ck0001353176-20220731
December
1, 2022
American
Century Investments
Statement
of Additional Information
American
Century Growth Funds, Inc.
Focused
Dynamic Growth Fund
Investor
Class (ACFOX)
I
Class (ACFSX)
A
Class (ACFDX)
R
Class (ACFCX)
R6
Class (ACFNX)
G
Class (ACFGX)
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| This
statement of additional information adds to the discussion in the fund’s
prospectus dated December 1, 2022, 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 a prospectus, please
contact us at one of the addresses or telephone numbers listed on the back
cover or visit American Century Investments’ website at
americancentury.com. |
|
This
statement of additional information incorporates by reference
certain
information that appears in the fund’s annual report, which are 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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©2022
American Century Proprietary Holdings, Inc. All rights reserved.
Table
of Contents
American
Century Growth Funds, Inc. is a registered open-end management investment
company that was organized in 2006 as a Maryland corporation. Throughout this
statement of additional information we refer to American Century Growth Funds,
Inc. as the corporation.
The
fund described in this statement of additional information is a separate series
of the corporation 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 numbers.
Effective
June 21, 2016, Legacy Focused Large Cap was renamed Focused Dynamic
Growth.
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| Fund |
Ticker
Symbol |
Inception
Date |
| Focused
Dynamic Growth |
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| Investor
Class |
ACFOX |
05/31/2006 |
| I
Class |
ACFSX |
05/31/2006 |
| A
Class |
ACFDX |
05/31/2006 |
| R
Class |
ACFCX |
05/31/2006 |
| R6
Class |
ACFNX |
12/01/2016 |
| G
Class |
ACFGX |
04/01/2019 |
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,
which begins on page 3. In the case of the fund’s principal investment
strategies, these descriptions elaborate upon discussions contained in the
prospectuses.
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.
In
general, within the restrictions outlined here and in the fund’s prospectus, the
portfolio managers have broad powers to decide how to invest fund assets,
including the power to hold them uninvested.
Investments
are varied according to what is judged advantageous under changing economic
conditions. It is the advisor’s policy to retain maximum flexibility in
management without restrictive provisions as to the proportion of one or another
class of securities that may be held, subject to the investment restrictions
described on the following pages. It is the advisor’s intention that the fund
will generally consist of domestic and foreign common stocks, convertible
securities and equity-equivalent securities. However, subject to the specific
limitations applicable to a fund, the fund’s management team may invest the
assets of the fund in varying amounts in other instruments and may use other
techniques, such as those reflected in the Fund Investments and Risks
section, when such a course is deemed appropriate in order to pursue the fund’s
investment objective. Senior securities that, in the opinion of the portfolio
managers, are high-grade issues also may be purchased for defensive purposes.
Unless otherwise noted, all 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 a
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.
So
long as a sufficient number of acceptable securities are available, the
portfolio managers intend to keep the fund fully invested. However, should the
fund’s investment methodology fail to identify sufficient acceptable securities,
or for any other reason including the desire to take a temporary defensive
position, the fund may invest up to 100% of its assets in U.S. government
securities. In most circumstances, the fund’s actual level of cash and cash
equivalents will be less than 10%. The managers may use futures contracts as a
way to expose the fund’s cash assets to the market while maintaining liquidity.
The managers may not leverage the fund’s portfolio without appropriately
segregating assets to cover such positions. See Derivative
Instruments,
page 5, Futures
and Options,
page 8 and Short-Term
Securities,
page 13.
Fund
Investments and Risks
This
section describes investment vehicles and techniques the portfolio managers can
use in managing a fund’s assets. It also details the risks associated with each,
because each investment vehicle and technique contributes to a fund’s overall
risk profile.
Convertible
Securities
A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular time period
at a specified price or formula. A convertible security entitles the holder to
receive the interest paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion or exchange, such securities ordinarily provide a
stream of income with generally higher yields than common stocks of the same or
similar issuers, but lower than the yield on non-convertible debt. Of course,
there can be no assurance of current income because issuers of convertible
securities may default on their obligations. In addition, there can be no
assurance of capital appreciation because the value of the underlying common
stock will fluctuate. Because of the conversion feature, the managers consider
some convertible securities to be equity equivalents.
The
price of a convertible security will normally fluctuate in some proportion to
changes in the price of the underlying asset. A convertible security is subject
to risks relating to the activities of the issuer and/or general market and
economic conditions. The
stream
of income typically paid on a convertible security may tend to cushion the
security against declines in the price of the underlying asset. However, the
stream of income causes fluctuations based upon changes in interest rates and
the credit quality of the issuer. In general, the value of a convertible
security is a function of (1) its yield in comparison with yields of other
securities of comparable maturity and quality that do not have a conversion
privilege and (2) its worth, at market value, if converted or exchanged into the
underlying common stock. The price of a convertible security often reflects such
variations in the price of the underlying common stock in a way that a
non-convertible security does not. At any given time, investment value generally
depends upon such factors as the general level of interest rates, the yield of
similar nonconvertible securities, the financial strength of the issuer and the
seniority of the security in the issuer’s capital structure.
A
convertible security may be subject to redemption at the option of the issuer at
a predetermined price. If a convertible security held by a fund is called for
redemption, the fund would be required to permit the issuer to redeem the
security and convert it to underlying common stock or to cash, or would sell the
convertible security to a third party, which may have an adverse effect on the
fund. A convertible security may feature a put option that permits the holder of
the convertible security to sell that security back to the issuer at a
predetermined price. A fund generally invests in convertible securities for
their favorable price characteristics and total return potential and normally
would not exercise an option to convert unless the security is called or
conversion is forced.
Counterparty
Risk
A
fund will be exposed to the credit risk of the counterparties with which, or the
brokers, dealers and exchanges through which, it deals, whether it engaged in
exchange traded or off-exchange transactions. If a fund’s futures
commission merchant, (FCM) becomes bankrupt or insolvent, or otherwise defaults
on its obligations to the fund, the fund may not receive all amounts owed to it
in respect of its trading, despite the clearinghouse fully discharging all of
its obligations. The Commodity Exchange Act requires an FCM to segregate
all funds received from its customers with respect to regulated futures
transactions from such FCM’s proprietary funds. If an FCM were not to do
so to the full extent required by law, the assets of an account might not be
fully protected in the event of the bankruptcy of an FCM. Furthermore, in
the event of an FCM’s bankruptcy, a fund would be limited to recovering only a
pro rata share of all available funds segregated on behalf of an FCM’s combined
customer accounts, even though certain property specifically traceable to the
fund (for example, U.S. Treasury bills deposited by the fund) was held by an
FCM. FCM bankruptcies have occurred in which customers were unable to
recover from the FCM’s estate the full amount of their funds on deposit with
such FCM and owing to them. Such situations could arise due to various
factors, or a combination of factors, including inadequate FCM capitalization,
inadequate controls on customer trading and inadequate customer capital.
In addition, in the event of the bankruptcy or insolvency of a clearinghouse,
the fund might experience a loss of funds deposited through its FCM as margin
with the clearinghouse, a loss of unrealized profits on its open positions, and
the loss of funds owed to it as realized profits on closed positions. Such
a bankruptcy or insolvency might also cause a substantial delay before the fund
could obtain the return of funds owed to it by an FCM who was a member of such
clearinghouse.
Because
bi-lateral derivative transactions are traded between counterparties based on
contractual relationships, a fund is subject to the risk that a counterparty
will not perform its obligations under the related contracts. Although the
fund intends to enter into transactions only with counterparties which the
advisor believes to be creditworthy, there can be no assurance that a
counterparty will not default and that the fund will not sustain a loss on a
transaction as a result. In situations where a fund is required to post margin
or other collateral with a counterparty, the counterparty may fail to segregate
the collateral or may commingle the collateral with the counterparty’s own
assets. As a result, in the event of the counterparty’s bankruptcy or
insolvency, a fund’s collateral may be subject to the conflicting claims of the
counterparty’s creditors, and a fund may be exposed to the risk of a court
treating a fund as a general unsecured creditor of the counterparty, rather than
as the owner of the collateral.
A
fund is subject to the risk that issuers of the instruments in which it invests
and trades may default on their obligations under those instruments, and that
certain events may occur that have an immediate and significant adverse effect
on the value of those instruments. There can be no assurance that an
issuer of an instrument in which a fund invests will not default, or that an
event that has an immediate and significant adverse effect on the value of an
instrument will not occur, and that a fund will not sustain a loss on a
transaction as a result.
Transactions
entered into by a fund may be executed on various U.S. and non-U.S. exchanges,
and may be cleared and settled through various clearinghouses, custodians,
depositories and prime brokers throughout the world. Although a fund
attempts to execute, clear and settle the transactions through entities the
advisor believes to be sound, there can be no assurance that a failure by any
such entity will not lead to a loss to a fund.
Cyber
Security Risk
As
a fund increasingly relies on technology and information systems to operate,
they become 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 business continuity plans 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.
Debt
Securities
The
fund may invest in debt securities when the portfolio managers believe such
securities represent an attractive investment for the fund. The fund may invest
in debt securities for income, or as a defensive strategy when the managers
believe adverse economic or market conditions exist.
The
value of debt securities in which the fund may invest will fluctuate based upon
changes in interest rates and the credit quality of the issuer. Debt securities
generally will be limited to investment-grade obligations. Investment grade
means that at the time of purchase, such obligations are rated within the four
highest categories by a nationally recognized statistical rating organization
(for example, at least Baa by Moody’s Investors Service, Inc. or BBB by Standard
& Poor’s Corporation), or, if not rated, are of equivalent investment
quality as determined by the fund’s advisor. According to Moody’s, bonds rated
Baa are medium-grade and possess some speculative characteristics. A BBB rating
by S&P indicates S&P’s belief that a security exhibits a satisfactory
degree of safety and capacity for repayment, but is more vulnerable to adverse
economic conditions and changing circumstances.
In
addition, the value of a fund’s investments in fixed-income securities will
change as prevailing interest rates change. In general, the prices of such
securities vary inversely with interest rates. As prevailing interest rates
fall, the prices of bonds and other securities that trade on a yield basis
generally rise. When prevailing interest rates rise, bond prices generally fall.
Depending upon the particular amount and type of fixed-income securities
holdings of a fund, these changes may impact the net asset value of that fund’s
shares.
Depositary
Receipts
American
Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) are receipts
representing ownership of shares of a foreign-based issuer held in trust by a
bank or similar financial institution. These are designed for U.S. and Global
securities markets as alternatives to purchasing underlying securities in their
corresponding national markets and currencies. ADRs and GDRs can be sponsored or
unsponsored.
Sponsored
ADRs and GDRs are certificates in which a bank or financial institution
participates with a custodian. Issuers of unsponsored ADRs and GDRs are not
contractually obligated to disclose material information in the United States.
Therefore, there may not be a correlation between such information and the
market value of the unsponsored ADR or GDR.
ADRs
are dollar-denominated receipts representing interests in the securities of a
foreign issuer. They are issued by U.S. banks and traded on exchanges or over
the counter in the United States. Ordinary shares are shares of foreign issuers
that are traded abroad and on a U.S. exchange. New York shares are shares that a
foreign issuer has allocated for trading in the United States. ADRs, ordinary
shares and New York shares all may be purchased with and sold for U.S. dollars,
which protect the fund from the foreign settlement risks described under the
section titled Foreign
Securities,
page 6.
Derivative
Instruments
To
the extent permitted by its investment objectives and policies, the fund may
invest in instruments that are commonly referred to as derivative instruments.
Generally, a derivative instrument is a financial arrangement the value of which
is based on, or derived from, a traditional security, asset, or market index.
Examples of common derivative instruments includes futures contracts, warrants,
structured notes, credit default swaps, options contracts, swap transactions and
forward currency contracts. Certain derivative instruments are described more
accurately as index/structured instruments. Index/structured instruments are
derivative instruments whose value or performance is linked to other equity
securities, currencies, interest rates, indices or other financial indicators
(reference indices).
Some
derivative instruments, such as mortgage-related and other asset-backed
securities, are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There
are many different types of derivative instruments and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
The
return on a derivative instrument may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There
are risks associated with investing in derivatives, including:
•the
risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio managers anticipate
or that the value of the structured or derivative instrument will not move or
react to changes in the underlying security, interest rate, market index or
other financial asset as anticipated;
•the
possibility that there may be no liquid secondary market, which may make it
difficult or impossible to close out a position when desired;
•the
risk that daily limits on price fluctuations and speculative position limits on
exchanges on which a fund may conduct its transactions in derivative instruments
may prevent profitable liquidation of positions, subjecting a fund to the
potential of greater losses;
•the
risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund’s initial investment;
•the
risk that a fund will have an obligation to deliver securities or currency
pursuant to a derivatives transaction that such fund does not own at the
inception of the derivatives trade;
•the
risk that the counterparty will fail to perform its obligations;
and
•the
risk that a fund will be subject to higher volatility because some derivative
instruments create leverage.
