coupon U.S. government agency
security is a debt obligation of the issuing agency. Some agency securities are
backed by the full faith and credit of the U.S. government, while others are
guaranteed only by the issuing agency. Agency securities typically offer
somewhat higher yields than U.S. Treasury securities with similar maturities.
However, these securities may involve greater risk of default than securities
backed by the U.S. Treasury. The fund will limit its purchase of zero-coupon
U.S. government agency securities to those that receive the highest rating (AAA)
by an independent rating organization. The fund’s credit quality restrictions
apply at the time of purchase; the fund will not necessarily sell securities if
they are downgraded by a rating agency.
Securities
issued by U.S. government agencies in zero-coupon form are referred to as
original issue zero-coupon securities.
Current
Status of Fannie Mae and Freddie Mac
Since
September 2008, Fannie Mae and Freddie Mac have operated under a conservatorship
administered by the Federal Housing Finance Agency (FHFA). In addition, the U.S.
Treasury has entered into senior preferred stock purchase agreements (SPSPAs) to
provide additional financing to Fannie Mae and Freddie Mac. Although the SPSPAs
are intended to provide Fannie Mae and Freddie Mac with the necessary cash
resources to meet their obligations, Fannie Mae and Freddie Mac continue to
operate as going concerns while in conservatorship, and each remains liable for
all of its obligations, including its guaranty obligations, associated with its
mortgage-backed securities.
The
future status and role of Fannie Mae or Freddie Mac could be impacted by, among
other things, the actions taken and restrictions placed on Fannie Mae or Freddie
Mac by the FHFA in its role as conservator, the restrictions placed on Fannie
Mae’s or Freddie Mac’s operations and activities under the senior preferred
stock purchase agreements, market responses to developments at Fannie Mae or
Freddie Mac, and future legislative, regulatory, or legal action that alters the
operations, ownership, structure and/or mission of Fannie Mae or Freddie Mac,
each of which may, in turn, impact the value of, and cash flows on, any
securities guaranteed by Fannie Mae and Freddie Mac.
Investment
Policies
Unless
otherwise indicated, with the exception of the percentage limitations on
borrowing, the policies described below apply at the time the fund enters into a
transaction. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in the fund’s assets will not be considered
in determining whether it has complied with its investment
policies.
Fundamental
Investment Policies
The
fund’s fundamental investment policies are set forth below. These investment
policies, the fund’s investment objective set forth in its prospectus, and the
fund’s status as diversified may not be changed without approval of a majority
of the outstanding votes of shareholders of the fund. Under the Investment
Company Act, the vote of a majority of the outstanding votes of shareholders
means, the vote of (A) 67 percent or more of the voting securities present at a
shareholder meeting, if the holders of more than 50 percent of the outstanding
voting securities are present or represented by proxy; or (B) more than 50
percent of the outstanding voting securities, whichever is less.
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| Subject |
Policy |
| Senior
Securities |
A
fund may not issue senior securities, except as permitted under the
Investment Company Act. |
| Borrowing |
A
fund may not borrow money, except that a fund may borrow for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33⅓% of the fund’s total assets (including the amount borrowed)
less liabilities (other than borrowings). |
| Lending |
A
fund may not lend any security or make any other loan if, as a result,
more than 33⅓% of the fund’s total assets would be lent to other parties,
except (i) through the purchase of debt securities in accordance with its
investment objective, policies and limitations or (ii) by engaging in
repurchase agreements with respect to portfolio securities. |
| Real
Estate |
A
fund may not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments. This policy shall not
prevent a fund from investing in securities or other instruments backed by
real estate or securities of companies that deal in real estate or are
engaged in the real estate business. |
| Concentration |
A
fund may not concentrate its investments in securities of issuers in a
particular industry (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities). |
| Underwriting |
A
fund may not act as an underwriter of securities issued by others, except
to the extent that the fund may be considered an underwriter within the
meaning of the Securities Act of 1933 in the disposition of restricted
securities. |
| Commodities |
A
fund may not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments, provided that this
limitation shall not prohibit the fund from purchasing or selling options
and futures contracts or from investing in securities or other instruments
backed by physical commodities. |
| Control |
A
fund may not invest for purposes of exercising control over
management. |
For
purposes of the investment policy relating to senior securities, the fund may
borrow from any bank provided that immediately after any such borrowing there is
asset coverage of at least 300% for all borrowings of the fund. In the event
that such asset coverage falls below 300%, the fund shall, within three days
thereafter (not including Sundays and holidays) or such longer period as the SEC
may prescribe by rules and regulations, reduce the amount of its borrowings to
an extent that the asset coverage of such borrowings is at least 300%.
For
purposes of the investment policies relating to lending and borrowing, the fund
has received an exemptive order from the SEC regarding an interfund lending
program. Under the terms of the exemptive order, the fund may borrow money from
or lend money to other American Century Investments-advised funds that permit
such transactions. All such transactions will be subject to the limits on
borrowing and lending set forth above. The fund will borrow money through the
program only when the costs are equal to or lower than the cost of short-term
bank loans. Interfund loans and borrowings normally extend only overnight, but
can have a maximum duration of seven days. The fund will lend through the
program only when the returns are higher than those available from other
short-term instruments (such as repurchase agreements). The fund may have to
borrow from a bank at a higher interest rate if an interfund loan is called or
not renewed. Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional borrowing costs.
For
purposes of the investment policy relating to concentration, the fund shall not
purchase any securities that would cause 25% or more of the value of the fund’s
net assets at the time of purchase to be invested in the securities of one or
more issuers conducting their principal business activities in the same
industry, provided that
(a)there
is no limitation with respect to obligations issued or guaranteed by the U.S.
government, any state, territory or possession of the United States, the
District of Columbia or any of their authorities, agencies, instrumentalities or
political subdivisions and repurchase agreements secured by such obligations,
(except that an Industrial Development Bond backed only by the assets and
revenues of a non-governmental user will be deemed to be an investment in the
industry represented by such user),
(b)wholly
owned finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing the activities of
the parents,
(c)utilities
will be divided according to their services, for example, gas, gas transmission,
electric and gas, electric, and telephone will each be considered a separate
industry, and
(d)personal
credit and business credit businesses will be considered separate
industries.
Nonfundamental
Investment Policies
In
addition, the fund is subject to the following investment policies that are not
fundamental and may be changed by the Board of Trustees.
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| Subject |
Policy |
| Leveraging |
A
fund may not purchase additional investment securities at any time during
which outstanding borrowings exceed 5% of the total assets of the
fund. |
| Liquidity |
A
fund may not purchase any security or enter into a repurchase agreement
if, as a result, more than 15% of its net assets would be invested in
illiquid securities. Illiquid securities include repurchase agreements not
entitling the holder to payment of principal and interest within seven
days, and securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available
market. |
| Short
Sales |
A
fund may not sell securities short, unless it owns or has the right to
obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in futures contracts, options, and
other derivative instruments are not deemed to constitute selling
securities short. |
| Margin |
A
fund may not purchase securities on margin, except to obtain such
short-term credits as are necessary for the clearance of transactions, and
provided that margin payments and other deposits in connection with
transactions involving futures, options (puts, calls, etc.), swaps, short
sales, forward contracts, commitment agreements, and other similar
investment techniques shall not be deemed to constitute purchasing
securities on margin. |
The
Investment Company Act imposes certain additional restrictions upon the fund’s
ability to acquire securities issued by insurance companies, broker-dealers,
underwriters or investment advisors, and upon transactions with affiliated
persons as therein defined. It also defines and forbids the creation of cross
and circular ownership.
Temporary
Defensive Measures
For
temporary defensive purposes, the fund may invest in securities that may not fit
its investment objective or its stated market. During a temporary defensive
period, the fund may direct its assets to the following investment
vehicles:
•U.S.
government securities and repurchase agreements collateralized by U.S.
government securities; and
•money
market funds.
To
the extent the fund assumes a defensive position, it may not achieve its
investment objective.
Portfolio
Turnover
Under
normal conditions, the fund’s annual portfolio turnover rate is not expected to
exceed 100%. Because a higher turnover rate increases transaction costs and may
increase taxable capital gains, the portfolio managers carefully weigh the
potential benefits of short-term investing against these
considerations.
The
portfolio turnover rate of the fund for the most recent fiscal year is included
in the Fund
Summary
section of the fund’s prospectus. The portfolio turnover rate for the fund’s
last five fiscal years is shown in the Financial Highlights table in the
prospectus. Variations in a fund’s portfolio turnover rate from year to year may
be due to a fluctuating volume of shareholder purchase and redemption activity,
varying market conditions, and/or changes in the managers’ investment
outlook.
Disclosure
of Portfolio Holdings
The
advisor (ACIM) has adopted policies and procedures with respect to the
disclosure of fund portfolio holdings and characteristics, which are described
below.
Distribution
to the Public
Month-end
full portfolio holdings for the fund will generally be made available for
distribution 15 days after the end of each calendar quarter for each of the
preceding three months. This disclosure is in addition to the portfolio
disclosure in annual and semiannual shareholder reports and the quarter-end
portfolio disclosures on Form N-PORT. Such disclosures are filed with the
Securities and Exchange Commission within 60 days of each fiscal quarter end and
also posted on americancentury.com at approximately the same time the filings
are made. The distribution of holdings after the above time periods is not
limited.
On
a monthly basis, top 10 holdings (on an absolute basis and relative to the
appropriate benchmark) for each fund will generally be made available for
distribution 7 days after the end of each month, and will be posted on
americancentury.com at approximately the same time.
Portfolio
characteristics that are derived from portfolio holdings will be made available
for distribution 7 days after the end of each month, or as soon thereafter as
possible, which timeframe may vary by fund. Certain characteristics, as
determined by the advisor, will be posted on americancentury.com monthly at
approximately the time they are made available for distribution. Data derived
from portfolio returns and any other characteristics not deemed confidential
will be available for distribution at any time. The advisor may make
determinations of confidentiality on a fund-by-fund basis, and may add or delete
characteristics to or from those considered confidential at any
time.
Any
American Century Investments fund that sells securities short as an investment
strategy will disclose full portfolio holdings in annual and semiannual
shareholder reports and on Form N-PORT. These funds will make long and short
holdings as of the end
of
a calendar quarter available for distribution 15 days after the end of each
calendar quarter. These funds may also make limited disclosures as noted in the
Single Event Requests section below. The distribution of holdings after the
above time periods is not limited.
Examples
of securities (both long and short) currently or previously held in a portfolio
may be included in presentations or other marketing documents as soon as
available. The inclusion of such examples is at the relevant portfolio’s team
discretion.
So
long as portfolio holdings are disclosed in accordance with the above
parameters, the advisor makes no distinction among different categories of
recipients, such as individual investors, institutional investors,
intermediaries that distribute the funds’ shares, third-party service providers,
rating and ranking organizations, and fund affiliates. Because this information
is publicly available and widely disseminated, the advisor places no conditions
or restrictions on, and does not monitor, its use. Nor does the advisor require
special authorization for its disclosure.
Accelerated
Disclosure
The
advisor recognizes that certain parties, in addition to the advisor and its
affiliates, may have legitimate needs for information about portfolio holdings
and characteristics prior to the times prescribed above. Such accelerated
disclosure is permitted under the circumstances described below.
Ongoing
Arrangements
Certain
parties, such as investment consultants who provide regular analysis of fund
portfolios for their clients and intermediaries who pass through information to
fund shareholders, may have legitimate needs for accelerated disclosure. These
needs may include, for example, the preparation of reports for customers who
invest in the funds, the creation of analyses of fund characteristics for
intermediary or consultant clients, the reformatting of data for distribution to
the intermediary’s or consultant’s clients, and the review of fund performance
for ERISA fiduciary purposes.
In
such cases, accelerated disclosure is permitted if the service provider enters
an appropriate non-disclosure agreement with the funds’ distributor in which it
agrees to treat the information confidentially until the public distribution
date and represents that the information will be used only for the legitimate
services provided to its clients (i.e., not for trading). Non-disclosure
agreements require the approval of an attorney in the advisor’s legal
department. The advisor’s compliance department receives quarterly reports
detailing which clients received accelerated disclosure, what they received,
when they received it and the purposes of such disclosure. Compliance personnel
are required to confirm that an appropriate non-disclosure agreement has been
obtained from each recipient identified in the reports.
Those
parties who have entered into non-disclosure agreements as of September 30, 2023
are as follows:
•Aetna
Inc.
•Alight
Solutions LLC
•AllianceBernstein
L.P.
•American
Fidelity Assurance Co.
•Ameritas
Life Insurance Corporation
•AMP
Capital Investors Limited
•Annuity
Investors Life Insurance Company
•Aon
Hewitt Investment Consulting
•Athene
Annuity & Life Assurance Company
•AUL/American
United Life Insurance Company
•Bell
Globemedia Publishing
•Bellwether
Consulting, LLC
•BNY
Mellon Performance & Risk Analytics, LLC
•Brighthouse
Life Insurance Company
•Callan
Associates, Inc.
•Calvert
Asset Management Company, Inc.
•Cambridge
Associates, LLC
•Capital
Cities, LLC
•CBIZ,
Inc.
•Charles
Schwab & Co., Inc.
•Choreo,
LLC
•Clearwater
Analytics, LLC
•Cleary
Gull Inc.
•Commerce
Bank N.A.
•Connecticut
General Life Insurance Company
•Corestone
Investment Managers AG
•Corning
Incorporated
•Curcio
Webb LLC
•Deutsche
AM Distributors, Inc.
•Eckler,
Ltd.
•Electra
Information Systems, Inc.
•Empower
Plan Services, LLC
•Equitable
Investment Management Group, LLC
•EquiTrust
Life Insurance Company
•Farm
Bureau Life Insurance Company
•Investment
Management
•Fidelity
Workplace Services, LLC
•Finance-Doc
Multimanagement AG
•Fund
Evaluation Group, LLC
•Government
Employees Pension Service
•GSAM
Strategist Portfolios, LLC
•The
Guardian Life Insurance Company of America
•Intel
Corporation
•InvesTrust
Consulting, LLC
•Iron
Capital Advisors
•Jefferson
National Life Insurance Company
•JLT
Investment Management Limited
•John
Hancock Distributors LLC
•Kansas
City Life Insurance Company
•Kiwoom
Asset Management
•Kmotion,
Inc.
•Korea
Investment Management Co. Ltd.
•Korea
Teachers Pension
•Legal
Super Pty Ltd.
•The
Lincoln National Life Insurance Company
•Lipper
Inc.
•Marquette
Associates
•Massachusetts
Mutual Life Insurance Company
•Mercer
Investment Management, Inc.
•Merian
Global Investors Limited
•Merrill
Lynch
•Midland
National Life Insurance Company
•Minnesota
Life Insurance Company
•Modern
Woodmen of America
•Montana
Board of Investments
•Morgan
Stanley Wealth Management
•Morningstar
Investment Management LLC
•Morningstar,
Inc.
•Morningstar
Investment Services, Inc.
•Mutual
of America Life Insurance Company
•National
Life Insurance Company
•Nationwide
Financial
•NEPC
•The
Newport Group
•Nomura
Asset Management U.S.A. Inc.
•Nomura
Securities International, Inc.
•The
Northern Trust Company
•Northwestern
Mutual Life Insurance Co.
•NYLIFE
Distributors, LLC
•Pacific
Life Insurance Company
•Principal
Life Insurance Company
•Prudential
Financial, Inc.
•RidgeWorth
Capital Management, Inc.
•Rocaton
Investment Advisors, LLC
•RVK,
Inc.
•Säästöpankki
(The Savings Banks)
•Security
Benefit Life Insurance Co.
