April
1, 2024
American
Century Investments
Statement
of Additional Information
American
Century World Mutual Funds, Inc.
| Emerging Markets Fund | Focused International Growth Fund | International Opportunities Fund | ||||||
| Investor Class (TWMIX) | Investor Class (AFCNX) | Investor Class (AIOIX) | ||||||
| I Class (AMKIX) | I Class (AFCSX) | I Class (ACIOX) | ||||||
| Y Class (AEYMX) | A Class (AFCLX) | A Class (AIVOX) | ||||||
| A Class (AEMMX) | C Class (AFCHX) | C Class (AIOCX) | ||||||
| C Class (ACECX) | R Class (AFCWX) | R Class (AIORX) | ||||||
| R Class (AEMRX) | R6 Class (AFCMX) | |||||||
| R5 Class (AEGMX) | G Class (AFCGX) | International Small-Mid Cap Fund | ||||||
| R6 Class (AEDMX) | Investor Class (ANTSX) | |||||||
| G Class (ACADX) | Global Small Cap Fund | G Class (ANTMX) | ||||||
| Investor Class (AGCVX) | ||||||||
| Emerging Markets Small Cap Fund | I Class (AGCSX) | International Value Fund | ||||||
| Investor Class (AECVX) | A Class (AGCLX) | Investor Class (ACEVX) | ||||||
| I Class (AECSX) | C Class (AGCHX) | I Class (ACVUX) | ||||||
| A Class (AECLX) | R Class (AGCWX) | A Class (MEQAX) | ||||||
| C Class (AECHX) | R6 Class (AGCTX) | C Class (ACCOX) | ||||||
| R Class (AECMX) | R Class (ACVRX) | |||||||
| R6 Class (AECTX) | International Growth Fund | R6 Class (ACVDX) | ||||||
| Investor Class (TWIEX) | G Class (ACAFX) | |||||||
| Focused Global Growth Fund | I Class (TGRIX) | |||||||
| Investor Class (TWGGX) | Y Class (ATYGX) | Non-U.S. Intrinsic Value Fund | ||||||
| I Class (AGGIX) | A Class (TWGAX) | Investor Class (ANTUX) | ||||||
| Y Class (AGYGX) | C Class (AIWCX) | I Class (ANVHX) | ||||||
| A Class (AGGRX) | R Class (ATGRX) | A Class (ANVLX) | ||||||
| C Class (AGLCX) | R5 Class (ATGGX) | R Class (ANVRX) | ||||||
| R Class (AGORX) | R6 Class (ATGDX) | R6 Class (ANVMX) | ||||||
| R5 Class (AGFGX) | G Class (ACAEX) | G Class (ANTGX) | ||||||
| R6 Class (AGGDX) | ||||||||
|
This
statement of additional information adds to the discussion in the funds’
prospectuses dated April 1, 2024, but is not a prospectus. The statement
of additional information should be read in conjunction with the funds’
current prospectuses. 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 funds’ annual reports, which are delivered to all
investors. You may obtain a free copy of the funds’ annual reports by
calling 1-800-345-2021. |
 | ||||
©2024
American Century Proprietary Holdings, Inc. All rights reserved.
Table
of Contents
American
Century World Mutual Funds, Inc., is a registered open-end management investment
company that was organized in 1990 as a Maryland corporation under the name
Twentieth Century World Investors, Inc. In January 1997, it changed its name to
American Century World Mutual Funds, Inc. Throughout this statement of
additional information we refer to American Century World Mutual Funds, Inc. as
the corporation.
The
International Value Fund is the post-reorganization successor to the Mason
Street International Equity Fund. The reorganization occurred April 1, 2006.
Each
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. Each fund has its own investment objective, strategy, management team,
assets, and tax identification and stock registration number.
Effective
November 22, 2019, Global Growth Fund was renamed Focused Global Growth
Fund.
| Fund/Class | Ticker Symbol | Inception Date | ||||||
| Emerging Markets | ||||||||
| Investor Class | TWMIX | 09/30/1997 | ||||||
| I Class | AMKIX | 01/28/1999 | ||||||
| Y Class | AEYMX | 04/10/2017 | ||||||
| A Class | AEMMX | 05/12/1999 | ||||||
| C Class | ACECX | 12/18/2001 | ||||||
| R Class | AEMRX | 09/28/2007 | ||||||
| R5 Class | AEGMX | 04/10/2017 | ||||||
| R6 Class | AEDMX | 07/26/2013 | ||||||
| G Class | ACADX | 04/01/2022 | ||||||
| Emerging Markets Small Cap | ||||||||
| Investor Class | AECVX | 04/07/2016 | ||||||
| I Class | AECSX | 04/07/2016 | ||||||
| A Class | AECLX | 04/07/2016 | ||||||
| C Class | AECHX | 04/07/2016 | ||||||
| R Class | AECMX | 04/07/2016 | ||||||
| R6 Class | AECTX | 04/07/2016 | ||||||
| Focused Global Growth | ||||||||
| Investor Class | TWGGX | 12/01/1998 | ||||||
| I Class | AGGIX | 08/01/2000 | ||||||
| Y Class | AGYGX | 04/10/2017 | ||||||
| A Class | AGGRX | 02/05/1999 | ||||||
| C Class | AGLCX | 03/01/2002 | ||||||
| R Class | AGORX | 07/29/2005 | ||||||
| R5 Class | AGFGX | 04/10/2017 | ||||||
| R6 Class | AGGDX | 07/26/2013 | ||||||
| Focused International Growth | ||||||||
| Investor Class | AFCNX | 03/29/2016 | ||||||
| I Class | AFCSX | 03/29/2016 | ||||||
| A Class | AFCLX | 03/29/2016 | ||||||
| C Class | AFCHX | 03/29/2016 | ||||||
| R Class | AFCWX | 03/29/2016 | ||||||
| R6 Class | AFCMX | 03/29/2016 | ||||||
| G Class | AFCGX | 04/01/2019 | ||||||
2
| Fund/Class | Ticker Symbol | Inception Date | ||||||
| Global Small Cap | ||||||||
| Investor Class | AGCVX | 03/29/2016 | ||||||
| I Class | AGCSX | 03/29/2016 | ||||||
| A Class | AGCLX | 03/29/2016 | ||||||
| C Class | AGCHX | 03/29/2016 | ||||||
| R Class | AGCWX | 03/29/2016 | ||||||
| R6 Class | AGCTX | 03/29/2016 | ||||||
| International Growth | ||||||||
| Investor Class | TWIEX | 05/09/1991 | ||||||
| I Class | TGRIX | 11/20/1997 | ||||||
| Y Class | ATYGX | 04/10/2017 | ||||||
| A Class | TWGAX | 10/02/1996 | ||||||
| C Class | AIWCX | 06/04/2001 | ||||||
| R Class | ATGRX | 08/29/2003 | ||||||
| R5 Class | ATGGX | 04/10/2017 | ||||||
| R6 Class | ATGDX | 07/26/2013 | ||||||
| G Class | ACAEX | 04/01/2022 | ||||||
| International Opportunities | ||||||||
| Investor Class | AIOIX | 06/01/2001 | ||||||
| I Class | ACIOX | 01/09/2003 | ||||||
| A Class | AIVOX | 03/01/2010 | ||||||
| C Class | AIOCX | 03/01/2010 | ||||||
| R Class | AIORX | 03/01/2010 | ||||||
| International Small-Mid Cap | ||||||||
| Investor Class | ANTSX | 03/19/2015 | ||||||
| G Class | ANTMX | 03/19/2015 | ||||||
| International Value | ||||||||
| Investor Class | ACEVX | 04/03/2006 | ||||||
| I Class | ACVUX | 04/03/2006 | ||||||
| A Class | MEQAX | 03/31/1997 | ||||||
| C Class | ACCOX | 04/03/2006 | ||||||
| R Class | ACVRX | 04/03/2006 | ||||||
| R6 Class | ACVDX | 07/26/2013 | ||||||
| G Class | ACAFX | 04/01/2022 | ||||||
| Non-U.S. Intrinsic Value | ||||||||
| Investor Class | ANTUX | 12/06/2018 | ||||||
| I Class | ANVHX | 12/03/2019 | ||||||
| A Class | ANVLX | 12/03/2019 | ||||||
| R Class | ANVRX | 12/03/2019 | ||||||
| R6 Class | ANVMX | 12/03/2019 | ||||||
| G Class | ANTGX | 12/06/2018 | ||||||
3
This
section explains the extent to which the funds’ advisor, American Century
Investment Management, Inc. (ACIM), can use various investment vehicles and
strategies in managing a 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 4. In the case of the funds’ principal investment
strategies, these descriptions elaborate upon discussions contained in the
prospectuses.
The
funds are 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, each 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 or
securities of other investment companies).
To
meet federal tax requirements for qualification as a regulated investment
company, each 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 funds’ prospectuses,
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 below. It is the advisor’s intention that each fund will generally
consist of foreign (and U.S. in the case of Focused Global Growth and Global
Small Cap) equity and equity-equivalent securities. However, subject to the
specific limitations applicable to a fund, the funds’ management teams may
invest the assets of each fund in varying amounts in other instruments when such
a course is deemed appropriate in order to pursue a fund’s investment
objective. Unless otherwise noted, all investment restrictions described
below and in each 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 funds fully invested, regardless of the
movement of stock or bond prices generally. In most circumstances, each fund’s
actual level of cash and cash equivalents will be less than 10%. The managers
may use futures as a way to expose each fund’s cash assets to the market, while
maintaining liquidity. The managers may not leverage a fund’s portfolio without
appropriately segregating assets to cover such positions. See Derivative
Instruments,
page 6, Futures
and Options,
page 8 and Short-Term
Securities,
page 17.
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
4
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.
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
the funds increasingly rely 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 funds’ 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 funds’ business operations. Breaches in information security may
result in financial losses, interference with the funds’ 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 funds may incur substantial costs
to prevent future cyber incidents. The funds have 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 funds do not control the
cyber security plans and systems of our service providers and other third party
business partners. The funds and their shareholders could be negatively impacted
as a result.
Debt
Securities
The
managers believe that equity securities ordinarily offer the greatest potential
for capital appreciation. The funds may invest, however, in any security the
managers believe has the potential for capital appreciation. When the managers
believe that the total return potential of other securities equals or exceeds
the potential return of equity securities, each fund (except Emerging Markets,
Emerging Markets Small Cap, Global Small Cap and International Value, which are
20%) may invest up to 35% of its assets in such other securities. The other
securities the funds may invest in are bonds, notes and debt securities of
companies, and obligations of domestic or foreign governments and their
agencies.
The
funds may purchase sovereign debt instruments issued or guaranteed by foreign
governments or their agencies, including debt of emerging market countries.
Sovereign debt may be in the form of conventional securities or other types of
debt instruments, such as loans or loan participations. Sovereign debt of
emerging market countries may involve a high degree of risk and may present a
risk of default or renegotiation or rescheduling of debt payments.
Focused
Global Growth, International Growth and Focused International Growth will limit
their purchases of debt securities to investment-grade obligations except
convertible securities, which may be rated below investment grade. For long-term
debt obligations, this includes securities that are rated Baa or better by
Moody’s Investors Service, Inc. or BBB or better by Standard &
5
Poor’s
Corporation (S&P), or that are not rated but are considered by the managers
to be of equivalent quality. See Explanation
of Fixed-Income Securities Ratings,
Appendix
D,
for an explanation of the ratings.
Emerging
Markets, Emerging Markets Small Cap, Global Small Cap, International
Opportunities, International Small-Mid Cap and International Value have no
credit quality or maturity restrictions with regard to the bonds, corporate debt
securities and government obligations in which the funds may invest. Debt
securities, especially those of issuers in emerging market countries, may be of
poor quality and speculative in nature. While these securities will be chosen
primarily for their appreciation potential, a fund also may take the potential
for income into account when selecting investments.
In
addition to other factors that will affect its value, 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 rise. When prevailing interest rates
rise, bond prices generally fall. These changes in value may, depending upon the
particular amount and type of fixed-income securities holdings of a fund, impact
the net asset value of that fund’s shares.
In
the event of adverse
market, economic political or other conditions,
the funds may, as a temporary defensive measure, invest all or a substantial
portion of their assets in cash or high-quality, short-term debt securities. To
the extent a fund assumes a defensive position, it may not achieve its
investment objective.
Depositary
Receipts
American
Depositary Receipts (“ADRS”), as well as other “hybrid” forms of ADRs, including
European Depositary Receipts (“EDRs”) and Global Depositary Receipts (“GDRs”),
are certificates evidencing ownership of shares of a foreign issuer. Depositary
receipts are securities that evidence ownership interests in a security or a
pool of securities that have been deposited with a “depository” and may be
sponsored or unsponsored. These certificates are issued by depository banks and
generally trade on an established market in the United States or elsewhere. The
underlying shares are held in trust by a custodian bank or similar financial
institution in the issuer’s home country. The depository bank may not have
physical custody of the underlying securities at all times and may charge fees
for various services, including forwarding dividends and interest and corporate
actions. ADRs are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However, ADRs
continue to be subject to many of the risks associated with investing directly
in foreign securities.
For
ADRs, the depository is typically a U.S. financial institution and the
underlying securities are issued by a foreign issuer. For other depositary
receipts, the depository may be a foreign or a U.S. entity, and the underlying
securities may have a foreign or a U.S. issuer. Depositary receipts will not
necessarily be denominated in the same currency as their underlying securities.
Generally, ADRs are issued in registered form, denominated in U.S. dollars, and
designed for use in the U.S. securities markets. Other depositary receipts, such
as GDRs and EDRs, may be issued in bearer form and denominated in other
currencies, and are generally designed for use in securities markets outside the
U.S. While the two types of depositary receipt facilities (unsponsored or
sponsored) are similar, there are differences regarding a holder’s rights and
obligations and the practices of market participants. A depository may establish
an unsponsored facility without participation by (or acquiescence of) the
underlying issuer; typically, however, the depository requests a letter of
non-objection from the underlying issuer prior to establishing the facility.
Holders of unsponsored depositary receipts generally bear all the costs of the
facility. The depository usually charges fees upon deposit and withdrawal of the
underlying securities, the conversion of dividends into U.S. dollars or other
currency, the disposition of non-cash distributions, and the performance of
other services. The depository of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the underlying
issuer or to pass through voting rights to depositary receipt holders with
respect to the underlying securities.
Sponsored
depositary receipt facilities are created in generally the same manner as
unsponsored facilities, except that sponsored depositary receipts are
established jointly by a depository and the underlying issuer through a deposit
agreement. The deposit agreement sets out the rights and responsibilities of the
underlying issuer, the depository, and the depositary receipt holders. With
sponsored facilities, the underlying issuer typically bears some of the costs of
the depositary receipts (such as dividend payment fees of the depository),
although most sponsored depositary receipts agree to distribute notices of
shareholders meetings, voting instructions, and other shareholder communications
and information to the depositary receipt holders at the underlying issuer’s
request. The depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through, to the holders of the receipts,
voting rights with respect to the deposited securities. Depositary receipts do
not eliminate all of the risks associated with directly investing in the
securities of foreign issuers.
Derivative
Instruments
To
the extent permitted by its investment objectives and policies, each of the
funds may invest in 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. A fund may not invest in a
derivative instrument if its credit, interest rate, liquidity, counterparty or
other associated risks are outside acceptable limits set forth in its
prospectus. The advisor has a derivatives risk management program that includes
policies and procedures reasonably designed to manage each fund’s respective
derivatives risk. The derivatives risk management program complies with Rule
18f-4 of the Investment Company Act. Unless a fund qualifies as a limited
derivatives user, the fund will be required to
6
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.
Examples
of common derivative instruments include futures contracts, warrants, structured
notes, credit default swaps, options contracts, swap transactions and forward
currency contracts.
The
risks associated with investments in derivatives differ from, and may be greater
than, the risks associated with investing directly in traditional
investments.
Leverage
Risk –
Relatively small market movements may cause large changes in an investment’s
value. Leverage is associated with certain types of derivatives or trading
strategies. Certain transactions in derivatives (such as futures transactions or
sales of put options) involve substantial leverage and may expose a fund to
potential losses that exceed the amount of initial investment.
Hedging
Risk
– When used to hedge against a position in a fund, losses on a derivative
instrument are typically offset by gains on the hedged position, and vice versa.
Thus, though hedging can minimize or cancel out losses, it can also have the
same effect on gains. Occasionally, there may be imperfect matching between the
derivative and the underlying security, such a match may prevent the fund from
achieving the intended hedge or expose it to a risk of loss. There is no
guarantee that a fund’s hedging strategy will be effective. Portfolio managers
may decide not to hedge against any given risk either because they deem such
risk improbable or they do not foresee the occurrence of the risk. Additionally,
certain risks may be impossible to hedge against.
Correlation
Risk
– The value of the underlying security, interest rate, market index or other
financial asset may not move in the direction the portfolio managers anticipate.
Additionally, the value of the derivative may not move or react to changes in
the underlying security, interest rate, market index or other financial asset as
anticipated.
Illiquidity
Risk
– There may be no liquid secondary market, which may make it difficult or
impossible to close out a position when desired. For exchange-traded derivatives
contracts, daily limits on price fluctuations and speculative position limits
set by the exchanges on which the fund transacts in derivative instruments may
prevent profitable liquidation of positions, subjecting a fund to the potential
of greater losses.