The
funds’ Board of Directors has reviewed the advisor’s derivatives risk management
program policy, which includes policies and procedures reasonably designed to
manage a fund’s derivatives risk. Unless a fund qualifies as a limited
derivatives user, the fund will be required to participate in the derivatives
risk management program, which includes compliance with value-at-risk based
leverage limits, oversight by a derivatives risk manager, and additional
reporting and disclosure regarding its derivatives positions. A fund designated
as a limited derivatives user has policies and procedures to manage its
aggregate derivatives risk. The advisor will report on the derivatives risk
management program to the Board of Directors on a quarterly basis. The
derivatives risk management program complies with recently adopted Rule 18f-4.
In connection with the adoption of Rule 18f-4, the SEC also eliminated the
existing asset segregation framework for covering derivatives and certain
financial instruments.
Equity
Equivalents
In
addition to investing in common stocks, the fund may invest in other equity
securities and equity equivalents, including securities that permit a fund to
receive an equity interest in an issuer, the opportunity to acquire an equity
interest in an issuer, or the opportunity to receive a return on its investment
that permits the fund to benefit from the growth over time in the equity of an
issuer. Examples of equity securities and equity equivalents include preferred
stock, convertible preferred stock and convertible debt securities.
Equity
equivalents also may include securities whose value or return is derived from
the value or return of a different security.
Foreign
Securities
The
fund may invest an unlimited portion of their assets in the securities of
foreign issuers, when these securities meet its standards of selection. The fund
may invest in common stocks, convertible securities, preferred stocks, bonds,
notes and other debt securities of foreign issuers, foreign governments and
their agencies. Securities of foreign issuers may trade in the U.S. or foreign
securities markets.
The
fund may purchase foreign securities of issuers whose principal business
activities are located in developed and emerging market countries. The fund
considers a security to be a developed country security if its issuer is located
in the following developed countries list, which is subject to change:
Australia, Austria, Belgium, Bermuda, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, The Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States.
Investments
in foreign securities may present certain risks, including:
Currency
Risk
– The value of the foreign investments held by the fund may be significantly
affected by changes in currency exchange rates. The dollar value of a foreign
security generally decreases when the value of the dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the dollar falls against such currency. In addition, the value of
fund assets may be affected by losses and other expenses incurred in converting
between various currencies in order to purchase and sell foreign securities, and
by currency restrictions, exchange control regulation, currency devaluations and
political developments.
Social,
Political and Economic Risk
– The economies of many of the countries in which the fund invests are not as
developed as the economy of the United States and may be subject to
significantly different forces. Political or social instability, expropriation,
nationalization, confiscatory taxation and limitations on the removal of funds
or other assets also could adversely affect the value of investments. Further,
the fund may find it difficult or be unable to enforce ownership rights, pursue
legal remedies or obtain judgments in foreign courts.
Regulatory
Risk
– Foreign companies generally are not subject to the regulatory controls imposed
on U.S. issuers and, in general, there is less publicly available information
about foreign securities than is available about domestic securities. Many
foreign companies are not subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to domestic companies and there may be less stringent investor protection and
disclosure standards in some foreign markets. Certain jurisdictions do not
currently provide the Public Company Accounting Oversight Board (“PCAOB”) with
sufficient
access
to inspect audit work papers and practices, or otherwise do not cooperate with
U.S. regulators, potentially exposing investors in U.S. capital markets to
significant risks. Income from foreign securities owned by the fund may be
reduced by a withholding tax at the source, which would reduce dividend income
payable to shareholders.
Market
and Trading Risk
– Brokerage commission rates in foreign countries, which generally are fixed
rather than subject to negotiation as in the United States, are likely to be
higher. The securities markets in many of the countries in which the fund
invests will have substantially less trading volume than the principal U.S.
markets. As a result, the securities of some companies in these countries may be
less liquid, more volatile and harder to value than comparable U.S. securities.
Furthermore, one securities broker may represent all or a significant part of
the trading volume in a particular country, resulting in higher trading costs
and decreased liquidity due to a lack of alternative trading partners. There
generally is less government regulation and supervision of foreign stock
exchanges, brokers and issuers, which may make it difficult to enforce
contractual obligations.
Clearance
and Settlement Risk
– Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in clearance and settlement could
result in temporary periods when assets of the fund is uninvested and no return
is earned. The inability of the fund to make intended security purchases due to
clearance and settlement problems could cause the fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
clearance and settlement problems could result either in losses to the fund due
to subsequent declines in the value of the portfolio security or, if the fund
has entered into a contract to sell the security, liability to the
purchaser.
Ownership
Risk
– Evidence of securities ownership may be uncertain in many foreign countries.
As a result, there is a risk that a fund’s trade details could be incorrectly or
fraudulently entered at the time of the transaction, resulting in a loss to the
fund.
Emerging
Markets Risk
– The fund may invest its holdings in securities of issuers located in emerging
market (developing) countries. The fund considers “emerging market countries” to
include all countries that are not considered by the advisor to be developed
countries, which are listed on page 6.
Investing
in securities of issuers in emerging market countries involves exposure to
significantly higher risk than investing in countries with developed markets.
Risks of investing in emerging markets countries may relate to lack of
liquidity, market manipulation, limited reliable access to capital, and
differing foreign investment structures. Emerging market countries may have
economic structures that generally are less diverse and mature, and political
systems that can be expected to be less stable than those of developed
countries. Securities prices in emerging market countries can be significantly
more volatile than in developed countries, reflecting the greater uncertainties
of investing in lesser developed markets and economies. In particular, emerging
market countries may have relatively unstable governments, and may present the
risk of nationalization of businesses, expropriation, confiscatory taxation or
in certain instances, reversion to closed-market, centrally planned economies.
Such countries may also have less protection of property rights than developed
countries.
The
economies of emerging market countries may be based predominantly on only a few
industries or may be dependent on revenues from particular commodities or on
international aid or developmental assistance, may be highly vulnerable to
changes in local or global trade conditions, and may suffer from extreme and
volatile debt burdens or inflation rates. In addition, securities markets in
emerging market countries may trade a relatively small number of securities and
may be unable to respond effectively to increases in trading volume, potentially
resulting in a lack of liquidity and in volatility in the price of securities
traded on those markets. Also, securities markets in emerging market countries
typically offer less regulatory protection for investors.
Sanctions
–
The
U.S. may impose economic sanctions against companies in various sectors of
certain countries. This could limit a fund's investment opportunities in such
countries, impairing the fund’s ability to invest in accordance with its
investment strategy and/or to meet its investment objective. For example, a fund
may be prohibited from investing in securities issued by companies subject to
such sanctions. In addition, the sanctions may require a fund to freeze its
existing investments in sanctioned companies, prohibiting the fund from selling
or otherwise transacting in these investments. Current sanctions or the threat
of potential sanctions may also impair the value or liquidity of affected
securities and negatively impact a fund.
In
early 2022, the United States and countries throughout the world imposed
economic sanctions on Russia in response to its military invasion of Ukraine.
The sanctions are broad and include restrictions on the Russian government as
well as Russian companies, individuals, and banking entities. The sanctions and
other measures, such as boycotts or changes in consumer preferences, will likely
cause declines in the value and liquidity of Russian securities, downgrades in
the credit ratings of Russian securities, devaluation of Russia’s currency, and
increased market volatility and disruption in Russia and throughout the world.
Sanctions and similar measures, such as banning Russia from financial
transaction systems that facilitate international transfers of funds, could
limit or prevent the funds from selling and buying impacted securities both in
Russia and in other markets. Such measures will likely cause significant delay
in the settlement of impacted securities transactions or prevent settlement all
together. The lack of available market prices for such securities may cause the
funds to use fair value procedures to value certain securities. The consequences
of the war and sanctions may negatively impact other regional and global
economic markets. Additionally, Russia may take counter measures or engage in
retaliatory actions—including cyberattacks and espionage—which could further
disrupt global markets and supply chains. Companies in other countries that do
business with Russia and the global commodities market for oil and natural gas,
especially, will likely feel
the
impact of the sanctions. The sanctions, together with the potential for a wider
armed or cyber conflict, could increase financial market volatility globally and
negatively impact the funds’ performance beyond any direct exposure to Russian
issuers or securities.
Forward
Currency Exchange Contracts
The
fund may purchase and sell foreign currency on a spot (i.e., cash) basis and may
engage in forward currency contracts, currency options and futures transactions
for hedging or any other lawful purpose. See Derivative
Instruments,
page 5.
The
fund expects to use forward currency contracts under two
circumstances:
(1)When
the portfolio managers are purchasing or selling a security denominated in
a foreign currency and wishes to lock in the U.S. dollar price of that security,
the portfolio managers would be able to enter into a forward currency contract
to do so;
(2)When
the portfolio managers believe that the currency of a particular foreign country
may suffer a substantial decline against the U.S. dollar, a fund would be able
to enter into a forward currency contract to sell foreign currency for a fixed
U.S. dollar amount approximating the value of some or all of its portfolio
securities either denominated in, or whose value is tied to, such foreign
currency.
In
the first circumstance, when a fund enters into a trade for the purchase or sale
of a security denominated in a foreign currency, it may be desirable to
establish (lock in) the U.S. dollar cost or proceeds. By entering into forward
currency contracts in U.S. dollars for the purchase or sale of a foreign
currency involved in an underlying security transaction, the fund will be able
to protect itself against a possible loss between trade and settlement dates
resulting from the adverse change in the relationship between the U.S. dollar
and the subject foreign currency.
In
the second circumstance, when the portfolio managers believe that the currency
of a particular country may suffer a substantial decline relative to the U.S.
dollar, a fund could enter into a forward currency contract to sell for a fixed
dollar amount the amount in foreign currencies approximating the value of some
or all of its portfolio securities either denominated in, or whose value is tied
to, such foreign currency. The fund will generally cover outstanding forward
contracts by maintaining liquid portfolio securities denominated in, or whose
value is tied to, the currency underlying the forward contract or the currency
being hedged.
The
precise matching of forward currency contracts in the amounts and values of
securities involved generally would not be possible because the future values of
such foreign currencies will change as a consequence of market movements in the
values of those securities between the date the forward currency contract is
entered into and the date it matures. Predicting short-term currency market
movements is extremely difficult, and the successful execution of short-term
hedging strategy is highly uncertain. Normally, consideration of the prospect
for currency parities will be incorporated into the long-term investment
decisions made with respect to overall diversification strategies. However, the
portfolio managers believe that it is important to have flexibility to enter
into such forward currency contracts when they determine that a fund’s best
interests may be served.
When
the forward currency contract matures, the fund may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate the obligation to deliver the foreign currency by
purchasing an offsetting forward currency contract with the same currency trader
that obligates the fund to purchase, on the same maturity date, the same amount
of the foreign currency.
It
is impossible to forecast with absolute precision the market value of portfolio
securities at the expiration of the forward currency contract. Accordingly, it
may be necessary for a fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the fund is obligated to
deliver and if a decision is made to sell the security to make delivery of the
foreign currency the fund is obligated to deliver.
Futures
and Options
The
fund may enter into futures contracts, options or options on futures contracts.
Futures contracts provide for the sale by one party and purchase by another
party of a specific security at a specified future time and price. Generally,
futures transactions will be used to:
•protect
against a decline in market value of the fund’s securities (taking a short
futures position),
•protect
against the risk of an increase in market value for securities in which the fund
generally invests at a time when the fund is not fully invested (taking a long
futures position), or
•provide
a temporary substitute for the purchase of an individual security that may not
be purchased in an orderly fashion.
Some
futures and options strategies, such as selling futures, buying puts and writing
calls, hedge a fund’s investments against price fluctuations. Other strategies,
such as buying futures, writing puts and buying calls, tend to increase market
exposure.
Although
other techniques may be used to control a fund’s exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.
For
example, the sale of a future by a fund means the fund becomes obligated to
deliver the security (or securities, in the case of an index future) at a
specified price on a specified date. The purchase of a future means the fund
becomes obligated to buy the security (or securities) at a specified price on a
specified date. The portfolio managers may engage in futures and options
transactions based on securities indices, provided that the transactions are
consistent with the fund’s investment objectives. An example of an index that
may
be
used is the S&P 500 Index. The managers also may engage in futures and
options transactions based on specific securities, such as U.S. Treasury bonds
or notes. Futures contracts are traded on national futures exchanges. Futures
exchanges and trading are regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission (CFTC), a U.S. government
agency.