•Shinhan
Asset Management
•State
Street Global Exchange
•State
Street Global Markets Canada Inc
•Stellantis
•Symetra
Life Insurance Company
•Tokio
Marine Asset Management Co., Ltd.
•Truist
Bank
•UBS
Financial Services, Inc.
•UBS
Wealth Management
•Univest
Company
•Valic
Financial Advisors Inc.
•VALIC
Retirement Services Company
•Vestek
Systems, Inc.
•Voya
Retirement Insurance and Annuity Company
•Wells
Fargo Bank, N.A.
•Wilshire
Advisors LLC
•WTW
•Zeno
Consulting Group, LLC
Once
a party has executed a non-disclosure agreement, it may receive any or all of
the following data for funds in which its clients have investments or are
actively considering investment:
(1)
Full holdings (both long and short) quarterly as soon as reasonably available;
(2)
Full holdings (long only) monthly as soon as reasonably available;
(3)
Top 10 holdings monthly as soon as reasonably available; and
(4)
Portfolio attributes (such as sector or country weights), characteristics and
performance attribution monthly as soon as reasonably available.
The
types, frequency and timing of disclosure to such parties vary.
Single
Event Requests
In
certain circumstances, the advisor may provide fund holding information on an
accelerated basis outside of an ongoing arrangement with manager-level or higher
authorization. For example, from time to time the advisor may receive requests
for
proposals
(RFPs) from consultants or potential clients that request information about a
fund’s holdings on an accelerated basis. As long as such requests are on a
one-time basis, and do not result in continued receipt of data, such information
may be provided in the RFP. In these circumstances, top 15 long and short
holdings may be disclosed 7 days after the end of each month. Such disclosure
may be presented in paired trades, such as by showing a long holding in one
sector or security and a corresponding short holding in another sector or
security together to show a long/short strategy. Such information will be
provided with a confidentiality legend and only in cases where the advisor has
reason to believe that the data will be used only for legitimate purposes and
not for trading.
Service
Providers
Various
service providers to the fund and the fund’s advisor must have access to some or
all of the fund’s portfolio holdings information on an accelerated basis from
time to time in the ordinary course of providing services to the fund. These
service providers include the fund’s custodian (daily, with no lag), auditors
(as needed) and brokers involved in the execution of fund trades (as needed).
Additional information about these service providers and their relationships
with the fund and the advisor are provided elsewhere in this statement of
additional information. In addition, the fund’s investment advisor may use
analytical systems provided by third party data aggregators who have access to
the fund’s portfolio holdings daily, with no lag. These data aggregators enter
into separate non-disclosure agreements after authorization by an appropriate
officer of the advisor. The agreements with service providers and data
aggregators generally require that they treat the fund’s portfolio holdings
information confidentially until the public distribution date and represent that
the information will be used only for the legitimate services it provides (i.e.,
not for trading).
Additional
Safeguards
The
advisor’s policies and procedures include a number of safeguards designed to
control disclosure of portfolio holdings and characteristics so that such
disclosure is consistent with the best interests of fund shareholders, including
procedures to address conflicts between the interests of shareholders and those
of the advisor and its affiliates. First, the frequency with which this
information is disclosed to the public, and the length of time between the date
of the information and the date on which the information is disclosed, are
selected to minimize the possibility of a third party improperly benefiting from
fund investment decisions to the detriment of fund shareholders. In the event
that a request for portfolio holdings or characteristics creates a potential
conflict of interest that is not addressed by the safeguards and procedures
described above, the advisor’s procedures require that such requests may only be
granted with the approval of the advisor’s legal department and the relevant
chief investment officers. In addition, distribution of portfolio holdings
information, including compliance with the advisor’s policies and the resolution
of any potential conflicts that may arise, is monitored quarterly by the
advisor’s compliance department. Finally, the fund’s Board of Trustees exercises
oversight of disclosure of the fund’s portfolio securities. The board has
received and reviewed a summary of the advisor’s policy and is informed on a
quarterly basis of any changes to or violations of such policy detected during
the prior quarter.
Neither
the advisor nor the fund receive any compensation from any party for the
distribution of portfolio holdings information.
The
advisor reserves the right to change its policies and procedures with respect to
the distribution of portfolio holdings information at any time. There is no
guarantee that these policies and procedures will protect the fund from the
potential misuse of holdings information by individuals or firms in possession
of such information.
Management
Board
of Trustees
The
individuals listed below serve as trustees of the fund. Each trustee will
continue to serve in this capacity until death, retirement, resignation or
removal from office. The board has adopted a mandatory retirement age for
trustees who are not “interested persons,” as that term is defined in the
Investment Company Act (independent trustees). Independent trustees shall retire
on December 31 of the year in which they reach their 76th
birthday.
Jonathan
S. Thomas is an “interested person” because he currently serves as President and
Chief Executive Officer of American Century Companies, Inc. (ACC), the parent
company of American Century Investment Management, Inc. (ACIM or the advisor).
The other trustees (more than three-fourths of the total number) are
independent. They are not employees, directors or officers of, and have no
financial interest in, ACC or any of its wholly owned, direct or indirect,
subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS)
and American Century Services, LLC (ACS), and they do not have any other
affiliations, positions or relationships that would cause them to be considered
“interested persons” under the Investment Company Act. The trustees serve in
this capacity for eight (in the case of Jonathan S. Thomas, 16; and Jeremy I.
Bulow, 9) registered investment companies in the American Century Investments
family of funds.
The
following table presents additional information about the trustees. The mailing
address for each trustee other than Jonathan S. Thomas is 3945 Freedom Circle,
Suite #800, Santa Clara, California 95054. The mailing address for Jonathan S.
Thomas is 4500 Main Street, Kansas City, Missouri 64111.
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Name
(Year of Birth) |
Position(s)
Held with Funds |
Length
of Time Served |
Principal
Occupation(s) During Past 5 Years |
Number
of American Century Portfolios Overseen by Trustee |
Other
Directorships Held During Past 5 Years |
|
Independent
Trustees |
|
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| |
|
Tanya
S. Beder
(1955) |
Trustee
and Board Chair |
Since
2011 (Board Chair since 2022) |
Chairman
and CEO, SBCC
Group Inc.
(independent advisory services) (2006 to present) |
32 |
Kirby
Corporation;
Nabors
Industries Ltd. |
|
Jeremy
I. Bulow
(1954) |
Trustee |
Since
2011 |
Professor
of Economics, Stanford
University, Graduate School of Business
(1979 to present) |
87 |
None |
Jennifer
Cabalquinto
(1968) |
Trustee |
Since
2021 |
Retired;
Chief Financial Officer, EMPIRE
(digital media distribution) (2023); Chief Financial Officer, 2K
(interactive
entertainment) (2021 to 2023); Special Advisor, GSW
Sports, LLC (2020
to 2021); Chief Financial Officer, GSW
Sports, LLC (2013
to 2020) |
32 |
Sabio
Holdings Inc. |
|
Anne
Casscells (1958) |
Trustee |
Since
2016 |
Co-Chief
Executive Officer and Chief Investment Officer, Aetos
Alternatives Management (investment
advisory firm) (2001 to present) |
32 |
None |
|
Jonathan
D. Levin (1972) |
Trustee |
Since
2016 |
Philip
H. Knight Professor and Dean, Graduate
School of Business, Stanford University (2016
to present) Professor, Stanford
University
(2000 to present) |
32 |
None |
John
M. Loder
(1958) |
Trustee |
Since
2024 |
Retired;
Lawyer, Ropes
& Gray LLP
(1984 to 2023) |
32 |
None |
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Name
(Year of Birth) |
Position(s)
Held with Funds |
Length
of Time Served |
Principal
Occupation(s) During Past 5 Years |
Number
of American Century Portfolios Overseen by Trustee |
Other
Directorships Held During Past 5 Years |
|
Interested
Trustee |
|
|
| |
|
Jonathan
S. Thomas
(1963) |
Trustee |
Since
2007 |
President
and Chief Executive Officer, ACC
(2007 to present). Also serves as Chief Executive Officer, ACS;
Director, ACC
and other ACC
subsidiaries |
152 |
None |
Qualifications
of Trustees
Generally,
no one factor was decisive in the selection of the trustees to the board.
Qualifications considered by the board to be important to the selection and
retention of trustees include the following: (i) the individual’s business and
professional experience and accomplishments; (ii) the individual’s educational
background and accomplishments; (iii) the individual’s experience and expertise
performing senior policy-making functions in business, government, education,
accounting, law and/or administration; (iv) how the individual’s expertise and
experience would contribute to the mix of relevant skills and experience on the
board; (v) the individual’s ability to work effectively with the other members
of the board; and (vi) the individual’s ability and willingness to make the time
commitment necessary to serve as an effective trustee. In addition, the
individuals’ ability to review and critically evaluate information, their
ability to evaluate fund service providers, their ability to exercise good
business judgment on behalf of fund shareholders, their prior service on the
board, and their familiarity with the funds are considered important
assets.
While
the board has not adopted a specific policy on diversity, it takes overall
diversity into account when considering and evaluating nominees for trustee. The
board generally considers the manner in which each trustee’s professional
experience, background, skills, and other individual attributes will contribute
to the effectiveness of the board. Additional information about each trustee’s
individual educational and professional experience (supplementing the
information provided in the table above) follows.
Tanya
S. Beder:
BA, Yale University; MBA, Harvard University; Fellow in Practice, International
Center for Finance, Yale University, School of Management; formerly, Lecturer in
Public Policy, Stanford University; formerly, Chief Executive Officer, Tribeca
Global Management LLC (asset management firm); formerly, Managing Director and
Head of Strategic Quantitative Investment Division, Caxton Associates LLC;
formerly, President and Co-Founder, Capital Market Risk Advisors Inc.; formerly,
Founder and Chief Executive Officer, SB Consulting Corp.
Jeremy
I. Bulow: BA,
MA, Yale University; PhD in Economics, Massachusetts Institute of Technology;
formerly, Director, Bureau of Economics, Federal Trade Commission
Jennifer
Cabalquinto: BS
in Accounting, State University of New York; Experienced Financial Leadership
Program Graduate, General Electric Company; formerly, Chief Financial Officer,
Legal Solutions Holdings Inc.; formerly, Chief Financial Officer, NBC Universal,
Universal Studios Hollywood; formerly, Vice President, Finance, NBC Universal,
Los Angeles Television Station Group
Anne
Casscells:
BA in British Studies, Yale University; MBA, Stanford Graduate School of
Business; formerly, Lecturer in Accounting, Stanford University, Graduate School
of Business; formerly, Chief Investment Officer and Managing Director of
Investment Policy Research, Stanford Management Company; formerly, Vice
President, Fixed Income Division, Goldman Sachs
Jonathan
D. Levin: BA
in English, BS in Mathematics, Stanford University; MPhil in Economics, Oxford
University; PhD in Economics, Massachusetts Institute of Technology; Senior
Fellow, Stanford Institute for Economic Policy Research; Trustee, Gordon and
Betty Moore Foundation; Member, President's Council of Advisors on Science and
Technology
John
M. Loder: AB
in English History and Literature, Harvard University; JD, Harvard Law School;
over 35 years serving as counsel to investment companies, their directors, and
asset management firms
Jonathan
S. Thomas:
BA
in Economics, University of Massachusetts; MBA, Boston College; formerly, held
senior leadership roles with Fidelity Investments, Boston Financial Services,
Bank of America and Morgan Stanley; serves on the Board of Governors of the
Investment Company Institute
Responsibilities
of the Board
The
board is responsible for overseeing the advisor’s management and operations of
the fund pursuant to the management agreement. Trustees also have significant
responsibilities under the federal securities laws. Among other things,
they:
•oversee
the performance of the fund;
•oversee
the quality of the advisory and shareholder services provided by the
advisor;
•review
annually the fees paid to the advisor for its services;
•monitor
potential conflicts of interest between the fund and its affiliates, including
the advisor;
•oversee
custody of assets and the valuation of securities; and
•oversee
the fund’s compliance program.
In
performing their duties, board members receive detailed information about the
fund and the advisor regularly throughout the year, and they meet in person at
least quarterly with management of the advisor to review reports about fund
operations. Certain Board committee members also hold periodic telephone
conferences with management between quarterly board meetings. The trustees’ role
is to provide oversight and not to provide day-to-day management.
The
board has all powers necessary or convenient to carry out its responsibilities.
Consequently, the board may adopt bylaws providing for the regulation and
management of the affairs of the fund and may amend and repeal them to the
extent that such bylaws do not reserve that right to the fund’s shareholders.
They may increase or reduce the number of board members and may, subject to the
Investment Company Act, fill board vacancies. Board members also may elect and
remove such officers and appoint and terminate such agents as they consider
appropriate. They may establish and terminate committees consisting of two or
more trustees who may exercise the powers and authority of the board as
determined by the trustees. They may, in general, delegate such authority as
they consider desirable to any officer of the fund, to any board committee and
to any agent or employee of the fund or to any custodian, transfer agent,
investor servicing agent, principal underwriter or other service provider for
the fund.
To
communicate with the board, or a member of the board, a shareholder should send
a written communication addressed to the board or member of the board to the
attention of the Corporate Secretary at the following address: P.O. Box 418210,
Kansas City, Missouri 64141-9210. Shareholders who prefer to communicate by
email may send their comments to [email protected]. All
shareholder communications received will be forwarded to the board or to the
independent board chair.
Board
Leadership Structure and Standing Board Committees
Tanya
S. Beder currently serves as the independent board chair and has served in such
capacity since 2022. Of the board’s members, Jonathan S. Thomas is the only
member who is an “interested person” as that term is defined in the Investment
Company Act. The remaining members are independent trustees. The independent
trustees meet separately to consider a variety of
matters
that are scheduled to come before the board and meet periodically with the
fund’s Chief Compliance Officer and fund auditors. They are advised by
independent legal counsel. No independent trustee may serve as an officer or
employee of a fund. The board has also established several committees, as
described below. Each committee is comprised solely of independent trustees. The
board believes that the current leadership structure, with independent trustees
filling all but one position on the board, with an independent trustee serving
as board chair and with the board committees comprised only of independent
trustees, is appropriate and allows for independent oversight of the
fund.
The
board has an Audit and Compliance Committee that approves the fund’s engagement
of the independent registered public accounting firm and recommends approval of
such engagement to the independent trustees. The committee also oversees the
activities of the accounting firm, receives regular reports regarding fund
accounting, oversees securities valuation (approving the fund’s or the trust’s
valuation policy and receiving reports regarding instances of fair valuation
thereunder), and receives regular reports from the advisor’s internal audit
department. The committee also reviews the results of the fund’s compliance
testing program, meets regularly with the fund’s Chief Compliance Officer, and
monitors implementation of the fund’s Code of Ethics. The committee currently
consists of Jennifer Cabalquinto (chair), Tanya S. Beder, Anne Casscells and
John M. Loder. It met four times during the fiscal year ended September 30,
2023.
The
board also has a Portfolio Committee that meets quarterly to review the
investment activities and strategies used to manage the fund’s assets and
monitor investment performance. The committee regularly receives reports from
the advisor’s Chief Investment Officer, portfolio managers, credit analysts and
other investment personnel concerning the fund’s investments. The committee also
receives information regarding fund trading activities and monitors derivative
usage. It currently consists of Anne Casscells (chair), Tanya S. Beder, Jeremy
I. Bulow, Jennifer Cabalquinto, Jonathan D. Levin and John M. Loder. The
committee met four times during the fiscal year ended September 30,
2023.