Settlement
Risk
– A fund may 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.
Counterparty
Risk
– A counterparty may fail to perform its obligations. 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 each 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 funds 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.
Volatility
Risk –
A fund could face higher volatility because some derivative instruments create
leverage.
Forward
Currency Transactions and Forward Exchange Contracts
A
fund may conduct foreign currency transactions on a spot basis (i.e., cash) or
forward basis (i.e., by entering into forward currency exchange contracts,
currency options and futures transactions to purchase or sell foreign
currencies). Although foreign exchange dealers generally do not charge a fee for
such transactions, they do realize a profit based on the difference between the
prices at which they are buying and selling various currencies.
Forward
contracts are customized transactions that require a specific amount of a
currency to be delivered at a specific exchange rate on a specific date or range
of dates in the future. Forward contracts are generally traded in an interbank
market directly between currency traders (usually larger commercial banks) and
their customers. The parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the contract to maturity
and complete the contemplated currency exchange.
The
following summarizes the principal currency management strategies involving
forward contracts. A fund may also use swap agreements, indexed securities, and
options and futures contracts relating to foreign currencies for the same
purposes.
(1)Settlement
Hedges or Transaction Hedges. When the portfolio managers wish to lock in the
U.S. dollar price of a foreign currency denominated security when a fund is
purchasing or selling the security, the fund may enter into a forward contract
to do so. This type of currency transaction, often called a “settlement hedge”
or “transaction hedge,” protects the fund against an adverse change in foreign
currency values between the date a security is purchased or sold and the date on
which payment is made or received (i.e., settled). Forward contracts to purchase
or sell a foreign currency may also be used by a fund in anticipation of future
purchases or sales of securities denominated in foreign currency, even if the
specific investments have not yet been selected by the portfolio managers. This
strategy is often referred to as “anticipatory hedging.”
7
(2)Position
Hedges. When the portfolio managers believe that the currency of a particular
foreign country may suffer substantial decline against the U.S. dollar, a fund
may enter into a forward 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. This
use of a forward contract is sometimes referred to as a “position hedge.” For
example, if a fund owned securities denominated in Euro, it could enter into a
forward contract to sell Euro in return for U.S. dollars to hedge against
possible declines in the Euro’s value. This hedge would tend to offset both
positive and negative currency fluctuations, but would not tend to offset
changes in security values caused by other factors.
A
fund could also hedge the position by entering into a forward contract to sell
another currency expected to perform similarly to the currency in which the
fund’s existing investments are denominated. This type of hedge, often called a
“proxy hedge,” could offer advantages in terms of cost, yield or efficiency, but
may not hedge currency exposure as effectively as a simple position hedge
against U.S. dollars. This type of hedge may result in losses if the currency
used to hedge does not perform similarly to the currency in which the hedged
securities are denominated.
The
precise matching of forward 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 contract is entered into
and the date it matures. Predicting short-term currency market movements is
extremely difficult, and the successful execution of a 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 managers
believe that it is important to have flexibility to enter into such forward
contracts when they determine that a fund’s best interests may be
served.
At
the maturity of the forward contract, 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 contract with the same currency trader
obligating 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 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 and make delivery of the foreign
currency the fund is obligated to deliver.
(3)Shifting
Currency Exposure. A fund may also enter into forward contracts to shift its
investment exposure from one currency into another. This may include shifting
exposure from U.S. dollars to foreign currency, or from one foreign currency to
another foreign currency. This strategy tends to limit exposure to the currency
sold, and increase exposure to the currency that is purchased, much as if a fund
had sold a security denominated in one currency and purchased an equivalent
security denominated in another currency. For example, if the portfolio managers
believed that the U.S. dollar may suffer a substantial decline against the Euro,
they could enter into a forward contract to purchase Euros for a fixed amount of
U.S. dollars. This transaction would protect against losses resulting from a
decline in the value of the U.S. dollar, but would cause the fund to assume the
risk of fluctuations in the value of the Euro.
Successful
use of currency management strategies will depend on the fund management team’s
skill in analyzing currency values. Currency management strategies may
substantially subject a fund’s investment exposure to changes in currency rates
and could result in losses to a fund if currencies do not perform as the
portfolio managers anticipate. For example, if a currency’s value rose at a time
when the portfolio manager hedged a fund by selling the currency in exchange for
U.S. dollars, a fund would not participate in the currency’s appreciation.
Similarly, if the portfolio managers increase a fund’s exposure to a currency
and that currency’s value declines, a fund will sustain a loss. There is no
assurance that the portfolio managers’ use of foreign currency management
strategies will be advantageous to a fund or that they will hedge at appropriate
times.
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.
Futures
and Options
Each
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. 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.
Futures
Generally,
futures transactions will be used to:
•protect
against a decline in market value of the fund’s securities (taking a short
futures position), or
•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
8
•provide
a temporary substitute for the purchase of an individual security that may be
purchased in an orderly fashion.
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, provided that the transactions are consistent with the fund’s
investment objectives. Examples of indices that may be used include the Morgan
Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index,
the S&P/Citigroup EMI Growth World ex-US Index, and the MSCI Emerging
Markets Free Index. The managers also may engage in futures and options
transactions based on specific securities. 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.
Options
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.
Purchasing an option on a futures contract does not require a fund to make
margin payments unless the option is exercised. 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
9
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.
Although
they do not currently intend to do so, the funds 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 funds 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.
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 were 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 funds 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.
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.
Restrictions
on the Use of Futures Contracts and Options
Each
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 each 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 each 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
funds will be able to execute their investment strategies within the limits
10
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 any of the funds. In the
event that one of the funds 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.
Swap
Agreements
Each
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 funds 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 funds 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
funds by the Internal Revenue Code may limit the funds’ 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.
Equity
Equivalents
In
addition to investing in common stocks, the funds 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, convertible securities, stock futures
contracts or stock index futures contracts. Equity equivalents also may include
securities whose value or return is derived from the value or return of a
different security.
ESG
Integration Risk
For
Emerging Markets, Emerging Markets Small Cap, Focused Global Growth, Focused
International Growth, Global Small Cap, International Growth, International
Opportunities, International Small-Mid Cap and Non-U.S. Intrinsic
Value:
11
The
portfolio managers use a variety of analytical research tools and techniques to
help them make decisions about buying or holding stocks of companies that meet
their investment criteria and selling the stocks of companies that do not. In
addition to fundamental financial metrics, the portfolio managers may also
consider environmental, social, and/or governance (ESG) data to evaluate a
company's sustainability characteristics. However, the portfolio managers may
not consider ESG data with respect to every investment decision and, even when
such data is considered, they may conclude that other attributes of an
investment outweigh sustainability-related considerations when making decisions
for the funds. Sustainability-related characteristics may or may not impact the
performance of an investee company or the funds, and the funds may perform
differently than other funds that do not consider ESG data. Companies with
strong sustainability-related characteristics may or may not outperform
companies with weak sustainability-related characteristics. ESG data used by the
portfolio managers often lacks standardization, consistency, and transparency,
and also may not be available, complete, or accurate.
Foreign
Securities
Each
fund invests in the securities of foreign issuers, including foreign
governments, when these securities meet the fund’s standards of selection. The
funds may make foreign investments either directly in foreign securities or
indirectly by purchasing depositary receipts, depositary shares or similar
instruments (DRs) for foreign securities. DRs are securities that are listed on
exchanges or quoted in over-the-counter markets in one country but represent
shares of issuers domiciled in another country. The funds also may purchase
securities of issuers in foreign markets, either on foreign securities
exchanges, electronic trading networks or in over-the-counter
markets.
A
description of the funds’ investment strategies regarding foreign securities is
contained in the funds’ prospectuses. Investing in securities of foreign issuers
generally involves greater risks than investing in the securities of domestic
companies including:
Currency
Risk.
The value of the foreign investments held by the funds 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 funds invest 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, or confiscatory taxation, and limitations on the removal of
funds or other assets, could also adversely affect the value of investments.
Further, the funds 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 funds 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 are generally 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 funds
invest 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 is
generally less government regulation and supervision of foreign stock exchanges,
brokers and issuers, which may make it difficult to enforce contractual
obligations. In addition, it may be more difficult in foreign countries to
accurately determine appropriate brokerage commissions, taxes and other trading
costs related to securities trades.
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. Market practice may require that
payments are made prior to receipt of the security which is being purchased or
that delivery of a security must be made before payment is received. Delays in
clearance and settlement could result in temporary periods when assets of the
funds are uninvested and no return is earned. The inability of the funds to make
intended security purchases due to clearance and settlement problems could cause
the funds to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to clearance and settlement problems could result
either in losses to the funds due to subsequent declines in the value of the
portfolio security or, if the fund has entered into a contract to sell the
security,
12
liability
to the purchaser. This risk may be magnified in emerging markets because
settlement systems may be less organized, creating a risk that settlements may
be not only delayed, but also lost because of failures or defects in such
systems.
Ownership
Risk.
Evidence of securities ownership may be uncertain in many foreign countries. In
many of these countries, the most notable of which is the Russian Federation,
the ultimate evidence of securities ownership is the share register held by the
issuing company or its registrar. While some companies may issue share
certificates or provide extracts of the company’s share register, these are not
negotiable instruments and are not effective evidence of securities ownership.
In an ownership dispute, the company’s share register is controlling. As a
result, there is a risk that a fund’s trade details could be incorrectly or
fraudulently entered on the issuer’s share register at the time of the
transaction, or that a fund’s ownership position could thereafter be altered or
deleted entirely, resulting in a loss to the fund. While the funds intend to
invest directly in Russian companies that utilize an independent registrar,
there can be no assurance that such investments will not result in a loss to the
funds.
Emerging
Markets Risk.
Investing in emerging market companies generally is also riskier than investing
in other foreign securities due to lower liquidity, market manipulation
concerns, limited reliable access to capital, and differing company
organizational and foreign investment structures. Emerging market countries may
have unstable governments and/or economies that are subject to sudden change.
These changes may be magnified by the countries’ emergent financial markets,
resulting in significant volatility to investments in these countries. These
countries also may lack the legal, business and social framework to support
securities markets. Certain jurisdictions do not provide auditors 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. Additionally, the Sarbanes-Oxley Act of
2002 requires that PCAOB registered accounting firms which prepare or issue
audit opinions for U.S.-listed issuers, submit to PCAOB inspections and produce
audit work papers. This requirement applies to audit opinions for all
U.S.-listed issuers, regardless of the domicile of the issuer. Certain
jurisdictions do not provide the PCAOB with sufficient access to inspect audit
work papers and practices, or otherwise do not cooperate with U.S. regulators.
This lack of access and cooperation potentially exposes investors in U.S.
capital markets to significant risks of capital loss and limits the rights and
remedies available to funds and shareholders.
As
a result of the foregoing risks, these funds are intended for aggressive
investors seeking significant gains through investments in foreign securities.
Those investors must be willing and able to accept the significantly greater
risks associated with the investment strategy that the funds will pursue. An
investment in the funds is not appropriate for individuals with limited
investment resources or who are unable to tolerate fluctuations in the value of
their investment.
Risk
of Focusing Investment on Region or Country.
Investing a significant portion of assets in one country or region makes a fund
more dependent upon the political and economic circumstances of that particular
country or region.
Eurozone
Investment Risk –
The Economic and Monetary Union of the European Union (EMU) is comprised of the
European Union (EU) members that have adopted the euro currency. By adopting the
euro as its currency, a member state relinquishes control of its own monetary
policies and is subject to fiscal and monetary controls. EMU members could
voluntarily abandon, or be forced out of, the euro. Such events could impact the
market values of Eurozone and various other securities and currencies, cause
redenomination of certain securities into less valuable local currencies, and
create more volatile and illiquid markets. As a result, European countries are
significantly affected by fiscal and monetary controls implemented by the EMU.
The euro currency may not fully reflect the strengths and weaknesses of the
various economies that comprise the EMU and Europe generally. Certain countries
and regions in the EU are experiencing significant financial difficulties. Some
of these countries may be dependent on assistance from other European
governments and institutions or agencies. Assistance may be dependent on a
country’s implementation of reforms or reaching a certain level of performance.
Failure to reach those objectives or an insufficient level of assistance could
result in an economic downturn that could significantly affect the value of
investments in those and other European countries. One or more countries could
depart from the EU, which could weaken the EU and, by extension, its remaining
members. For example, the United Kingdom’s departure, described in more detail
below.
United
Kingdom Investment Risk –
Commonly known as “Brexit,” the United Kingdom’s exit from the EU occurred in
January of 2021. The UK and the EU continue to work to establish regulatory
frameworks for cooperation on financial services. Continuing uncertainty in the
UK, EU, and other financial markets may result in volatility, fluctuations in
asset values and exchange rates, decreased liquidity and unwillingness or
inability of financial and other counterparties to enter into
transactions.
Risk
of Investing in China.
Investing in Chinese securities is riskier than investing in U.S. securities.
Although the Chinese government is currently implementing reforms to promote
foreign investment and reduce government economic control, there is no guarantee
that the reforms will be ongoing or effective. Investing in China involves risk
of loss due to nationalization, expropriation, and confiscation of assets and
property. Losses may also occur due to new or expanded restrictions on foreign
investments or repatriation of capital. Participants in the Chinese market are
subject to less regulation and oversight than participants in the U.S. market.
This may lead to trading volatility, difficulty in the settlement and recording
of transactions, and uncertainty in interpreting and applying laws and
regulations. Reduction in spending on Chinese products and services, institution
of tariffs or other trade barriers, or a downturn in the economies of any of
China’s key trading partners may adversely affect the securities of Chinese
issuers. Regional conflict could also have an adverse effect on the Chinese
economy. Though
the PCAOB recently secured complete access to inspect registered public
accounting firms headquartered in mainland China and Hong Kong, the SEC and the
PCAOB continue to
13
have
concerns about deficiencies in these firms' audit engagements.
Because of these deficiencies, there is the risk that material information about
Chinese issuers may be unavailable. As a result, there is substantially greater
risk that disclosures will be incomplete or misleading and, in the event of
investor harm, substantially less access to recourse, in comparison to U.S.
domestic companies.
The
U.S. government may occasionally place restrictions on investments in Chinese
companies. For example, in November 2020, an Executive Order was issued that
prohibits U.S. persons from purchasing or investing in certain publicly-traded
securities of companies identified as “Communist Chinese military companies” or
in instruments that are designed to provide investment exposure to those
companies. The companies identified may change from time to time. A fund may
incur losses if more investors attempt to sell such securities or if the fund is
unable to participate in an otherwise attractive investment. Securities that are
or become prohibited may become less liquid and their market prices may decline.
In addition, the market for securities of other Chinese-based issuers may also
be negatively impacted, resulting in reduced liquidity and price
declines.
Due
to Chinese governmental restrictions on foreign ownership of companies in
certain industries, Chinese operating companies often rely on variable interest
entity (VIE) structures to raise capital from non-Chinese investors. In a VIE
structure, a China-based operating company establishes an entity—typically
offshore—that enters into service and other contracts with the Chinese company
designed to provide economic exposure to the company. The offshore entity then
issues shares that are sold to non-Chinese investors. A U.S.-listed company and
its China-based VIE might appear to be the same company—because they are
presented in a consolidated manner—but they are not. The U.S.-listed company’s
control over the China-based company is predicated on contracts with the
China-based company, not equity ownership. The Chinese government has never
explicitly approved these structures and thus could determine at any time, and
without notice, that the VIE’s underlying contractual arrangements violate
Chinese law. If either the China-based company (or its officers, directors, or
Chinese equity owners) breach those contracts with the U.S.-listed shell
company, or Chinese law changes in a way that affects the enforceability of
these arrangements, or those contracts are otherwise not enforceable under
Chinese law, U.S. investors may suffer losses with limited recourse available.
Additionally, investments in the U.S.-listed company may be affected by
conflicts of interest and duties between the legal owners of the China-based VIE
and the stockholders of the U.S.-listed company. Finally, if Chinese companies
listed on U.S. exchanges, including ADRs and companies that rely on VIE
structures, do not meet U.S. accounting standards and auditor oversight
requirements they may be delisted, which would likely decrease the liquidity and
value of these securities.
Stock
Connect Risk.
Investments in China A-shares listed and traded through the
Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect programs
(“Stock Connect Programs”) involve unique risks. The Stock Connect Programs are
relatively new and there is no guarantee that they will continue. Trading
through Stock Connect Programs is subject to daily quotas that limit the maximum
daily net purchases and daily limits on permitted price fluctuations. Trading
suspensions are more likely in the A-shares market than in many other global
equity markets. There can be no assurance that a liquid market on an exchange
will exist. In addition, investments made through Stock Connect Programs are
subject to comparatively untested trading, clearance and settlement procedures.
Stock Connect Programs are available only on days when markets in both China and
Hong Kong are open. A fund’s ownership interest in Stock Connect Programs
securities will not be reflected directly, and thus the fund may have to rely on
the ability or willingness of a third party to enforce its rights. Investments
in Stock Connect Program A-shares are generally subject to Chinese securities
regulations and listing rules, among other restrictions. Hong Kong investor
compensation funds, which protect against trade defaults, are unavailable when
investing through Stock Connect Programs. Uncertainties in Chinese tax rules
could also result in unexpected tax liabilities for the fund.