Index
futures contracts differ from traditional futures contracts in that when
delivery takes place, no stocks or bonds change hands. Instead, these contracts
settle in cash at the spot market value of the index. Although other types of
futures contracts by their terms call for actual delivery or acceptance of the
underlying securities, in most cases the contracts are closed out before the
settlement date. A futures position may be closed by taking an opposite position
in an identical contract (i.e., buying a contract that has previously been sold
or selling a contract that has previously been bought).
Unlike
when the fund purchases or sells a security, no price is paid or received by the
fund upon the purchase or sale of the future. Initially, the fund will be
required to deposit an amount of cash or securities equal to a varying specified
percentage of the contract amount. This amount is known as initial margin. The
margin deposit is intended to ensure completion of the contract (delivery or
acceptance of the underlying security) if it is not terminated prior to the
specified delivery date. A margin deposit does not constitute a margin
transaction for purposes of the fund’s investment restrictions. Minimum initial
margin requirements are established by the futures exchanges and may be
revised.
In
addition, brokers may establish margin deposit requirements that are higher than
the exchange minimums. Cash held in the margin accounts generally is not
income-producing. However, coupon bearing securities, such as Treasury bills and
bonds, held in margin accounts generally will earn income. Subsequent payments
to and from the broker, called variation margin, will be made on a daily basis
as the price of the underlying security or index fluctuates, making the future
more or less valuable, a process known as marking the contract to market.
Changes in variation margin are recorded by the fund as unrealized gains or
losses. At any time prior to expiration of the future, the fund may elect to
close the position by taking an opposite position. A final determination of
variation margin is then made; additional cash is required to be paid by or
released to the fund and the fund realizes a loss or gain.
By
buying a put option, a fund obtains the right (but not the obligation) to sell
the instrument underlying the option at a fixed strike price and in return a
fund pays the current market price for the option (known as the option premium).
A fund may terminate its position in a put option it has purchased by allowing
it to expire, by exercising the option or by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, a
fund will lose the entire premium it paid. If a fund exercises a put option on a
security, it will sell the instrument underlying the option at the strike price.
The buyer of a typical put option can expect to realize a gain if the value of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss limited to the
amount of the premium paid, plus related transaction costs.
The
features of call options are essentially the same as those of put options,
except that the buyer of a call option obtains the right to purchase, rather
than sell, the instrument underlying the option at the option’s strike price.
The buyer of a typical call option can expect to realize a gain if the value of
the underlying instrument increases substantially and can expect to suffer a
loss if security prices do not rise sufficiently to offset the cost of the
option.
When
a fund writes a put option, it takes the opposite side of the transaction from
the option’s buyer. In return for the receipt of the premium, a fund assumes the
obligation to pay the strike price for the instrument underlying the option if
the other party to the option chooses to exercise it. A fund may seek to
terminate its position in a put option it writes before exercise by purchasing
an offsetting option in the market at its current price. Otherwise, a fund must
continue to be prepared to pay the strike price while the option is outstanding,
regardless of price changes, and must continue to post margin as discussed
below. If the price of the underlying instrument rises, a put writer would
generally realize as profit the premium it received. If the price of the
underlying instrument remains the same over time, it is likely that the writer
will also profit, because it should be able to close out the option at a lower
price. If the price of the underlying instrument falls, the put writer would
expect to suffer a loss.
A
fund writing a call option is obligated to sell or deliver the option’s
underlying instrument in return for the strike price upon exercise of the
option. Writing calls generally is a profitable strategy if the price of the
underlying instrument remains the same or falls. A call writer offsets part of
the effect of a price decline by receipt of the option premium, but gives up
some ability to participate in security price increases. The writer of an
exchange traded put or call option on a security, an index of securities or a
futures contract is required to deposit cash or securities or a letter of credit
as margin and to make mark to market payments of variation margin as the
position becomes unprofitable.
Risks
Related to Futures and Options Transactions
Futures
and options prices can be volatile, and trading in these markets involves
certain risks. If the portfolio managers apply a hedge at an inappropriate time
or judge interest rate or equity market trends incorrectly, futures and options
strategies may lower a fund’s return.
A
fund could suffer losses if it is unable to close out its position because of an
illiquid secondary market. Futures contracts may be closed out only on an
exchange that provides a secondary market for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when the portfolio managers consider it appropriate or
desirable to do so. In the event of adverse price movements, a fund would be
required to continue making daily cash payments to maintain its required margin.
If the fund had insufficient cash, it might
have
to sell portfolio securities to meet daily margin requirements at a time when
the portfolio managers would not otherwise elect to do so. In addition, a fund
may be required to deliver or take delivery of instruments underlying futures
contracts it holds. The portfolio managers will seek to minimize these risks by
limiting the futures contracts entered into on behalf of the fund to those
traded on national futures exchanges and for which there appears to be a liquid
secondary market.
A
fund could suffer losses if the prices of its futures and options positions were
poorly correlated with its other investments, or if securities underlying
futures contracts purchased by a fund had different maturities than those of the
portfolio securities being hedged. Such imperfect correlation may give rise to
circumstances in which a fund loses money on a futures contract at the same time
that it experiences a decline in the value of its hedged portfolio securities. A
fund also could lose margin payments it has deposited with a margin broker, if,
for example, the broker became bankrupt.
Most
futures exchanges limit the amount of fluctuation permitted in futures contract
prices during a single trading day. The daily limit establishes the maximum
amount that the price of a futures contract may vary either up or down from the
previous day’s settlement price at the end of the trading session. Once the
daily limit has been reached in a particular type of contract, no trades may be
made on that day at a price beyond the limit. However, the daily limit governs
only price movement during a particular trading day and, therefore, does not
limit potential losses. In addition, the daily limit may prevent liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
Options
on Futures
By
purchasing an option on a futures contract, a fund obtains the right, but not
the obligation, to sell the futures contract (a put option) or to buy the
contract (a call option) at a fixed strike price. A fund can terminate its
position in a put option by allowing it to expire or by exercising the option.
If the option is exercised, the fund completes the sale of the underlying
security at the strike price. Purchasing an option on a futures contract does
not require a fund to make margin payments unless the option is exercised.
Although they do not currently intend to do so, the fund may write (or sell)
call options that obligate them to sell (or deliver) the option’s underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the fund would give up some
ability to participate in a price increase on the underlying security. If a fund
were to engage in options transactions, it would own the futures contract at the
time a call was written and would keep the contract open until the obligation to
deliver it pursuant to the call expired.
Restrictions
on the Use of Futures Contracts and Options
The
fund may enter into futures contracts, options, options on futures contracts, or
swap agreements as permitted by its investment policies and the Commodity
Futures Trading Commission (CFTC) rules. The advisor to the fund has claimed an
exclusion from the definition of the term “commodity pool operator” under the
Commodity Exchange Act and, therefore, the advisor is not subject to
registration or regulation as a commodity pool operator under that Act with
respect to its provision of services to the fund.
Certain
rules adopted by the CFTC may impose additional limits on the ability of a fund
to invest in futures contracts, options on futures, swaps, and certain other
commodity interests if its investment advisor does not register with the CFTC as
a “commodity pool operator” with respect to such fund. It is expected that the
fund will be able to execute their investment strategies within the limits
adopted by the CFTC’s rules. As a result, the advisor does not intend to
register with the CFTC as a commodity pool operator on behalf of the fund. In
the event that the fund engages in transactions that necessitate future
registration with the CFTC, the advisor will register as a commodity pool
operator and comply with applicable regulations with respect to that
fund.
To
the extent required by law, the fund will segregate cash, cash equivalents or
other appropriate liquid securities on its records in an amount sufficient to
cover its obligations under the futures contracts, options and swap
agreements.
Initial
Public Offerings
The
fund may invest in initial public offerings (IPOs) of common stock or other
equity securities issued by a company. The purchase of securities in an IPO may
involve higher transaction costs than those associated with the purchase of
securities already traded on exchanges or other established markets. In addition
to the risks associated with equity securities generally, IPO securities may be
subject to additional risk due to factors such as the absence of a prior public
market, unseasoned trading and speculation, a potentially small number of
securities available for trading, limited information about the issuer and other
factors. These factors may cause IPO shares to be volatile in price. While a
fund may hold IPO securities for a period of time, it may sell them in the
aftermarket soon after the purchase, which could increase portfolio turnover and
lead to increased expenses such as commissions and transaction costs.
Investments in IPOs could have a magnified impact (either positive or negative)
on performance if a fund’s assets are relatively small. The impact of IPOs on a
fund’s performance may tend to diminish as assets grow.
Investment
in Issuers with Limited Operating Histories
The
fund may invest up to 10% of its assets in the equity securities of issuers with
limited operating histories. The managers consider an issuer to have a limited
operating history if that issuer has a record of less than three years of
continuous operation. The managers will consider periods of capital formation,
incubation, consolidations, and research and development in determining whether
a particular issuer has a record of three years of continuous
operation.
Investments
in securities of issuers with limited operating histories may involve greater
risks than investments in securities of more mature issuers. By their nature,
such issuers present limited operating histories and financial information upon
which the managers may base their investment decision on behalf of the fund. In
addition, financial and other information regarding such issuers, when
available, may be incomplete or inaccurate.
For
purposes of this limitation, “issuers” refers to operating companies that issue
securities for the purposes of issuing debt or raising capital as a means of
financing their ongoing operations. It does not, however, refer to entities,
corporate or otherwise, that are created for the express purpose of securitizing
obligations or income streams. For example, a fund’s investments in a trust
created for the purpose of pooling mortgage obligations would not be subject to
the limitation.
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, financial institutions
have started the process of phasing
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. As
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, a 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 Directors governing
lending of securities. These guidelines strictly govern:
•the
type and amount of collateral that must be received by the fund;
•the
circumstances under which additions to that collateral must be made by
borrowers;
•the
return to be received by the fund on the loaned securities;
•the
limitations on the percentage of fund assets on loan; and
•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.
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 a 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.
A
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, a 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. A 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).
A fund may also incur brokerage commissions, as well as the cost of the bid/ask
spread, when purchasing or selling ETF shares.
Repurchase
Agreements
The
fund may invest in repurchase agreements when they present an attractive
short-term return on cash that is not otherwise committed to the purchase of
securities pursuant to the investment policies of that fund.
A
repurchase agreement occurs when, at the time a fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to purchase it on a specified
date in the future at an agreed-upon price. The repurchase price reflects an
agreed-upon interest rate during the time the fund’s money is invested in the
security.
Because
the security purchased constitutes collateral for the repurchase obligation, a
repurchase agreement can be considered a loan collateralized by the security
purchased. The fund’s risk is the seller’s ability to pay the agreed-upon
repurchase price on the repurchase date. If the seller defaults, the fund may
incur costs in disposing of the collateral, which would reduce the amount
realized thereon. If the seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited. To the extent the value
of the security decreases, the fund could experience a loss.
The
fund will limit repurchase agreement transactions to securities issued by the
U.S. government and its agencies and instrumentalities, and will enter into such
transactions with those banks and securities dealers who are deemed creditworthy
by the fund’s advisor.
Repurchase
agreements maturing in more than seven days would count toward a fund’s 15%
limit on illiquid securities.
Restricted
and Illiquid Securities
The
fund may, from time to time, purchase restricted or illiquid securities,
including Rule 144A securities, when they present attractive investment
opportunities that otherwise meet the fund’s criteria for selection. Restricted
securities include securities that cannot be sold to the public without
registration under the Securities Act of 1933 or the availability of an
exemption from registration, or that are “not readily marketable” because they
are subject to other legal or contractual delays in or restrictions on resale.
Rule 144A securities are securities that are privately placed with and traded
among qualified institutional investors rather than the general public. Although
Rule 144A securities are considered restricted securities, they are not
necessarily illiquid.
With
respect to securities eligible for resale under Rule 144A, the advisor will
determine the liquidity of such securities pursuant to the fund's Liquidity Risk
Management Program, approved by the Board of Directors in accordance with Rule
22e-4.
Because
the secondary market for restricted securities is generally limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A or other
security that is illiquid. In such an event, the portfolio managers will
consider appropriate remedies to minimize the effect on such fund’s liquidity.
The fund may invest no more than 15% of the value of its assets in illiquid
securities.
Short
Sales
A
fund may engage in short sales for cash management purposes only if, at the time
of the short sale, the fund owns or has the right to acquire securities
equivalent in kind and amount to the securities being sold short.
In
a short sale, the seller does not immediately deliver the securities sold and is
said to have a short position in those securities until delivery occurs. To make
delivery to the purchaser, the executing broker borrows the securities being
sold short on behalf of the seller. While the short position is maintained, the
seller collateralizes its obligation to deliver the securities sold short in an
amount equal to the proceeds of the short sale plus an additional margin amount
established by the Board of Governors of the Federal Reserve. If a fund engages
in a short sale, the fund’s custodian will segregate cash, cash equivalents or
other appropriate liquid securities on its records in an amount sufficient to
meet the purchase price. There will be certain additional transaction costs
associated with short sales, but the fund will endeavor to offset these costs
with income from the investment of the cash proceeds of short
sales.