The
Client Experience Oversight Committee monitors the quality of services that the
fund offers both to direct customers and to intermediaries who offer fund shares
to their customers. All channels of communication (written, telephone, web and
mobile) are reviewed. The level of performance is compared to peer competitors.
The committee also monitors payments to intermediaries and trading in fund
shares that could harm the interests of other shareholders and reviews future
strategic initiatives of the advisor and their potential effects on fund
shareholders. The committee currently consists of Jeremy I. Bulow (chair),
Jonathan D. Levin and John M. Loder. It met four times during the fiscal year
ended September 30, 2023.
The
Technology and Risk Committee coordinates the board’s oversight of the fund’s
risk management processes and monitors the systems, practices and procedures the
advisor uses to manage the fund’s risks. In addition, the committee oversees
enterprise technology risk management and the advisor’s processes for oversight
of vendors that provide critical services or technologies to the fund or on
which the advisor relies in providing services to the fund. It also makes
recommendations to the board regarding the allocation of risk oversight
activities among the board’s committees. The committee currently consists of
Tanya S. Beder (chair), Jennifer Cabalquinto and Anne Casscells. It met four
times during the fiscal year ended September 30, 2023.
The
board has a Corporate Governance Committee that is responsible for reviewing
board procedures and committee structures. The committee also considers and
recommends individuals for nomination as trustees. The names of potential
trustee candidates may be drawn from a number of sources, including
recommendations from members of the board, the advisor (in the case of
interested trustees only), shareholders and third party search firms. The
committee seeks to identify and recruit the best available candidates and will
evaluate qualified shareholder nominees on the same basis as those identified
through other sources. Although not written, the funds have a policy of
considering all candidates recommended in writing by shareholders. Shareholders
may submit trustee nominations in writing to the Corporate Secretary, P.O. Box
418210, Kansas City, Missouri 64141-9210, or by email to
[email protected]. The nomination should include the
following information:
•Shareholder’s
name, the fund name, number of fund shares owned and length of period
held;
•Name,
age and address of the candidate;
•A
detailed resume describing, among other things, the candidate’s educational
background, occupation, employment history, financial knowledge and expertise
and material outside commitments (e.g., memberships on other boards and
committees, charitable foundations, etc.);
•Any
other information relating to the candidate that is required to be disclosed in
solicitations of proxies for election of trustees in an election contest
pursuant to Regulation 14A under the Securities Exchange Act of
1934;
•A
supporting statement that (i) describes the candidate’s reasons for seeking
election to the board and (ii) documents his/her qualifications to serve as a
trustee; and
•A
signed statement from the candidate confirming his/her willingness to serve on
the board.
The
Corporate Governance Committee also may consider, and make recommendations to
the board regarding, other matters relating to the corporate governance of the
funds. It currently consists of Jonathan D. Levin (chair), Tanya S. Beder,
Jeremy I. Bulow and John M. Loder. The committee met four times during the
fiscal year ended September 30, 2023.
Risk
Oversight by the Board
As
previously disclosed, the board oversees the advisor’s management of the fund
and meets at least quarterly with management of the advisor to review reports
and receive information regarding fund operations. Risk oversight relating to
the fund is one component of the board’s oversight and is undertaken in
connection with the duties of the board. As described in the previous section,
the board’s committees, including the Technology and Risk Committee, assist the
board in overseeing various types of risks relating to the fund. The board
receives regular reports from each committee regarding the committee’s areas of
oversight responsibility. In addition, the board receives information regarding,
and has discussions with senior management of the advisor about, the advisor’s
enterprise risk management systems and strategies. There can be no assurance
that all elements of risk, or even all elements of material risk, will be
disclosed to or identified by the board, or that the advisor’s risk management
systems and strategies, and the board’s oversight thereof, will mitigate all
elements of risk, or even all elements of material risk, to the
fund.
Board
Compensation
Each
independent trustee receives compensation for service as a member of the board.
Under the terms of each management agreement with the advisor, the fund is
responsible for paying such fees and expenses. None of the interested trustees
or officers of the fund receive compensation from the fund. For the fiscal year
ended September 30, 2023, each independent trustee received the following
compensation for his or her service to the fund and the American Century family
of funds. Because Mr. Loder was not a trustee on June 30, 2023, he is not
included in the table.
|
|
|
|
|
|
|
|
| |
| Name
of Trustee |
Total
Compensation for Service as Trustee of the Fund1
|
Total
Compensation for Service as Directors/Trustees for the
American
Century
Investments Family of Funds2
|
| Tanya
S. Beder |
$1,572 |
$400,000 |
| Jeremy
I. Bulow |
$1,140 |
$433,750 |
| Anne
Casscells |
$1,218 |
$310,000 |
| Jennifer
Cabalquinto |
$1,229 |
$312,500 |
| Jonathan
D. Levin |
$1,199 |
$305,000 |
|
Peter
F. Pervere3 |
$1,161 |
$296,250 |
|
John
B. Shoven3 |
$1,199 |
$305,000 |
1 Includes
compensation paid to the trustees for fiscal year ended September 30, 2023, and
also includes amounts deferred at the election of the trustees under the
American Century Mutual Funds’ Independent Directors’ Deferred Compensation
Plan.
2 Includes
compensation paid to each trustee for his or her service as director/trustee for
eight (in the case of Mr. Bulow, nine) investment companies in the American
Century Investments family of funds. The total amount of deferred compensation
included in the table is as follows: Mr. Bulow, $118,338; Ms. Cascells,
$310,000; and Mr. Pervere, $29,625.
3
Mr. Pervere and Mr. Shoven retired from the board on December 31,
2023.
The
fund does not currently provide any pension or retirement benefits to the
trustees except pursuant to the American Century Mutual Funds’ Independent
Directors’ Deferred Compensation Plan adopted by the trust. Under the plan, the
independent trustees may defer receipt of all or any part of the fees to be paid
to them for serving as trustees of the fund. All deferred fees are credited to
accounts established in the names of the trustees. The amounts credited to each
account then increase or decrease, as the case may be, in accordance with the
performance of one or more American Century funds selected by the trustees. The
account balance continues to fluctuate in accordance with the performance of the
selected fund or funds until final payment of all amounts credited to the
account. Trustees are allowed to change their designation of funds from time to
time.
Generally,
deferred fees are not payable to a trustee until the distribution date elected
by the trustee in accordance with the terms of the plan. Such distribution date
may be a date on or after the trustee’s retirement date, but may be an earlier
date if the trustee agrees not to make any additional deferrals after such
distribution date. Distributions may commence prior to the elected payment date
for certain reasons specified in the plan, such as unforeseeable emergencies,
death or disability. Trustees may receive deferred fee account balances either
in a lump sum payment or in substantially equal installment payments to be made
over a period not to exceed 10 years. Upon the death of a trustee, all remaining
deferred fee account balances are paid to the trustee’s beneficiary or, if none,
to the trustee’s estate.
The
plan is an unfunded plan and, accordingly, the fund has no obligation to
segregate assets to secure or fund the deferred fees. To date, the fund has met
all payment obligations under the plan. The rights of trustees to receive their
deferred fee account balances are the same as the rights of a general unsecured
creditor of the fund. The plan may be terminated at any time by the
administrative committee of the plan. If terminated, all deferred fee account
balances will be paid in a lump sum.
Ownership
of Fund Shares
The
trustees owned shares in the fund as of December 31, 2023, as shown in the table
below. Because Mr. Loder was not a trustee on December 31, 2023, he is not
included in the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
Name
of Trustee |
| |
Jonathan
S.
Thomas |
Tanya
S.
Beder |
Jeremy
I.
Bulow |
Jennifer
Cabalquinto |
| Dollar
Range of Equity Securities in the Funds: |
| Zero
Coupon 2025 |
A |
A |
A |
A |
|
Aggregate
Dollar Range of Equity
Securities
in all Registered Investment
Companies
Overseen by Trustees in
Family
of Investment Companies
|
E |
E |
E |
A |
Ranges:
A—none, B—$1-$10,000, C—$10,001-$50,000, D—$50,001-$100,000, E—More than
$100,000
|
|
|
|
|
|
|
|
| |
| |
| |
| |
Anne
Casscells |
Jonathan
D. Levin |
| Dollar
Range of Equity Securities in the Funds: |
| Zero
Coupon 2025 |
A |
A |
Aggregate
Dollar Range of Equity
Securities in all Registered
Investment
Companies Overseen by Trustees in
Family of Investment
Companies |
E |
A |
Ranges:
A—none, B—$1-$10,000, C—$10,001-$50,000, D—$50,001-$100,000, E—More than
$100,000
Beneficial
Ownership of Affiliates by Independent Trustees
No
independent trustee or his or her immediate family members beneficially owned
shares of the advisor, the principal underwriter of the fund or any other person
directly or indirectly controlling, controlled by, or under common control with
the advisor or the fund’s principal underwriter as of December 31,
2023.
Officers
The
following table presents certain information about the executive officers of the
fund. Each officer serves as an officer for 16 investment companies in the
American Century family of funds. No officer is compensated for his or her
service as an officer of the fund. The listed officers are interested persons of
the fund and are appointed or re-appointed on an annual basis. The mailing
address for each of the officers listed below is 4500 Main Street, Kansas City,
Missouri 64111.
|
|
|
|
|
|
|
|
| |
|
Name
(Year
of
Birth)
|
Offices
with
the
Fund
|
Principal
Occupation(s) During the Past Five Years
|
Patrick
Bannigan
(1965) |
President
since 2019 |
Executive
Vice President and Director, ACC
(2012 to present); Chief Financial Officer, Chief Accounting Officer and
Treasurer, ACC
(2015 to present). Also serves as President, ACS;
Vice President, ACIM;
Chief Financial Officer, Chief Accounting Officer and/or Director,
ACIM,
ACS
and other ACC
subsidiaries |
R.
Wes Campbell
(1974) |
Chief
Financial
Officer and Treasurer
since 2018; Vice President since
2023 |
Vice
President, ACS
(2020
to present); Investment Operations and Investment Accounting, ACS
(2000 to present) |
Amy
D. Shelton
(1964) |
Chief
Compliance
Officer and Vice President since 2014 |
Chief
Compliance Officer, American Century funds,
(2014
to present); Chief Compliance Officer, ACIM
(2014 to present); Chief Compliance Officer, ACIS
(2009 to present). Also serves as Vice President, ACIS |
John
Pak
(1968) |
General
Counsel and
Senior Vice President since 2021 |
General
Counsel and Senior Vice President, ACC
(2021 to present); Also serves as General Counsel and Senior Vice
President, ACIM,
ACS and ACIS.
Chief Legal Officer of Investment and Wealth Management, The
Bank of New York Mellon
(2014 to 2021) |
Cihan
Kasikara
(1974) |
Vice
President
since 2023 |
Senior
Vice President, ACS
(2022 to present); Treasurer, ACS
(2023 to present); Vice President, ACS
(2020 to 2022); Vice President, Franklin
Templeton
(2015 to 2020) |
| Kathleen
Gunja Nelson (1976) |
Vice
President since 2023 |
Vice
President, ACS
(2017 to present) |
Ward
D.
Stauffer
(1960) |
Secretary
since
2005 |
Attorney,
ACC
(2003 to present) |
Code
of Ethics
The
fund, its investment advisor and principal underwriter and, if applicable,
subadvisor have adopted codes of ethics under Rule 17j-1 of the Investment
Company Act. They permit personnel subject to the codes to invest in securities,
including securities that may be purchased or held by the fund, provided that
they first obtain approval from the compliance department before making such
investments.
Proxy
Voting Policies
The
fund’s Board of Trustees has adopted a general statement of proxy voting
principles that governs the exercise of voting and consent rights associated
with the securities purchased and/or held by the fund. The fund has delegated to
the advisor the responsibility for exercising such rights, subject to the
board’s oversight. The advisor has adopted proxy voting policies that describe
in detail how the advisor intends to exercise its delegated proxy voting
authority in a manner consistent with the board’s principles.
Copies
of the advisor’s proxy voting policies are attached hereto as Appendix E. Copies
of the board’s proxy voting principles, as well as information regarding how the
advisor voted proxies relating to portfolio securities during the most recent
12-month period ended June 30, are available at americancentury.com/proxy. The
advisor’s proxy voting record also is available on the SEC’s website at
sec.gov.
The
Fund’s Principal Shareholders
A
list of the fund’s principal shareholders appears in Appendix A.
Service
Providers
The
fund has no employees. To conduct the fund’s day-to-day activities, the trust
has hired a number of service providers. Each service provider has a specific
function to fill on behalf of the fund that is described below.
ACIM,
ACS and ACIS are wholly owned, directly or indirectly, by ACC. The Stowers
Institute for Medical Research (SIMR) controls ACC by virtue of its beneficial
ownership of more than 25% of the voting securities of ACC. SIMR is part of a
not-for-profit biomedical research organization dedicated to finding the keys to
the causes, treatments and prevention of disease.
Investment
Advisor
American
Century Investment Management, Inc. (ACIM) serves as the investment advisor for
the fund. A description of the responsibilities of the advisor appears in the
prospectus under the heading Management.
Each
class of the fund is subject to a contractual unified management fee based on a
percentage of the daily net assets of such class. For more information about the
unified management fee, see The
Investment Advisor
under the heading Management
in the
fund’s
prospectus. The annual rate at which this fee is assessed is determined daily in
a multi-step process. First, each fund is categorized according to the broad
asset class in which it invests (e.g., money market, bond or equity), and the
assets of all funds for which ACIM serves as the investment advisor and for
which American Century Investment Services, Inc. (ACIS) serves as the
distributor are totaled for each category (Fund Category Assets). Second, the
assets are totaled for certain other accounts managed by the advisor (Other
Account Category Assets). To be included, these accounts must have the same
management team and investment objective as a fund in the same category with the
same Board of Trustees as the trust. Together, the Fund Category Assets and the
Other Account Category Assets comprise the “Investment Category Assets.” The
Investment Category Fee Rate is then calculated by applying a fund’s Investment
Category Fee Schedule to the Investment Category Assets and dividing the result
by the Investment Category Assets.
Finally,
a separate Complex Fee Schedule is applied to the assets of all funds for which
ACIM serves as the investment advisor and for which ACIS serves as the
distributor (the Complex Assets), and the Complex Fee Rate is calculated based
on the resulting total. The Investment Category Fee Rate and the Complex Fee
Rate are then added to determine the Management Fee Rate payable by a class of
the fund to the advisor.
For
purposes of determining the assets that comprise the Fund Category Assets, Other
Account Category Assets and Complex Assets, the assets of registered investment
companies managed by the advisor that invest exclusively in the shares of other
registered investment companies shall not be included.
The
schedules by which the unified management fee is determined are shown
below.
|
|
|
|
|
| |
| Investment
Category Fee Schedule for Zero Coupon 2025 |
| Category
Assets |
Fee
Rate |
| First
$1 billion |
0.3600% |
| Next
$1 billion |
0.3080% |
| Next
$3 billion |
0.2780% |
| Next
$5 billion |
0.2580% |
| Next
$15 billion |
0.2450% |
| Next
$25 billion |
0.2430% |
| Thereafter |
0.2425% |
The
Complex Fee is determined according to the schedule below.
|
|
|
|
|
| |
| Complex
Fee Schedule |
| Complex
Assets |
Fee
Rate Investor
and
Advisor Classes |
| First
$2.5 billion |
0.3100% |
| Next
$7.5 billion |
0.3000% |
| Next
$15 billion |
0.2985% |
| Next
$25 billion |
0.2970% |
| Next
$25 billion |
0.2870% |
| Next
$25 billion |
0.2800% |
| Next
$25 billion |
0.2700% |
| Next
$25 billion |
0.2650% |
| Next
$25 billion |
0.2600% |
| Next
$25 billion |
0.2550% |
| Thereafter |
0.2500% |
On
each calendar day, each class of the fund accrues a management fee that is equal
to the class’s Management Fee Rate times the net assets of the class divided by
365 (366 in leap years). On the first business day of each month, the fund pays
a management fee to the advisor for the previous month. The fee for the previous
month is the sum of the calculated daily fees for each class of a fund during
the previous month.