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
14
market
volatility globally and negatively impact the funds’ performance beyond any
direct exposure to Russian issuers or securities.
Initial
Public Offerings
The
funds 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.
Investments
in Issuers with Limited Operating Histories
The
funds may invest the following portions of their assets in the equity securities
of issuers with limited operating histories: Focused Global Growth, Focused
International Growth, International Growth and International Small-Mid Cap up to
5%; Emerging Markets, Emerging Markets Small Cap and International Value up to
10%; and Global Small Cap and International Opportunities, up to 20%. The
portfolio 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 funds. 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 or other financial
assets would not be subject to the limitation.
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:
(1)the
type and amount of collateral that must be received by the fund;
(2)the
circumstances under which additions to that collateral must be made by
borrowers;
(3)the
return to be received by the fund on the loaned securities;
(4)the
limitations on the percentage of fund assets on loan; and
(5)the
credit standards applied in evaluating potential borrowers of portfolio
securities.
In
addition, the guidelines require that the fund have the option to terminate any
loan of a portfolio security at any time and set requirements for recovery of
securities from borrowers.
Other
Investment Companies
Each
of the funds 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 the fund’s total assets in the aggregate.
15
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 each 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
Each
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 the 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 security 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
funds will limit repurchase agreement transactions to securities issued by the
U.S. government, its agencies and instrumentalities, and will enter into such
transactions with those banks and securities dealers who are deemed creditworthy
by the funds’ 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
funds may, from time to time, purchase restricted or illiquid securities,
including Rule 144A securities, when they present attractive investment
opportunities that otherwise meet the funds’ 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.
Each of the funds 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.
16
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 funds 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; and
•Money
market funds.
Structured
Investments
A
structured investment is a security whose value or performance is linked to an
underlying index or other security or asset class. Structured investments
involve the transfer of specified financial assets to a special purpose entity,
generally a corporation or trust, or the deposit of financial assets with a
custodian; and the issuance of securities or depositary receipts backed by, or
representing interests in, those assets. Structured investments may be organized
and operated to restructure the investment characteristics of the underlying
security. The cash flow on the underlying instruments may be apportioned among
the newly issued structured investments to create securities with different
investment characteristics, such as varying maturities, payment priorities and
interest rate provisions, and the extent of such payments made with respect to
structured investments is dependent on the extent of the cash flow on the
underlying instruments.
Structured
investments are generally individually negotiated agreements or traded over the
counter, and as such, there is no active trading market for such investments.
Thus structured investments may be less liquid than other securities. Because
structured investments typically involve no credit enhancement, their credit
risk generally will be equivalent to that of the underlying instruments. In
addition, structured investments are subject to the risks that the issuers of
the underlying securities may be unable or unwilling to repay principal and
interest (credit risk), and that issuers of the underlying securities may
request to reschedule or restructure outstanding debt and to extend additional
loan amounts (prepayment or extension risk).
When-Issued
and Forward Commitment Agreements
The
funds may engage in securities transactions 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 the 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, a 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.
17
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
funds’ fundamental investment policies are set forth below. These investment
policies, a fund’s status as diversified, and, except for Emerging Markets Small
Cap, Focused International Growth, Global Small Cap, International Small-Mid Cap
and Non-U.S. Intrinsic Value, a fund’s investment objective as set forth in its
prospectus, 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). | ||||
| 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%.
For
purposes of the investment policies relating to lending and borrowing, the funds
have received an exemptive order from the SEC regarding an interfund lending
program. Under the terms of the exemptive order, the funds 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 funds will borrow money through the
program only when the costs are equal to or lower than the cost of short-term
bank loans. Interfund loans and borrowings normally extend only overnight, but
can have a maximum duration of seven days. The funds will lend through the
program only when the returns are higher than those available from other
short-term instruments (such as repurchase agreements). The funds 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),
18
(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.
Nonfundamental
Investment Policies
In
addition, the funds are subject to the following investment policies that are
not fundamental. These policies, along with the investment objectives of
Emerging Markets Small Cap, Focused International Growth, Global Small Cap,
International Small-Mid Cap and Non-U.S. Intrinsic Value, as set forth in their
prospectuses, 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 in 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 equity securities of issuers with limited operating histories. See Investment in Issuers with Limited Operating Histories under Fund Investments and Risks. 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 funds’
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.
The
portfolio turnover rate of each fund for its most recent fiscal year is included
in the Fund
Summary
section of that fund’s prospectus. The portfolio turnover rate for each 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 tables in the prospectus.
The
portfolio managers will sell securities without regard to the length of time the
security has been held. Accordingly, each 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 each fund’s investment objective, the portfolio 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 funds may decrease or
eliminate entirely their equity positions and increase their cash positions, and
when a general rise in price levels is anticipated, the funds may increase their
equity positions and decrease their cash positions. However, it should be
expected that the funds 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
19
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 funds pay directly. Portfolio
turnover also may affect the character of capital gains realized and distributed
by the fund, if any, since short-term capital gains are characterized 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.
The
advisor 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 each fund will generally be made available for
distribution 15 days after the end of each calendar quarter for each of the
preceding three months. This disclosure is in addition to the portfolio
disclosure in annual and semiannual shareholder reports and the quarter-end
portfolio disclosures on Form N-PORT. Such disclosures are filed with the
Securities and Exchange Commission within 60 days of each fiscal quarter end and
also posted on americancentury.com at approximately the same time the filings
are made. The distribution of holdings after the above time periods is not
limited.
On
a monthly basis, top 10 holdings (on an absolute basis and relative to the
appropriate benchmark) for each fund (except AC Alternatives Market Neutral
Value Fund, which is limited to the top five pairs by type, as described below)
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.
20
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 December 31,
2023
are as follows:
•Aetna
Inc.
•Alight
Solutions LLC
•AllianceBernstein
L.P.
•American
Fidelity Assurance Co.
•Ameritas
Life Insurance Corporation
•AMP
Capital Investors Limited
•Annuity
Investors Life Insurance Company
•Aon
Hewitt Investment Consulting
•Athene
Annuity & Life Assurance Company
•AUL/American
United Life Insurance Company
•Bell
Globemedia Publishing
•Bellwether
Consulting, LLC
•BNY
Mellon Performance & Risk Analytics, LLC
•Brighthouse
Life Insurance Company
•Callan
Associates, Inc.
•Calvert
Asset Management Company, Inc.
•Cambridge
Associates, LLC
•Capital
Cities, LLC
•CBIZ,
Inc.
•Charles
Schwab & Co., Inc.
•Choreo,
LLC
•Clearwater
Analytics, LLC
•Cleary
Gull Inc.
•Commerce
Bank N.A.
•Connecticut
General Life Insurance Company
•Corestone
Investment Managers AG
•Corning
Incorporated
•Curcio
Webb LLC
•Deutsche
AM Distributors, Inc.
•Eckler,
Ltd.
•Electra
Information Systems, Inc.
•Empower
Plan Services, LLC
•Equitable
Investment Management Group, LLC
•EquiTrust
Life Insurance Company
•Farm
Bureau Life Insurance Company
•Fidelity
Workplace Services, LLC
•FIL
Investment Management
•Finance-Doc
Multimanagement AG
•Fund
Evaluation Group, LLC
•Government
Employees Pension Service
•GSAM
Strategist Portfolios, LLC
21
•The
Guardian Life Insurance Company of America
•Intel
Corporation
•InvesTrust
Consulting, LLC
•Iron
Capital Advisors
•Jefferson
National Life Insurance Company
•JLT
Investment Management Limited
•John
Hancock Distributors
LLC
•Kansas
City Life Insurance Company
•Kiwoom
Asset Management
•Kmotion,
Inc.
•Korea
Investment Management Co. Ltd.
•Korea
Teachers Pension
•Legal
Super Pty Ltd.
•The
Lincoln National Life Insurance Company
•Lipper
Inc.
•Marquette
Associates
•Massachusetts
Mutual Life Insurance Company
•Mercer
Investment Management, Inc.
•Merian
Global Investors Limited
•Merrill
Lynch
•Midland
National Life Insurance Company
•Minnesota
Life Insurance Company
•Modern
Woodmen of America
•Montana
Board of Investments
•Morgan
Stanley Wealth Management
•Morningstar
Investment Management LLC
•Morningstar,
Inc.
•Morningstar
Investment Services, Inc.
•Mutual
of America Life Insurance Company
•National
Life Insurance Company
•Nationwide
Financial
•NEPC
•The
Newport Group
•Nomura
Asset Management U.S.A. Inc.
•Nomura
Securities International, Inc.
•The
Northern Trust Company
•Northwestern
Mutual Life Insurance Co.
•NYLIFE
Distributors, LLC
•Pacific
Life Insurance Company
•Principal
Life Insurance Company
•Prudential
Financial,
Inc.
•RidgeWorth
Capital Management, Inc.
•Rocaton
Investment Advisors, LLC
•RVK,
Inc.
22
•Säästöpankki
(The Savings Banks)
•Security
Benefit Life Insurance Co.
•Shinhan
Asset Management
•State
Street Global Exchange
•State
Street Global Markets Canada Inc.
•Stellantis
•Symetra
Life Insurance Company
•Tokio
Marine Asset Management Co., Ltd.
•Truist
Bank
•UBS
Financial Services, Inc.
•UBS
Wealth Management
•Univest
Company
•Valic
Financial Advisors Inc.
•VALIC
Retirement Services Company
•Vestek
Systems, Inc.
•Voya
Retirement Insurance and Annuity Company
•Wells
Fargo Bank, N.A.
•Wilshire
Advisors
LLC
•WTW
•Zeno
Consulting Group, LLC
Once
a party has executed a non-disclosure agreement, it may receive any or all of
the following data for funds in which its clients have investments or are
actively considering investment:
(1)
Full holdings (both long and short) quarterly as soon as reasonably available;
(2)
Full holdings (long only) monthly as soon as reasonably available;
(3)
Top 10 holdings monthly as soon as reasonably available; and
(4)
Portfolio attributes (such as sector or country weights), characteristics and
performance attribution monthly as soon as reasonably available.
The
types, frequency and timing of disclosure to such parties vary.
Single
Event Requests
In
certain circumstances, the advisor may provide fund holding information on an
accelerated basis outside of an ongoing arrangement with manager-level or higher
authorization. For example, from time to time the advisor may receive requests
for proposals (RFPs) from consultants or potential clients that request
information about a fund’s holdings on an accelerated basis. As long as such
requests are on a one-time basis, and do not result in continued receipt of
data, such information may be provided in the RFP. In these circumstances, top
15 long and short holdings may be disclosed 7 days after the end of each month.
Such disclosure may be presented in paired trades, such as by showing a long
holding in one sector or security and a corresponding short holding in another
sector or security together to show a long/short strategy. Such information will
be provided with a confidentiality legend and only in cases where the advisor
has reason to believe that the data will be used only for legitimate purposes
and not for trading.
Service
Providers
Various
service providers to the 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).
23
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 funds. Each director will
continue to serve in this capacity until death, retirement, resignation or
removal from office. The board has adopted a mandatory retirement age for
directors who are not “interested persons,” as that term is defined in the
Investment Company Act (independent directors). Independent directors shall
retire 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 Thomas
W. Bunn,
8) registered investment companies in the American Century Investments family of
funds.
The
following table presents additional information about the directors. The mailing
address for each director is 4500 Main Street, Kansas City, Missouri
64111.
| Name
(Year of Birth) |
Position(s)
Held
with
Funds
|
Length
of
Time
Served
|
Principal Occupation(s) During Past 5 Years |
Number
of
American
Century
Portfolios
Overseen
by
Director
|
Other
Directorships
Held
During Past 5
Years
| ||||||||||||
| Independent Directors | |||||||||||||||||
| 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 |
119 |
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 | ||||||||||||
24
| Name
(Year of Birth) |
Position(s)
Held
with
Funds
|
Length
of
Time
Served
|
Principal Occupation(s) During Past 5 Years |
Number
of
American
Century
Portfolios
Overseen
by
Director
|
Other
Directorships
Held
During Past 5
Years
| ||||||||||||
|
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 M. Jenkins (1963) | Director | Since 2019 |
Senior
Policy Advisor, Capitol
Hill Policy Group
(2020 to present); Consultant, LJ
Strategies
(2019 to 2023) |
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.
| ||||||||||||
| 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 |
150 | 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 funds 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.
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
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
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 Executive
Committee of the Board of Directors of ICI Mutual Insurance Company
25
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
M. 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
Responsibilities
of the Board
The
board is responsible for overseeing the advisor’s management and operations of
the funds pursuant to the management agreements. Directors also have significant
responsibilities under the federal securities laws. Among other things,
they:
•oversee
the performance of the funds;
•oversee
the quality of the advisory and shareholder services provided by the advisor and
other service providers to the funds;
•review
annually the fees paid to the advisor for its services;
•monitor
potential conflicts of interest between the funds and their affiliates,
including the advisor;
•oversee
custody of assets and the valuation of securities; and
•oversee
the funds’ compliance program.
In
performing their duties, board members receive detailed information about the
funds, the advisor and other service providers to the funds 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 funds and may amend and repeal them to the
extent that such bylaws do not reserve that right to the funds’ 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 funds, to any board committee and
to any agent or employee of the funds 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 funds’ 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 funds’ 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 funds.
26
The
board has an Audit Committee that approves the funds’ (or corporation’s)
engagement of the independent registered public accounting firm and recommends
approval of such engagement to the funds’ 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 funds’ independent auditors.The committee
currently consists of Chris H. Cheesman (chair), Barry Fink, Lynn M. Jenkins and
Gary C. Meltzer. It met four
times during the fiscal year ended November 30, 2023.
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 funds’
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), Brian
Bulatao,
Lynn M. Jenkins, Jan M. Lewis and
Gary C. Meltzer.
It met four times during the fiscal year ended November 30, 2023.
The
board also has a Compliance and Shareholder Services Committee, which reviews
the results of the funds’ compliance testing program, meets regularly with the
funds’ Chief Compliance Officer, reviews shareholder communications, reviews
quarterly reports regarding the quality of shareholder service provided by the
advisor, and monitors implementation of the funds’ Code of Ethics. The committee
currently consists of Thomas W. Bunn (chair), Brian Bulatao, Rajesh K. Gupta and
Jan M. Lewis. It met four times during the fiscal year ended November 30,
2023.
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 funds’ 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), Brian
Bulatao, Thomas W. Bunn, Chris H. Cheesman, Barry Fink, Lynn M. Jenkins, Jan M.
Lewis and Gary C. Meltzer. The committee met four times during the fiscal year
ended November 30, 2023.
Risk
Oversight by the Board
As
previously disclosed, the board oversees the advisor’s management of the funds
and meets at least quarterly with management of the advisor to review reports
and receive information regarding fund operations. Risk oversight relating to
the funds 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
funds, 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
funds.
27
Board
Compensation
Each
independent director receives compensation for service as a member of the board.
Under the terms of each management agreement with the advisor, the funds are
responsible for paying such fees and expenses. None of the interested directors
or officers of the funds receive compensation from the funds. For the fiscal
year ended November 30, 2023,
each independent director received the following compensation for his or her
service to the funds and the American Century family of funds.
| Name of Director |
Total
Compensation for Service
as
Director of the Funds1 |
Total
Compensation for Service as Directors/Trustees for the American Century
Investments Family of Funds
| ||||||
| Independent Directors | ||||||||
| Brian Bulatao | $26,509 | $325,500 | ||||||
| Thomas W. Bunn | $27,975 | $343,500 | ||||||
| Chris H. Cheesman | $27,975 | $343,500 | ||||||
| Barry Fink | $27,975 | $343,500 | ||||||
|
Rajesh
K. Gupta |
$27,975 | $343,500 | ||||||
| Lynn M. Jenkins | $26,509 |
$325,5002 | ||||||
| Jan M. Lewis | $32,617 | $400,500 | ||||||
| Gary C. Meltzer | $26,509 | $325,500 | ||||||
|
Stephen
E. Yates3 |
$26,509 | $473,417 | ||||||
1 Includes
compensation paid to the directors for the fiscal year ended November 30,
2023,
and also includes amounts deferred at the election of the directors under the
American Century Mutual Funds’ Independent Directors’ Deferred Compensation
Plan.
2 Includes
compensation paid to each director for his or her service as director/trustee
for seven (in the case of Mr. Bunn, eight) investment companies in the American
Century Investments family of funds. The total amount of deferred compensation
included in the table is as follows: Ms. Jenkins, $130,200.
3 Mr.
Yates retired from the board on December 31, 2023.
None
of the funds currently provides any 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 funds. 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 funds have no obligation to
segregate assets to secure or fund the deferred fees. To date, the funds have
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 funds. 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.
28
Ownership
of Fund Shares
The
directors owned shares in the funds as of December 31, 2023, as shown in the
table below.
| Name of Director | |||||||||||||||||
|
Jonathan
S.