Short-Term
Securities
In
order to meet anticipated redemptions, anticipated purchases of additional
securities for a fund’s portfolio, or, in some cases, for temporary defensive
purposes, the fund may invest a portion of their assets in money market and
other short-term securities.
Examples
of those securities include:
•Securities
issued or guaranteed by the U.S. government and its agencies and
instrumentalities
•Commercial
Paper
•Certificates
of Deposit and Euro Dollar Certificates of Deposit
•Bankers’
Acceptances
•Short-term
notes, bonds, debentures or other debt instruments
•Repurchase
agreements
•Money
market funds
Swap
Agreements
The
fund may invest in swap agreements, consistent with its investment objective and
strategies. A fund may enter into a swap agreement in order to, for example,
attempt to obtain or preserve a particular return or spread at a lower cost than
obtaining a return or spread through purchases and/or sales of instruments in
other markets; protect against currency fluctuations; attempt to manage duration
to protect against any increase in the price of securities the fund anticipates
purchasing at a later date; or gain exposure to certain markets in the most
economical way possible.
Swap
agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard “swap” transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest factor. The
gross returns to be exchanged or “swapped” between the parties are generally
calculated with respect to a “notional amount,” i.e., the return on or increase
in value of a particular dollar amount invested at a particular interest rate,
in a particular foreign currency, or in a “basket” of securities representing a
particular index. Forms of swap agreements include, for example, interest rate
swaps, under which fixed- or floating-rate interest payments on a specific
principal amount are exchanged and total return swaps, under which one party
agrees to pay the other the total return of a defined underlying asset (usually
an index, including inflation indexes, stock, bond or defined portfolio of loans
and mortgages) in exchange for fee payments, often a variable stream of
cashflows based on a reference rate. The fund may enter into credit default swap
agreements to hedge an existing position by purchasing or selling credit
protection. Credit default swaps enable an investor to buy/sell protection
against a credit event of a specific issuer. The seller of credit protection
against a security or basket of securities receives an up-front or periodic
payment to compensate against potential default event(s). The fund may enhance
returns by selling protection or attempt to mitigate credit risk by buying
protection. Market supply and demand factors may cause distortions between the
cash securities market and the credit default swap market.
Whether
a fund’s use of swap agreements will be successful depends on the advisor’s
ability to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Interest rate swaps could result
in losses if interest rate changes are not correctly anticipated by the fund.
Total return swaps could result in losses if the reference index, security, or
investments do not perform as anticipated by the fund. Credit default swaps
could result in losses if the fund does not correctly evaluate the
creditworthiness of the issuer on which the credit default swap is based.
Because they are two-party contracts and because they may have terms of greater
than seven days, swap agreements may be considered to be illiquid. Moreover, a
fund bears the risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap agreement
counterparty. The fund will enter into swap agreements only with counterparties
that meet certain standards of creditworthiness or that are cleared through a
Derivatives Clearing Organization (“DCO”). Certain restrictions imposed on the
fund by the Internal Revenue Code may limit the fund’s ability to use swap
agreements.
The
Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)
and related regulatory developments require the clearing and exchange-trading of
certain standardized derivative instruments that the CFTC and SEC have defined
as “swaps.” The CFTC has implemented mandatory exchange-trading and clearing
requirements under the Dodd-Frank Act and the CFTC continues to approve
contracts for central clearing. Although exchange trading is designed to
decrease counterparty risk, it does not do so entirely because the fund will
still be subject to the credit risk of the central clearinghouse. Cleared swaps
are subject to margin requirements imposed by both the central clearinghouse and
the clearing member FCM. Uncleared swaps are now subject to posting and
collecting collateral on a daily basis to secure mark-to-market obligations
(variation margin). Swaps data reporting may subject
a fund to administrative costs, and the safeguards established to
protect trader anonymity may not function as expected.
Exchange trading, central clearing, margin
requirements, and data reporting regulations may increase a fund’s
cost of hedging risk and, as a result, may affect shareholder
returns.
U.S.
Government Securities
U.S.
Treasury bills, notes, zero-coupon bonds and other bonds are direct obligations
of the U.S. Treasury, which has never failed to pay interest and repay principal
when due. Treasury bills have initial maturities of one year or less, Treasury
notes from two to 10 years, and Treasury bonds more than 10 years. Although U.S.
Treasury securities carry little principal risk if held to maturity, the prices
of these securities (like all debt securities) change between issuance and
maturity in response to fluctuating market interest rates.
A
number of U.S. government agencies and instrumentalities issue debt securities.
These agencies generally are created by Congress to fulfill a specific need,
such as providing credit to home buyers or farmers. Among these agencies are the
Federal Home Loan Banks, the Federal Farm Credit Banks, the Student Loan
Marketing Association and the Resolution Funding Corporation.
Some
agency securities are backed by the full faith and credit of the U.S.
government, and some 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.
Interest
rates on agency securities may be fixed for the term of the investment
(fixed-rate agency securities) or tied to prevailing interest rates
(floating-rate agency securities). Interest rate resets on floating-rate agency
securities generally occur at intervals of one year or less, based on changes in
a predetermined interest rate index.
Floating-rate
agency securities frequently have caps limiting the extent to which coupon rates
can be raised. The price of a floating-rate agency security may decline if its
capped coupon rate is lower than prevailing market interest rates. Fixed- and
floating-rate agency securities may be issued with a call date (which permits
redemption before the maturity date). The exercise of a call may reduce an
obligation’s yield to maturity.
Interest
Rate Resets on Floating-Rate U.S. Government Agency Securities
Interest
rate resets on floating-rate U.S. government agency securities generally occur
at intervals of one year or less in response to changes in a predetermined
interest rate index. There are two main categories of indices: those based on
U.S. Treasury securities and those derived from a calculated measure, such as a
cost-of-funds index. Commonly used indices include the three-month, six-month
and one-year Treasury bill rates; the two-year Treasury note yield; and the
Eleventh District Federal Home Loan Bank Cost of Funds Index (EDCOFI).
Fluctuations in the prices of floating-rate U.S. government agency securities
are typically attributed to differences between the coupon rates on these
securities and prevailing market interest rates between interest rate reset
dates.
When-Issued
and Forward Commitment Agreements
The
fund may sometimes purchase new issues of securities on a when-issued or forward
commitment basis in which the transaction price and yield are each fixed at the
time the commitment is made, but payment and delivery occur at a future
date.
For
example, a fund may sell a security and at the same time make a commitment to
purchase the same or a comparable security at a future date and specified price.
Conversely, a fund may purchase a security and at the same time make a
commitment to sell the same or a comparable security at a future date and
specified price. These types of transactions are executed simultaneously in what
are known as dollar-rolls, buy/sell back transactions, cash and carry, or
financing transactions. For example, a broker-dealer may seek to purchase a
particular security that a fund owns. The fund will sell that security to the
broker-dealer and simultaneously enter into a forward commitment agreement to
buy it back at a future date. This type of transaction generates income for the
fund if the dealer is willing to execute the transaction at a favorable price in
order to acquire a specific security.
When
purchasing securities on a when-issued or forward commitment basis, a fund
assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. Market rates of interest on debt securities at the time of
delivery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of that security may decline prior to delivery,
which could result in a loss to the fund. While the fund will make commitments
to purchase or sell securities with the intention of actually receiving or
delivering them, it may sell the securities before the settlement date if doing
so is deemed advisable as a matter of investment strategy.
To
the extent a fund remains fully invested or almost fully invested at the same
time it has purchased securities on a when-issued basis, there will be greater
fluctuations in its net asset value than if it solely set aside cash to pay for
when-issued securities. When the time comes to pay for the when-issued
securities, the fund will meet its obligations with available cash, through the
sale of securities, or, although it would not normally expect to do so, by
selling the when-issued securities themselves (which may have a market value
greater or less than the fund’s payment obligation). Selling securities to meet
when-issued or forward commitment obligations may generate taxable capital gains
or losses.
Unless
otherwise indicated, with the exception of the percentage limitations on
borrowing, the policies described below apply at the time a fund enters into a
transaction. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in a 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, a fund’s investment objective set forth in its prospectus, and a
fund’s status as diversified may not be changed without approval of a majority
of the outstanding votes of shareholders of a 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.
|
|
|
|
|
| |
| 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). For the
purpose of concentration, industry is defined to mean those companies that
are assigned the same sub-industry classification under the Global
Industry Classification Standard (GICS). |
| 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, a 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 such 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%. In
addition, when a fund enters into certain transactions involving potential
leveraging, it will hold offsetting positions or segregate assets to cover such
obligations at levels consistent with the guidance of the SEC and its
staff.
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 for
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 costs 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, a 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
their 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.
For
the purpose of concentration, industry is defined as those companies that are
assigned the same sub-industry classification under the Global Industry
Classification Standard (GICS).
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 Directors.
|
|
|
|
|
| |
| 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. |
Futures
and
Options |
A
fund may enter into futures contracts and write and buy put and call
options relating to futures contracts. A fund may not, however, enter into
leveraged futures transactions if it would be possible for the fund to
lose more than the notional value of the investment. |
Issuers
with
Limited
Operating
Histories |
A
fund may invest a portion of its assets in the securities of issuers with
limited operating histories. An issuer is considered to have a limited
operating history if that issuer has a record of less than three years of
continuous operation. Periods of capital formation, incubation,
consolidations, and research and development may be considered in
determining whether a particular issuer has a record of three years of
continuous operation. |
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 defined by the Act. It also defines and forbids the creation of cross
and circular ownership. Neither the SEC nor any other agency of the federal or
state government participates in or supervises the management of the fund or its
investment practices or policies.
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, a fund may invest a portion of its assets in money market and other
short-term securities.
Examples
of those securities include:
•securities
issued or guaranteed by the U.S. government and its agencies and
instrumentalities;
•commercial
paper;
•interest-bearing
bank accounts or certificates of deposit;
•short-term
notes, bonds, or other debt instruments;
•repurchase
agreements; and
•money
market funds.
To
the extent a fund assumes a defensive position, it may not achieve its
investment objective.
The
portfolio turnover rate of the fund for its 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 (or a shorter period if the fund is less than five years
old) is shown in the Financial Highlights table in the prospectus.
The
managers may sell securities without regard to the length of time the securities
have been held. Accordingly, the fund’s portfolio turnover rate may be
substantial.
The
portfolio managers intend to purchase a given security whenever they believe it
will contribute to the stated objective of a particular fund. In order to
achieve the fund’s investment objective, the managers may sell a given security
regardless of the length of time it has been held in the portfolio, and
regardless of the gain or loss realized on the sale. The managers may sell a
portfolio security if they believe that the security is not fulfilling its
purpose because, among other things, it did not live up to the managers’
expectations, because it may be replaced with another security holding greater
promise, because it has reached its optimum potential,
because
of a change in the circumstances of a particular company or industry or in
general economic conditions, or because of some combination of such
reasons.
When
a general decline in security prices is anticipated, the fund may decrease or
eliminate entirely their equity positions and increase their cash positions, and
when a general rise in price levels is anticipated, the fund may increase its
equity position and decrease its cash positions. However, it should be expected
that the fund will, under most circumstances, be essentially fully invested in
equity securities.
Because
investment decisions are based on a particular security’s anticipated
contribution to a fund’s investment objective, the managers believe that the
rate of portfolio turnover is irrelevant when they determine that a change is
required to pursue the fund’s investment objective. As a result, a fund’s annual
portfolio turnover rate cannot be anticipated and may be higher than that of
other mutual funds with similar investment objectives. Higher turnover would
generate correspondingly greater brokerage commissions, which is a cost the fund
pays directly. Portfolio turnover also may affect the character of capital gains
realized and distributed by the fund, if any, because short-term capital gains
are taxable as ordinary income.
Because
the managers do not take portfolio turnover rate into account in making
investment decisions, (1) the managers have no intention of maintaining any
particular rate of portfolio turnover, whether high or low, and (2) the
portfolio turnover rates in the past should not be considered as representative
of the rates that will be attained in the future.
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.
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 the 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
15,
2022,
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
•AXA
Equitable Funds Management Group, LLC
•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
•Cambridge
Financial Services, Inc.
•Capital Cities,
LLC
•CBIZ,
Inc.
•Charles
Schwab & Co., Inc.
•Choreo,
LLC
•Clearwater
Analytics, LLC
•Cleary
Gull Inc.
•Commerce
Bank
•Connecticut
General Life Insurance Company
•Corestone
Investment Managers AG
•Corning
Incorporated
•Curcio
Webb LLC
•Deutsche
AM Distributors, Inc.