The
management agreement between the trust and the advisor shall continue in effect
for a period of two years from its effective date (unless sooner terminated in
accordance with its terms) and shall continue in effect from year to year
thereafter for the fund so long as such continuance is approved at least
annually by:
•either
the fund’s Board of Trustees, or a majority of the outstanding voting securities
of the fund (as defined in the Investment Company Act) and
•the
vote of a majority of the trustees of the fund who are not parties to the
agreement or interested persons of the advisor, cast in person at a meeting
called for the purpose of voting on such approval.
The
management agreement states that the fund’s Board of Trustees or a majority of
the outstanding voting securities of each class of the fund may terminate the
management agreement at any time without payment of any penalty on 60 days’
written notice to the advisor. The management agreement shall be automatically
terminated if it is assigned.
The
management agreement provides that the advisor shall not be liable to the fund
or its shareholders for anything other than willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties. The
management agreement also provides that the advisor and its officers, trustees
and employees may engage in other business, devote time and attention to any
other business whether of a similar or dissimilar nature, and render services to
others.
Certain
investments may be appropriate for the fund and also for other clients advised
by the advisor. Investment decisions for the fund and other clients are made
with a view to achieving their respective investment objectives after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investment generally. A particular security
may be bought or sold for only one client or fund, or in different amounts and
at different times for more than one but less than all clients or funds. A
particular security may be bought for one client or fund on the same day it is
sold for another client or fund, and a client or fund may hold a short position
in a particular security at the same time another client or fund holds a long
position. In addition, purchases or sales of the same security may be made for
two or more clients or funds on the same date. The advisor has adopted
procedures designed to ensure such transactions will be allocated among clients
and funds in a manner believed by the advisor to be equitable to each. In some
cases this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a fund.
The
advisor may aggregate purchase and sale orders of the fund with purchase and
sale orders of its other clients when the advisor believes that such aggregation
provides the best execution for the fund. The Board of Trustees has approved the
policy of the advisor with respect to the aggregation of portfolio transactions.
Fixed-income securities transactions are not executed through a centralized
trading desk. Instead, portfolio teams are responsible for executing trades with
broker-dealers in a predominantly dealer marketplace. Trade allocation decisions
are made by the portfolio manager at the time of trade execution and orders
entered on the fixed-income order management system. The advisor will not
aggregate portfolio transactions of the fund unless it believes such aggregation
is consistent with its duty to seek best execution on behalf of the fund and the
terms of the management agreement. The advisor receives no additional
compensation or remuneration as a result of such aggregation.
Unified
management fees incurred by the fund for the fiscal periods ended September 30,
2023, 2022 and 2021, are indicated in the following table.
|
|
|
|
|
|
|
|
|
|
|
| |
| Unified
Management Fees |
|
| |
| Fund |
2023 |
2022 |
2021 |
| Zero
Coupon 2025 |
$858,035 |
$773,129 |
$840,509 |
Portfolio
Managers
Accounts
Managed
The
portfolio managers are responsible for the day-to-day management of various
accounts, as indicated by the following table. Unless otherwise noted, these
accounts do not have an advisory fee based on the performance of the
account.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Accounts
Managed (As of September 30, 2023) |
| |
| |
|
Registered
Investment
Companies
(e.g.,
American
Century Investments funds
and American
Century
Investments-
subadvised
funds)
|
Other
Pooled
Investment
Vehicles
(e.g.,
commingled
trusts
and
529 education
savings
plans)
|
Other
Accounts
(e.g.,
separate
accounts
and
corporate
accounts,
including
incubation
strategies
and
corporate money)
|
| Miguel
Castillo |
Number
of Accounts |
11 |
1 |
2 |
|
| Assets |
$11.0
billion(1) |
$94.5
million |
$465.4
million |
| Robert
V. Gahagan |
Number
of Accounts |
14 |
0 |
2 |
|
| Assets |
$18.4
billion(1) |
N/A |
$465.4
million |
| James
E. Platz |
Number
of Accounts |
17 |
0 |
2 |
|
| Assets |
$18.9
billion(1) |
N/A |
$465.4
million |
1 Includes
$173.6 million in Zero Coupon 2025.
Potential
Conflicts of Interest
Certain
conflicts of interest may arise in connection with the management of multiple
portfolios. Potential conflicts include, for example, conflicts among investment
strategies, such as one portfolio buying or selling a security while another
portfolio has a differing, potentially opposite position in such security. This
may include one portfolio taking a short position in the security of an issuer
that is held long in another portfolio (or vice versa). Other potential
conflicts may arise with respect to the allocation of investment opportunities,
which are discussed in more detail below. American Century Investments has
adopted policies and procedures that are designed to minimize the effects of
these conflicts.
Responsibility
for managing American Century Investments client portfolios is organized
according to investment discipline. Investment disciplines include, for example,
disciplined equity, global growth equity, global value equity, global fixed
income, multi-asset strategies, exchange traded funds and Avantis Investors
funds. Within each discipline are one or more portfolio teams responsible for
managing specific client portfolios. Generally, client portfolios with similar
strategies are managed by the same team using the same objective, approach, and
philosophy. Accordingly, portfolio holdings, position sizes, and industry and
sector exposures tend to be similar across similar portfolios, which minimizes
the potential for conflicts of interest. In addition, American Century
Investments maintains an ethical wall that restricts real time access to
information regarding any portfolio’s transaction activities and positions to
team members that have responsibility for a given portfolio or are within the
same equity investment discipline. The ethical wall is intended to aid in
preventing the misuse of portfolio holdings information and trading activity in
the other disciplines.
For
each investment strategy, one portfolio is generally designated as the “policy
portfolio.” Other portfolios with similar investment objectives, guidelines and
restrictions, if any, are referred to as “tracking portfolios.” When managing
policy and tracking portfolios, a portfolio team typically purchases and sells
securities across all portfolios that the team manages. American Century
Investments’ trading systems include various order entry programs that assist in
the management of multiple portfolios, such as the ability to purchase or sell
the same relative amount of one security across several funds. In some cases a
tracking portfolio may have additional restrictions or limitations that cause it
to be managed separately from the policy portfolio. Portfolio managers make
purchase and sale decisions for such portfolios alongside the policy portfolio
to the extent the overlap is appropriate, and separately, if the overlap is
not.
American
Century Investments may aggregate orders to purchase or sell the same security
for multiple portfolios when it believes such aggregation is consistent with its
duty to seek best execution on behalf of its clients. Orders of certain client
portfolios may, by investment restriction or otherwise, be determined not
available for aggregation. American Century Investments has adopted policies and
procedures to minimize the risk that a client portfolio could be systematically
advantaged or disadvantaged in connection with the aggregation of orders. To the
extent equity trades are aggregated, shares purchased or sold are generally
allocated to the participating portfolios pro rata based on order size. Because
initial public offerings (IPOs) are usually available in limited supply and in
amounts too small to permit across-the-board pro rata allocations, American
Century Investments has adopted special procedures designed to promote a fair
and equitable allocation of IPO securities among clients over time. A
centralized trading desk executes all fixed income securities transactions for
Avantis ETFs and mutual funds. For all other funds in the American Century
complex portfolio teams are responsible for executing fixed income trades with
broker-dealers in a predominantly dealer marketplace. Trade allocation decisions
are made by the portfolio manager at the time of trade execution and orders
entered on the fixed-income order management system. There is an ethical wall
between the Avantis trading desk and all other American Century traders. The
Advisor’s Global Head of Trading monitors all trading activity for best
execution and to make sure no set of clients is being systematically
disadvantaged.
Finally,
investment of American Century Investments’ corporate assets in proprietary
accounts may raise additional conflicts of interest. To mitigate these potential
conflicts of interest, American Century Investments has adopted policies and
procedures intended to provide that trading in proprietary accounts is performed
in a manner that does not give improper advantage to American Century
Investments to the detriment of client portfolios.
Compensation
American
Century Investments portfolio manager compensation is structured to align the
interests of portfolio managers with those of the shareholders whose assets they
manage. As of September 30, 2023, it includes the components described below,
each of which is determined with reference to a number of factors such as
overall performance, market competition, and internal equity.
Base
Salary
Portfolio
managers receive base pay in the form of a fixed annual salary.
Bonus
A
significant portion of portfolio manager compensation takes the form of an
annual incentive bonus which is determined by a combination of factors. One
factor is investment performance of funds a portfolio manager manages. The
mutual funds’ investment performance is generally measured by a combination of
one-, three- and five-year pre-tax performance relative to
various
benchmarks and/or internally-customized peer groups, such as indicated below.
The performance comparison periods may be adjusted based on a fund’s inception
date or a portfolio manager’s tenure on the fund.
|
|
|
|
|
|
|
|
| |
| Fund |
Benchmarks |
Peer
Group |
| Zero
Coupon 2025 |
11/15/2025
STRIPS Issue |
N/A |
Portfolio
managers may have responsibility for multiple American Century Investments
mutual funds. In such cases, the performance of each is assigned a percentage
weight appropriate for the portfolio manager’s relative levels of
responsibility. Portfolio managers also may have responsibility for other types
of managed portfolios or ETFs. If the performance of a managed account or ETF is
considered for purposes of compensation, it is generally measured via the same
criteria as an American Century Investments mutual fund (i.e., relative to the
performance of a benchmark and/or peer group).
A
second factor in the bonus calculation relates to the performance of a number of
American Century Investments funds managed according to one of the following
investment disciplines: global growth equity, global value equity, disciplined
equity, global fixed income and multi-asset strategies. The performance of
American Century ETFs may also be included for certain investment disciplines.
Performance is measured for each product individually as described above and
then combined to create an overall composite for the product group. These
composites may measure one-year performance (equal weighted) or a combination of
one-, three- and five-year performance (equal or asset weighted) depending on
the portfolio manager’s responsibilities and products managed and the composite
for certain portfolio managers may include multiple disciplines. This feature is
designed to encourage effective teamwork among portfolio management teams in
achieving long-term investment success for similarly styled portfolios.
A
portion of portfolio managers’ bonuses may be discretionary and may be tied to
factors such as profitability or individual performance goals, such as research
projects and/or the development of new products.
Restricted
Stock Plans
Portfolio
managers are eligible for grants of restricted stock of ACC. These grants are
discretionary, and eligibility and availability can vary from year to year. The
size of an individual’s grant is determined by individual and product
performance as well as other product-specific considerations, such as
profitability. Grants can appreciate/depreciate in value based on the
performance of the ACC stock during the restriction period (generally three to
four years).
Deferred
Compensation Plans
Portfolio
managers are eligible for grants of deferred compensation. These grants are used
in very limited situations, primarily for retention purposes. Grants are fixed
and can appreciate/depreciate in value based on the performance of the American
Century Investments mutual funds in which the portfolio manager chooses to
invest them.
Ownership
of Securities
The
following table indicates the dollar range of securities of the fund
beneficially owned by the fund’s portfolio managers as of September 30, 2023,
the fund’s most recent fiscal year end. Certain portfolio managers serve on
teams that oversee a number of funds in the same broad investment strategy and
are not expected to invest in each fund.
|
|
|
|
|
|
|
|
| |
| Ownership
of Securities |
| |
|
Aggregate
Dollar Range of Securities in Fund |
| Zero
Coupon 2025 Fund |
|
| Miguel
Castillo |
A |
| |
James
E. Platz |
A |
| |
Robert
V. Gahagan |
A |
Ranges:
A – none; B – $1-$10,000; C – $10,001-$50,000; D – $50,001-$100,000; E –
$100,001-$500,000; F – $500,001-$1,000,000; G – More than
$1,000,000.
Transfer
Agent and Administrator
American
Century Services, LLC (ACS), 4500 Main Street, Kansas City, Missouri 64111,
serves as transfer agent and dividend-paying agent for the fund. It provides
physical facilities, computer hardware and software, and personnel for the
day-to-day administration of the fund and the advisor. The advisor pays ACS’s
costs for serving as transfer agent and dividend-paying agent for the fund out
of the advisor’s unified management fee. For a description of this fee and the
terms of its payment, see the above discussion under the caption Investment
Advisor.
Proceeds
from purchases of fund shares may pass through accounts maintained by the
transfer agent at Commerce Bank, N.A. or UMB Bank, n.a. before being held at the
fund’s custodian. Redemption proceeds also may pass from the custodian to the
shareholder through such bank accounts.
From
time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the advisor.
Sub-Administrator
The
advisor has entered into an Administration Agreement with State Street Bank and
Trust Company (SSB) to provide certain fund accounting, fund financial
reporting, tax and treasury/tax compliance services for the fund, including
striking the daily net asset value for the fund. The advisor pays SSB a monthly
fee as compensation for these services that is based on the total net assets of
accounts in the American Century complex serviced by SSB. ACS does pay SSB for
some additional services on a per fund basis. While ACS continues to serve as
the administrator of the fund, SSB provides sub-administrative services that
were previously undertaken by ACS.
Distributor
The
fund’s shares are distributed by American Century Investment Services, Inc.
(ACIS), a registered broker-dealer. The distributor is a wholly owned subsidiary
of ACC and its principal business address is 4500 Main Street, Kansas City,
Missouri 64111.
The
distributor is the principal underwriter of the fund’s shares. The distributor
makes a continuous, best-efforts underwriting of the fund’s shares. This means
the distributor has no liability for unsold shares. The advisor pays ACIS’s
costs for serving as principal underwriter of the fund’s shares out of the
advisor’s unified management fee. For a description of this fee and the terms of
its payment, see the above discussion under the caption Investment
Advisor.
ACIS does not earn commissions for distributing the fund’s shares.
Certain
financial intermediaries unaffiliated with the distributor or the fund may
perform various administrative and shareholder services for their clients who
are invested in the fund. These services may include assisting with fund
purchases, redemptions and exchanges, distributing information about the fund
and its performance, preparing and distributing client account statements, and
other administrative and shareholder services that would otherwise be provided
by the distributor or its affiliates. The distributor may pay fees out of its
own resources to such financial intermediaries for providing these
services.
Custodian
Bank
State
Street Bank and Trust Company (SSB), One Congress Street, Suite 1, Boston,
Massachusetts 02114-2016 serves as custodian of the fund’s cash and securities
under a Master Custodian Agreement with the trust. Foreign securities, if any,
are held by foreign banks participating in a network coordinated by SSB. The
custodian takes no part in determining the investment policies of the fund or in
deciding which securities are purchased or sold by the fund. The fund, however,
may invest in certain obligations of the custodian and may purchase or sell
certain securities from or to the custodian.
Securities
Lending Agent
State
Street Bank and Trust Company (SSB) serves as securities lending agent for the
fund pursuant to a Securities Lending Administration Agreement with the advisor.
The fund did not loan its securities or employ SSB as securities lending agent
during its most recent fiscal year. To the extent that the fund engages in
securities lending during the current fiscal year, information concerning the
amounts of income and fees/compensation related to securities lending activities
will be included in the statement of additional information in the next annual
update to the fund’s registration statement.
As
the fund’s securities lending agent, SSB is expected to locate borrowers for
fund securities, execute loans of portfolio securities pursuant to terms and
parameters defined by the advisor and the Board of Trustees, monitor the daily
value of the loaned securities and collateral, require additional collateral as
necessary, manage cash collateral, and provide certain limited recordkeeping and
accounting services.