Thomas
|
Brian Bulatao | Thomas W. Bunn | Chris H. Cheesman |
Barry
Fink
| |||||||||||||
| Dollar
Range of Equity Securities in the Funds: | |||||||||||||||||
| Emerging Markets | E | A | A | C | A | ||||||||||||
| Emerging Markets Small Cap | A | A | A | A | A | ||||||||||||
| Focused Global Growth | E | A | A | A | D | ||||||||||||
| Focused International Growth | A | A | A | B | A | ||||||||||||
| Global Small Cap | A | A | A | A | A | ||||||||||||
| International Growth | A | A | A | C | A | ||||||||||||
| International Opportunities | B | A | A | A | A | ||||||||||||
| International Small-Mid Cap | A | A | A | A | A | ||||||||||||
| International Value | A | A | A | A | A | ||||||||||||
| Non-U.S. Intrinsic Value | A | A | A | D | A | ||||||||||||
|
Aggregate
Dollar Range of Equity Securities in all Registered Investment Companies
Overseen by Director in Family of Investment Companies
|
E | A | 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 | ||||||||||||||
| Rajesh K. Gupta | Lynn M. Jenkins |
Jan
M.
Lewis
|
Gary C. Meltzer | |||||||||||
| Dollar
Range of Equity Securities in the Funds: | ||||||||||||||
| Emerging Markets | A | A | C | A | ||||||||||
| Emerging Markets Small Cap | A | A | A | A | ||||||||||
| Focused Global Growth | A | A | D | A | ||||||||||
| Focused International Growth | A | A | A | A | ||||||||||
| Global Small Cap | A | A | A | A | ||||||||||
| International Growth | A | A | C | A | ||||||||||
| International Opportunities | E | A | C | A | ||||||||||
| International Small-Mid Cap | A | A | A | A | ||||||||||
| International Value | A | A | C | A | ||||||||||
| Non-U.S. Intrinsic Value | E | 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 | A | ||||||||||
Ranges:
A—none, B—$1-$10,000, C—$10,001-$50,000, D—$50,001-$100,000, E—More than
$100,000
Beneficial
Ownership of Affiliates by Independent Directors
No
independent director or his or her immediate family members beneficially owned
shares of the advisor, the funds’ principal underwriter or any other person
directly or indirectly controlling, controlled by, or under common control with
the advisor or the funds’ principal underwriter as of December 31, 2023.
29
The
following table presents certain information about the executive officers of the
funds. Each officer serves as an officer for 16 investment companies in the
American Century family of funds. No officer is compensated for his or her
service as an officer of the funds. The listed officers are interested persons
of the funds and are appointed or re-appointed on an annual basis. The mailing
address for each officer listed below is 4500 Main Street, Kansas City, Missouri
64111.
| Name
(Year of Birth) |
Offices
with
the
Funds
|
Principal Occupation(s) During the Past Five Years | ||||||
| Patrick
Bannigan (1965) |
President since 2019 |
Executive
Vice President and Director, ACC
(2012 to present); Chief Financial Officer, Chief Accounting Officer and
Treasurer, ACC (2015
to present). Also serves as President, ACS;
Vice President, ACIM;
Chief Financial Officer, Chief Accounting Officer and/or
Director, ACIM,
ACS and
other ACC subsidiaries | ||||||
| R.
Wes Campbell (1974) |
Chief
Financial Officer and Treasurer since 2018; Vice President since 2023 |
Vice
President, ACS
(2020 to present); Investment Operations and Investment Accounting,
ACS
(2000 to present) | ||||||
| Amy
D. Shelton (1964) |
Chief
Compliance Officer and Vice President since 2014 |
Chief
Compliance Officer, American Century funds, (2014 to present); Chief
Compliance Officer,
ACIM
(2014 to present); Chief Compliance Officer, ACIS
(2009 to present). Also serves as Vice President, ACIS
| ||||||
| John
Pak (1968) |
General
Counsel and Senior Vice President since 2021 |
General
Counsel and Senior Vice President, ACC
(2021 to present). Also serves as General Counsel and Senior Vice
President, ACIM,
ACS
and ACIS.
Chief Legal Officer of Investment and Wealth Management, The Bank of New
York Mellon (2014 to 2021) | ||||||
| Cihan
Kasikara (1974) |
Vice President since 2023 |
Senior
Vice President, ACS
(2022 to present); Treasurer, ACS
(2023 to present); Vice President, ACS
(2020 to 2022); Vice President, Franklin
Templeton
(2015 to 2020) | ||||||
| Kathleen Gunja Nelson (1976) | Vice President since 2023 |
Vice
President, ACS
(2017 to present) | ||||||
| Ward
D. Stauffer (1960) |
Secretary since 2005 |
Attorney,
ACC
(2003 to present) | ||||||
The
funds, their investment advisor, principal underwriter and, if applicable,
subadvisor have adopted codes of ethics under Rule 17j-1 of the Investment
Company Act. They permit personnel subject to the codes to invest in securities,
including securities that may be purchased or held by the funds, 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 funds. The funds’ 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 E.
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 funds’ principal shareholders appears in Appendix
A.
The
funds have no employees. To conduct the funds’ 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 funds 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.
30
American
Century Investment Management, Inc. (ACIM) serves as the investment advisor for
each of the funds. A description of the responsibilities of the advisor appears
in each prospectus under the heading Management.
Each
class of each 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 each fund’s prospectus. The amount of the fee is calculated daily and paid
monthly in arrears. For each 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 alone, 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 a 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 funds appear below.
For
each fund with a stepped fee schedule, the schedules by which the unified
management fee is determined are as follows:
| Fund | Class | Percentage of Strategy Assets | ||||||
| Focused Global Growth | Investor,
A, C and R |
1.300%
of first $1 billion 1.150% of the next $1 billion 1.050% over $2 billion | ||||||
| I and R5 | 1.100%
of first $1 billion 0.950% of the next $1 billion 0.850% over $2 billion | |||||||
| Y and R6 | 0.950%
of first $1 billion 0.800% of the next $1 billion 0.700% over $2 billion | |||||||
| International Growth | Investor, A, C and R | 1.500%
of first $1 billion 1.200% of the next $1 billion 1.100% of the next $2 billion 1.050% over $4 billion | ||||||
| I and R5 | 1.300%
of first $1 billion 1.000% of the next $1 billion 0.900% of the next $2 billion 0.850% over $4 billion | |||||||
| Y, R6 and G | 1.150%
of first $1 billion 0.850% of the next $1 billion 0.750% of the next $2 billion 0.700% over $4 billion | |||||||
| International Opportunities | Investor, A, C and R | 1.550%
of first $1 billion 1.200% over $1 billion | ||||||
| I | 1.350%
of first $1 billion 1.000% over $1 billion | |||||||
The
management fee schedule for the funds without a stepped fee schedule are as
follows:
| Fund | Class | Management Fee Rate | ||||||
| Emerging Markets | Investor, A, C and R | 1.25% | ||||||
| I and R5 | 1.05% | |||||||
| Y, R6 and G | 0.90% | |||||||
| Emerging Markets Small Cap | Investor, A, C and R | 1.39% | ||||||
| I | 1.19% | |||||||
| R6 | 1.04% | |||||||
| Focused International Growth | Investor, A, C and R | 1.09% | ||||||
| I | 0.89% | |||||||
| R6 and G | 0.74% | |||||||
31
| Fund | Class | Management Fee Rate | ||||||
| Global Small Cap | Investor, A, C and R | 1.10% | ||||||
| I | 0.90% | |||||||
| R6 | 0.75% | |||||||
| International Value | Investor, A, C and R | 1.10% | ||||||
| I | 0.90% | |||||||
| R6 and G | 0.75% | |||||||
| International Small-Mid Cap | Investor | 1.43% | ||||||
| G | 1.08% | |||||||
| Non-U.S. Intrinsic Value | Investor, A and R | 1.15% | ||||||
| I Class | 0.95% | |||||||
| R6 and G | 0.80% | |||||||
On
each calendar day, each class of each 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 funds pay 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 each fund so long as such continuance is approved at
least annually by
(1)either
the funds’ 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 funds 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 funds’ 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 that the advisor shall not be liable to the funds or
their 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 funds and also for other clients advised
by the advisor. Investment decisions for the funds 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 funds with purchase and
sale orders of its other clients when the advisor believes that such aggregation
provides the best execution for the funds. 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 each fund for the fiscal periods ended November 30,
2023,
November 30, 2022 and November 30, 2021, are indicated in the following
table.
32
| Unified Management Fees | |||||||||||
| Fund | 2023 | 2022 | 2021 | ||||||||
| Emerging Markets |
$18,026,5921 |
$26,592,5482 |
$35,317,035 | ||||||||
| Emerging Markets Small Cap | $147,023 | $123,638 | $121,987 | ||||||||
| Focused Global Growth | $5,759,518 | $6,363,421 | $7,511,065 | ||||||||
| Focused International Growth |
$494,4013 |
$418,9904 |
$305,6445 | ||||||||
| Global Small Cap | $827,181 | $705,822 | $573,377 | ||||||||
| International Growth |
$15,749,3836 |
$15,993.5337 |
$18,750,860 | ||||||||
| International Opportunities | $6,763,938 | $7,562,363 | $9,836,301 | ||||||||
| International Small-Mid Cap |
$1,210,6688 |
$1,206,2709 |
$1,507,89010 | ||||||||
| International Value |
$2,850,05511 |
$1,896,69712 |
$634,271 | ||||||||
| Non-U.S. Intrinsic Value |
$1,416,60813 |
$1,710,70214 |
$1,774,33615 | ||||||||
1 Amount
shown reflects waiver by advisor of $6,579,652 in fees for G Class.
2 Amount
shown reflects waiver by advisor of $3,923,100 in fees for G Class.
3 Amount
shown reflects waiver by advisor of $228,903 in fees for G Class.
4 Amount
shown reflects waiver by advisor of $157,103 in fees for G Class.
5 Amount
shown reflects waiver by advisor of $93,344 in fees for G Class.
6 Amount
shown reflects waiver by advisor of $12,541,361 in fees for G
Class.
7 Amount
shown reflects waiver by advisor of $6,818,681 in fees for G Class.
8 Amount
shown reflects waiver by advisor of $4,568,910 in fees.
9 Amount
shown reflects waiver by advisor of $4,366,436 in fees.
10 Amount
shown reflects waiver by advisor of $4,999,509 in fees for G Class.
11 Amount
shown reflects waiver by advisor of $8,552,919 in fees for G Class.
12 Amount
shown reflects waiver by advisor of $4,506,373 in fees for G Class.
13 Amount
shown reflects waiver by advisor of $3,608,432 in fees for G Class.
14 Amount
shown reflects waiver by advisor of $3,677,083 in fees for G Class.
15 Amount
shown reflects waiver by advisor of $4,575,930 in fees for G Class.
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, none of
these accounts has an advisory fee based on the performance of the
account.
|
Accounts
Managed As of November 30, 2023 | ||||||||||||||
|
Registered
Investment
Companies
(e.g.,
American
Century
Investments
funds
and
American Century
Investments
-
subadvised
funds)
|
Other
Pooled
Investment
Vehicles
(e.g.,
commingled
trusts
and 529
education
savings
plans)
|
Other
Accounts (e.g.,
separate
accounts and
corporate
accounts,
including
incubation
strategies
and
corporate
money)
| ||||||||||||
|
Keith
Creveling |
Number
of Accounts |
3 | 6 | 24 | ||||||||||
|
Assets
|
$729.3
million1,
2 |
$944.0
million3 |
$13.6
billion4 | |||||||||||
| Arun Daniel |
Number
of Accounts |
8 | 0 | 0 | ||||||||||
|
Assets
|
$7.1
billion5 |
N/A | N/A | |||||||||||
|
Rajesh
Gandhi
|
Number
of Accounts |
7 | 4 | 13 | ||||||||||
|
Assets
|
$3.7
billion6 |
$587.1
million |
$1.8
billion | |||||||||||
|
Trevor
Gurwich
|
Number
of Accounts |
4 | 9 | 14 | ||||||||||
|
Assets
|
$1.3
billion7 |
$1.1
billion8 |
$1.7
billion | |||||||||||
33
|
Accounts
Managed As of November 30, 2023 | ||||||||||||||
|
Registered
Investment
Companies
(e.g.,
American
Century
Investments
funds
and
American Century
Investments
-
subadvised
funds)
|
Other
Pooled
Investment
Vehicles
(e.g.,
commingled
trusts
and 529
education
savings
plans)
|
Other
Accounts (e.g.,
separate
accounts and
corporate
accounts,
including
incubation
strategies
and
corporate
money)
| ||||||||||||
|
Ted
Harlan |
Number
of Accounts |
3 | 6 | 24 | ||||||||||
|
Assets |
$729.3
million1,
2 |
$944.0
million3 |
$13.6
billion4 | |||||||||||
|
Federico
Laffan
|
Number
of Accounts |
4 | 9 | 14 | ||||||||||
|
Assets |
$1.3
billion7 |
$1.1
billion8 |
$1.7
billion | |||||||||||
|
Yulin
Long |
Number
of Accounts |
9 | 0 | 0 | ||||||||||
|
Assets |
$7.1
billion5 |
N/A | N/A | |||||||||||
|
Pratik
Patel |
Number
of Accounts |
3 | 5 | 5 | ||||||||||
|
Assets
|
$1.2
billion9 |
$226.5
million10 |
$735.6
million | |||||||||||
|
Brent
Puff |
Number
of Accounts |
3 | 6 | 24 | ||||||||||
|
Assets
|
$729.3
million1,
2 |
$944.0
million3 |
$13.6
billion4 | |||||||||||
| Stephen Quance |
Number
of Accounts |
9 | 0 | 0 | ||||||||||
|
Assets
|
$7.1
billion5 |
N/A | N/A | |||||||||||
|
Patricia
Ribeiro |
Number
of Accounts |
2 | 3 | 5 | ||||||||||
|
Assets
|
$2.1
billion11 |
$569.2
million |
$712.4
million | |||||||||||
|
Sherwin
Soo |
Number
of Accounts |
2 | 3 | 5 | ||||||||||
|
Assets |
$2.1
billion11 |
$569.2
million |
$712.4
million | |||||||||||
|
Jonathan
Veiga |
Number
of Accounts |
2 | 0 | 2 | ||||||||||
|
Assets |
$877.0
million12 |
N/A | $128.6 million | |||||||||||
| Bert Whitson | Number of Accounts | 2 | 0 | 2 | ||||||||||
| Assets |
$877.0
million12 |
N/A | $128.6 million | |||||||||||
|
Jim
Zhao |
Number
of Accounts |
7 | 4 | 13 | ||||||||||
|
Assets |
$3.7
billion6 |
$587.1
million |
$1.8
billion | |||||||||||
1 Includes
$590.3 million in Focused Global Growth.
2 Includes
two accounts with $139.0 million in assets with a performance fee.
3 Includes
one account with $223.7 million in assets with a performance fee.
4 Includes
one account with $277.3 million in assets with a performance fee.
5 Includes
$1.4 billion in International Value.
6 Includes
$87.1 billion in Focused International Growth and $2.8 billion in International
Growth.
7 Includes
$78.1 million in Global Small Cap; $423.1 million in International
Opportunities; and $514.1 million in International Small-Mid Cap.
8 Includes
two accounts with $83.9 million in assets with a performance fee.
9 Includes
$423.1 million International Opportunities and $514.1 million in International
Small-Mid Cap.
10Includes
one account with $56.9 million in assets with a performance fee.
11Includes
$2.1 billion in Emerging Markets and $14.4 million in Emerging Markets Small
Cap.
12
Includes
$584.3 million in Non-U.S. Intrinsic Value.
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.
34
Responsibility
for managing American Century Investments client portfolios is organized
according to investment discipline. Investment disciplines include, for example,
disciplined equity, global growth equity, global value equity, global fixed
income, multi-asset strategies, exchange traded funds and Avantis Investors
funds. Within each discipline are one or more portfolio teams responsible for
managing specific client portfolios. Generally, client portfolios with similar
strategies are managed by the same team using the same objective, approach, and
philosophy. Accordingly, portfolio holdings, position sizes, and industry and
sector exposures tend to be similar across similar portfolios, which minimizes
the potential for conflicts of interest. In addition, American Century
Investments maintains an ethical wall that restricts real time access to
information regarding any portfolio’s transaction activities and positions to
team members that have responsibility for a given portfolio or are within the
same equity investment discipline. The ethical wall is intended to aid in
preventing the misuse of portfolio holdings information and trading activity in
the other disciplines.
For
each investment strategy, one portfolio is generally designated as the “policy
portfolio.” Other portfolios with similar investment objectives, guidelines and
restrictions, if any, are referred to as “tracking portfolios.” When managing
policy and tracking portfolios, a portfolio team typically purchases and sells
securities across all portfolios that the team manages. American Century
Investments’ trading systems include various order entry programs that assist in
the management of multiple portfolios, such as the ability to purchase or sell
the same relative amount of one security across several funds. In some cases a
tracking portfolio may have additional restrictions or limitations that cause it
to be managed separately from the policy portfolio. Portfolio managers make
purchase and sale decisions for such portfolios alongside the policy portfolio
to the extent the overlap is appropriate, and separately, if the overlap is
not.