•Eckler,
Ltd.
•Electra
Information Systems, Inc.
•Equitable
Investment Management Group, LLC
•EquiTrust
Life Insurance Company
•Farm
Bureau Life Insurance Company
•Fidelity
Workplace Services, LLC
•FIL
Investment Management
•Finance-Doc
Multimanagement AG
•Fund
Evaluation Group, LLC
•Government
Employees Pension Service
•Great-West
Financial Retirement Plan Services, LLC
•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 Financial Services, Inc.
•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.
•MUFG
Union Bank, NA
•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
•RidgeWorth
Capital Management, Inc.
•Rocaton
Investment Advisors, LLC
•RVK,
Inc.
•S&P
Financial Communications
•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.
•Towers
Watson Investment Services, Inc.
•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
Associates Incorporated
•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 funds and the funds’ advisor must have access to some
or all of the funds’ portfolio holdings information on an accelerated basis from
time to time in the ordinary course of providing services to the funds. These
service providers include the funds’ 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 funds and the advisor are provided
elsewhere
in this statement of additional information. In addition, the funds’ investment
advisor may use analytical systems provided by third party data aggregators who
have access to the funds’ 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 funds’ 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 funds’ Board of Directors
exercises oversight of disclosure of the funds’ 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 funds 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 funds from the
potential misuse of holdings information by individuals or firms in possession
of such information.
The
individuals listed below serve as directors of the fund. Each director will
continue to serve in this capacity until death, retirement, resignation or
removal from office. The board has adopted a mandatory retirement age for
directors who are not “interested persons,” as that term is defined in the
Investment Company Act (independent directors). Independent directors shall
retire on
December 31 of the year in which they reach their 75th
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 directors (more than three-fourths of the total number) are
independent. They are not employees, directors or officers of, and have no
financial interest in, ACC or any of its wholly owned, direct or indirect,
subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS)
and American Century Services, LLC (ACS), and they do not have any other
affiliations, positions or relationships that would cause them to be considered
“interested persons” under the Investment Company Act. The directors serve in
this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E.
Yates, 8) registered investment companies in the American Century Investments
family of funds.
The
following table presents additional information about the directors. The mailing
address for each director is 4500 Main Street, Kansas City, Missouri
64111.
|
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| |
|
Name
(Year of Birth)
|
Position(s)
Held
with
Funds
|
Length
of
Time
Served
|
Principal
Occupation(s) During Past 5 Years
|
Number
of
American
Century
Portfolios
Overseen
by
Director
|
Other
Directorships
Held
During Past
5
Years
|
|
Independent
Directors
|
|
|
|
|
Brian
Bulatao
(1964) |
Director |
Since
2022 |
Chief
Administrative Officer, Activision
Blizzard, Inc.
(2021 to present); Under Secretary of State for Management,
U.S. Department of State
(2018 to 2021); Chief Operating Officer, Central
Intelligence Agency
(2017 to 2018) |
64 |
None |
| Thomas
W. Bunn (1953) |
Director |
Since
2017 |
Retired |
64 |
None |
|
Chris
H. Cheesman
(1962) |
Director |
Since
2019 |
Retired.
Senior Vice President & Chief Audit Executive, AllianceBernstein
(1999 to 2018) |
64 |
Alleghany
Corporation
(2021
to 2022) |
Barry
Fink
(1955) |
Director |
Since
2012 (independent since 2016) |
Retired |
64 |
None |
|
Rajesh
K. Gupta (1960) |
Director |
Since
2019 |
Partner
Emeritus, SeaCrest
Investment Management
and SeaCrest
Wealth Management
(2019 to present); Chief Executive Officer and Chief Investment Officer,
SeaCrest
Investment Management
(2006 to 2019); Chief Executive Officer and Chief Investment
Officer, SeaCrest
Wealth Management
(2008 to 2019) |
64 |
None |
|
Lynn
Jenkins (1963) |
Director |
Since
2019 |
Consultant,
LJ
Strategies
(2019 to present); United States Representative,
U.S. House of Representatives (2009
to 2018) |
64 |
MGP
Ingredients, Inc. (2019 to 2021) |
Jan
M. Lewis
(1957) |
Director
and Board Chair |
Since
2011 (Board Chair since 2022) |
Retired |
64 |
None |
Gary
C. Meltzer
(1963) |
Director |
Since
2022 |
Advisor,
Pontoro
(2021 to present); Executive Advisor, Consultant and Investor,
Harris
Ariel Advisory LLC
(2020 to present); Managing Partner, PricewaterhouseCoopers
LLP
(1985 to 2020) |
64 |
ExcelFin
Acquisition Corp., Apollo Realty Income Solutions, Inc.
|
Stephen
E. Yates
(1948) |
Director
|
Since
2012 |
Retired |
108 |
None |
|
Interested
Director
|
|
|
| |
Jonathan
S. Thomas
(1963) |
Director
|
Since
2007 |
President
and Chief Executive Officer, ACC
(2007 to present). Also serves as Chief Executive Officer, ACS;
Director, ACC
and other ACC
subsidiaries |
142 |
None |
Qualifications
of Directors
Generally,
no one factor was decisive in the selection of the directors to the board.
Qualifications considered by the board to be important to the selection and
retention of directors 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 director. 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 fund are considered important
assets.
When
assessing potential new directors, the board has a policy of considering
individuals from various and diverse backgrounds. Such diverse backgrounds may
include differences in professional experience, education, individual skill sets
and other individual attributes. Additional information about each director’s
individual educational and professional experience (supplementing the
information provided in the table above) follows and was considered as part of
his or her nomination to, or retention on, the board.
Brian
Bulatao:
BS in Engineering Management, United States Military Academy at West Point; MBA
from Harvard Business School; former military service followed by experience at
McKinsey & Co. (global management consulting) and in the private equity
industry; experience in senior management positions in government and the
private sector
Thomas
W. Bunn: BS
in Business Administration, Wake Forest University; MBA in Finance, University
of North Carolina at Chapel Hill; formerly Vice Chairman and President,
KeyCorp
(banking
services); 31 years of experience in investment, commercial and corporate
banking; managing directorship roles with Bank of America
Chris
H. Cheesman:
BS in Business Administration (Accounting), Hofstra University; 32 years of
experience in global financial services at AllianceBernstein; formerly, auditor
with Price Waterhouse; Certified Public Accountant and Certified Financial
Services Auditor
Barry
Fink:
BA in English and History, Binghamton University; Juris Doctorate, University of
Michigan; formerly held leadership roles including chief operating officer with
American Century Investments; formerly held leadership roles during a 20-year
career with Morgan Stanley Investment Management; formerly asset management and
securities law attorney at Seward & Kissel; serves on the Board of Directors
of ICI Mutual Insurance Company
Rajesh
K. Gupta: BS
in Quantitative Analysis, New York University, Stern School of Business; MBA in
Finance, New York University, Stern School of Business; formerly held leadership
roles during 19-year career with Morgan Stanley Investment
Management
Lynn
Jenkins: BS
in Accounting, Weber State University; AA in Business, Kansas State University;
formerly, United States Representative; formerly, Kansas State Treasurer, Kansas
State Senator and Kansas State Representative; 20 years of experience in finance
and accounting, including as a certified public accountant
Jan
M. Lewis:
BS in Civil Engineering, University of Nebraska and MBA, Rockhurst College;
Graduate Certificate in Financial Markets and Institutions, Boston University;
formerly, President and Chief Executive Officer, Catholic Charities of Northeast
Kansas (human services organization); formerly, President, BUCON, Inc.
(full-service design-build construction company); 20 years of experience with
Butler Manufacturing Company (metal buildings producer) and its
subsidiaries
Gary
C. Meltzer:
BS in Accounting, Binghamton University; Certified Public Accountant; formerly
held a variety of roles during 35 years of experience as business advisor and
independent auditor providing high quality audits and value-added services with
PricewaterhouseCoopers LLP
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
Stephen
E. Yates:
BS and MS in Industrial Engineering, University of Alabama; formerly, Executive
Vice President, Technology & Operations, KeyCorp (banking services);
formerly, President, USAA Information Technology Company (financial services);
33 years of experience in Information Technology; formerly, Director, Applied
Industrial Technologies, Inc.
Responsibilities
of the Board
The
board is responsible for overseeing the advisor’s management and operations of
the fund pursuant to the management agreement. Directors 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 and
other service providers to the fund;
•review
annually the fees paid to the advisor for its services;
•monitor
potential conflicts of interest between the fund and their 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, the advisor and other service providers to the fund regularly throughout
the year, and meet at least quarterly with management of the advisor to review
reports about fund operations. The directors’ 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 directors who may exercise the powers and authority of the board as
determined by the directors. 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 a
fund.
To
communicate with the board, or a member of the board, a shareholder should send
a written communication addressed to the attention of the corporate secretary
(the “Corporate Secretary”) at American Century funds, P.O. Box 418210, Kansas
City, Missouri 64141-9210. Shareholders who prefer to communicate by email may
send their comments to [email protected]. The Corporate
Secretary will forward all such communications to each member of the Compliance
and Shareholder Services Committee, or if applicable, the individual director(s)
and/or committee chair named in the correspondence. However, if a shareholder
communication is addressed exclusively to the fund’s independent directors, the
Corporate Secretary will forward the communication to the Compliance and
Shareholder Services Committee chair, who will determine the appropriate
action.
Board
Leadership Structure and Standing Board Committees
Jan
M. Lewis
currently serves as the independent
board chair and
has served in such capacity since 2022. All of the board’s members except for
Jonathan S. Thomas are independent directors. The independent directors meet
separately, as needed and at least in conjunction with each quarterly meeting of
the board, to oversee
fund activities, review contractual arrangements with service providers, review
fund performance
and meet periodically with the fund’s Chief Compliance Officer and fund
auditors. They are advised by independent legal counsel. No independent director
may serve as an officer or employee of a fund. The board has also established
several committees, as described below. The board believes that the current
leadership structure, with independent directors filling all but one position on
the board, with an independent director serving as
board chair,
and with the board committees comprised only of independent directors, is
appropriate and allows for independent oversight of the fund.
The
board has an Audit Committee that approves the fund’s (or corporation’s)
engagement of the independent registered public accounting firm and recommends
approval of such engagement to the fund’s
board.
The committee also oversees the activities of the accounting firm, receives
regular reports regarding fund accounting, oversees securities valuation
by
the advisor
as valuation designee
and
receives regular reports from the advisor’s internal audit department.
The
Audit Committee meets with the corporation’s independent auditors to review and
approve the scope and results of their professional services; to review the
procedures for evaluating the adequacy of the corporation’s accounting controls;
to consider the range of audit fees; and to make recommendations to the board
regarding the engagement of the fund’s independent auditors.The
committee currently consists of Chris H. Cheesman (chair), Barry Fink and Lynn
M. Jenkins. It met five
times during the fiscal year ended July 31, 2022.
The
board has a Governance Committee that is responsible for reviewing board
procedures and committee structures. The committee also considers and recommends
individuals for nomination as directors. The names of potential director
candidates may be drawn from a number of sources, including members of the
board, management and shareholders. Shareholders may submit director nominations
at any time to the Corporate Secretary, American Century funds, P.O. Box 418210,
Kansas City, MO 64141-9210. When submitting nominations, shareholders should
include the name, age and address of the candidate, as well as a detailed resume
of the candidate’s qualifications and a signed statement from the candidate of
his/her willingness to serve on the board. Shareholders submitting nominations
should also include information concerning the number of fund shares and length
of time held by the shareholder, and if applicable, similar information for the
potential candidate. All nominations submitted by shareholders will be forwarded
to the chair of the Governance Committee for consideration. The Corporate
Secretary will maintain copies of such materials for future reference by the
committee when filling board positions.
If
this process yields more than one desirable candidate, the committee will rank
them by order of preference depending on their qualifications and the fund’s
needs. The candidate(s) may then be contacted to evaluate their interest and be
interviewed by the full committee. Based upon its evaluation and any appropriate
background checks, the committee will decide whether to recommend a candidate’s
nomination to the board.
The
Governance Committee also may recommend the creation of new committees, evaluate
the membership structure of new and existing committees, consider the frequency
and duration of board and committee meetings and otherwise evaluate the
responsibilities,
processes,
resources, performance and compensation of the board. The committee currently
consists of Barry Fink (chair), Lynn M. Jenkins, Jan M. Lewis and Stephen E.
Yates. It met four
times during the fiscal year ended July 31, 2022.