Independent
Registered Public Accounting Firm
The
fund’s Board appointed Deloitte & Touche LLP to serve as the fund’s
independent registered public account firm for the fiscal year ended September
30, 2023. The address of Deloitte & Touche LLP is 1100 Walnut Street, Kansas
City, Missouri 64106. As the independent registered public accounting firm of
the fund, Deloitte & Touche LLP provides services including auditing the
annual financial statements and financial highlights for the fund.
Brokerage
Allocation
The
advisor places orders for equity portfolio transactions with broker-dealers, who
receive commissions for their services. Generally, commissions relating to
securities traded on foreign exchanges will be higher than commissions relating
to securities traded on U.S. exchanges. The advisor purchases and sells
fixed-income securities through principal transactions, meaning the advisor
normally purchases securities on a net basis directly from the issuer or a
primary market-maker acting as principal for the
securities.
The fund generally does not pay a stated brokerage commission on these
transactions, although the purchase price for debt securities usually includes
an undisclosed compensation. Purchases of securities from underwriters typically
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market-makers typically include a dealer’s
mark-up (i.e., a spread between the bid and asked prices).
Under
the management agreement between the fund and the advisor, the advisor has the
responsibility of selecting brokers and dealers to execute portfolio
transactions. The fund’s policy is to secure the most favorable prices and
execution of orders on its portfolio transactions. The advisor selects
broker-dealers on their perceived ability to obtain “best execution” in
effecting transactions in its clients’ portfolios. In selecting broker-dealers
to effect portfolio transactions relating to equity securities, the advisor
considers the full range and quality of a broker-dealer’s research and brokerage
services, including, but not limited to, the following:
•applicable
commission rates and other transaction costs charged by the
broker-dealer
•value
of research provided to the advisor by the broker-dealer (including economic
forecasts, fundamental and technical advice on individual securities, market
analysis, and advice, either directly or through publications or writings, as to
the value of securities, availability of securities or of purchasers/sellers of
securities)
•timeliness
of the broker-dealer’s trade executions
•efficiency
and accuracy of the broker-dealer’s clearance and settlement
processes
•broker-dealer’s
ability to provide data on securities executions
•financial
condition of the broker-dealer
•the
quality of the overall brokerage and customer service provided by the
broker-dealer
In
transactions to buy and sell fixed-income securities, the selection of the
broker-dealer is determined by the availability of the desired security and its
offering price, as well as the broker-dealer’s general execution and operational
and financial capabilities in the type of transaction involved. The advisor will
seek to obtain prompt execution of orders at the most favorable prices or
yields. The advisor does not consider the receipt of products or services other
than brokerage or research services in selecting broker-dealers.
On
an ongoing basis, the advisor seeks to determine what levels of commission rates
are reasonable in the marketplace. In evaluating the reasonableness of
commission rates, the advisor considers:
•rates
quoted by broker-dealers
•the
size of a particular transaction, in terms of the number of shares, dollar
amount, and number of clients involved
•the
ability of a broker-dealer to execute large trades while minimizing market
impact
•the
complexity of a particular transaction
•the
nature and character of the markets on which a particular trade takes
place
•the
level and type of business done with a particular firm over a period of
time
•the
ability of a broker-dealer to provide anonymity while executing
trades
•historical
commission rates
•rates
that other institutional investors are paying, based on publicly available
information
The
brokerage commissions paid by the fund may exceed those that another
broker-dealer might have charged for effecting the same transactions, because of
the value of the brokerage and research services provided by the broker-dealer.
Research services furnished by broker-dealers through whom the fund effects
securities transactions may be used by the advisor in servicing all of its
accounts, and not all such services may be used by the advisor in managing the
portfolios of the fund.
Pursuant
to its internal allocation procedures, the advisor regularly evaluates the
brokerage and research services provided by each broker-dealer that it uses. On
a periodic basis, members of the advisor’s portfolio management team assess the
quality and value of research and brokerage services provided by each
broker-dealer that provides execution services and research to the advisor for
its clients’ accounts. The results of the periodic assessments are used to add
or remove brokers from the approved brokers list, if needed, and to set research
budgets for the following period. Execution-only brokers are used where deemed
appropriate.
During
the fiscal years ended September 30, 2023, 2022 and 2021, the fund did not pay
any brokerage commissions, including, as applicable, futures
commissions.
Regular
Broker-Dealers
As
of the end of the most recently completed fiscal year, the fund owned no
securities of its regular brokers or dealers (as defined by Rule 10b-1 under the
Investment Company Act) or of their parent companies.
Information
About Fund Shares
The
Declaration of Trust permits the Board of Trustees to issue an unlimited number
of full and fractional shares of beneficial interest without par value, which
may be issued in a series (or funds). The fund named on the front of this
statement of additional information is a series of shares issued by the trust.
In addition, each series (or fund) may be divided into separate classes. See
Multiple
Class Structure,
which follows. Additional funds and classes may be added without a shareholder
vote.
Each
fund votes separately on matters affecting that fund exclusively. Voting rights
are not cumulative, so that investors holding more than 50% of the trust’s (all
funds’) outstanding shares may be able to elect a Board of Trustees. The trust
undertakes dollar-based voting, meaning that the number of votes a shareholder
is entitled to is based upon the dollar amount of the shareholder’s investment.
The election of trustees is determined by the votes received from all the
trust’s shareholders without regard to whether a majority of shares of any one
fund voted in favor of a particular nominee or all nominees as a
group.
Each
shareholder has rights to dividends and distributions declared by the fund he or
she owns and to the net assets of such fund upon its liquidation or dissolution
proportionate to his or her share ownership interest in the fund. Shares of each
fund have equal voting rights, although each fund votes separately on matters
affecting that fund exclusively.
The
trust shall continue unless terminated by (1) approval of at least two-thirds of
the shares of each fund entitled to vote or (2) the trustees by written notice
to shareholders of each fund. Any fund may be terminated by (1) approval of at
least two-thirds of the shares of that fund or (2) the trustees by written
notice to shareholders of that fund.
Upon
termination of the trust or a fund, as the case may be, the trust shall pay or
otherwise provide for all charges, taxes, expenses and liabilities belonging to
the trust or the fund. Thereafter, the trust shall reduce the remaining assets
belonging to each fund (or the particular fund) to cash, shares of other
securities or any combination thereof, and distribute the proceeds belonging to
each fund (or the particular fund) to the shareholders of that fund ratably
according to the number of shares of that fund held by each shareholder on the
termination date.
Shareholders
of a Massachusetts business trust could, under certain circumstances, be held
personally liable for its obligations. However, the Declaration of Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the trust. The Declaration of Trust also provides for indemnification and
reimbursement of expenses of any shareholder held personally liable for
obligations of the trust. The Declaration of Trust provides that the trust will,
upon request, assume the defense of any claim made against any shareholder for
any act or obligation of the trust and satisfy any judgment thereon. The
Declaration of Trust further provides that the trust may maintain appropriate
insurance (for example, fidelity, bonding, and errors and omissions insurance)
for the protection of the trust, its shareholders, trustees, officers, employees
and agents to cover possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss as a result of shareholder liability is
limited to circumstances in which both inadequate insurance exists and the trust
is unable to meet its obligations.
The
assets belonging to each series are held separately by the custodian and the
shares of each series represent a beneficial interest in the principal, earnings
and profit (or losses) of investments and other assets held for each series.
Your rights as a shareholder are the same for all series of securities unless
otherwise stated. Within their respective fund or class, all shares have equal
redemption rights. Each share, when issued, is fully paid and
non-assessable.
Fund
Liquidations
Near
the end of the fund’s target maturity year, its investments will be sold or
allowed to mature; its liabilities will be discharged or a provision will be
made for their discharge; and its accounts will be closed. A shareholder may
choose to redeem his or her shares in one of the following ways: (1) by
receiving redemption proceeds or (2) by exchanging shares for shares of another
American Century Investments fund. The estimated expenses of terminating and
liquidating the fund’s portfolio securities will be accrued ratably over its
target maturity year. These expenses, which are charged to income (as are all
expenses), are not expected to exceed significantly the ordinary annual expenses
incurred by the fund and, therefore, should have little or no effect on the
maturity value of the fund.
Multiple
Class Structure
The
Board of Trustees has adopted a multiple class plan pursuant to Rule 18f-3 under
the Investment Company Act. The plan is described in the fund’s prospectus.
Pursuant to such plan, the fund may issue up to two classes of shares: an
Investor Class and an Advisor Class.
The
Investor Class is made available to investors directly from American Century
Investments and/or through some financial intermediaries. Investor Class shares
charge a single unified management fee, without any load or commission payable
to American Century Investments. Additional information regarding eligibility
for Investor Class shares may be found in the fund’s prospectus. The Advisor
Class is made available through financial intermediaries, for purchase by
individual investors who receive advisory and personal services from the
intermediary. The unified management fee for the Advisor Class is the same as
for the Investor Class, but the Advisor Class shares are subject to a Master
Distribution and Individual Shareholder Services Plan
(the
Advisor Class Plan) described below. The Advisor Class Plan has been adopted by
the fund’s Board of Trustees in accordance with Rule 12b-1 adopted by the SEC
under the Investment Company Act.
Rule
12b-1
Rule
12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by its Board of
Trustees and approved by its shareholders. Pursuant to such rule, the Board of
Trustees of the fund’s Advisor Class have approved and entered into the Advisor
Class Plan. The plan is described below.
In
adopting the plan, the Board of Trustees (including a majority of trustees who
are not interested persons of the fund, as defined in the Investment Company
Act, hereafter referred to as the independent trustees) determined that there
was a reasonable likelihood that the plan would benefit the fund and the
shareholders of the affected class. Some of the anticipated benefits include
improved name recognition of the fund generally; and growing assets in existing
funds, which helps retain and attract investment management talent, provides a
better environment for improving fund performance, and can lower the total
expense ratio for funds with stepped-fee schedules. Pursuant to Rule 12b-1,
information about revenues and expenses under the plan is presented to the Board
of Trustees quarterly. Continuance of the plan must be approved by the Board of
Trustees, including a majority of the independent trustees, annually. The plan
may be amended by a vote of the Board of Trustees, including a majority of the
independent trustees, except that the plan may not be amended to materially
increase the amount to be spent for distribution without majority approval of
the shareholders of the affected class. The plan terminates automatically in the
event of an assignment and may be terminated upon a vote of a majority of the
independent trustees or by vote of a majority of outstanding shareholder votes
of the affected class.
All
fees paid under the plan will be made in accordance with Section 2830 of the
Conduct Rules of the Financial Industry Regulatory Authority
(FINRA).
Advisor
Class Plan
As
described in the prospectus, the fund’s Advisor Class shares are made available
to participants in employer-sponsored retirement plans and to persons purchasing
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative, shareholder and distribution
services. The fund’s distributor enters into contracts with various banks,
broker-dealers, insurance companies and other financial intermediaries, with
respect to the sale of the fund’s shares and/or the use of the fund’s shares in
various investment products or in connection with various financial
services.
Certain
recordkeeping and administrative services that would otherwise be performed by
the fund’s transfer agent may be performed by a plan sponsor (or its agents) or
by a financial intermediary for shareholders in the Advisor Class. In addition
to such services, the financial intermediaries provide various distribution
services.
To
enable the fund’s shares to be made available through such plans and financial
intermediaries, and to compensate them for these services, the fund’s Board of
Trustees has adopted the Advisor Class Plan. Pursuant to the Advisor Class Plan,
the Advisor Class pays the fund’s distributor 0.25% annually of the average
daily net asset value of the Advisor Class shares. The distributor may use these
fees to pay for certain ongoing shareholder and administrative services and for
distribution services, including past distribution services. This payment is
fixed at 0.25%, and is not based on expenses incurred by the
distributor.
During
the fiscal year ended September 30, 2023, the aggregate amount of fees paid
under the Advisor Class Plan was:
The
distributor then makes these payments to the financial intermediaries (including
underwriters and broker-dealers, who may use some of the proceeds to compensate
sales personnel) who offer the Advisor Class shares for the services described
below. No portion of these payments is used by the distributor to pay for
advertising, printing costs or interest expenses.
Payments
may be made for a variety of individual shareholder services, including, but not
limited to:
(a)providing
individualized and customized investment advisory services, including the
consideration of shareholder profiles and specific goals;
(b)creating
investment models and asset allocation models for use by shareholders in
selecting appropriate funds;
(c)conducting
proprietary research about investment choices and the market in
general;
(d)periodic
rebalancing of shareholder accounts to ensure compliance with the selected asset
allocation;
(e)consolidating
shareholder accounts in one place;
(f)paying
service fees for providing personal, continuing services to investors, as
contemplated by the Conduct Rules of FINRA; and
(g)other
individual services.
Individual
shareholder services do not include those activities and expenses that are
primarily intended to result in the sale of additional shares of the
fund.
Distribution
services include any activity undertaken or expense incurred that is primarily
intended to result in the sale of Advisor Class shares, which services may
include but are not limited to:
(a)paying
of sales commissions, on-going commissions and other payments to brokers,
dealers, financial institutions or others who sell Advisor Class shares pursuant
to selling agreements;
(b)compensating
registered representatives or other employees of the distributor who engage in
or support distribution of the funds’ Advisor Class shares;
(c)compensating
and paying expenses (including overhead and telephone expenses) of the
distributor;
(d)printing
prospectuses, statements of additional information and reports for
other-than-existing shareholders;
(e)preparing,
printing and distributing sales literature and advertising materials provided to
the fund’s shareholders and prospective shareholders;
(f)receiving
and answering correspondence from prospective shareholders, including
distributing prospectuses, statements of additional information, and shareholder
reports;
(g)providing
facilities to answer questions from prospective shareholders about fund
shares;
(h)complying
with federal and state securities laws pertaining to the sale of fund
shares;
(i)assisting
shareholders in completing application forms and selecting dividend and other
account options;
(j)providing
other reasonable assistance in connection with the distribution of fund
shares;
(k)organizing
and conducting sales seminars and payments in the form of transactional and
compensation or promotional incentives;
(l)profit
on the foregoing; and
(m)such
other distribution and services activities as the advisor determines may be paid
for by the fund pursuant to the terms of the agreement between the trust and the
fund’s distributor and in accordance with Rule 12b-1 of the Investment Company
Act.
Valuation
of a Fund’s Securities
The
net asset value (NAV) for each class of the fund is calculated by adding the
value of all portfolio securities and other assets attributable to the class,
deducting liabilities, and dividing the result by the number of shares of the
class outstanding. Expenses and interest earned on portfolio securities are
accrued daily.
All
classes of the fund are offered at their NAV. The fund’s NAV is calculated as of
the close of business of the New York Stock Exchange (NYSE) on each day the NYSE
is open. The NYSE usually closes at 4 p.m. Eastern time. The NYSE typically
observes the following holidays: New Year’s Day, Martin Luther King Jr. Day,
Presidents’ Day, Good Friday, Memorial Day, Juneteenth National Independence
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Although
the fund expects the same holidays to be observed in the future, the NYSE may
modify its holiday schedule at any time.
Securities
held by the fund normally are priced using data supplied by an independent
pricing service, provided that such prices are believed by the advisor to
reflect the fair market value of portfolio securities.
Securities
maturing within 60 days of the valuation date may be valued at cost, plus or
minus any amortized discount or premium, unless the advisor, based on guidelines
and procedures established by the Board of Trustees for determining the
valuation of a security, determines that this would not result in fair valuation
of a given security. Other assets and securities for which quotations are not
readily available are valued in good faith using methods approved by the Board
of Trustees.