American
Century Investments may aggregate orders to purchase or sell the same security
for multiple portfolios when it believes such aggregation is consistent with its
duty to seek best execution on behalf of its clients. Orders of certain client
portfolios may, by investment restriction or otherwise, be determined not
available for aggregation. American Century Investments has adopted policies and
procedures to minimize the risk that a client portfolio could be systematically
advantaged or disadvantaged in connection with the aggregation of orders. To the
extent equity trades are aggregated, shares purchased or sold are generally
allocated to the participating portfolios pro rata based on order size. Because
initial public offerings (IPOs) are usually available in limited supply and in
amounts too small to permit across-the-board pro rata allocations, American
Century Investments has adopted special procedures designed to promote a fair
and equitable allocation of IPO securities among clients over time. A
centralized trading desk executes all fixed income securities transactions for
Avantis ETFs and mutual funds. For all other funds in the American Century
complex, portfolio teams are responsible for executing fixed income trades with
broker/dealers in a predominantly dealer marketplace. Trade allocation decisions
are made by the portfolio manager at the time of trade execution and orders
entered on the fixed income order management system. There is an ethical wall
between the Avantis trading desk and all other American Century traders. The
Advisor’s Global Head of Trading monitors all trading activity for best
execution and to make sure no set of clients is being systematically
disadvantaged.
Finally,
investment of American Century Investments’ corporate assets in proprietary
accounts may raise additional conflicts of interest. To mitigate these potential
conflicts of interest, American Century Investments has adopted policies and
procedures intended to provide that trading in proprietary accounts is performed
in a manner that does not give improper advantage to American Century
Investments to the detriment of client portfolios.
Compensation
American
Century Investments portfolio manager compensation is structured to align the
interests of portfolio managers with those of the shareholders whose assets they
manage. As of November 30, 2023,
it includes the components described below, each of which is determined with
reference to a number of factors such as overall performance, market
competition, and internal equity.
Base
Salary
Portfolio
managers receive base pay in the form of a fixed annual salary.
Bonus
A
significant portion of portfolio manager compensation takes the form of an
annual incentive bonus which is determined by a combination of factors. One
factor is investment performance of funds a portfolio manager manages. The
mutual funds’ investment performance is generally measured by a combination of
one-, three- and five-year pre-tax performance relative to various benchmarks
and/or internally-customized peer groups, as indicated below. The performance
comparison periods may be adjusted based on a fund’s inception date or a
portfolio manager’s tenure on the fund.
| Benchmark |
Peer
Group1
| |||||||
| Emerging Markets | MSCI Emerging Markets Index | Morningstar Diversified Emerging Markets | ||||||
| Emerging Markets Small Cap | MSCI Emerging Markets Small Cap Index | Morningstar Diversified Emerging Markets | ||||||
| Focused Global Growth | MSCI ACWI Index | Morningstar Global Large-Stock Growth | ||||||
| Focused International Growth | MSCI ACWI ex-U.S. Index | Morningstar Foreign Large Growth | ||||||
| Global Small Cap | MSCI ACWI Small Cap Index | Morningstar Global Small/Mid Stock | ||||||
| International Growth | 50%
MSCI EAFE Index, 50% MSCI EAFE Growth Index |
Morningstar Foreign Large Growth | ||||||
35
| Benchmark |
Peer
Group1
| |||||||
| International Opportunities | MSCI ACWI ex-U.S. Small Cap Growth Index | Morningstar Foreign Small/Mid Growth | ||||||
| International Small-Mid Cap | MSCI EAFE Small Cap Index | Morningstar Foreign Small/Mid Growth | ||||||
| International Value | MSCI EAFE Value Index | Morningstar Foreign Large Value | ||||||
| Non-U.S. Intrinsic Value | MSCI ACWI ex-U.S. Index | Morningstar Foreign Large Value | ||||||
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 similarly managed portfolios. If the performance of a similarly managed
account is considered for purposes of compensation, it is measured in the same
way as a comparable 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. 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 is 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 each fund
beneficially owned by the fund’s portfolio managers as of November 30,
2023,
the fund’s most recent fiscal year end.
| Ownership of Securities | ||||||||
| Aggregate Dollar Range of Securities in Fund | ||||||||
| Emerging Markets Fund | ||||||||
|
Patricia
Ribeiro1
|
A | |||||||
|
Sherwin
Soo1
|
A | |||||||
| Emerging Markets Small Cap Fund | ||||||||
| Patricia Ribeiro | A | |||||||
| Sherwin Soo | A | |||||||
| Focused Global Growth Fund | ||||||||
| Keith Creveling | G | |||||||
| Ted Harlan | E | |||||||
| Brent Puff | G | |||||||
| Focused International Growth Fund | ||||||||
| Rajesh Gandhi |
A2 | |||||||
| Jim Zhao |
A2 | |||||||
36
| Ownership of Securities | ||||||||
| Aggregate Dollar Range of Securities in Fund | ||||||||
| Global Small Cap Fund | ||||||||
| Trevor Gurwich | F | |||||||
| Federico Laffan | C | |||||||
| International Growth Fund | ||||||||
| Rajesh Gandhi | A | |||||||
| Jim Zhao | A | |||||||
| International Opportunities Fund | ||||||||
| Trevor Gurwich | F | |||||||
| Federico Laffan | C | |||||||
| Pratik Patel |
C3 | |||||||
| International Small-Mid Cap Fund | ||||||||
| Trevor Gurwich | A | |||||||
| Federico Laffan | A | |||||||
| Pratik Patel | A | |||||||
| International Value Fund | ||||||||
| Arun Daniel | A | |||||||
| Yulin Long | A | |||||||
| Stephen Quance | A | |||||||
| Non-U.S. Intrinsic Value Fund | ||||||||
| Jonathan Veiga | A | |||||||
| Bert Whitson | A | |||||||
Ranges:
A - none; B - $1-$10,000; C - $10,001-$50,000; D - $50,001-$100,000; E -
$100,001-$500,000; F - $500,001-$1,000,000; G - More than
$1,000,000.
1 This
figure excludes 401(k) investments in a collective trust vehicle that is managed
identically to Emerging Markets. Inclusion of such 401(k) investments would
result in the amount categorized in the table as an E for Patricia Ribeiro and
as a D for Sherwin Soo.
2 This
figure excludes 401(k) investments in a collective trust vehicle that is managed
identically to Focused International Growth. Inclusion of such 401(k)
investments would result in the amount categorized in the table as an F for
Rajesh Gandhi and as
an E for Zhao.
3 This
figure excludes 401(k) investments in a collective trust vehicle that is managed
identically to International Opportunities. Inclusion of such 401(k) investments
would result in the amount categorized in the table as a D for Pratik
Patel.
American
Century Services, LLC (ACS), 4500 Main Street, Kansas City, Missouri 64111,
serves as transfer agent and dividend-paying agent for the funds. It provides
physical facilities, computer hardware and software and personnel, for the
day-to-day administration of the funds and the advisor. The advisor pays ACS’s
costs for serving as transfer agent and dividend-paying agent for the funds out
of the advisor’s unified management fee. For a description of this fee and the
terms of its payment, see the discussion under the caption Investment
Advisor
on page 31.
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 funds, including
striking the daily net asset value for each 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 funds, SSB provides sub-administrative services that
were previously undertaken by ACS.
37
The
funds’ 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 funds’ shares. The distributor
makes a continuous, best efforts underwriting of the funds’ shares. This means
the distributor has no liability for unsold shares. The advisor pays ACIS’s
costs for serving as principal underwriter of the funds’ shares out of the
advisor’s unified management fee. For a description of this fee and the terms of
its payment, see the discussion under the caption Investment
Advisor
on page 31. ACIS does not earn commissions for distributing the funds’
shares.
Certain
financial intermediaries unaffiliated with the distributor or the funds may
perform various administrative and shareholder services for their clients who
are invested in the funds. These services may include assisting with fund
purchases, redemptions and exchanges, distributing information about the funds
and their 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),
One Congress Street, Suite 1,
Boston, Massachusetts 02114-2016
serves as custodian of the funds’ 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 funds or in deciding which
securities are purchased or sold by the funds. The funds, 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
funds pursuant to a Securities Lending Administration Agreement with the
advisor. The following tables provides the amounts of income and
fees/compensation related to the funds’ securities lending activities during the
most recent fiscal year:
| Emerging Markets Fund | |||||
| Gross income from securities lending activities | $240,434 | ||||
| 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 | $12,025 | ||||
| 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 | $1,208 | ||||
| Administrative fees not included in the revenue split | $0 | ||||
| Indemnification fee not included in the revenue split | $0 | ||||
| Rebate (paid to borrower) | $119,913 | ||||
| Other fees not included in revenue split | $0 | ||||
| Aggregate fees/compensation for securities lending activities | $133,146 | ||||
| Net income from securities lending activities | $107,288 | ||||
| Emerging Markets Small Cap Fund | |||||
| Gross income from securities lending activities | $13,063 | ||||
| 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 | $558 | ||||
| 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 | $56 | ||||
| Administrative fees not included in the revenue split | $0 | ||||
| Indemnification fee not included in the revenue split | $0 | ||||
| Rebate (paid to borrower) | $7,404 | ||||
| Other fees not included in revenue split | $0 | ||||
| Aggregate fees/compensation for securities lending activities | $8,019 | ||||
| Net income from securities lending activities | $5,044 | ||||
38
| Focused International Growth Fund | |||||
| Gross income from securities lending activities | $27,190 | ||||
| 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 | $616 | ||||
| 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 | $151 | ||||
| Administrative fees not included in the revenue split | $0 | ||||
| Indemnification fee not included in the revenue split | $0 | ||||
| Rebate (paid to borrower) | $20,876 | ||||
| Other fees not included in revenue split | $0 | ||||
| Aggregate fees/compensation for securities lending activities | $21,642 | ||||
| Net income from securities lending activities | $5,548 | ||||
| Global Small Cap Fund | |||||
| Gross income from securities lending activities | $132,239 | ||||
| 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 | $4,365 | ||||
| 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 | $759 | ||||
| Administrative fees not included in the revenue split | $0 | ||||
| Indemnification fee not included in the revenue split | $0 | ||||
| Rebate (paid to borrower) | $87,818 | ||||
| Other fees not included in revenue split | $0 | ||||
| Aggregate fees/compensation for securities lending activities | $92,943 | ||||
| Net income from securities lending activities | $39,296 | ||||
| International Growth Fund | |||||
| Gross income from securities lending activities | $722,048 | ||||
| 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 | $21,224 | ||||
| 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 | $3,652 | ||||
| Administrative fees not included in the revenue split | $0 | ||||
| Indemnification fee not included in the revenue split | $0 | ||||
| Rebate (paid to borrower) | $500,334 | ||||
| Other fees not included in revenue split | $0 | ||||
| Aggregate fees/compensation for securities lending activities | $525,210 | ||||
| Net income from securities lending activities | $196,838 | ||||
39
| International Opportunities Fund | |||||
| Gross income from securities lending activities | $729,829 | ||||
| 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 | $37,929 | ||||
| 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 | $3,380 | ||||
| Administrative fees not included in the revenue split | $0 | ||||
| Indemnification fee not included in the revenue split | $0 | ||||
| Rebate (paid to borrower) | $346,376 | ||||
| Other fees not included in revenue split | $0 | ||||
| Aggregate fees/compensation for securities lending activities | $387,685 | ||||
| Net income from securities lending activities | $342,144 | ||||
| International Small-Mid Cap Fund | |||||
| Gross income from securities lending activities | $556,488 | ||||
| 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 | $21,899 | ||||
| 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 | $2,774 | ||||
| Administrative fees not included in the revenue split | $0 | ||||
| Indemnification fee not included in the revenue split | $0 | ||||
| Rebate (paid to borrower) | $335,015 | ||||
| Other fees not included in revenue split | $0 | ||||
| Aggregate fees/compensation for securities lending activities | $359,688 | ||||
| Net income from securities lending activities | $196,800 | ||||
| International Value Fund | |||||
| Gross income from securities lending activities | $1,886,298 | ||||
| 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 | $102,886 | ||||
| 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 | $6,932 | ||||
| Administrative fees not included in the revenue split | $0 | ||||
| Indemnification fee not included in the revenue split | $0 | ||||
| Rebate (paid to borrower) | $841,894 | ||||
| Other fees not included in revenue split | $0 | ||||
| Aggregate fees/compensation for securities lending activities | $951,712 | ||||
| Net income from securities lending activities | $934,586 | ||||
As
the funds’ 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
funds. 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 each fund.
40
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 funds generally
do 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 funds and the advisor, the advisor has the
responsibility of selecting brokers and dealers to execute portfolio
transactions. The funds’ policy is to secure the most favorable prices and
execution of orders on its portfolio transactions. The advisor selects
broker-dealers on their perceived ability to obtain “best execution” in
effecting transactions in its clients’ portfolios. In selecting broker-dealers
to effect portfolio transactions relating to equity securities, the advisor
considers the full range and quality of a broker-dealer’s research and brokerage
services, including, but not limited to, the following:
•applicable
commission rates and other transaction costs charged by the
broker-dealer
•value
of research provided to the advisor by the broker-dealer (including economic
forecasts, fundamental and technical advice on individual securities, market
analysis, and advice, either directly or through publications or writings, as to
the value of securities, availability of securities or of purchasers/sellers of
securities)
•timeliness
of the broker-dealer’s trade executions
•efficiency
and accuracy of the broker-dealer’s clearance and settlement
processes
•broker-dealer’s
ability to provide data on securities executions
•financial
condition of the broker-dealer
•the
quality of the overall brokerage and customer service provided by the
broker-dealer
In
transactions to buy and sell fixed-income securities, the selection of the
broker-dealer is determined by the availability of the desired security and its
offering price, as well as the broker-dealer’s general execution and operational
and financial capabilities in the type of transaction involved. The advisor will
seek to obtain prompt execution of orders at the most favorable prices or
yields. The advisor does not consider the receipt of products or services other
than brokerage or research services in selecting
broker-dealers.
On
an ongoing basis, the advisor seeks to determine what levels of commission rates
are reasonable in the marketplace. In evaluating the reasonableness of
commission rates, the advisor considers:
•rates
quoted by broker-dealers
•the
size of a particular transaction, in terms of the number of shares, dollar
amount, and number of clients involved
•the
ability of a broker-dealer to execute large trades while minimizing market
impact
•the
complexity of a particular transaction
•the
nature and character of the markets on which a particular trade takes
place
•the
level and type of business done with a particular firm over a period of
time
•the
ability of a broker-dealer to provide anonymity while executing
trades
•historical
commission rates
•rates
that other institutional investors are paying, based on publicly available
information
The
brokerage commissions paid by the funds 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 funds effect
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 funds.
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.
41
In
the fiscal years ended November 30, 2023, 2022 and 2021, the brokerage
commissions including, as applicable, futures commissions, of each fund are
listed in the following table.
| Fund | 2023 | 2022 | 2021 | ||||||||
| Emerging Markets | $1,752,890 | $2,080,282 | $2,196,671 | ||||||||
| Emerging Markets Small Cap | $7,573 | $6,145 | $4,652 | ||||||||
| Focused Global Growth | $227,924 | $149,457 | $184,576 | ||||||||
| Focused International Growth | $44,590 | $34,035 | $32,740 | ||||||||
| Global Small Cap | $75,447 | $62,566 | $48,542 | ||||||||
| International Growth | $1,308,192 | $811,464 | $787,812 | ||||||||
| International Opportunities | $493,098 | $610,752 | $962,778 | ||||||||
| International Small-Mid Cap | $493,211 | $447,416 | $593,384 | ||||||||
| International Value | $823,153 | $715,351 | $53,718 | ||||||||
| Non-U.S. Intrinsic Value | $375,098 | $372,319 | $282,725 | ||||||||
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
funds’ distributor (ACIS) and investment advisor (ACIM) are wholly owned,
directly or indirectly, by ACC. Nomura Holdings, Inc. (Nomura) is an equity
investor in ACC. The funds listed below paid a subsidiary of Nomura (Affiliated
Broker) the following brokerage commissions for the fiscal years ended November
30, 2023, 2022 and 2021.
| Fund | 2023 | 2022 | 2021 | ||||||||
| Global Small Cap | $0 | $0 | $21 | ||||||||
| International Value | $0 | $0 | $68 | ||||||||
As
of the end of its most recently completed fiscal year, each of the funds listed
below owned securities of its regular brokers or dealers (as defined by Rule
10b-1 under the Investment Company Act) or of their parent
companies.
| Fund | Broker, Dealer or Parent | Value
of Securities Owned as of November 30, 2023 | ||||||
| Focused International Growth | UBS Group AG | $1,661,829 | ||||||
| International Growth | UBS Group AG | $25,049,503 | ||||||
| International Value | BARCLAYS PLC | $18,333,974 | ||||||
| Mizuho Financial Group Inc | $10,268,349 | |||||||
| Non-U.S. Intrinsic Value | BARCLAYS PLC | $13,805,289 | ||||||
Each
of the funds named on the front of this statement of additional information is a
series of shares issued by the corporation, and shares of each 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.
Each
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 investment 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.
42
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 funds may issue the following classes of shares: Investor Class, I Class, Y
Class, A Class, C Class, R Class, R5 Class, R6 Class and G Class. Not all funds
offer all classes.