The
board also has a Compliance and Shareholder Services Committee, which reviews
the results of the fund’s compliance testing program, meets regularly with the
fund’s Chief Compliance Officer, reviews shareholder communications, reviews
quarterly reports regarding the quality of shareholder service provided by the
advisor, and monitors implementation of the fund’s Code of Ethics. The committee
currently consists of Thomas W. Bunn (chair), Rajesh K. Gupta, Jan M. Lewis and
Stephen E. Yates. It met four times during the fiscal year ended July 31,
2022.
The
board has a Fund Performance Review Committee that meets quarterly to review the
investment activities and strategies used to manage fund assets and monitor
investment performance. The committee regularly receives reports from the
advisor’s chief investment officer, portfolio managers and other investment
personnel concerning the fund’s efforts to achieve their investment objectives.
The committee also receives information regarding fund trading activities and
monitors derivative usage. The Committee does not review individual security
selections. The committee currently consists of Rajesh K. Gupta (chair), Thomas
W. Bunn, Chris H. Cheesman, Barry Fink, Lynn M. Jenkins, Jan M. Lewis and
Stephen E. Yates. The committee met four times during the fiscal year ended July
31, 2022.
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 above, the board’s
committees assist the board in overseeing various types of risks relating to the
fund, including, but not limited to, investment risk, operational risk and
enterprise risk. The board receives regular reports from each committee
regarding the committee’s areas of oversight responsibility and, through those
reports and its regular interactions with management of the advisor during and
between meetings, analyzes, evaluates, and provides feedback on the advisor’s
risk management processes. 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, including an annual
review of the advisor’s risk management practices. 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
For
the fiscal year ended July 31, 2022, each independent director received the
following compensation for his or her service to the fund and the American
Century family of funds. Under the terms of the management agreement with the
advisor, the fund is responsible for paying such fees and expenses. Neither
Jonathan Thomas nor any officers of the fund receive compensation from the fund.
Because Mr. Bulatao and Mr. Meltzer were not directors as of the fiscal year
end, they are not included in the table below.
|
|
|
|
|
|
|
|
| |
| Name
of Director |
Total
Compensation for Service as Director of the Fund(1) |
Total
Compensation for Service as Directors for the American Century Investments
Family of Funds(2) |
| Independent
Directors |
| |
| Thomas
W. Bunn |
$6,089 |
$343,500 |
| Chris
H. Cheesman |
$6,089 |
$343,500 |
| Barry
Fink |
$6,089 |
$343,500 |
| Rajesh
K. Gupta |
$6,089 |
$343,500 |
| Lynn
Jenkins |
$5,935 |
$336,000 |
| Jan
M. Lewis |
$6,457 |
$369,250 |
|
John
R. Whitten(3) |
$2,787 |
$135,625 |
| Stephen
E. Yates |
$6,412 |
$454,667 |
1
Includes
compensation paid to the directors for the fiscal year ended July 31, 2022, and
also includes amounts deferred at the election of the directors under the
American Century Investments Mutual Funds’ Independent Directors’ Deferred
Compensation Plan.
2
Includes
compensation paid to each director for his or her service as director for seven
(in the case of Mr. Yates, eight) investment companies in the American Century
Investments family of funds served by this board at the end of the fiscal year.
The total amount of deferred compensation included in the table is as follows:
Ms. Jenkins, $134,400
and Mr. Yates, $191,875.
3 Mr.
Whitten retired from the board on December 31, 2021.
The
fund currently provides no pension or retirement benefits to the directors
except pursuant to the American Century Mutual Funds’ Independent Directors’
Deferred Compensation Plan adopted by the corporation. Under the plan, the
independent directors may defer receipt of all or any part of the fees to be
paid to them for serving as directors of the fund. All deferred fees are
credited to accounts established in the names of the directors. 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
directors. 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. Directors are allowed to change their designation of
funds from time to time.
Generally,
deferred fees are not payable to a director until the distribution date elected
by the director in accordance with the terms of the plan. Such distribution date
may be a date on or after the director’s retirement date, but may be an earlier
date if the director 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. Directors 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 director, all
remaining deferred fee account balances are paid to the director’s beneficiary
or, if none, to the director’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 directors 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
directors owned shares in the fund as of December 31, 2021, as shown in the
table below. Because Mr. Bulatao and Mr. Meltzer were not directors as of
December 31, 2021, they are not included in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
Name
of Director |
| |
Jonathan
S. Thomas
|
Thomas
Bunn |
Chris
Cheesman |
Barry
Fink
|
Rajesh
Gupta |
| Dollar
Range of Equity Securities in the Fund: |
|
| Focused
Dynamic Growth Fund |
A |
A |
A |
A |
A |
|
Aggregate
Dollar Range of Equity Securities in all
Registered
Investment Companies Overseen by
Director
in Family of Investment Companies
|
E |
E |
E |
E |
E |
Ranges:
A—none, B—$1-$10,000, C—$10,001-$50,000, D—$50,001-$100,000, E—More than
$100,000
|
|
|
|
|
|
|
|
|
|
|
| |
| |
Name
of Director |
| |
Lynn
Jenkins |
Jan
M.
Lewis
|
Stephen
E.
Yates |
| Dollar
Range of Equity Securities in the Fund: |
|
| |
| Focused
Dynamic Growth Fund |
A |
A |
A |
|
Aggregate
Dollar Range of Equity Securities in all
Registered
Investment Companies Overseen by
Director in
Family of Investment Companies |
E |
E |
E |
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 Directors
No
independent director or his or her immediate family members beneficially owned
shares of the advisor, the fund’s principal underwriter 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, 2021.
The
following table presents certain information about the executive officers of the
fund. Each officer serves as an officer for each of the 16 (in the case of
Robert J. Leach, 15) investment companies in the American Century family of
funds. No officer is compensated for his or her service as an officer of the
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 officer 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, 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) |
C.
Jean Wade
(1964) |
Vice
President
since 2012 |
Senior
Vice President, ACS
(2017 to present); Vice President, ACS
(2000 to 2017) |
Robert
J.
Leach
(1966) |
Vice
President
since 2006 |
Vice
President, ACS
(2000 to present) |
David
H.
Reinmiller
(1963) |
Vice
President
since 2000 |
Attorney,
ACC
(1994 to present). Also serves as Vice President, ACIM
and ACS
|
Ward
D.
Stauffer
(1960) |
Secretary
since
2005 |
Attorney,
ACC
(2003 to present) |
The
fund, its investment advisor and principal underwriter 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.
The
advisor is responsible for exercising the voting rights associated with the
securities purchased and/or held by the fund. The fund’s Board of Directors has
approved the advisor’s proxy voting policies to govern the advisor’s proxy
voting activities.
A
copy of the advisor’s proxy voting policies is attached hereto as Appendix D.
Information regarding how the advisor voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30 is available at
americancentury.com/proxy. The advisor’s proxy voting record also is available
on the SEC’s website at sec.gov.
A
list of the fund’s principal shareholders are provided in Appendix
A.
The
fund has no employees. To conduct the fund’s day-to-day activities, the
corporation 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.
American
Century Investment Management, Inc. (ACIM) serves as the investment advisor for
the fund. A description of the responsibilities of the advisor appears in each
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 amount of the fee is calculated daily and paid
monthly in arrears. For a fund with a stepped fee schedule, the rate of the fee
is determined by applying the formula indicated in the table below. This formula
takes into account the assets of the fund as
well
as certain assets, if any, of other clients of the advisor outside the American
Century Investments fund family (such as subadvised funds and separate
accounts),
as well as exchange-traded funds managed by the advisor, that use very similar
investment teams and strategies (strategy assets). The use of strategy assets,
rather than fund assets in calculating the fee rate for a particular fund could
allow the fund to realize scheduled cost savings more quickly. However, it is
possible that the fund’s strategy assets will not include assets of other
accounts or that any
such assets may not be sufficient to result in a lower fee rate. The management
fee schedules for the fund appears below.
|
|
|
|
|
|
|
|
| |
| Fund |
Class |
Percentage
of Strategy Assets |
| Focused
Dynamic Growth |
Investor,
A and R |
0.850%
of first $5 billion
0.825% of next $5 billion
0.800% over $10
billion |
| |
I |
0.650%
of first $5 billion
0.625% of next $5 billion
0.600% over $10
billion |
|
| R6
and G |
0.500%
of first $5 billion
0.475% of next $5 billion
0.450% over $10
billion |
On
each calendar day, each class of the fund accrues a management fee that is equal
to the class’s management fee rate (as calculated pursuant to the above
schedules) 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 management fee is the sum of the daily fee
calculations for each day of the previous month.
The
management agreement between the corporation 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:
(1)either
the fund’s Board of Directors, or a majority of the outstanding voting
securities of such fund (as defined in the Investment Company Act)
and
(2)the
vote of a majority of the directors 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 Directors or a majority of
the outstanding voting securities of each class of such 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 states 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, directors
and employees may engage in other business, render services to others, and
devote time and attention to any other business whether of a similar or
dissimilar nature.
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 Directors has approved
the policy of the advisor with respect to the aggregation of portfolio
transactions. To the extent equity trades are aggregated, shares purchased or
sold are generally allocated to the participating portfolios pro rata based on
order size. The advisor will not aggregate portfolio transactions of the funds
unless it believes such aggregation is consistent with its duty to seek best
execution on behalf of the funds 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 years ended July 31,
2022,
2021 and 2020,
are indicated in the following table.
|
|
|
|
|
|
|
|
|
|
|
| |
| Unified
Management Fee |
|
| |
| Fund |
2022 |
2021 |
2020 |
| Focused
Dynamic Growth |
$13,594,785(1) |
$12,687,746(2) |
$2,870,241(3) |
1
Amount shown reflects waiver by advisor of $2,384,398 in management
fees.
2
Amount shown reflects waiver by advisor of $5,871,312 in management
fees.
3
Amount
shown reflects waiver by advisor of $1,701,471 in management fees.
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 July 31, 2022) |
| |
|
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)
|
| Keith
Lee |
Number
of Accounts |
6 |
3 |
5 |
|
| Assets |
$23.9
billion(1) |
$354.0
million |
$1.7
billion |
| Michael
Li |
Number
of Accounts |
7 |
4 |
9 |
|
| Assets |
$24.1
billion(1) |
$360.0
million |
$4.0
billion |
| Henry
He |
Number
of Accounts |
2 |
3 |
4 |
|
| Assets |
$1.82
billion(1) |
$253.5
million |
$1.3
billion |
1
Includes
$1.7 billion
in Focused Dynamic Growth.
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
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 July 31, 2022,
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. The
mutual fund’s 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 those
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(1) |
| Focused
Dynamic Growth |
Russell
1000 Growth Index |
Morningstar
Large Growth |
1
Custom
peer groups are constructed using all the funds in the indicated categories as a
starting point. Funds are then eliminated from the peer group based on a
standardized methodology designed to result in a final peer group that is both
more stable (i.e., has less peer turnover) over the long term and that more
closely represents the fund’s true peers based on internal investment
mandates.
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 July 31, 2022,
the fund’s most recent fiscal year end.
|
|
|
|
|
| |
| Ownership
of Securities |
| |
Aggregate
Dollar Range of Securities in Fund |
| Focused
Dynamic Growth |
|
| Keith
Lee |
G |
| Michael
Li |
G |
| Henry
He |
E |
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
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
on page 28.
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.
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.
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
on page 28. 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.
State
Street Bank and Trust Company (SSB), State Street Financial Center, One Lincoln
Street, Boston, Massachusetts 02111 serves as custodian of the fund’s cash and
securities under a Master Custodian Agreement with the corporation. 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.
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 following table provides the amounts of income and fees/compensation related
to the fund’s securities lending activities during the most recent fiscal
year:
|
|
|
|
|
| |
|
| Focused
Dynamic Growth |
| Gross
income from securities lending activities |
$339,089 |
| Fees
and/or compensation paid by the fund for securities lending activities and
related services: |
|
| Fees
paid to securities lending agent from a revenue split |
$33,221 |
| Fees
paid for any cash collateral management service (including fees deducted
from a pooled cash collateral reinvestment vehicle) that are not included
in the revenue split |
$1,217 |
| Administrative
fees not included in the revenue split |
$0 |
| Indemnification
fee not included in the revenue split |
$0 |
| Rebate
(paid to borrower) |
$5,579 |
| Other
fees not included in revenue split |
$0 |
| Aggregate
fees/compensation for securities lending activities |
$40,017 |
| Net
income from securities lending activities |
$299,072 |
As
the fund’s securities lending agent, SSB provides the following services:
locating borrowers for fund securities, executing loans of portfolio securities
pursuant to terms and parameters defined by the advisor and the Board of
Directors, monitoring the daily value of the loaned securities and collateral,
requiring additional collateral as necessary, managing cash collateral, and
providing certain limited recordkeeping and accounting services.