Taxes
Federal
Income Tax
The
fund intends to qualify annually as a regulated investment company (RIC) under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). RICs
generally are not subject to federal and state income taxes. To qualify as a RIC
a fund must, among other requirements, distribute substantially all of its net
investment income and net realized capital gains (if any) to investors each
year. If a fund were not eligible to be treated as a RIC, it would be liable for
taxes at the fund level on all its income, significantly reducing its
distributions to investors and eliminating investors’ ability to treat
distributions received from the fund in the same manner in which they were
realized by the fund. Under certain circumstances, the Code allows funds to cure
deficiencies that would otherwise result in the loss of RIC status, including by
paying a fund-level tax.
To
qualify as a RIC, a fund must meet certain requirements of the Code, among which
are requirements relating to sources of its income and diversification of its
assets. A fund is also required to distribute 90% of its investment company
taxable income each year. Additionally, a fund must declare dividends by
December 31 of each year equal to at least 98% of ordinary income (as of
December 31) and 98.2% of capital gains (as of October 31) to avoid the
nondeductible 4% federal excise tax on any undistributed amounts.
Certain
bonds purchased by the fund may be treated as bonds that were originally issued
at a discount. Original issue discount represents interest for federal income
tax purposes and can generally be defined as the difference between the price at
which a security was issued and its stated redemption price at maturity.
Although no cash is actually received by the fund until the maturity of the
bond, original issue discount is treated for federal income tax purposes as
income earned by a fund over the term of the bond, and therefore is subject to
the distribution requirements of the Code. The annual amount of income earned on
such a bond by the fund generally is determined on the basis of a constant yield
to maturity that takes into account the semiannual compounding of accrued
interest. Original issue discount on an obligation with interest exempt from
federal income tax will constitute tax-exempt interest income to the
fund.
In
addition, some of the bonds may be purchased by the fund at a discount that
exceeds the original issue discount on such bonds, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any bond having market discount generally will be
treated as taxable ordinary income to the extent it does not exceed the accrued
market discount on such bond (unless the fund elects to include market discount
in income in tax years to which it is attributable or if the amount is
considered de minimis). Generally, market discount accrues on a daily basis for
each day the bond is held by the fund on a constant yield to maturity basis. In
the case of any debt security having a fixed maturity date of not more than one
year from date of issue, the gain realized on disposition generally will be
treated as a short-term capital gain.
As
of September 30, 2023, the fund had an unlimited capital loss carryover of
$(418,036). When a fund has a capital loss carryover, it does not make capital
gains distributions until the loss has been offset. The Regulated Investment
Company Modernization Act of 2010 allows the fund to carry forward capital
losses incurred in future taxable years for an unlimited period.
If
you have not complied with certain provisions of the Internal Revenue Code and
Regulations, either American Century Investments or your financial intermediary
is required by federal law to withhold and remit to the IRS the applicable
federal withholding rate on reportable payments (which may include taxable
dividends, capital gains distributions and redemption proceeds). Those
regulations require you to certify that the Social Security number or tax
identification number you provide is correct and that you are not subject to
withholding for previous under-reporting to the IRS. You will be asked to make
the appropriate certification on your account application. Payments reported by
us to the IRS that omit your Social Security number or tax identification number
will subject us to a non-refundable penalty of $50, which will be charged
against your account if you fail to provide the certification by the time the
report is filed.
If
fund shares are purchased through taxable accounts, distributions of either cash
or additional shares of net investment income and net short-term capital gains
are taxable to you as ordinary income, unless they are designated as qualified
dividend income and you meet a minimum required holding period with respect to
your shares of a fund, in which case such distributions are taxed at the same
rate as long-term capital gains. Qualified dividend income is a dividend
received by a fund from the stock of a domestic or qualifying foreign
corporation, provided that the fund has held the stock for a required holding
period and the stock was not on loan at the time of the dividend. The required
holding period for qualified dividend income is met if the underlying shares are
held more than 60 days in the 121-day period beginning 60 days prior to the
ex-dividend date. Dividends received by the fund on shares of stock of domestic
corporations may qualify for the 70% dividends-received deduction when
distributed to corporate shareholders to the extent that the fund held these
shares for more than 45 days. The fund does not expect a significant portion of
its distributions to be qualified dividend income or to qualify for the
corporate dividends-received deduction.
Distributions
from gains on assets held by a fund longer than 12 months are taxable as
long-term gains regardless of the length of time you have held your shares in
the fund. If you purchase shares in a fund and sell them at a loss within six
months, your loss on the sale of those shares will be treated as a long-term
capital loss to the extent of any long-term capital gains dividend you received
on those shares.
The
fund may use the “equalization method” of accounting to allocate a portion of
its earnings and profits to redemption proceeds. Although using this method
generally will not affect the fund’s total returns, it may reduce the amount
that the fund would otherwise distribute to continuing shareholders by reducing
the effect of redemptions of fund shares on fund distributions to
shareholders.
A
redemption of shares of the fund (including a redemption made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
you generally will recognize gain or loss in an amount equal to the difference
between the basis of the shares and the amount received. If a loss is realized
on the redemption of fund shares, the reinvestment in additional fund shares
within 30 days before or after the redemption may be subject to the “wash sale”
rules of the Code, postponing the recognition of such loss for federal income
tax purposes.
A
3.8% Medicare contribution tax is imposed on net investment income, including
interest, dividends and capital gains, provided you meet specified income
levels.
State
and Local Taxes
Distributions
by the fund also may be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received such interest directly, would be
exempt from state
income
tax. However, most but not all states allow this tax exemption to pass through
to fund shareholders when a fund pays distributions to its shareholders. You
should consult your tax advisor about the tax status of such distributions in
your state.
The
information above is only a summary of some of the tax considerations affecting
the fund and its U.S. shareholders. No attempt has been made to discuss
individual tax consequences. A prospective investor should consult with his or
her tax advisor or state or local tax authorities to determine whether the fund
is a suitable investment.
Financial
Statements
The
financial statements for the fiscal year ended September 30, 2023 have been
audited by Deloitte & Touche LLP, independent registered public accounting
firm. Their Report of Independent Registered Public Accounting Firm and the
financial statements included in the fund’s Annual
Report
for the fiscal year ended September 30, 2023 are incorporated herein by
reference.
Appendix
A – Principal Shareholders
As
of December 31, 2023, the following shareholders owned more than 5% of the
outstanding shares of a class of the fund. The table shows shares owned of
record unless otherwise noted.
|
|
|
|
|
|
|
|
| |
| Fund/Class |
Shareholder |
Percentage
of
Outstanding
Shares
Owned
Of Record
|
| Zero
Coupon 2025 |
| Investor
Class |
|
| National
Financial Services LLC
Jersey City, New Jersey |
21% |
|
| Charles
Schwab & Co. Inc.
San Francisco, California |
16% |
|
| LPL
Financial
San Diego, California |
10% |
|
| Pershing
LLC
Jersey City, New Jersey |
9% |
| Advisor
Class |
|
| Pershing
LLC
Jersey City, New Jersey |
31% |
|
|
Mid
Atlantic Trust Company
Pittsburgh,
Pennsylvania
Includes
13.43% registered for the benefit of The New York Preparatory 401k Profit
Sharing Plan & Trust |
15% |
|
| Ascensus
Trust Co
Fargo, North Dakota |
12% |
|
| M
L P F & S
Jacksonville, Florida |
10% |
|
| Charles
Schwab & Co. Inc.
San Francisco, California |
9% |
|
| National
Financial Services LLC
Jersey City, New Jersey |
8% |
|
| Vanguard
Brokerage Services
El Paso, Texas |
7% |
A
shareholder owning beneficially more than 25% of the trust’s outstanding shares
may be considered a controlling person. The vote of any such person could have a
more significant effect on matters presented at a shareholders’ meeting than
votes of other shareholders. The funds are unaware of any shareholders,
beneficial or of record, who own more than 25% of the voting securities of the
trust. As of December 31, 2023, the officers and trustees of the fund as a
group, owned less than 1% of any class of a fund’s outstanding
shares.
Appendix
B – Payments to Dealers
Payments
to Dealers
From
time to time, the distributor may make additional payments to dealers, including
but not limited to payment assistance for conferences and seminars, provision of
sales or training programs for dealer employees and/or the public (including, in
some cases, payment for travel expenses for registered representatives and other
dealer employees who participate), advertising and sales campaigns about a fund
or funds, and assistance in financing dealer-sponsored events. Other payments
may be offered as well, and all such payments will be consistent with applicable
law, including the then-current rules of the Financial Industry Regulatory
Authority. Such payments will not change the price paid by investors for shares
of the funds.
Appendix
C – Buying and Selling Fund Shares
Information
about buying, selling, exchanging and, if applicable, converting fund shares is
contained in the fund’s prospectus. The prospectus is available to investors
without charge and may be obtained by calling us.
Employer-Sponsored
Retirement Plans
Certain
group employer-sponsored retirement plans that hold a single account for all
plan participants with the fund, or that are part of a retirement plan or
platform offered by banks, broker-dealers, financial advisors or insurance
companies, or serviced by retirement recordkeepers are eligible to purchase
Investor and Advisor Class shares. Advisor Class shares purchased in
employer-sponsored retirement plans are subject to applicable distribution and
service (12b-1) fees, which the financial intermediary begins receiving
immediately at the time of purchase. American Century does not impose minimum
initial investment amount, plan size or participant number requirements by class
for employer-sponsored retirement plans; however, financial intermediaries or
plan recordkeepers may require plans to meet different
requirements.
Examples
of employer-sponsored retirement plans include the following:
•401(a)
plans
•pension
plans
•profit
sharing plans
•401(k)
plans (including plans with a Roth 401(k) feature, SIMPLE 401(k) plans and Solo
401(k) plans)
•money
purchase plans
•target
benefit plans
•Taft-Hartley
multi-employer pension plans
•SERP
and “Top Hat” plans
•ERISA
trusts
•employee
benefit plans and trusts
•employer-sponsored
health plans
•457
plans
•KEOGH
or HR(10) plans
•employer-sponsored
403(b) plans (including plans with a Roth 403(b) feature)
•nonqualified
deferred compensation plans
•nonqualified
excess benefit plans
•nonqualified
retirement plans
Traditional
and Roth IRAs are not considered employer-sponsored retirement plans, and SIMPLE
IRAs, SEP IRAs and SARSEPs are collectively referred to as Business
IRAs.
Appendix
D – Explanation of Fixed-Income Securities Ratings
As
described in the prospectuses, the fund invests in fixed-income securities.
Those investments, however, are subject to certain credit quality restrictions,
as noted in the prospectuses and in this statement of additional information.
The following are examples of the rating categories referenced in the prospectus
disclosure.
|
|
|
|
|
| |
| Ratings
of Corporate and Municipal Debt Securities |
| Standard
& Poor’s Long-Term Issue Credit Ratings* |
| Category |
Definition |
| AAA |
An
obligation rated ‘AAA’ has the highest rating assigned by Standard &
Poor’s. The obligor’s capacity to meet its financial commitment on the
obligation is extremely strong. |
| AA |
An
obligation rated ‘AA’ differs from the highest-rated obligations only to a
small degree. The obligor’s capacity to meet its financial commitment on
the obligation is very strong. |
| A |
An
obligation rated ‘A’ is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor’s capacity to meet its
financial commitment on the obligation is still strong. |
| BBB |
An
obligation rated ‘BBB’ exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation. |
| BB;B;
CCC; CC; and C |
Obligations
rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having significant
speculative characteristics. ‘BB’ indicates the least degree of
speculation and ‘C’ the highest. While such obligations will likely have
some quality and protective characteristics, these may be outweighed by
large uncertainties or major exposures to adverse conditions. |
| BB |
An
obligation rated ‘BB’ is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to the obligor’s inadequate capacity to meet its financial
commitment on the obligation. |
| B |
An
obligation rated ‘B’ is more vulnerable to nonpayment than obligations
rated ‘BB’, but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor’s capacity or
willingness to meet its financial commitment on the
obligation. |
| CCC |
An
obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation. |
| CC |
An
obligation rated ‘CC’ is currently highly vulnerable to nonpayment. The
‘CC’ rating is used when a default has not yet occurred, but Standard
& Poor’s expects default to be a virtual certainty, regardless of the
anticipated time to default. |
| C |
An
obligation rated ‘C’ is currently highly vulnerable to nonpayment,and the
obligation is expected to have lower relative seniority or lower ultimate
recovery compared to obligations that are rated higher. |
| D |
An
obligation rated ‘D’ is in default or in breach of an imputed promise. For
non-hybrid capital instruments, the ‘D’ rating category is used when
payments on an obligation are not made on the date due, unless Standard
& Poor’s believes that such payments will be made within five business
days in the absence of a stated grace period or within the earlier of the
stated grace period or 30 calendar days. The ‘D’ rating also will be used
upon the filing of a bankruptcy petition or the taking of similar action
and where default on an obligation is a virtual certainty, for example due
to automatic stay provisions. An obligation’s rating is lowered to ‘D’ if
it is subject to a distressed exchange offer. |
| NR |
This
indicates that no rating has been requested, or that there is insufficient
information on which to base a rating, or that Standard & Poor’s does
not rate a particular obligation as a matter of
policy. |
*The
ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating
categories.
|
|
|
|
|
| |
| Moody’s
Investors Service, Inc. Global Long-Term Rating Scale |
| Category |
Definition |
| Aaa |
Obligations
rated Aaa are judged to be of the highest quality, subject to the lowest
level of credit risk. |
| Aa |
Obligations
rated Aa are judged to be of high quality and are subject to very low
credit risk. |
| A |
Obligations
rated A are judged to be upper-medium grade and are subject to low credit
risk. |
| Baa |
Obligations
rated Baa are judged to be medium-grade and subject to moderate credit
risk and as such may possess certain speculative
characteristics. |
| Ba |
Obligations
rated Ba are judged to be speculative and are subject to substantial
credit risk. |
| B |
Obligations
rated B are considered speculative and are subject to high credit
risk. |
| Caa |
Obligations
rated Caa are judged to be speculative of poor standing and are subject to
very high credit risk. |
| Ca |
Obligations
rated Ca are highly speculative and are likely in, or very near, default,
with some prospect of recovery of principal and interest. |
| C |
Obligations
rated C are the lowest rated and are typically in default, with little
prospect for recovery of principal or
interest. |
Note:
Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category. Additionally, a “(hyb)” indicator is appended to
all ratings of hybrid securities issued by banks, insurers, finance companies,
and securities firms.
|
|
|
|
|
| |
| Fitch
Investors Service, Inc. Long-Term Ratings |
| Category |
Definition |
| AAA |
Highest
credit quality. ‘AAA’
ratings denote the lowest expectation of credit risk. They are assigned
only in cases of exceptionally strong capacity for payment of financial
commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events. |
| AA |
Very
High credit quality. ‘AA’
ratings denote expectations of very low credit risk. They indicate very
strong capacity for payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events. |
| A |
High
credit quality. ‘A’
ratings denote expectations of low credit risk. The capacity for payment
of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to adverse business or economic
conditions than is the case for higher ratings. |
| BBB |
Good
credit quality. ‘BBB’
ratings indicate that expectations of credit risk are currently low. The
capacity for payment of financial commitments is considered adequate but
adverse business or economic conditions are more likely to impair this
capacity. |
| BB |
Speculative.