Shares
of International Small-Mid Cap Fund are only available for purchase by certain
funds and collective investment trusts advised by American Century Investments.
Shares of all other funds are available as follows. 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 funds’ prospectuses. The I Class is
made available to institutional shareholders or through financial intermediaries
that provide various shareholder and administrative services. Y Class shares are
available through financial intermediaries that offer fee-based advisory
programs. The A and C Classes also are 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. R5 and R6 classes are 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, C and R Class shares each are subject to a separate Master
Distribution and Individual Shareholder Services Plan (the A Class Plan, C Class
Plan and R Class Plan, respectively, and collectively, the plans) described
below. The plans have been adopted by the funds’ 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 funds’ A, C and R Classes have approved and entered into the A
Class Plan, C 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 funds, 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 funds and the
shareholders of the affected class. Some of the anticipated benefits include
improved name recognition of the funds 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 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 a
majority of the 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 prospectuses, the A, C and R Class shares of the funds are made
available to persons purchasing through broker-dealers, banks, insurance
companies and other financial intermediaries that provide various
administrative, shareholder and distribution services. In addition, the A, C and
R Classes are made available to participants in employer-sponsored retirement
plans. The funds’ distributor enters into contracts with various banks,
broker-dealers, insurance companies and other financial intermediaries, with
respect to the sale of the funds’ shares and/or the use of the funds’ shares in
various investment products or in connection with various financial
services.
Certain
recordkeeping and administrative services that would otherwise be performed by
the funds’ transfer agent may be performed by a plan sponsor (or its agents) or
by a financial intermediary for A, C and R Class investors. In addition to such
services, the financial intermediaries provide various individual shareholder
and distribution services.
To
enable the funds’ shares to be made available through such plans and financial
intermediaries, and to compensate them for such services, the funds’ Board of
Directors has adopted the A, C and R Class Plans. Pursuant to the plans, the
following fees are paid and described further below.
43
A
Class
The
A Class pays the funds’ distributor 0.25% annually of the average daily net
asset value of the A Class 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.
C
Class
The
C Class pays the funds’ distributor 1.00% annually of the average daily net
asset value of the funds’ C Class shares, 0.25% of which is paid for certain
ongoing individual shareholder and administrative services and 0.75% of which is
paid for distribution services, including past distribution services. This
payment is fixed at 1.00% and is not based on expenses incurred by the
distributor.
R
Class
The
R Class pays the funds’ 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 November 30, 2023,
the aggregate amount of fees paid under each class plan was:
| A Class | C Class | R Class | |||||||||
| Emerging Markets | $109,136 | $110,795 | $29,620 | ||||||||
| Emerging Markets Small Cap | $693 | $127 | $2,821 | ||||||||
| Focused Global Growth | $64,866 | $24,703 | $29,920 | ||||||||
| Focused International Growth | $388 | $398 | $5,815 | ||||||||
| Global Small Cap | $8,589 | $5,140 | $8,507 | ||||||||
| International Growth | $167,120 | $5,849 | $35,651 | ||||||||
| International Opportunities | $12,383 | $2,360 | $7,741 | ||||||||
| International Value | $14,685 | $3,211 | $3,062 | ||||||||
| Non-U.S. Intrinsic Value | $86 | — | $599 | ||||||||
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, C 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
funds.
Distribution
services include any activity undertaken or expense incurred that is primarily
intended to result in the sale of A, C 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, C and 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 funds’ A, C and 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 funds’ shareholders and prospective shareholders;
44
(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 funds pursuant to the terms of the agreement between the corporation
and the funds’ distributor and in accordance with Rule 12b-1 of the Investment
Company Act.
The
net asset value (NAV) for each class of each 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 net asset value
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 $5.00/(1-5.75%) = $5.31.
Each
fund’s NAV is calculated as of the close of regular trading of 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 funds expect the
same holiday schedule 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 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 calculations and the
value of the funds’ portfolios may be affected on days when shares of the fund
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
45
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
procedure.
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 nor 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.
Each
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 investments 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.
If
more than 50% of the value of a fund’s total assets at the end of its fiscal
year consists of securities of foreign corporations, the fund may make an
election with the Internal Revenue Service with respect to such fiscal year so
that fund shareholders may be able to claim a foreign tax credit. If such an
election is made, the eligible foreign taxes will be treated as income received
by you. In order for you to utilize the foreign tax credit, you must have held
your shares for 16 days or more during the 31-day period, beginning 15 days
prior to the ex-dividend date for the mutual fund shares. The mutual fund must
meet a similar holding period requirement with respect to securities to which a
dividend is attributable. Any foreign taxes withheld on payments made “in lieu
of” dividends or interest with respect to loaned securities will not qualify for
the pass-through foreign tax credit to shareholders. Any portion of the foreign
tax credit that is ineligible will be deducted in computing net investment
income.
If
a fund purchases the securities of certain foreign investment entities called
passive foreign investment companies (PFIC), capital gains on the sale of such
holdings will be deemed ordinary income regardless of how long the fund holds
the investment. The fund also may be subject to corporate income tax and an
interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to the
fund. To avoid such tax and interest, the fund may elect to treat PFICs as sold
on the last day of its fiscal year, mark-to-market these securities, and
recognize any unrealized gains (or losses, to the extent of previously
recognized gains) as ordinary income each year.
46
As
of November 30, 2023,
the funds in the table below had the following 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 funds to carry forward capital losses incurred in future
taxable years for an unlimited period.
| Fund | Unlimited | ||||
| Emerging Markets | $(859,799,659) | ||||
| Emerging Markets Small Cap | $(908,919) | ||||
| Focused Global Growth | — | ||||
| Focused International Growth | $(14,791,848) | ||||
| Global Small Cap | $(18,324,960) | ||||
| International Growth | $(241,233,160) | ||||
| International Opportunities | $(123,542,198) | ||||
| International Small-Mid Cap | $(116,592,662) | ||||
| International Value | $(195,789,524) | ||||
| Non-U.S. Intrinsic Value | — | ||||
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 same
rate as long-term capital gains. Qualified dividend income is a dividend
received by a fund from the stock of a domestic or qualifying foreign
corporation, provided that the fund has held the stock for a required holding
period and the stock was not on loan at the time of the dividend. The required
holding period for qualified dividend income is met if the underlying shares are
held more than 60 days in the 121-day period beginning 60 days prior to the
ex-dividend date. Dividends received by the funds 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 a fund longer than 12 months are taxable as
long-term gains regardless of the length of time you have held your shares in
the fund. If you purchase shares in 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.
Each
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 will generally 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, resulting in a postponement of 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.
47
Distributions
by the funds also may be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received such interest directly, would be
exempt from state income tax. However, most but not all states allow this tax
exemption to pass through to fund shareholders when a fund pays distributions to
its shareholders. You should consult your tax advisor about the tax status of
such distributions in your state.
The
information above is only a summary of some of the tax considerations affecting
the funds 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
funds are suitable investments.
The
funds’ financial statements and financial highlights for the fiscal year ended
November 30, 2023
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 annual
report
of each of these funds for the fiscal year ended November 30, 2023
are incorporated herein by reference.
48
As
of February 29, 2024, the following shareholders owned more than 5% of the
outstanding shares of a class of a fund. The table shows shares owned of record
unless otherwise noted.
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| Emerging Markets | ||||||||
| Investor Class | ||||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Moderate Omnibus
Kansas
City, MO
Shares
owned of record and beneficially
|
22% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Aggressive Omnibus
Kansas
City, MO
Shares
owned of record and beneficially
|
15% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Very Aggressive Omnibus
Kansas
City, MO
Shares
owned of record and beneficially
|
9% | |||||||
| LPL
Financial San Diego, CA |
6% | |||||||
| John
Hancock Trust Co LLC Boston, MA |
5% | |||||||
| I Class | ||||||||
| MSSB
LLC New York, NY |
24% | |||||||
| American
Enterprise Investment Svc Minneapolis, MN |
21% | |||||||
| Pershing
LLC Jersey City, NJ |
18% | |||||||
| MLPF&S Jacksonville, FL |
9% | |||||||
| National
Financial Services LLC Jersey City, NJ |
7% | |||||||
| Spec
Cdy A/C Excl Ben Cust UBSFSI Weehawken, NJ |
6% | |||||||
| Charles
Schwab & Co Inc San Francisco, CA |
5% | |||||||
| Y Class | ||||||||
| Pershing
LLC Jersey City, NJ |
93% | |||||||
| A Class | ||||||||
| MLPF&S Jacksonville, FL |
27% | |||||||
| MSSB
LLC New York, NY |
15% | |||||||
| American
Enterprise Investment Svc Minneapolis, MN |
11% | |||||||
| Pershing
LLC Jersey City, NJ |
9% | |||||||
| UMB
Bank NA Topeka, KS |
8% | |||||||
A-1
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| Emerging Markets | ||||||||
| C Class | ||||||||
| American
Enterprise Investment Svc Minneapolis, MN |
28% | |||||||
| MSSB
LLC New York, NY |
17% | |||||||
| Wells
Fargo Clearing Services LLC Saint Louis, MO |
11% | |||||||
| Spec
Cdy A/C Excl Ben Cust UBSFSI Weehawken, NJ |
9% | |||||||
| LPL
Financial San Diego, CA |
7% | |||||||
| MLPF&S Jacksonville, FL |
7% | |||||||
| National
Financial Services LLC Jersey City, NJ |
6% | |||||||
| R Class | ||||||||
| Sammons
Retirement Solutions WDM, IA |
20% | |||||||
| State
Street Bk/TR as TTEE and/or Cust FBO ADP Access Product Boston, MA |
19% | |||||||
| Massachusetts
Mutual Life Insurance Springfield, MA |
9% | |||||||
| DCGT
Trustee & or Custodian FBO Various Retirement Plans Des Moines, IA |
5% | |||||||
| R5 Class | ||||||||
| Empower
Trust FBO Recordkeeping for Large Benefit Pl Greenwood Vlg, CO |
87% | |||||||
| State
Street Bk/TR as TTEE and/or Cust FBO ADP Access Product Boston, MA |
6% | |||||||
| R6 Class | ||||||||
|
State
St Bk/Tr as TTEE and/or Cust
Boston,
MA
Includes
22.42% registered for the benefit of ADP Access Product |
23% | |||||||
|
Great-West
Trust Company LLC TTEE
Greenwood
Vlg, CO
Includes
7.65% registered for the benefit of F Employee Benefits Clients
401K |
11% | |||||||
| National
Financial Services LLC Jersey City, NJ |
7% | |||||||
| DCGT
Trustee & Or Custodian FBO PLIC Various Retirement Plans Des Moines, IA |
5% | |||||||
| G Class | ||||||||
|
AC
Retirement Date Trust
Woburn,
MA
Includes
11.87% registered for the benefit of TD 2045 Trust; 11.22% registered for
the benefit of TD 2050 Trust; 8.51% registered for the benefit of TD 2055
Trust; and 7.68% registered for the benefit of TD 2040
Trust |
52% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice 2045 Portfolio NT Emerging Markets Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
10% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2050 Portfolio NT Emerging Mkts Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
8% | |||||||
A-2
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| Emerging Markets | ||||||||
| G Class | ||||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2055 Portfolio NT Emerging Markets Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2040 Portfolio NT Emerging Mkts Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
| Emerging Markets Small Cap | ||||||||
| Investor Class | ||||||||
| Charles
Schwab & Co Inc San Francisco, CA |
15% | |||||||
|
SSB&T
Cust for the IRA Rollover of Francis Rex Middleton
Shady
Shores, TX
Shares
owned of record and beneficially |
5% | |||||||
| I Class | ||||||||
| Pershing
LLC Jersey City, NJ |
61% | |||||||
| National
Financial Services LLC Jersey City, NJ |
21% | |||||||
| RBC
Capital Markets LLC Minneapolis, MN |
15% | |||||||
| A Class | ||||||||
| Pershing
LLC Jersey City, NJ |
68% | |||||||
|
SSB&T
Cust Gentry Real Estate Group Inc Jeffrey R Gentry
Los
Angeles, CA
Shares
owned of record and beneficially |
13% | |||||||
|
SSB&T
Cust Midsouth Medicine Ciao Newman
Lake
Cormorant, MS
Shares
owned of record and beneficially |
7% | |||||||
| C Class | ||||||||
|
American
Century Investment Management Inc
Kansas
City, MO
Shares
owned of record and beneficially. |
65% | |||||||
|
SSB&T
Cust Winco Fireworks Intl LLC Simple IRA Stephen M. Putthoff
McDonough,
GA
Shares
owned of record and beneficially |
35% | |||||||
| R Class | ||||||||
|
SSB&T
CUST Mario’s Restaurant Clifton LLC Jose Alberto Molina
Afonso
Paramus,
NJ
Shares
owned of record and beneficially. |
5% | |||||||
|
SSB&T
CUST Giv Dentistry PC Daniel Giv
Katy,
TX
Shares
owned of record and beneficially |
5% | |||||||
| R6 Class | ||||||||
|
Mid
Atlantic Trust Co FBO Feintool Axios
Pittsburgh,
PA
Includes
13.62% registered for the benefit of Moderate Allocation and 12.12%
registered for the benefit of Moderately Aggressiv |
42% | |||||||
| National
Financial Services LLC Jersey City, NJ |
37% | |||||||
| Lincoln
Retirement Services Company FBO Phelps Memorial Health Fort Wayne, IN |
16% | |||||||
A-3
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| Focused Global Growth | ||||||||
| Investor Class | ||||||||
| Charles
Schwab & Co Inc San Francisco, CA |
9% | |||||||
| National
Financial Services LLC Jersey City, NJ |
7% | |||||||
| I Class | ||||||||
|
KS
Postsecondary Education SP SSB&T Custodian
Kansas
City, MO
Includes
8.52% registered for the benefit of KPESP LQ 100% Equity Global Growth
Omnibus Account; 8.36% registered for the benefit of KPESP LQ Moderate
Global Growth Omnibus Account; 8.12% registered for the benefit of KPESP
LQ Conservative Global Growth Omnibus Account; 7.74% registered for the
benefit of KPESP LQ Aggressive Global Growth Omnibus Account; and 6.86%
registered for the benefit of KPESP LQ Very Aggressive Global Growth
Omnibus Account |
56% | |||||||
| National
Financial Services LLC Jersey City, NJ |
19% | |||||||
| Spec
Cdy A/C Excl Ben Cust UBSFSI Weehawken, NJ |
9% | |||||||
| Y Class | ||||||||
| Charles
Schwab & Co Inc San Francisco, CA |
53% | |||||||
| JP
Morgan Securities LLC Brooklyn, NY |
35% | |||||||
| Pershing
LLC Jersey City, NJ |
7% | |||||||
| Lincoln
Investment Planning LLC FBO Lincoln Customers Ft Washington, PA |
6% | |||||||
| A Class | ||||||||
| State
St Bk/Tr as TTEE and/or Cust FBO ADP Access Boston, MA |
26% | |||||||
| Pershing
LLC Jersey City, NJ |
14% | |||||||
| American
Enterprise Investment Svc Minneapolis, MN |
10% | |||||||
| DCGT
Trustee & or Custodian FBO PLIC Various Retirement Plans Des Moins, IA |
8% | |||||||
| BNY
Mellon Investment Servicing Inc FBO Primerica Financial Services King of Prussia, PA |
6% | |||||||
| C Class | ||||||||
| Pershing
LLC Jersey City, NJ |
23% | |||||||
| Raymond
James St. Petersburg, FL |
22% | |||||||
| National
Financial Services LLC Jersey City, NJ |
15% | |||||||
| American
Enterprise Investment Svc Minneapolis, MN |
12% | |||||||
| Wells
Fargo Clearing Services LLC Saint Louis, MO |
9% | |||||||
A-4
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| Focused Global Growth | ||||||||
| R Class | ||||||||
| State
St Bk/TR as TTEE and/or Cust FBO ADP Access Product Boston, MA |
61% | |||||||
| Equitable
Life Insurance For Sep Acct on Behalf of Various 401K Expediter
Plans Jersey City, NJ |
6% | |||||||
| R5 Class | ||||||||
|
American
Century Investment Management Inc
Kansas
City, MO
Shares
owned of record and beneficially |
100% | |||||||
| R6 Class | ||||||||
|
Great-West
Trust Company LLC TTEE F
Greenwood
Vlg, CO
Includes
24.71% registered for the benefit of Global Medical Response Inc 401K and
5.69% registered for the benefit of Various Fascore LLC Recordkept
Plan |
36% | |||||||
| Charles
Schwab & Co Inc San Francisco, CA |
31% | |||||||
| MLPF&S