Deloitte
& Touche LLP is the independent registered public accounting firm of the
fund. The address of Deloitte & Touche LLP is 1100 Walnut Street, Kansas
City, Missouri 64106. As the independent registered public accounting firm of
the funds, Deloitte & Touche LLP provides services including auditing the
annual financial statements and financial highlights for the fund.
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
•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.
In
the fiscal years ended July 31, 2022,
2021 and 2020,
the brokerage commissions including, as applicable, futures commissions, of the
fund are listed in the following table.
|
|
|
|
|
|
|
|
|
|
|
| |
| Fund |
2022 |
2021 |
2020 |
| Focused
Dynamic Growth |
$152,441 |
$118,784 |
$76,095 |
Brokerage
commissions paid by a fund may vary significantly from year to year as a result
of changing asset levels throughout the year, portfolio turnover, varying market
conditions, and other factors. The increase in brokerage commissions for Focused
Dynamic Growth fund is correlated with the growth of assets under
management.
As
of the end of its 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.
The
fund named on the front of this statement of additional information is a series
of shares issued by the corporation, and shares of the fund have equal voting
rights. 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.
The
fund votes separately on matters affecting that fund exclusively. Voting rights
are not cumulative, so investors holding more than 50% of the corporation’s (all
funds’) outstanding shares may be able to elect a Board of Directors. The
corporation 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 directors is determined by the votes received from
all the corporation’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.
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.
Within their respective series, all shares have equal redemption rights. Each
share, when issued, is fully paid and non-assessable.
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.
The
corporation’s Board of Directors has adopted a multiple class plan pursuant to
Rule 18f-3 under
the Investment Company Act. The
plan is described in the prospectus of any fund that offers more than one class.
Pursuant to such plan, the fund may issue the following classes of shares:
Investor Class, I Class, A Class, R Class, and R6 Class.
The
Investor Class is made available to investors directly from American Century
Investments and/or through some financial intermediaries. Additional information
regarding eligibility for Investor Class shares may be found in the fund’s
prospectus. The I Class is made available to institutional shareholders or
through financial intermediaries that provide various shareholder and
administrative services. The A Class also is made available through financial
intermediaries, for purchase by individual investors who receive advisory and
personal services from the intermediary. The R Class is made available through
financial intermediaries and is generally used in 401(k) and other retirement
plans. The R6 Class is generally available only to participants in
employer-sponsored
retirement
plans where a financial intermediary provides recordkeeping services to plan
participants. G Class shares are available for purchase only by funds advised by
American Century Investments and other American Century advisory clients that
are subject to a contractual fee for investment management services. The classes
have different unified management fees as a result of their separate
arrangements for shareholder services. In addition, the A and R Class shares
each are subject to a separate Master Distribution and Individual Shareholder
Services Plan (the A Class Plan and R Class Plan, respectively, and
collectively, the plans) described below. The plans have been adopted by the
fund’s Board of Directors 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
Directors and approved by its shareholders. Pursuant to such rule, the Board of
Directors of the fund’s A and R Classes have approved and entered into the A
Class Plan and R Class Plan, respectively. The plans are described
below.
In
adopting the plans, the Board of Directors (including a majority of directors
who are not interested persons of the fund, as defined in the Investment Company
Act, hereafter referred to as the independent directors) determined that there
was a reasonable likelihood that the plans 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 plans is presented to the
Board of Directors quarterly. Continuance of the plans must be approved by the
Board of Directors, including a majority of the independent directors, annually.
The plans may be amended by a vote of the Board of Directors including a
majority of the independent directors, except that the plans 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 plans terminate
automatically in the event of an assignment and may be terminated upon a vote of
a majority of the independent directors or by vote of a majority of outstanding
shareholder votes of the affected class.
All
fees paid under the plans will be made in accordance with Section 2830 of the
Conduct Rules of the Financial Industry Regulatory Authority
(FINRA).
The
Share Class Plans
As
described in the prospectus, the A and R Class shares of the fund are made
available to participants in employer-sponsored retirement plans and 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 A and R Class investors. In addition to such
services, the financial intermediaries provide various individual shareholder
and distribution services.
To
enable the fund’s shares to be made available through such plans and financial
intermediaries, and to compensate them for such services, the fund’s Board of
Directors has adopted the A and R Class Plans. Pursuant to the plans, the
following fees are paid and described further below.
A
Class
The
A Class pays the fund’s distributor 0.25% annually of the average daily net
asset value of the A 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.
R
Class
The
R Class pays the fund’s distributor 0.50% annually of the average daily net
asset value of the R 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 0.50%
and is not based on expenses incurred by the distributor.
During
the fiscal year ended July 31, 2022, the aggregate amount of fees paid under
each class plan was:
|
|
|
|
|
|
|
|
| |
| |
A
Class |
R
Class |
| Focused
Dynamic Growth |
$49,064 |
$66,801 |
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 A and R 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 A and/or R Class shares, which services may
include but are not limited to:
(a)paying
sales commissions, on-going commissions and other payments to brokers, dealers,
financial institutions or others who sell A and/or R Class shares pursuant to
selling agreements;
(b)compensating
registered representatives or other employees of the distributor who engage in
or support distribution of the fund’s A and/or R 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 corporation
and the fund’s distributor and in accordance with Rule 12b-1 of the Investment
Company Act.
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 funds except the A Class are offered at their NAV. The A Class of
the funds is offered at its public offering price, which is the NAV plus the
appropriate sales charge. This calculation may be expressed as a
formula:
Offering
Price = NAV/(1 – Sales Charge as a % of Offering Price)
For
example, if the NAV of a fund’s A Class shares is $5.00, the public offering
price would be $5/(1-5.75%) = $5.31.
The
fund’s NAV is calculated as of the close of regular
trading on
the New York Stock Exchange (the NYSE) each day the NYSE is open for business.
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.
Equity
securities (including exchange-traded funds) and other equity instruments for
which market quotations are readily available are valued at the last reported
official closing price or sale price as of the time of valuation. Futures
contracts are generally valued at the settlement price as provided by the
exchange or clearing corporation. Portfolio securities primarily traded on
foreign securities exchanges that are open later than the NYSE are valued at the
last sale price reported at the time the NAV is determined.
Trading
in equity securities on European, African and Asian securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the NYSE is open. Model-derived fair value factors
may be applied to the market quotations of certain foreign equity securities
whose last closing price was before the time the NAV was determined. Factors are
based on observable market data and are generally provided by an independent
pricing service. Such factors are designed to estimate the price of the foreign
equity security that would have prevailed at the time the NAV is
determined.
Trading
of these securities in foreign markets may not take place on every day that the
NYSE is open. In addition, trading may take place in various foreign markets and
on some electronic trading networks on Saturdays or on other days when the NYSE
is not open and on which the funds’ NAVs are not calculated. Therefore, such
calculations do not take place contemporaneously with the determination of the
prices of many of the portfolio securities used in such calculation, and the
value of the funds’ portfolios may be affected on days when shares of the funds
may not be purchased or redeemed.
When
market quotations are not readily available or
are believed by the valuation designee to be unreliable, securities and other
assets are valued at fair value as determined in accordance with its policies
and
procedures.
Debt
securities and
swap agreements are generally valued using evaluated prices obtained from
approved independent pricing services or at the most recent mean of the bid and
asked prices provided by investment dealers in accordance with the valuation
policies and procedures.
Pricing
services will generally provide evaluated prices based on accepted industry
conventions, which may require the pricing service to exercise its own
discretion. Evaluated prices are commonly derived through utilization of market
models that take into consideration various market factors, assumptions, and
security characteristics including, but not limited to; trade data, quotations
from broker-dealers and active market makers, relevant yield curve and spread
data, related sector levels, creditworthiness, trade data or market information
on comparable securities and other relevant security-specific information.
Pricing services may exercise discretion including, but not limited to;
selecting and designing the valuation methodology, determining the source and
relevance of inputs and assumptions, and assessing price challenges received
from its clients. Pricing services may provide prices when market quotations are
not available or when certain pricing inputs may be stale. The use of different
models or inputs may result in different pricing services determining a
different price for the same security. Pricing services generally value
fixed-income securities assuming orderly transactions of an institutional round
lot size but may consider trades of smaller sizes in their models. The fund may
hold or transact in such securities in smaller lot sizes, sometimes referred to
as “odd-lots.” Securities may trade at different prices when transacted in
different lot sizes.
The methods used by the pricing services and the valuations so established are
reviewed by the valuation
designee
under the oversight of the Board of Directors. There are a number of pricing
services available, and the valuation
designee,
on the basis of ongoing evaluation of these services, may use other pricing
services or discontinue the use of any pricing service in whole or in
part.
Securities
maturing within 60 days of the valuation date may also be valued at cost, plus
or minus any amortized discount or premium, unless it is determined,
based
on established guidelines and procedures, that this would not result in fair
valuation of a given security. Other assets and securities for which market
quotations or the methods described above are not readily available are valued
in good faith in accordance with the valuation designee’s
procedures.
The
value of any security or other asset denominated in a currency other than U.S.
dollars is then converted to U.S. dollars at the prevailing foreign exchange
rate at the time the fund’s NAV is determined. Securities that are neither
listed on a securities exchange or traded over the counter may be priced using
the mean of the bid and asked prices obtained from an independent broker who is
an established market maker in the security.
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.
A
fund’s transactions in foreign currencies, forward contracts, options and
futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by the fund (i.e.,
may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the fund, defer fund losses, and affect the
determination of whether capital gains and losses are characterized as long-term
or short-term capital gains or losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also may require a fund to mark-to-market certain types of the positions in its
portfolio (i.e., treat them as if they were sold), which may cause the fund to
recognize income without receiving cash with which to make distributions in
amounts necessary to satisfy the distribution requirements of the Code for
relief from income and excise taxes. A fund will monitor its transactions and
may make such tax elections as fund management deems appropriate with respect to
these transactions.
A
fund’s investment in foreign securities may be subject to withholding and other
taxes imposed by foreign countries. However, tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Any foreign
taxes paid by a fund will reduce its dividend distributions to
investors.
As
of July 31, 2022, the fund had no capital loss carryovers. 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 of reportable payments (which may include 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
long-term capital gains tax rates. 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 those
shares for more than 45 days.
Distributions
from gains on assets held by the 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 the 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 a fund’s total returns, it may reduce the amount that
a 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 a 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.
Distributions
by the fund also may be subject to state and local taxes, even if all or a
substantial part of those 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 own state.
The
information above is only a summary of some of the tax considerations affecting
the fund and their U.S. shareholders. No attempt has been made to discuss
individual tax consequences. A prospective investor should consult with his or
her tax advisors or state or local tax authorities to determine whether the fund
is a suitable investment.
The
fund’s financial statements and financial highlights for the fiscal year ended
July 31, 2022,
have been audited by Deloitte & Touche LLP, independent registered public
accounting firm. Their Reports of Independent Registered Public Accounting Firm
and the financial statements included in the fund’s annual
report
for
the fiscal year ended July 31, 2022
are
incorporated herein by reference.
As
of October
31, 2022,
the following shareholders owned more than 5% of the outstanding shares of a
class of the funds. The table shows shares owned of record unless otherwise
noted.
|
|
|
|
|
|
|
|
| |
|
Fund/
Class
|
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
|
| Focused
Dynamic Growth |
| Investor
Class |
|
| Charles
Schwab & Co., Inc.
San Francisco, California |
26% |
|
| National
Financial Services LLC
Jersey City, New Jersey |
15% |
|
| LPL
Financial
San Diego, California |
7% |
| I
Class |
|
| Lincoln
Investment Planning LLC
Ft Washington, Pennsylvania |
26% |
|
| American
Enterprise Investment Svc
Minneapolis, Minnesota |
23% |
|
| MSSB
LLC
New York, New York |
17% |
|
| National
Financial Services LLC
Jersey City, New Jersey |
15% |
|
| Charles
Schwab & Co., Inc.