‘BB’
ratings indicate an elevated vulnerability to credit risk, particularly in
the event of adverse changes in business or economic conditions over time;
however, business or financial alternatives may be available to allow
financial commitments to be met. |
| B |
Highly
speculative. ‘B’
ratings indicate that material credit risk is present. |
| CCC |
Substantial
credit risk. ‘CCC’
ratings indicate that substantial credit risk is
present. |
| CC |
Very
high levels of credit risk. ‘CC’
ratings indicate very high levels of credit risk. |
| C |
Exceptionally
high levels of credit risk. ‘C’
indicates exceptionally high levels of credit
risk. |
Defaulted
obligations typically are not assigned ‘RD’ or ‘D’ ratings, but are instead
rated in the ‘B’ to ‘C’ rating categories, depending upon their recovery
prospects and other relevant characteristics. This approach better aligns
obligations that have comparable overall expected loss but varying vulnerability
to default and loss.
Notes:
The modifiers “+” or “-“ may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to the ‘AAA’
obligation rating category, or to corporate finance obligation ratings in the
categories below ‘CCC’.
|
|
|
|
|
| |
| Standard
& Poor’s Corporate Short-Term Note Ratings |
| Category |
Definition |
| A-1 |
A
short-term obligation rated ‘A-1’ is rated in the highest category by
Standard & Poor’s. The obligor’s capacity to meet its financial
commitment on the obligation is strong. Within this category, certain
obligations are designated with a plus sign (+). This indicates that the
obligor’s capacity to meet its financial commitment on these obligations
is extremely strong. |
| A-2 |
A
short-term obligation rated ‘A-2’ is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor’s capacity
to meet its financial commitment on the obligation is
satisfactory. |
| A-3 |
A
short-term obligation rated ‘A-3’ exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation. |
| B |
A
short-term obligation rated ‘B’ is regarded as vulnerable and has
significant speculative characteristics. The obligor currently has the
capacity to meet its financial commitments; however, it faces major
ongoing uncertainties which could lead to the obligor’s inadequate
capacity to meet its financial commitments. |
| C |
A
short-term obligation rated ‘C’ is currently vulnerable to nonpayment and
is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the
obligation. |
| D |
A
short-term obligation rated ‘D’ is in default or in breach of an imputed
promise. For non-hybrid capital instruments, the ‘D’ rating category is
used when payments on an obligation are not made on the date due, unless
Standard & Poor’s believes that such payments will be made within any
stated grace period. However, any stated grace period longer than five
business days will be treated as five business days. The ‘D’ rating also
will be used upon the filing of a bankruptcy petition or the taking of a
similar action and where default on an obligation is a virtual certainty,
for example due to automatic stay provisions. An obligation’s rating is
lowered to ‘D’ if it is subject to a distressed exchange offer.
|
|
|
|
|
|
| |
| Moody’s
Global Short-Term Rating Scale |
| Category |
Definition |
| P-1 |
Issuers
(or supporting institutions) rated Prime-1 have a superior ability to
repay short-term debt obligations. |
| P-2 |
Issuers
(or supporting institutions) rated Prime-2 have a strong ability to repay
short-term debt obligations. |
| P-3 |
Issuers
(or supporting institutions) rated Prime-3 have an acceptable ability to
repay short-term obligations. |
| NP |
Issuers
(or supporting institutions) rated Not Prime do not fall within any of the
Prime rating categories. |
|
|
|
|
|
| |
| Fitch
Investors Service, Inc. Short-Term Ratings |
| Category |
Definition |
| F1 |
Highest
short-term credit quality. Indicates
the strongest intrinsic capacity for timely payment of financial
commitments; may have an added “+” to denote any exceptionally strong
credit feature. |
| F2 |
Good
short-term credit quality. Good
intrinsic capacity for timely payment of financial
commitments. |
| F3 |
Fair
short-term credit quality. The
intrinsic capacity for timely payment of financial commitments is
adequate. |
| B |
Speculative
short-term credit quality. Minimal
capacity for timely payment of financial commitments, plus heightened
vulnerability to near term adverse changes in financial and economic
conditions. |
| C |
High
short-term default risk. Default
is a real possibility. |
| RD |
Restricted
default. Indicates
an entity that has defaulted on one or more of its financial commitments,
although it continues to meet other financial obligations. Typically
applicable to entity ratings only. |
| D |
Default
Indicates
a broad-based default event for an entity, or the default of a short-term
obligation. |
|
|
|
|
|
| |
| Standard
& Poor’s Municipal Short-Term Note Ratings |
| Category |
Definition |
| SP-1 |
Strong
capacity to pay principal and interest. An issue determined to possess a
very strong capacity to pay debt service is given a plus (+) designation.
|
| SP-2 |
Satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes. |
| SP-3 |
Speculative
capacity to pay principal and interest. |
|
|
|
|
|
| |
| Moody’s
US Municipal Short-Term Debt Ratings |
| Category |
Definition |
| MIG
1 |
This
designation denotes superior credit quality. Excellent protection is
afforded by established cash flows, highly reliable liquidity support, or
demonstrated broad-based access to the market for refinancing.
|
| MIG
2 |
This
designation denotes strong credit quality. Margins of protection are
ample, although not as large as in the preceding group. |
| MIG
3 |
This
designation denotes acceptable credit quality. Liquidity and cash-flow
protection may be narrow, and market access for refinancing is likely to
be less well-established. |
| SG |
This
designation denotes speculative-grade credit quality. Debt instruments in
this category may lack sufficient margins of protection.
|
|
|
|
|
|
| |
| Moody’s
Demand Obligation Ratings |
| Category |
Definition |
| VMIG
1 |
This
designation denotes superior credit quality. Excellent protection is
afforded by the superior short-term credit strength of the liquidity
provider and structural and legal protections that ensure the timely
payment of purchase price upon demand. |
| VMIG
2 |
This
designation denotes strong credit quality. Good protection is afforded by
the strong short-term credit strength of the liquidity provider and
structural and legal protections that ensure the timely payment of
purchase price upon demand. |
| VMIG
3 |
This
designation denotes acceptable credit quality. Adequate protection is
afforded by the satisfactory short-term credit strength of the liquidity
provider and structural and legal protections that ensure the timely
payment of purchase price upon demand. |
| SG |
This
designation denotes speculative-grade credit quality. Demand features
rated in this category may be supported by a liquidity provider that does
not have an investment grade short-term rating or may lack the structural
and/or legal protections necessary to ensure the timely payment of
purchase price upon demand. |
Appendix
E – Proxy Voting Policies
American
Century Investment Management, Inc. (the “Adviser”) is the investment manager
for a variety of advisory clients, including the American Century family of
funds. In such capacity, the Adviser has been delegated the authority to vote
proxies with respect to investments held in the accounts it manages. The
following is a statement of the proxy voting policies that have been adopted by
the Adviser. In the exercise of proxy voting authority which has been delegated
to it by particular clients, the Adviser will apply the following policies in
accordance with, and subject to, any specific policies that have been adopted by
the client and communicated to and accepted by the Adviser in
writing.
I. General
Principles
In
providing the service of voting client proxies, the Adviser is guided by general
fiduciary principles, must act prudently, solely in the interest of its clients,
and must not subordinate client interests to unrelated objectives. Except as
otherwise indicated in these Policies, the Adviser will vote all proxies with
respect to investments held in the client accounts it manages. The Adviser will
attempt to consider all factors of its vote that could affect the value of the
investment. Although in most instances the Adviser will vote proxies
consistently across all client accounts, the votes will be based on the best
interests of each client. As a result, accounts managed by the Adviser may at
times vote differently on the same proposals. Examples of when an account’s vote
might differ from other accounts managed by the Adviser include, but are not
limited to, proxy contests and proposed mergers. In short, the Adviser will vote
proxies in the manner that it believes will do the most to maximize shareholder
value.
II. Specific
Proxy Matters
A. Routine
Matters
1. Election
of Directors
a) Generally.
The
Adviser will generally support the election of directors that result in a board
made up of a majority of independent directors. In general, the Adviser will
vote in favor of management’s director nominees if they are running unopposed.
The Adviser believes that management is in the best possible position to
evaluate the qualifications of directors and the needs and dynamics of a
particular board. The Adviser of course maintains the ability to vote against
any candidate whom it feels is not qualified or if there are specific concerns
about the individual, such as allegations of criminal wrongdoing or breach of
fiduciary responsibilities. Additional information the Adviser may consider
concerning director nominees include, but is not limited to, whether (i) there
is an adequate explanation for repeated absences at board meetings, (ii) the
nominee receives non-board fee compensation, or (iii) there is a family
relationship between the nominee and the company’s chief executive officer or
controlling shareholder, and/or (iv) the nominee has sufficient time and
commitment to serve effectively in light of the nominee’s service on other
public company boards. When management’s nominees are opposed in a proxy
contest, the Adviser will evaluate which nominees’ publicly-announced management
policies and goals are most likely to maximize shareholder value, as well as the
past performance of the incumbents.
b) Committee
Service. The
Adviser will withhold votes for non-independent directors who serve on the audit
and/or compensation committees of the board.
c) Classification
of Boards. The
Adviser will support proposals that seek to declassify boards. Conversely, the
Adviser will oppose efforts to adopt classified board structures.
d) Majority
Independent Board. The
Adviser will support proposals calling for a majority of independent directors
on a board. The Adviser believes that a majority of independent directors can
help to facilitate objective decision making and enhances accountability to
shareholders.
e) Majority
Vote Standard for Director Elections.
The
Adviser will vote in favor of proposals calling for directors to be elected by
an affirmative majority of the votes cast in a board election, provided that the
proposal allows for a plurality voting standard in the case of contested
elections. The Adviser may consider voting against such shareholder proposals
where a company’s board has adopted an alternative measure, such as a director
resignation policy, that provides a meaningful alternative to the majority
voting standard and appropriately addresses situations where an incumbent
director fails to receive the support of the majority of the votes cast in an
uncontested election.
f) Withholding
Campaigns. The
Adviser will support proposals calling for shareholders to withhold votes for
directors where such actions will advance the principles set forth in paragraphs
(1) through (5) above.
2. Ratification
of Selection of Auditors
The
Adviser will generally rely on the judgment of the issuer’s audit committee in
selecting the independent auditors who will provide the best service to the
company. The Adviser believes that independence of the auditors is paramount and
will vote against auditors whose independence appears to be impaired. The
Adviser will vote against proposed auditors in those circumstances where (1) an
auditor has a financial interest in or association with the company, and is
therefore not independent; (2) non-audit fees comprise more than 50% of the
total fees paid by the company to the audit firm; or (3) there is reason to
believe that the independent auditor has previously rendered an opinion to the
issuer that is either inaccurate or not indicative of the company’s financial
position.
B. Compensation
Matters
1. Executive
Compensation
a) Advisory
Vote on Compensation. The
Adviser believes there are more effective ways to convey concerns about
compensation than through an advisory vote on compensation (such as voting
against specific excessive incentive plans or withholding votes from
compensation committee members). The Adviser will consider and vote on a
case-by-case basis on say-on-pay proposals and will generally support management
proposals unless there are inadequate risk-mitigation features or other specific
concerns exist, including if the Adviser concludes that executive compensation
is (i) misaligned with shareholder interests, (ii) unreasonable in amount, or
(iii) not in the aggregate meaningfully tied to the company’s
performance.
b) Frequency
of Advisory Votes on Compensation. The
Adviser generally supports the triennial option for the frequency of say-on-pay
proposals, but will consider management recommendations for an alternative
approach.
2. Equity
Based Compensation Plans
The
Adviser believes that equity-based incentive plans are economically significant
issues upon which shareholders are entitled to vote. The Adviser recognizes that
equity-based compensation plans can be useful in attracting and maintaining
desirable employees. The cost associated with such plans must be measured if
plans are to be used appropriately to maximize shareholder value. The Adviser
will conduct a case-by-case analysis of each stock option, stock bonus or
similar plan or amendment, and generally approve management’s recommendations
with respect to adoption of or amendments to a company’s equity-based
compensation plans, provided that the total number of shares reserved under all
of a company’s plans is reasonable and not excessively dilutive.
The
Adviser will review equity-based compensation plans or amendments thereto on a
case-by-case basis. Factors that will be considered in the determination include
the company’s overall capitalization, the performance of the company relative to
its peers, and the maturity of the company and its industry; for example,
technology companies often use options broadly throughout its employee base
which may justify somewhat greater dilution.
Amendments
which are proposed in order to bring a company’s plan within applicable legal
requirements will be reviewed by the Adviser’s legal counsel; amendments to
executive bonus plans to comply with IRS Section 162(m) disclosure requirements,
for example, are generally approved.
The
Adviser will generally vote against the adoption of plans or plan amendments
that:
•Provide
for immediate vesting of all stock options in the event of a change of control
of the company without reasonable safeguards against abuse (see “Anti-Takeover
Proposals” below);
•Reset
outstanding stock options at a lower strike price unless accompanied by a
corresponding and proportionate reduction in the number of shares designated.
The Adviser will generally oppose adoption of stock option plans that explicitly
or historically permit repricing of stock options, regardless of the number of
shares reserved for issuance, since their effect is impossible to
evaluate;
•Establish
restriction periods shorter than three years for restricted stock
grants;
•Do
not reasonably associate awards to performance of the company; or
•Are
excessively dilutive to the company.
C. Anti-Takeover
Proposals
In
general, the Adviser will vote against any proposal, whether made by management
or shareholders, which the Adviser believes would materially discourage a
potential acquisition or takeover. In most cases an acquisition or takeover of a
particular company will increase share value. The adoption of anti-takeover
measures may prevent or
frustrate
a bid from being made, may prevent consummation of the acquisition, and may have
a negative effect on share price when no acquisition proposal is pending. The
items below discuss specific anti-takeover proposals.
1. Cumulative
Voting
The
Adviser will vote in favor of any proposal to adopt cumulative voting and will
vote against any proposal to eliminate cumulative voting that is already in
place, except in cases where a company has a staggered board. Cumulative voting
gives minority shareholders a stronger voice in the company and a greater chance
for representation on the board. The Adviser believes that the elimination of
cumulative voting constitutes an anti-takeover measure.
2. Staggered
Board
If
a company has a “staggered board,” its directors are elected for terms of more
than one year and only a segment of the board stands for election in any year.
Therefore, a potential acquiror cannot replace the entire board in one year even
if it controls a majority of the votes. Although staggered boards may provide
some degree of continuity and stability of leadership and direction to the board
of directors, the Adviser believes that staggered boards are primarily an
anti-takeover device and will vote against establishing them and for eliminating
them. However, the Adviser does not necessarily vote against the re-election of
directors serving on staggered boards.
3. “Blank
Check” Preferred Stock
Blank
check preferred stock gives the board of directors the ability to issue
preferred stock, without further shareholder approval, with such rights,
preferences, privileges and restrictions as may be set by the board. In response
to a hostile takeover attempt, the board could issue such stock to a friendly
party or “white knight” or could establish conversion or other rights in the
preferred stock which would dilute the common stock and make an acquisition
impossible or less attractive. The argument in favor of blank check preferred
stock is that it gives the board flexibility in pursuing financing, acquisitions
or other proper corporate purposes without incurring the time or expense of a
shareholder vote. Generally, the Adviser will vote against blank check preferred
stock. However, the Adviser may vote in favor of blank check preferred if the
proxy statement discloses that such stock is limited to use for a specific,
proper corporate objective as a financing instrument.
4. Elimination
of Preemptive Rights
When
a company grants preemptive rights, existing shareholders are given an
opportunity to maintain their proportional ownership when new shares are issued.
A proposal to eliminate preemptive rights is a request from management to revoke
that right.
While
preemptive rights will protect the shareholder from having its equity diluted,
it may also decrease a company’s ability to raise capital through stock
offerings or use stock for acquisitions or other proper corporate purposes.