Inc Jacksonville, FL |
9% | |||||||
| National
Financial Services LLC Jersey City, NJ |
7% | |||||||
| Focused International Growth | ||||||||
| Investor Class | ||||||||
| Charles
Schwab & Co Inc San Francisco, CA |
21% | |||||||
| LPL
Financial San Diego, CA |
10% | |||||||
| I Class | ||||||||
| National
Financial Services LLC Jersey City, NJ |
82% | |||||||
| Charles
Schwab & Co Inc San Francisco, CA |
17% | |||||||
| A Class | ||||||||
|
SSB&T
Cust Advance Illinois NFP Robin Steans
Chicago,
IL
Shares
owned of record and beneficially |
18% | |||||||
| Pershing
LLC Jersey City, NJ |
14% | |||||||
| C Class | ||||||||
| Pershing
LLC Jersey City, NJ |
39% | |||||||
|
SSB&T
Cust CA Electric Inc Simple IRA Claudio Arruda
Medford,
MA
Shares
owned of record and beneficially |
33% | |||||||
|
SSB&T
Cust For the IRA Roth of Jerry R. Garman
Whitehall,
MI
Shares
owned of record and beneficially |
16% | |||||||
|
American
Century Investment Management Inc
Kansas
City, MO
Shares
owned of record and beneficially |
11% | |||||||
| R Class | ||||||||
| State
Street Bank Trustee and/or Custodian FBO ADP Access Product Boston, MA |
6% | |||||||
A-5
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| Focused International Growth | ||||||||
| R6 Class | ||||||||
| TIAA
Trust NA as Cust/TTEE of Retirement Plans Recordkept by TIAA Charlotte, NC |
41% | |||||||
|
Great-West
Trust Company LLC TTEE
Greenwood
Vlg, CO
Includes
16.27% registered for the benefit of Employee Benefits Clients 401K and
11.50% registered for the benefit of Empower Trust FBO Retirement
Plans |
28% | |||||||
| BTC
As TTEE for Yourpath Hybrid Moderate Overland Park, KS |
13% | |||||||
| DCGT
Trustee & Or Custodian FBO PLIC Various Retirement Plans Des Moines, IA |
5% | |||||||
| G Class | ||||||||
|
BTC
TR American Century
Overland
Park, KS
Includes
13.83% registered for the benefit of Retirement Date Hybrid 2050 Trust;
13.51% registered for the benefit of Retirement Date Hybrid 2045 Trust;
12.44% registered for the benefit of Retirement Date Hybrid 2055 Trust;
10.20% registered for the benefit of Retirement Date Hybrid 2040 Trust;
8.36% registered for the benefit of Retirement Date Hybrid 2035 Trust; and
6.47% registered for the benefit of Retirement Date Hybrid 2060
Trust |
71% | |||||||
| American
Century Services LLC SSB&T Custodian One Choice Blended 2045 Portfolio Focused Intl Growth Omnibus Kansas City, MO |
5% | |||||||
| Global Small Cap | ||||||||
| Investor Class | ||||||||
| Charles
Schwab & Co Inc San Francisco, CA |
62% | |||||||
| I Class | ||||||||
| Charles
Schwab & Co Inc San Francisco, CA |
49% | |||||||
| Pershing
LLC Jersey City, NJ |
30% | |||||||
| National
Financial Services LLC Jersey City, NJ |
19% | |||||||
| A Class | ||||||||
| UMB
Bank NA FBO Fiduciary for Various Retirement Programs Topeka, KS |
75% | |||||||
|
FIIOC
Covington,
KY
Includes
8.34% registered for the benefit of McDowell, Rice & Buchanan, PC 401K
Savings Plan |
12% | |||||||
| C Class | ||||||||
| Pershing
LLC Jersey City, NJ |
91% | |||||||
| SSB&T
Cust Bowtie Engineering LLC Simple IRA Athens, GA |
8% | |||||||
| R Class | ||||||||
| None | ||||||||
| R6 Class | ||||||||
| Northern
Trust Company Custodian FBO General Atomics Master RTRMNT Chicago, IL |
56% | |||||||
|
Great-West
Trust Company LLC TTEE
Greenwood
Vlg, CO
Includes
9.43% registered for the benefit of Employee Benefits Client
401K |
18% | |||||||
A-6
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| Global Small Cap | ||||||||
| R6 Class | ||||||||
| DCGT
Trustee & or Custodian FBO PLIC Various Retirement Plans Des Moines, IA |
12% | |||||||
| UMB
Bank Custodian Security Financial Resources Topeka, KS |
6% | |||||||
| International Growth | ||||||||
| Investor Class | ||||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Moderate Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
12% | |||||||
| Charles
Schwab & Co Inc San Francisco, CA |
7% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Aggressive Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
7% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Conservative Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
| National
Financial Services LLC Jersey City, NJ |
5% | |||||||
| I Class | ||||||||
|
KS
Postsecondary Education SP SSB&T Custodian
Kansas
City, MO
Includes
20.53% registered for the benefit of Schwab 95% Equity Intrnational Grwth
Advisor Omnibus; 13.94% registered for the benefit of Schwab 80% Equity
Intrnational Grwth Advisor Omnibus; 9.49% registered for the benefit of
Schwab 60% Equity Intrnational Grwth Advisor Omnibus; 5.59% registered for
the benefit of Schwab 50% Equity Intrnational Grwth Advisor Omnibus; and
5.57% registered for the benefit of Schwab 40% Equity Intrnational Grwth
Advisor Omnibus |
64% | |||||||
| Reliance
Trust Co FBO Comerica Non-EB R/R Atlanta, GA |
17% | |||||||
| National
Financial Services LLC Jersey City, NJ |
12% | |||||||
| Y Class | ||||||||
| Pershing
LLC Jersey City, NJ |
99.42% | |||||||
| A Class | ||||||||
| UMB
Bank NA Fiduciary for Various Tax Deferred Accts Topeka, KS |
67% | |||||||
| Security
Benefit Life Insurance Co SBL Variable Annuity Acct Topeka, KS |
7% | |||||||
| C Class | ||||||||
| American
Enterprise Investment Svc Minneapolis, MN |
31% | |||||||
| National
Financial Services LLC Jersey City, NJ |
13% | |||||||
| Pershing
LLC Jersey City, NJ |
10% | |||||||
| Wells
Fargo Clearing Services LLC Saint Louis, MO |
10% | |||||||
| Raymond
James St. Petersburg, FL |
9% | |||||||
A-7
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| International Growth | ||||||||
| C Class | ||||||||
| LPL
Financial San Diego, CA |
7% | |||||||
|
SSB&T
Cust for the IRA of Richard Fraser
Holbrook,
NY
Shares
owned of record and beneficially |
5% | |||||||
| R Class | ||||||||
| Massachusetts
Mutual Life Insurance Company Springfield, MA |
55% | |||||||
| Voya
Institutional Trust Company Windsor, CT |
13% | |||||||
| Hartford Hartford, CT |
12% | |||||||
| R5 Class | ||||||||
|
American
Century Investment Management Inc
Kansas
City, MO
Shares
owned of record and beneficially |
100% | |||||||
| R6 Class | ||||||||
|
Great-West
Trust Company LLC TTEE
Greenwood
Vlg, CO
Includes
30.71% registered for the benefit of Messer Retirement Savings Plan and
6.55% registered for the benefit of Empower Trust FBO Employee Benefits
Clients 401K |
38% | |||||||
| Charles
Schwab & Co Inc San Francisco, CA |
17% | |||||||
| Voya
Institutional Trust Company Windsor, CT |
11% | |||||||
| Matrix
Trust Company TR FBO The Sheakley Group Inc Denver, CO |
10% | |||||||
| National
Financial Services LLC Jersey City, NJ |
6% | |||||||
| G Class | ||||||||
|
AC
Retirement Date Trust
Woburn,
MA
Includes
7.11% registered for the benefit of TD 2045 Trust; 6.81% registered for
the benefit of TD 2035 Trust; 6.69% registered for the benefit of TD 2050
Trust; 6.49% registered for the benefit of TD 2040 Trust; and 6.18%
registered for the benefit of TD 2030 Trust; and 5.09% registered for the
benefit of TD 2055 Trust |
48% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice 2035 Portfolio NT International Growth Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
7% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2030 Portfolio NT International Growth Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice 2045 Portfolio NT Intl Growth Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice In Retirement Portfolio NT International Growth
Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
A-8
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| International Growth | ||||||||
| G Class | ||||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2040 Portfolio NT Intl Growth Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
5% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2025 Portfolio NT International Growth Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
5% | |||||||
| International Opportunities | ||||||||
| Investor Class | ||||||||
| Charles
Schwab & Co Inc San Francisco, CA |
10% | |||||||
| I Class | ||||||||
| Pershing
LLC Jersey City, NJ |
58% | |||||||
| Charles
Schwab & Co Inc San Francisco, CA |
22% | |||||||
| SEI
Private Trust Co Oaks, PA |
13% | |||||||
| A Class | ||||||||
| BNY
Mellon Investment Servicing Inc FBO Primerica Financial Services King of Prussia, PA |
20% | |||||||
| LPL
Financial San Diego, CA |
11% | |||||||
| Pershing
LLC Jersey City, NJ |
10% | |||||||
| Capital
Bank & Trust Co TTEE FBO Nickle Electrical Companies 401K Greenwood Vlg, CO |
9% | |||||||
| C Class | ||||||||
| LPL
Financial San Diego, CA |
33% | |||||||
| Pershing
LLC Jersey City, NJ |
22% | |||||||
| American
Enterprise Inv Svcs Minneapolis, MN |
13% | |||||||
| Edward
D Jones & Co Saint Louis, MO |
10% | |||||||
| MSSB
LLC New York, NY |
7% | |||||||
| R Class | ||||||||
|
Deborah
Levit & Henri C Levit TTEE Simon Miller Sales Co 401K PSP
Greenwood
Vlg, CO
Shares
owned of record and beneficially |
17% | |||||||
| State
St Bk/TR as TTEE and/or Cust FBO ADP Access Product Boston, MA |
12% | |||||||
|
David
Weinman & Stacy Weinman TTEE David M Weinman DMD PC 401K
Plan
Greenwood
Vlg, CO
Shares
owned of record and beneficially |
12% | |||||||
|
Myles
Mullaly & Marie L Mullaly TTE HMC LLC 401K
Greenwood
Vlg, CO
Shares
owned of record and beneficially |
7% | |||||||
A-9
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| International Small-Mid Cap | ||||||||
| Investor Class | ||||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Moderate Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
41% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Aggressive Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
26% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Very Aggressive Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
19% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Conservative Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
13% | |||||||
| G Class | ||||||||
|
AC
Retirement Date Trust
Woburn,
MA
Includes
9.22% registered for the benefit of TD 2045 Trust; 8.64% registered for
the benefit of TD 2050 Trust; 7.26% registered for the benefit of TD 2040
Trust; 6.48% registered for the benefit of TD 2055 Trust; and 6.17%
registered for the benefit of TD 2035 Trust |
49% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice 2045 Portfolio NT Intl Small-Mid Cap Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
8% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2050 Portfolio NT Intl Small-Mid Cap Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice 2035 Portfolio NT Intl Small-Mid Cap Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2040 Portfolio NT Intl Small-Mid Cap Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
| International Value | ||||||||
| Investor Class | ||||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Moderate Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
39% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Conservative Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
29% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Aggressive Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
18% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Very Aggressive Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
7% | |||||||
A-10
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| International Value | ||||||||
| I Class | ||||||||
| Pershing
LLC Jersey City, NJ |
98% | |||||||
| A Class | ||||||||
| Pershing
LLC Jersey City, NJ |
40% | |||||||
| C Class | ||||||||
| Wells
Fargo Clearing Services LLC Saint Louis, MO |
45% | |||||||
| LPL
Financial San Diego, CA |
10% | |||||||
|
SSB&T
Cust for the IRA Roth of Susan M Arens
Omaha,
NE
Shares
owned of record and beneficially |
8% | |||||||
|
SSB&T
Cust Winco Fireworks Intl LL Simple IRA Dona L Collar
Overland
Park, KS
Shares
owned of record and beneficially |
8% | |||||||
|
SSB&T
Cust for the IRA Roth of Elizabeth M Thomas-Garman
Whitehall,
MI
Shares
owned of record and beneficially |
7% | |||||||
| Pershing
LLC Jersey City, NJ |
7% | |||||||
| R Class | ||||||||
|
SSB&T
CUST Mario’s Restaurant Clifton LLC Jose Alberto Molina
Afonso
Paramus,
NJ
Shares
owned of record and beneficially |
8% | |||||||
| Ascensus
Trust Company FBO Airflow Equipment Inc 401(K) Plan Fargo, ND |
8% | |||||||
|
SSB&T
CUST Machattan Inc Vincent J Falcone Jr
Kunkletown,
PA
Shares
owned of record and beneficially |
6% | |||||||
| R6 Class | ||||||||
| State
Street Bank & Trust Co TTEE FBO Hallmark Voluntary EE Bene Tr Quincy, MA |
50% | |||||||
| Charles
Schwab & Co Inc San Francisco, CA |
44% | |||||||
| G Class | ||||||||
|
AC
Retirement Date Trust
Woburn,
MA
Includes
7.62% registered for the benefit of TD 2030 Trust; 7.22% registered for
the benefit of TD 2035 Trust; 6.00% registered for the benefit of TD 2025
Trust; 5.85% registered for the benefit of TD 2040 Trust; and 5.57%
registered for the benefit of TD 2045 Trust |
46% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice In Retirement Portfolio NT International Value Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
8% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice 2035 Portfolio NT International Value Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
7% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2025 Portfolio NT International Value Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
7% | |||||||
A-11
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| International Value | ||||||||
| G Class | ||||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2030 Portfolio NT International Value Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
7% | |||||||
| Non-U.S. Intrinsic Value | ||||||||
| Investor Class | ||||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Moderate Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
41% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Aggressive Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
34% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice Portfolio Very Aggressive Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
19% | |||||||
| I Class | ||||||||
| National
Financial Services LLC Jersey City, NJ |
99% | |||||||
| A Class | ||||||||
| Pershing
LLC Jersey City, NJ |
48% | |||||||
|
SSB&T
CUST Witzke Insurance Services Inc William Witzke
Auburn,
CA
Shares
owned of record and beneficially |
26% | |||||||
|
SSB&T
CUST Brine Group Staffing Solutions Jeffrey J. Brine
Billerica,
MA
Shares
owned of record and beneficially |
8% | |||||||
| R Class | ||||||||
|
SSB&T
CUST Polymer Cleaning Technology, Inc. Lisa Peason
Hillsborough,
NJ
Shares
owned of record and beneficially |
19% | |||||||
|
SSB&T
CUST Data Universe Consultancy LLC Alokesh Dey
Princeton,
NJ
Shares
owned of record and beneficially |
11% | |||||||
|
SSB&T
CUST Rischling Performance Consulting Richard Rischling
Coral
Springs, FL
Shares
owned of record and beneficially |
7% | |||||||
|
SSB&T
CUST Fortified Security Inc. Steven D Queen
Upper
Marlboro, MD
Shares
owned of record and beneficially |
7% | |||||||
|
SSB&T
CUST ID Wealth LLC Danny Holladay
Centennial,
CO
Shares
owned of record and beneficially |
6% | |||||||
|
SSB&T
CUST TidyupNYC LLC Kevin Meleshkewich
Long
Island City, NY
Shares
owned of record and beneficially |
6% | |||||||
| R6 Class | ||||||||
|
American
Century Investment Management Inc
Kansas
City, MO
Shares
owned of record and beneficially |
100% | |||||||
A-12
| Fund/ Class |
Shareholder |
Percentage
of Outstanding
Shares
Owned of Record
| ||||||
| Non-U.S. Intrinsic Value | ||||||||
| G Class | ||||||||
|
AC
Retirement Date Trust
Woburn,
MA
Includes
10.39% registered for the benefit of TD 2050 Trust; 10.03% registered for
the benefit of TD 2045 Trust; 8.63% registered for the benefit of TD 2055
Trust; 7.65% registered for the benefit of TD 2040 Trust; and 5.32%
registered for the benefit of TD 2035 Trust |
51% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice 2045 Portfolio NT Non-US Intrinsic Value Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
8% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2050 Portfolio NT Non-US Intrinsic Value Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
8% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2055 Portfolio NT Non-US Intrinsic Value Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
|
American
Century Services LLC SSB&T Custodian
One
Choice 2040 Portfolio NT Non-US Intrinsic Value Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
6% | |||||||
|
American
Century Serv Corp SSB&T Custodian
One
Choice 2035 Portfolio NT Non-US Intrinsic Value Omnibus
Kansas
City, MO
Shares
owned of record and beneficially |
5% | |||||||
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 February
29, 2024,
the officers and directors of the funds, as a group, owned less than 1% of any
class of a fund’s outstanding shares.
A-13
Sales
Charges
The
sales charges applicable to the A and C Classes of the funds are described in
the prospectuses for those classes 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, if applicable, waivers of the sales charges may be found in the
funds’ prospectuses. Shares of the A and C Classes 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 A Class and C Class shares in the
fiscal year ended November 30, 2023,
were:
| Fund | A Class | C Class | ||||||
| Emerging Markets | $16,502 | $205 | ||||||
| Focused Global Growth | — | $37 | ||||||
| Global Small Cap | — | $357 | ||||||
| International Growth | — | $20 | ||||||
Payments
to Dealers
The
funds’ distributor expects to pay dealer commissions to the financial
intermediaries who sell A and/or C 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. Payments will equal 1.00% of the purchase price of
the C Class shares sold by the financial intermediary. The distributor will
retain the 12b-1 fee paid by the C Class of funds for the first 12 months after
the shares are purchased. This fee is intended in part to permit the distributor
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. Beginning with the first day of the 13th month, the distributor
will make the C Class distribution and individual shareholder services fee
payments described above to the financial intermediaries involved on a quarterly
basis. In addition, C Class purchases and A Class purchases greater than
$1,000,000 are subject to a CDSC as described in the prospectuses.