San Francisco, California |
7% |
|
| Pershing
LLC
Jersey City, New Jersey |
6% |
| A
Class |
|
| American
Enterprise Investment Svc
Minneapolis, Minnesota |
28% |
|
| UMB
Bank NA
Topeka, Kansas |
17% |
|
| National
Financial Services LLC
Jersey City, New Jersey |
14% |
|
| Pershing
LLC
Jersey City, New Jersey |
14% |
|
| LPL
Financial
San Diego, California |
9% |
|
| Raymond
James
St. Petersburg, Florida |
8% |
| R
Class |
|
| None |
|
| R6
Class |
|
| Great-West
Trust Company LLC
Greenwood Vlg, Colorado |
23% |
|
| DCGT
Trustee & or Custodian FBO PLIC Various Retirement Plans
Des
Moines, Iowas |
15% |
|
| SEI
Private Trust Co
C/O Principal Financial ID 636
Oaks, Pennsylvania
|
15% |
|
| National
Financial Services LLC
Jersey City, New Jersey |
10% |
|
| State
Street Bk/TR as TTEE and/or Cust FBO ADP Access Product
Boston,
Massachusetts |
8% |
|
|
|
|
|
|
|
|
| |
| G
Class |
|
|
AC
Retirement Date Trust
Woburn,
Massachusetts
Includes
11.84% registered for the benefit of TD 2050 Trust; 9.79% registered for
the benefit of TD 2045 Trust; 9.28% registered for the benefit of TD 2055
Trust; 6.50% registered for the benefit of TD 2040 Trust |
47% |
|
| American
Century Services LLC, SSB&T Custodian One Choice 2050 Portfolio
Focused Dynamic Growth Omnibus
Kansas City, Missouri |
10% |
|
| American
Century Services LLC, SSB&T Custodian One Choice 2045 Portfolio
Focused Dynamic Growth Omnibus
Kansas City, Missouri |
9% |
|
| American
Century Services LLC, SSB&T Custodian One Choice 2055 Portfolio
Focused Dynamic Growth Omnibus
Kansas City, Missouri |
8% |
|
| American
Century Services LLC, SSB&T Custodian One Choice 2040 Portfolio
Focused Dynamic Growth Omnibus
Kansas City, Missouri |
6% |
A
shareholder owning beneficially more than 25% of the corporation’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 corporation. As of October 31,
2022,
the funds’ officers and directors, as a group, owned less than 1% of any class
of a fund’s outstanding shares.
Sales
Charges
The
sales charges applicable to the A Class of the fund is described in the
prospectus in the section titled Investing
Through a Financial Intermediary.
Shares
of the A Class are subject to an initial sales charge, which declines as the
amount of the purchase increases. Additional information regarding reductions
and waivers of the A Class sales charge may be found in the fund’s
prospectus.
Shares
of the A Class are subject to a contingent deferred sales charge (CDSC) upon
redemption of the shares in certain circumstances. The specific charges and when
they apply are described in the relevant prospectuses. The CDSC may be waived
for certain redemptions by some shareholders, as described in the
prospectuses.
An
investor may terminate his relationship with an intermediary at any time. If the
investor does not establish a relationship with a new intermediary and transfer
any accounts to that new intermediary, such accounts may be exchanged to the
Investor Class of the fund, if such class is available. The investor will be the
shareholder of record of such accounts. In this situation, any applicable CDSCs
will be charged when the exchange is made.
The
aggregate CDSCs paid to the distributor for the A Class shares in the fiscal
year ended July 31, 2022,
were:
|
|
|
|
|
| |
| Focused
Dynamic Growth |
$1,239 |
Payments
to Dealers
The
fund’s distributor expects to pay dealer commissions to the financial
intermediaries who sell A Class shares of the fund at the time of such sales.
Payments for A Class shares will be as follows:
|
|
|
|
|
| |
| Purchase
Amount |
Dealer
Commission as a % of Offering Price |
| <
$50,000 |
5.00% |
| $50,000
- $99,999 |
4.00% |
| $100,000
- $249,999 |
3.25% |
| $250,000
- $499,999 |
2.00% |
| $500,000
- $999,999 |
1.75% |
| $1,000,000
- $3,999,999 |
1.00% |
| $4,000,000
- $9,999,999 |
0.50% |
| >
$10,000,000 |
0.25% |
No
dealer commission will be paid on purchases by employer-sponsored retirement
plans. For this purpose, employer-sponsored retirement plans do not include SEP
IRAs, SIMPLE IRAs or SARSEPs.
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 (FINRA). Such payments will not change the price paid by investors for
shares of the fund.
Buying
and Selling Fund Shares
Information
about buying, selling, exchanging and, if applicable, converting fund shares is
contained in the fund’s prospectus. The prospectuses are 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, A, R, and R6 Class shares. Employer-sponsored retirement plans are not
eligible to purchase I Class shares. However, employer-sponsored retirement
plans that were invested in the I Class prior to April 10, 2017 may make
additional purchases. A and R Class purchases are available at net asset value
with no dealer commission paid to the financial professional, and do not incur a
CDSC. A and R 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 |
• |
employee
benefit plans and trusts |
| • |
pension
plans |
• |
employer-sponsored
health plans |
| • |
profit
sharing plans |
• |
457
plans |
| • |
401(k)
plans (including plans with a Roth 401(k) feature, SIMPLE 401(k) plans and
Solo 401(k) plans) |
• |
KEOGH
or HR(10) plans |
| • |
money
purchase plans |
• |
employer-sponsored
403(b) plans (including plans with a Roth 403(b) feature) |
| • |
target
benefit plans |
• |
nonqualified
deferred compensation plans |
| • |
Taft-Hartley
multi-employer pension plans |
• |
nonqualified
excess benefit plans |
| • |
SERP
and “Top Hat” plans |
• |
nonqualified
retirement plans |
| • |
ERISA
trusts |
|
|
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.
R
Class IRA Accounts established prior to August 1, 2006 may make additional
purchases.
Waiver
of Minimum Initial Investment Amounts — I Class
A
financial intermediary, upon receiving prior approval from American Century
Investments, may waive applicable minimum initial investment amounts per
shareholder for I Class shares in the following situations:
•Broker-dealers
, banks, trust companies, registered investment advisors and other financial
intermediaries may make I Class shares available with no initial investment
minimum in fee based advisory programs or accounts where such program or account
is traded omnibus by the financial intermediary;
•Qualified
Tuition Programs under Section 529 that have entered into an agreement with the
distributor; and
•Certain
other situations deemed appropriate by American Century
Investments.
American
Century Investment Management, Inc. (the “Advisor”) is the investment manager
for a variety of advisory clients, including the American Century family of
funds. In such capacity, the Advisor 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 Advisor. In the exercise of proxy voting authority which has been delegated
to it by particular clients, the Advisor 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 Advisor in
writing.
A.General
Principles
In
providing the service of voting client proxies, the Advisor 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 Advisor will vote all proxies with
respect to investments held in the client accounts it manages. The Advisor will
attempt to consider all factors of its vote that could affect the value of the
investment. Although in most instances the Advisor 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 Advisor may at
times vote differently on the same proposals. Examples of when an account’s vote
might differ from other accounts managed by the Advisor include, but are not
limited to, proxy contests and proposed mergers. In short, the Advisor will vote
proxies in the manner that it believes will do the most to maximize shareholder
value.
B.Specific
Proxy Matters
1. Routine
Matters
a. Election
of Directors
(1) Generally.
The
Advisor will generally support the election of directors that result in a board
made up of a majority of independent directors. In general, the Advisor will
vote in favor of management's director nominees if they are running unopposed.
The Advisor 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 Advisor 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 Advisor may consider
concerning director nominees include, but is not limited to, whether (1) there
is an adequate explanation for repeated absences at board meetings, (2) the
nominee receives non-board fee compensation, or (3) there is a family
relationship between the nominee and the company’s chief executive officer or
controlling shareholder. When management's nominees are opposed in a proxy
contest, the Advisor 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.
(2) Committee
Service. The
Advisor will withhold votes for non-independent directors who serve on the
audit, compensation, and/or nominating committees of the board.
(3) Classification
of Boards. The
Advisor will support proposals that seek to declassify boards. Conversely, the
Advisor will oppose efforts to adopt classified board structures.
(4) Majority
Independent Board. The
Advisor will support proposals calling for a majority of independent directors
on a board. The Advisor believes that a majority of independent directors can
help to facilitate objective decision making and enhances accountability to
shareholders.
(5) Majority
Vote Standard for Director Elections.
The
Advisor 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 Advisor 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.
(6) Withholding
Campaigns. The
Advisor 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.
b. Ratification
of Selection of Auditors
The
Advisor 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 Advisor believes that independence of the auditors is paramount and
will vote against auditors whose independence appears to be impaired. The
Advisor 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.
2. Compensation
Matters
a. Executive
Compensation
(1) Advisory
Vote on Compensation. The
Advisor 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 Advisor will consider and vote on a
case-by-case basis on say-on-pay proposals and will generally support management
proposals unless specific concerns exist, including if the Advisor 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.
(2) Frequency
of Advisory Votes on Compensation. The
Advisor generally supports the triennial option for the frequency of say-on-pay
proposals, but will consider management recommendations for an alternative
approach.
b. Equity
Based Compensation Plans
The
Advisor believes that equity-based incentive plans are economically significant
issues upon which shareholders are entitled to vote. The Advisor 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 Advisor
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
Advisor 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 Advisor's legal counsel; amendments to
executive bonus plans to comply with IRS Section 162(m) disclosure requirements,
for example, are generally approved.
The
Advisor 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 Advisor 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.
3. Anti-Takeover
Proposals
In
general, the Advisor will vote against any proposal, whether made by management
or shareholders, which the Advisor 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.
a. Cumulative
Voting
The
Advisor 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 Advisor believes that the elimination of
cumulative voting constitutes an anti-takeover measure.
b. 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 Advisor believes that
staggered boards are primarily an anti-takeover device and will vote against
establishing them and for eliminating them. However, the Advisor does not
necessarily vote against the re-election of directors serving on staggered
boards.
c. "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 Advisor will vote against blank check preferred
stock. However, the Advisor 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.
d. 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 Advisor generally votes against proposals to grant preemptive
rights, and for proposals to eliminate preemptive rights.
e. 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 Advisor 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.
f. 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 Advisor 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 Advisor 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.
g. "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 Advisor
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.
h. "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 Advisor will carefully examine all fair price
proposals. In general, the Advisor will vote against fair price proposals unless
the Advisor 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.
i. 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 Advisor 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 Advisor will generally vote against proposals attempting to
eliminate this right and for proposals attempting to restore it.
j. 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 Advisor believes that the potential benefits of a poison pill plan
are outweighed by the potential detriments. The Advisor will generally vote
against all forms of poison pills.
The
Advisor will, however, consider on a case-by-case basis poison pills that are
very limited in time and preclusive effect. The Advisor 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.
k. 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 Advisor will evaluate the specifics of the
plan presented.
l. 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
Advisor will examine reincorporation proposals on a case-by-case basis.
Generally, if the Advisor believes that the reincorporation will result in
greater protection from takeovers, the reincorporation proposal will be opposed.
The Advisor 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 Advisor will
generally vote affirmatively.
m. 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 Advisor 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 Advisor will generally vote in favor of any
proposal to adopt confidential voting.
n. 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 Advisor 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 Advisor will generally vote in favor of opting out of restrictive
state takeover laws.
4. Transaction
Related Proposals
The
Advisor 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
Advisor 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.
5. Other
Matters
a. Proposals
Involving Environmental, Social, and Governance (“ESG”) Matters
The
Advisor believes that 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 ESG Proxy 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 Advisor’s consideration. The ESG Proxy Team will generally
recommend support for well-targeted ESG proposals if it believes that there is a
rational linkage between a proposal, its 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 Advisor believes it is generally impossible to know
how to vote in a manner that would accurately reflect the views of the Advisor’s
clients, and, therefore, the Advisor will generally rely on management’s
assessment of the economic effect if the Advisor 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
Advisor 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 Advisor 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.
b. 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 Advisor 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.
c. Indemnification
The
Advisor 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.
d. 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 Advisor 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.
e. Director
Tenure
These
proposals ask that age and term restrictions be placed on the board of
directors. The Advisor 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.
f. Directors’
Stock Options Plans
The
Advisor believes that stock options are an appropriate form of compensation for
directors, and the Advisor 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.
g. Director
Share Ownership
The
Advisor 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.
h. Non-U.S.
Proxies
The
Advisor 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 Advisor 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.
C.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
Advisor 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 Advisor’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 Advisor, (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
Advisor 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 Advisor 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 Advisor 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.
D.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 Advisor’s staff the opportunity to ask additional questions about the
matter being presented. Companies with which the Advisor has direct business
relationships could theoretically use these relationships to attempt to unduly
influence the manner in which the Advisor votes on matters for its clients. To
ensure that such a conflict of interest does not affect proxy votes cast for the
Advisor’s clients, our proxy voting personnel regularly catalog companies with
whom the Advisor 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 Advisor
will “echo vote” such shares, if possible. Echo voting means the Advisor 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 (as in the case of
the “NT” funds, where the other American Century funds are the only
shareholders), the shares of the underlying fund (e.g. the “NT” fund) will be
voted in the same proportion as the vote of the shareholders of the
corresponding American Century policy portfolio for proposals common to both
funds. For example, NT Growth Fund shares will be echo voted in accordance with
the votes of the Growth Fund shareholders. In the case where 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 Advisor 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 Advisor’s staff, which is overseen by the
General Counsel of the Advisor, in consultation with equity managers. Electronic
records will be kept of all votes made.
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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 |
CL-SAI-91880 2212