Preemptive rights may therefore result in a lower market value for the company’s
stock. In the long term, shareholders could be adversely affected by preemptive
rights. The Adviser generally votes against proposals to grant preemptive
rights, and for proposals to eliminate preemptive rights.
5. Non-targeted
Share Repurchase
A
non-targeted share repurchase is generally used by company management to prevent
the value of stock held by existing shareholders from deteriorating. A
non-targeted share repurchase may reflect management’s belief in the favorable
business prospects of the company. The Adviser finds no disadvantageous effects
of a non-targeted share repurchase and will generally vote for the approval of a
non-targeted share repurchase subject to analysis of the company’s financial
condition.
6. Increase
in Authorized Common Stock
The
issuance of new common stock can also be viewed as an anti-takeover measure,
although its effect on shareholder value would appear to be less significant
than the adoption of blank check preferred. The Adviser will evaluate the amount
of the proposed increase and the purpose or purposes for which the increase is
sought. If the increase is not excessive and is sought for proper corporate
purposes, the increase will be approved. Proper corporate purposes might
include, for example, the creation of additional stock to accommodate a stock
split or stock dividend, additional stock required for a proposed acquisition,
or additional stock required to be reserved upon exercise of employee stock
option plans or employee stock purchase plans. Generally, the Adviser will vote
in favor of an increase in authorized common stock of up to 100%; increases in
excess of 100% are evaluated on a case-by-case basis, and will be voted
affirmatively if management has provided sound justification for the
increase.
7. “Supermajority”
Voting Provisions or Super Voting Share Classes
A
“supermajority” voting provision is a provision placed in a company’s charter
documents which would require a “supermajority” (ranging from 66 to 90%) of
shareholders and shareholder votes to approve any type of acquisition of the
company. A super voting share class grants one class of shareholders a greater
per-share vote than those of shareholders of other voting classes. The Adviser
believes that these are standard anti-takeover measures and will generally vote
against them. The supermajority provision makes an acquisition more
time-consuming and expensive for the acquiror. A super voting share class favors
one group of shareholders disproportionately to economic interest. Both are
often proposed in conjunction with other anti-takeover measures.
8. “Fair
Price” Amendments
This
is another type of charter amendment that would require an offeror to pay a
“fair” and uniform price to all shareholders in an acquisition. In general, fair
price amendments are designed to protect shareholders from coercive, two-tier
tender offers in which some shareholders may be merged out on disadvantageous
terms. Fair price amendments also have an anti-takeover impact, although their
adoption is generally believed to have less of a negative effect on stock price
than other anti-takeover measures. The Adviser will carefully examine all fair
price proposals. In general, the Adviser will vote against fair price proposals
unless the Adviser concludes that it is likely that the share price will not be
negatively affected and the proposal will not have the effect of discouraging
acquisition proposals.
9. Limiting
the Right to Call Special Shareholder Meetings.
The
corporation statutes of many states allow minority shareholders at a certain
threshold level of ownership (frequently 10%) to call a special meeting of
shareholders. This right can be eliminated (or the threshold increased) by
amendment to the company’s charter documents. The Adviser believes that the
right to call a special shareholder meeting is significant for minority
shareholders; the elimination of such right will be viewed as an anti-takeover
measure and the Adviser will generally vote against proposals attempting to
eliminate this right and for proposals attempting to restore it.
10. Poison
Pills or Shareholder Rights Plans
Many
companies have now adopted some version of a poison pill plan (also known as a
shareholder rights plan). Poison pill plans generally provide for the issuance
of additional equity securities or rights to purchase equity securities upon the
occurrence of certain hostile events, such as the acquisition of a large block
of stock.
The
basic argument against poison pills is that they depress share value, discourage
offers for the company and serve to “entrench” management. The basic argument in
favor of poison pills is that they give management more time and leverage to
deal with a takeover bid and, as a result, shareholders may receive a better
price. The Adviser believes that the potential benefits of a poison pill plan
are outweighed by the potential detriments. The Adviser will generally vote
against all forms of poison pills.
The
Adviser will, however, consider on a case-by-case basis poison pills that are
very limited in time and preclusive effect. The Adviser will generally vote in
favor of such a poison pill if it is linked to a business strategy that will -
in our view - likely result in greater value for shareholders, if the term is
less than three years, and if shareholder approval is required to reinstate the
expired plan or adopt a new plan at the end of this term.
11. Golden
Parachutes
Golden
parachute arrangements provide substantial compensation to executives who are
terminated as a result of a takeover or change in control of their company. The
existence of such plans in reasonable amounts probably has only a slight
anti-takeover effect. In voting, the Adviser will evaluate the specifics of the
plan presented.
12. Reincorporation
Reincorporation
in a new state is often proposed as one part of a package of anti-takeover
measures. Several states (such as Pennsylvania, Ohio and Indiana) now provide
some type of legislation that greatly discourages takeovers. Management believes
that Delaware in particular is beneficial as a corporate domicile because of the
well-developed body of statutes and case law dealing with corporate
acquisitions.
The
Adviser will examine reincorporation proposals on a case-by-case basis.
Generally, if the Adviser believes that the reincorporation will result in
greater protection from takeovers, the reincorporation proposal will be opposed.
The Adviser will also oppose reincorporation proposals involving jurisdictions
that specify that directors can recognize non-shareholder interests over those
of shareholders. When
reincorporation
is proposed for a legitimate business purpose and without the negative effects
identified above, the Adviser will generally vote affirmatively.
13. Confidential
Voting
Companies
that have not previously adopted a “confidential voting” policy allow management
to view the results of shareholder votes. This gives management the opportunity
to contact those shareholders voting against management in an effort to change
their votes.
Proponents
of secret ballots argue that confidential voting enables shareholders to vote on
all issues on the basis of merit without pressure from management to influence
their decision. Opponents argue that confidential voting is more expensive and
unnecessary; also, holding shares in a nominee name maintains shareholders’
confidentiality. The Adviser believes that the only way to insure anonymity of
votes is through confidential voting, and that the benefits of confidential
voting outweigh the incremental additional cost of administering a confidential
voting system. Therefore, the Adviser will generally vote in favor of any
proposal to adopt confidential voting.
14. Opting
In or Out of State Takeover Laws
State
takeover laws typically are designed to make it more difficult to acquire a
corporation organized in that state. The Adviser believes that the decision of
whether or not to accept or reject offers of merger or acquisition should be
made by the shareholders, without unreasonably restrictive state laws that may
impose ownership thresholds or waiting periods on potential acquirors.
Therefore, the Adviser will generally vote in favor of opting out of restrictive
state takeover laws.
D. Transaction
Related Proposals
The
Adviser will review transaction related proposals, such as mergers,
acquisitions, and corporate reorganizations, on a case-by-case basis, taking
into consideration the impact of the transaction on each client account. In some
instances, such as the approval of a proposed merger, a transaction may have a
differential impact on client accounts depending on the securities held in each
account. For example, whether a merger is in the best interest of a client
account may be influenced by whether an account holds, and in what proportion,
the stock of both the acquirer and the acquiror. In these circumstances, the
Adviser may determine that it is in the best interests of the accounts to vote
the accounts’ shares differently on proposals related to the same
transaction.
E. Other
Matters
1. Proposals
Involving Environmental, Social, and Governance (ESG”) Matters
The
Adviser believes that certain ESG issues can potentially impact an issuer's
long-term financial performance and has developed an analytical framework, as
well as a proprietary assessment tool, to integrate risks and opportunities
stemming from ESG issues into our investment process. This ESG integration
process extends to our proxy voting practices in that our Sustainable Research
Team analyzes on a case-by-case basis the financial materiality and potential
risks or economic impact of the ESG issues underpinning proxy proposals and
makes voting recommendations based thereon for the Adviser's consideration. The
Sustainable Research Team evaluates ESG-related proposals based on a rational
linkage between the proposal, its potential economic impact, and its potential
to maximize long-term shareholder value.
Where
the economic effect of such proposals is unclear and there is not a specific
written client-mandate, the Adviser believes it is generally impossible to know
how to vote in a manner that would accurately reflect the views of the Adviser’s
clients, and, therefore, the Adviser will generally rely on management’s
assessment of the economic effect if the Adviser believes the assessment is not
unreasonable.
Shareholders
may also introduce proposals which are the subject of existing law or
regulation. Examples of such proposals would include a proposal to require
disclosure of a company’s contributions to political action committees or a
proposal to require a company to adopt a non-smoking workplace policy. The
Adviser believes that such proposals may be better addressed outside the
corporate arena and, absent a potential economic impact, will generally vote
with management’s recommendation. In addition, the Adviser will generally vote
against any proposal which would require a company to adopt practices or
procedures which go beyond the requirements of existing, directly applicable
law.
2. Anti-Greenmail
Proposals
“Anti-greenmail”
proposals generally limit the right of a corporation, without a shareholder
vote, to pay a premium or buy out a 5% or greater shareholder. Management often
argues that they should not be restricted from negotiating a deal to buy out a
significant shareholder at a premium if they believe it is in the best interest
of the company. Institutional shareholders generally believe that all
shareholders should be
able
to vote on such a significant use of corporate assets. The Adviser believes that
any repurchase by the company at a premium price of a large block of stock
should be subject to a shareholder vote. Accordingly, it will generally vote in
favor of anti-greenmail proposals.
3. Indemnification
The
Adviser will generally vote in favor of a corporation’s proposal to indemnify
its officers and directors in accordance with applicable state law.
Indemnification arrangements are often necessary in order to attract and retain
qualified directors. The adoption of such proposals appears to have little
effect on share value.
4. Non-Stock
Incentive Plans
Management
may propose a variety of cash-based incentive or bonus plans to stimulate
employee performance. In general, the cash or other corporate assets required
for most incentive plans is not material, and the Adviser will vote in favor of
such proposals, particularly when the proposal is recommended in order to comply
with IRC Section 162(m) regarding salary disclosure requirements. Case-by-case
determinations will be made of the appropriateness of the amount of shareholder
value transferred by proposed plans.
5. Director
Tenure
These
proposals ask that age and term restrictions be placed on the board of
directors. The Adviser believes that these types of blanket restrictions are not
necessarily in the best interests of shareholders and therefore will vote
against such proposals, unless they have been recommended by
management.
6. Directors’
Stock Options Plans
The
Adviser believes that stock options are an appropriate form of compensation for
directors, and the Adviser will generally vote for director stock option plans
which are reasonable and do not result in excessive shareholder dilution.
Analysis of such proposals will be made on a case-by-case basis, and will take
into account total board compensation and the company’s total exposure to stock
option plan dilution.
7. Director
Share Ownership
The
Adviser will generally vote against shareholder proposals which would require
directors to hold a minimum number of the company’s shares to serve on the Board
of Directors, in the belief that such ownership should be at the discretion of
Board members.
8. Non-U.S.
Proxies
The
Adviser will generally evaluate non-U.S. proxies in the context of the voting
policies expressed herein but will also, where feasible, take into consideration
differing laws, regulations, and practices in the relevant foreign market in
determining if and how to vote. There may also be circumstances when
practicalities and costs involved with non-U.S. investing make it
disadvantageous to vote shares. For instance, the Adviser generally does not
vote proxies in circumstances where share blocking restrictions apply, when
meeting attendance is required in person, or when current share ownership
disclosure is required.
III. Use
of Proxy Advisory Services
The
Adviser may retain proxy advisory firms to provide services in connection with
voting proxies, including, without limitation, to provide information on
shareholder meeting dates and proxy materials, translate proxy materials printed
in a foreign language, provide research on proxy proposals and voting
recommendations in accordance with the voting policies expressed herein, provide
systems to assist with casting the proxy votes, and provide reports and assist
with preparation of filings concerning the proxies voted.
Prior
to the selection of a proxy advisory firm and periodically thereafter, the
Adviser will consider whether the proxy advisory firm has the capacity and
competency to adequately analyze proxy issues and the ability to make
recommendations based on material accurate information in an impartial manner.
Such considerations may include some or all of the following (i) periodic
sampling of votes cast through the firm’s systems to determine that votes are in
accordance with the Adviser’s policies and its clients best interests, (ii)
onsite visits to the proxy advisory firm’s office and/or discussions with the
firm to determine whether the firm continues to have the resources (e.g.,
staffing, personnel, technology, etc.) capacity and competency to carry out its
obligations to the Adviser, (iii) a review of the firm’s policies and
procedures, with a focus on those relating to identifying and addressing
conflicts of interest and monitoring that current and accurate information is
used in creating recommendations, (iv) requesting that the firm notify the
Adviser if there is a change in the firm’s material policies and procedures,
particularly with respect to conflicts, or material business practices (e.g.,
entering or exiting new lines of business), and reviewing any such change, and
(v) in case of an error made by the firm, discussing the error with the
firm
and determining whether appropriate corrective and preventative action is being
taken. In the event the Adviser discovers an error in the research or voting
recommendations provided by the firm, it will take reasonable steps to
investigate the error and seek to determine whether the firm is taking
reasonable steps to reduce similar errors in the future.
While
the Adviser takes into account information from many different sources,
including independent proxy advisory services, the decision on how to vote
proxies will be made in accordance with these policies.
IV.
Monitoring Potential Conflicts of Interest
Corporate
management has a strong interest in the outcome of proposals submitted to
shareholders. As a consequence, management often seeks to influence large
shareholders to vote with their recommendations on particularly controversial
matters. In the vast majority of cases, these communications with large
shareholders amount to little more than advocacy for management’s positions and
give the Adviser’s staff the opportunity to ask additional questions about the
matter being presented. Companies with which the Adviser has direct business
relationships could theoretically use these relationships to attempt to unduly
influence the manner in which the Adviser votes on matters for its clients. To
ensure that such a conflict of interest does not affect proxy votes cast for the
Adviser’s clients, our proxy voting personnel regularly catalog companies with
whom the Adviser has significant business relationships; all discretionary
(including case-by-case) voting for these companies will be voted by the client
or an appropriate fiduciary responsible for the client (e.g., a committee of the
independent directors of a fund or the trustee of a retirement
plan).
In
addition, to avoid any potential conflict of interest that may arise when one
American Century fund owns shares of another American Century fund, the Adviser
will “echo vote” such shares, if possible. Echo voting means the Adviser will
vote the shares in the same proportion as the vote of all of the other holders
of the fund’s shares. So, for example, if shareholders of a fund cast 80% of
their votes in favor of a proposal and 20% against the proposal, any American
Century fund that owns shares of such fund will cast 80% of its shares in favor
of the proposal and 20% against. When this is not possible where American
Century funds are the only shareholders, the shares of the underlying fund will
be voted in the same proportion as the vote of the shareholders of a
corresponding American Century policy portfolio for proposals common to both
funds. In the case where there is no policy portfolio or the policy portfolio
does not have a common proposal, shares will be voted in consultation with a
committee of the independent directors.
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The
voting policies expressed above are of course subject to modification in certain
circumstances and will be reexamined from time to time. With respect to matters
that do not fit in the categories stated above, the Adviser will exercise its
best judgment as a fiduciary to vote in the manner which will most enhance
shareholder value.
Case-by-case
determinations will be made by the Adviser’s staff, which is overseen by the
General Counsel of the Adviser, in consultation with equity managers. Electronic
records will be kept of all votes made.
Notes
Notes
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American
Century Investments
americancentury.com
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Retail
Investors
P.O. Box 419200
Kansas City,
Missouri 64141-6200
1-800-345-2021 or 816-531-5575 |
Financial
Professionals
P.O. Box 419385
Kansas City, Missouri
64141-6385
1-800-345-6488 |
Investment
Company Act File No. 811-04165
CL-SAI-90857 2402