From
time to time, the distributor may make additional payments to dealers, including
but not limited to payment assistance for conferences and seminars, provision of
sales or training programs for dealer employees and/or the public (including, in
some cases, payment for travel expenses for registered representatives and other
dealer employees who participate), advertising and sales campaigns about a fund
or funds, and assistance in financing dealer-sponsored events. Other payments
may be offered as well, and all such payments will be consistent with applicable
law, including the then-current rules of the Financial Industry Regulatory
Authority. Such payments will not change the price paid by investors for shares
of the funds.
B-1
Information
about buying, selling, exchanging and, if applicable, converting fund shares is
contained in the funds’ prospectuses. 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, C, R, R5 and R6 Class shares. Employer-sponsored retirement plans
are not eligible to purchase I or Y 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 C Class purchases are available at net asset
value with no dealer commission paid to the financial professional and do not
incur a CDSC. A, C 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 Investments does not impose minimum initial investment amount,
plan size or participant number requirements by class for employer-sponsored
retirement plans; however, financial intermediaries or plan recordkeepers may
require plans to meet different requirements.
Examples
of employer-sponsored retirement plans include the following:
•401(a)
plans
•pension
plans
•profit
sharing plans
•401(k)
plans (including plans with a Roth
401(k)
feature, SIMPLE 401(k) plans and
Solo
401(k) plans)
•money
purchase plans
•target
benefit plans
•Taft-Hartley
multi-employer pension plans
•SERP
and “Top Hat” plans
•ERISA
trusts
•employee
benefit plans and trusts
•employer-sponsored
health plans
•457
plans
•KEOGH
or HR(10) plans
•employer-sponsored
403(b) plans
(including
plans with a Roth 403(b) feature)
•nonqualified
deferred compensation plans
•nonqualified
excess benefit plans
•nonqualified
retirement plans
Traditional
and Roth IRAs are not considered employer-sponsored retirement plans, and SIMPLE
IRAs, SEP IRAs and SARSEPs are collectively referred to as Business IRAs. SEP
IRA, SIMPLE IRA or SARSEP retirement plans that (i) held shares of an A Class
fund prior to March 1, 2009 that received sales charge waivers or (ii) held
shares of an Advisor Class fund that was renamed A Class on March 1, 2010, may
permit additional purchases by new and existing participants in A Class shares
without an initial sales charge.
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.
C-1
As
described in the prospectuses, the funds invest in fixed-income securities.
Those investments, however, are subject to certain credit quality restrictions,
as noted in the prospectuses and in this statement of additional information.
The following are examples of the rating categories referenced in the prospectus
disclosure.
| Ratings of Corporate and Municipal Debt Securities | |||||
| Standard & Poor’s Long-Term Issue Credit Ratings* | |||||
| Category | Definition | ||||
| AAA | An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. | ||||
| AA | An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong. | ||||
| A | An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. | ||||
| BBB | An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. | ||||
| BB;B; CCC; CC; and C | Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. | ||||
| BB | An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. | ||||
| B | An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation. | ||||
| CCC | An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. | ||||
| CC | An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred, but Standard & Poor’s expects default to be a virtual certainty, regardless of the anticipated time to default. | ||||
| C | An obligation rated ‘C’ is currently highly vulnerable to nonpayment,and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher. | ||||
| D | An obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless Standard & Poor’s believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation’s rating is lowered to ‘D’ if it is subject to a distressed exchange offer. | ||||
| NR | This indicates that no rating has been requested, or that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy. | ||||
*The
ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating
categories.
| Moody’s Investors Service, Inc. Global Long-Term Rating Scale | |||||
| Category | Definition | ||||
| Aaa | Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk. | ||||
| Aa | Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. | ||||
| A | Obligations rated A are judged to be upper-medium grade and are subject to low credit risk. | ||||
| Baa | Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics. | ||||
D-1
| Ba | Obligations rated Ba are judged to be speculative and are subject to substantial credit risk. | ||||
| B | Obligations rated B are considered speculative and are subject to high credit risk. | ||||
| Caa | Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk. | ||||
| Ca | Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. | ||||
| C | Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest. | ||||
Note:
Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category. Additionally, a “(hyb)” indicator is appended to
all ratings of hybrid securities issued by banks, insurers, finance companies,
and securities firms.
| Fitch Investors Service, Inc. Long-Term Ratings | |||||
| Category | Definition | ||||
| AAA |
Highest
credit quality.
‘AAA’ ratings denote the lowest expectation of credit risk. They are
assigned only in cases of exceptionally strong capacity for payment of
financial commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events. | ||||
| AA |
Very
high credit quality. ‘AA’
ratings denote expectations of very low credit risk. They indicate very
strong capacity for payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events. | ||||
| A |
High
credit quality.
‘A’ ratings denote expectations of low credit risk. The capacity for
payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to adverse business or economic
conditions than is the case for higher ratings. | ||||
| BBB |
Good
credit quality.
‘BBB’ ratings indicate that expectations of credit risk are currently low.
The capacity for payment of financial commitments is considered adequate
but adverse business or economic conditions are more likely to impair this
capacity. | ||||
| BB |
Speculative.
‘BB’
ratings indicate an elevated vulnerability to credit risk, particularly in
the event of adverse changes in business or economic conditions over time;
however, business or financial alternatives may be available to allow
financial commitments to be met. | ||||
| B |
Highly
speculative.
‘B’ ratings indicate that material credit risk is
present. | ||||
| CCC |
Substantial
credit risk.
‘CCC’ ratings indicate that substantial credit risk is
present. | ||||
| CC |
Very
high levels of credit risk.
‘CC’ ratings indicate very high levels of credit risk. | ||||
| C |
Exceptionally
high levels of credit risk.
‘C’ indicates exceptionally high levels of credit
risk. | ||||
Defaulted
obligations typically are not assigned ‘RD’ or ‘D’ ratings, but are instead
rated in the ‘B’ to ‘C’ rating categories, depending upon their recovery
prospects and other relevant characteristics. This approach better aligns
obligations that have comparable overall expected loss but varying vulnerability
to default and loss.
Notes:
The modifiers “+” or “-“ may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to the ‘AAA’
obligation rating category, or to corporate finance obligation ratings in the
categories below ‘CCC’.
| Standard & Poor’s Corporate Short-Term Note Ratings | |||||
| Category | Definition | ||||
| A-1 | A short-term obligation rated ‘A-1’ is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong. | ||||
| A-2 | A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory. | ||||
| A-3 | A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. | ||||
| B | A short-term obligation rated ‘B’ is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitments. | ||||
D-2
| C | A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. | ||||
| D | A short-term obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless Standard & Poor’s believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation’s rating is lowered to ‘D’ if it is subject to a distressed exchange offer. | ||||
| Moody’s Global Short-Term Rating Scale | |||||
| Category | Definition | ||||
| P-1 | Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations. | ||||
| P-2 | Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations. | ||||
| P-3 | Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations. | ||||
| NP | Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories. | ||||
| Fitch Investors Service, Inc. Short-Term Ratings | |||||
| Category | Definition | ||||
| F1 |
Highest
short-term credit quality.
Indicates the strongest intrinsic capacity for timely payment of financial
commitments; may have an added “+” to denote any exceptionally strong
credit feature. | ||||
| F2 |
Good
short-term credit quality. Good
intrinsic capacity for timely payment of financial
commitments. | ||||
| F3 |
Fair
short-term credit quality.
The intrinsic capacity for timely payment of financial commitments is
adequate. | ||||
| B |
Speculative
short-term credit quality.
Minimal capacity for timely payment of financial commitments, plus
heightened vulnerability to near term adverse changes in financial and
economic conditions. | ||||
| C |
High
short-term default risk. Default
is a real possibility. | ||||
| RD |
Restricted
default. Indicates
an entity that has defaulted on one or more of its financial commitments,
although it continues to meet other financial obligations. Typically
applicable to entity ratings only. | ||||
| D |
Default
Indicates a broad-based default event for an entity, or the default of a
short-term obligation. | ||||
| Standard & Poor’s Municipal Short-Term Note Ratings | |||||
| Category | Definition | ||||
| SP-1 | Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation. | ||||
| SP-2 | Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. | ||||
| SP-3 | Speculative capacity to pay principal and interest. | ||||
| Moody’s US Municipal Short-Term Debt Ratings | |||||
| Category | Definition | ||||
| MIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing. | ||||
| MIG 2 | This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group. | ||||
| MIG 3 | This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established. | ||||
| SG | This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection. | ||||
D-3
| Moody’s Demand Obligation Ratings | |||||
| Category | Definition | ||||
| VMIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. | ||||
| VMIG 2 | This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. | ||||
| VMIG 3 | This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. | ||||
| SG | This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand. | ||||
D-4
American
Century Investment Management, Inc. (the “Adviser”) is the investment manager
for a variety of advisory clients, including the American Century family of
funds. In such capacity, the Adviser has been delegated the authority to vote
proxies with respect to investments held in the accounts it manages. The
following is a statement of the proxy voting policies that have been adopted by
the Adviser. In the exercise of proxy voting authority which has been delegated
to it by particular clients, the Adviser will apply the following policies in
accordance with, and subject to, any specific policies that have been adopted by
the client and communicated to and accepted by the Adviser in
writing.
I. General
Principles
In
providing the service of voting client proxies, the Adviser is guided by general
fiduciary principles, must act prudently, solely in the interest of its clients,
and must not subordinate client interests to unrelated objectives. Except as
otherwise indicated in these Policies, the Adviser will vote all proxies with
respect to investments held in the client accounts it manages. The Adviser will
attempt to consider all factors of its vote that could affect the value of the
investment. Although in most instances the Adviser will vote proxies
consistently across all client accounts, the votes will be based on the best
interests of each client. As a result, accounts managed by the Adviser may at
times vote differently on the same proposals. Examples of when an account’s vote
might differ from other accounts managed by the Adviser include, but are not
limited to, proxy contests and proposed mergers. In short, the Adviser will vote
proxies in the manner that it believes will do the most to maximize shareholder
value.
II. Specific
Proxy Matters
A. Routine
Matters
1. Election
of Directors
a) Generally.
The
Adviser will generally support the election of directors that result in a board
made up of a majority of independent directors. In general, the Adviser will
vote in favor of management’s director nominees if they are running unopposed.
The Adviser believes that management is in the best possible position to
evaluate the qualifications of directors and the needs and dynamics of a
particular board. The Adviser of course maintains the ability to vote against
any candidate whom it feels is not qualified or if there are specific concerns
about the individual, such as allegations of criminal wrongdoing or breach of
fiduciary responsibilities. Additional information the Adviser may consider
concerning director nominees include, but is not limited to, whether (i) there
is an adequate explanation for repeated absences at board meetings, (ii) the
nominee receives non-board fee compensation, or (iii) there is a family
relationship between the nominee and the company’s chief executive officer or
controlling shareholder, and/or (iv) the nominee has sufficient time and
commitment to serve effectively in light of the nominee’s service on other
public company boards. When management’s nominees are opposed in a proxy
contest, the Adviser will evaluate which nominees’ publicly-announced management
policies and goals are most likely to maximize shareholder value, as well as the
past performance of the incumbents.
b) Committee
Service. The
Adviser will withhold votes for non-independent directors who serve on the audit
and/or compensation committees of the board.
c) Classification
of Boards. The
Adviser will support proposals that seek to declassify boards. Conversely, the
Adviser will oppose efforts to adopt classified board structures.
d) Majority
Independent Board. The
Adviser will support proposals calling for a majority of independent directors
on a board. The Adviser believes that a majority of independent directors can
help to facilitate objective decision making and enhances accountability to
shareholders.
e) Majority
Vote Standard for Director Elections.
The
Adviser will vote in favor of proposals calling for directors to be elected by
an affirmative majority of the votes cast in a board election, provided that the
proposal allows for a plurality voting standard in the case of contested
elections. The Adviser may consider voting against such shareholder proposals
where a company’s board has adopted an alternative measure, such as a director
resignation policy, that provides a meaningful alternative to the majority
voting standard and appropriately addresses situations where an incumbent
director fails to receive the support of the majority of the votes cast in an
uncontested election.
f) Withholding
Campaigns. The
Adviser will support proposals calling for shareholders to withhold votes for
directors where such actions will advance the principles set forth in paragraphs
(1) through (5) above.
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2. Ratification
of Selection of Auditors
The
Adviser will generally rely on the judgment of the issuer’s audit committee in
selecting the independent auditors who will provide the best service to the
company. The Adviser believes that independence of the auditors is paramount and
will vote against auditors whose independence appears to be impaired. The
Adviser will vote against proposed auditors in those circumstances where (1) an
auditor has a financial interest in or association with the company, and is
therefore not independent; (2) non-audit fees comprise more than 50% of the
total fees paid by the company to the audit firm; or (3) there is reason to
believe that the independent auditor has previously rendered an opinion to the
issuer that is either inaccurate or not indicative of the company’s financial
position.
B. Compensation
Matters
1. Executive
Compensation
a) Advisory
Vote on Compensation. The
Adviser believes there are more effective ways to convey concerns about
compensation than through an advisory vote on compensation (such as voting
against specific excessive incentive plans or withholding votes from
compensation committee members). The Adviser will consider and vote on a
case-by-case basis on say-on-pay proposals and will generally support management
proposals unless there
are inadequate risk-mitigation features or other
specific concerns exist, including if the Adviser concludes that executive
compensation is (i) misaligned with shareholder interests, (ii) unreasonable in
amount, or (iii) not in the aggregate meaningfully tied to the company’s
performance.
b) Frequency
of Advisory Votes on Compensation. The
Adviser generally supports the triennial option for the frequency of say-on-pay
proposals, but will consider management recommendations for an alternative
approach.
2. Equity
Based Compensation Plans
The
Adviser believes that equity-based incentive plans are economically significant
issues upon which shareholders are entitled to vote. The Adviser recognizes that
equity-based compensation plans can be useful in attracting and maintaining
desirable employees. The cost associated with such plans must be measured if
plans are to be used appropriately to maximize shareholder value. The Adviser
will conduct a case-by-case analysis of each stock option, stock bonus or
similar plan or amendment, and generally approve management’s recommendations
with respect to adoption of or amendments to a company’s equity-based
compensation plans, provided that the total number of shares reserved under all
of a company’s plans is reasonable and not excessively dilutive.
The
Adviser will review equity-based compensation plans or amendments thereto on a
case-by-case basis. Factors that will be considered in the determination include
the company’s overall capitalization, the performance of the company relative to
its peers, and the maturity of the company and its industry; for example,
technology companies often use options broadly throughout its employee base
which may justify somewhat greater dilution.
Amendments
which are proposed in order to bring a company’s plan within applicable legal
requirements will be reviewed by the Adviser’s legal counsel; amendments to
executive bonus plans to comply with IRS Section 162(m) disclosure requirements,
for example, are generally approved.
The
Adviser will generally vote against the adoption of plans or plan amendments
that:
•Provide
for immediate vesting of all stock options in the event of a change of control
of the company without reasonable safeguards against abuse (see “Anti-Takeover
Proposals” below);
•Reset
outstanding stock options at a lower strike price unless accompanied by a
corresponding and proportionate reduction in the number of shares designated.
The Adviser will generally oppose adoption of stock option plans that explicitly
or historically permit repricing of stock options, regardless of the number of
shares reserved for issuance, since their effect is impossible to
evaluate;
•Establish
restriction periods shorter than three years for restricted stock
grants;
•Do
not reasonably associate awards to performance of the company; or
•Are
excessively dilutive to the company.
C. Anti-Takeover
Proposals
In
general, the Adviser will vote against any proposal, whether made by management
or shareholders, which the Adviser believes would materially discourage a
potential acquisition or takeover. In most cases an acquisition or takeover of a
particular company will increase share value. The adoption of anti-takeover
measures may prevent or
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frustrate
a bid from being made, may prevent consummation of the acquisition, and may have
a negative effect on share price when no acquisition proposal is pending. The
items below discuss specific anti-takeover proposals.
1. Cumulative
Voting
The
Adviser will vote in favor of any proposal to adopt cumulative voting and will
vote against any proposal to eliminate cumulative voting that is already in
place, except in cases where a company has a staggered board. Cumulative voting
gives minority shareholders a stronger voice in the company and a greater chance
for representation on the board. The Adviser believes that the elimination of
cumulative voting constitutes an anti-takeover measure.
2. Staggered
Board
If
a company has a “staggered board,” its directors are elected for terms of more
than one year and only a segment of the board stands for election in any year.
Therefore, a potential acquiror cannot replace the entire board in one year even
if it controls a majority of the votes. Although staggered boards may provide
some degree of continuity and stability of leadership and direction to the board
of directors, the Adviser believes that staggered boards are primarily an
anti-takeover device and will vote against establishing them and for eliminating
them. However, the Adviser does not necessarily vote against the re-election of
directors serving on staggered boards.
3. “Blank
Check” Preferred Stock
Blank
check preferred stock gives the board of directors the ability to issue
preferred stock, without further shareholder approval, with such rights,
preferences, privileges and restrictions as may be set by the board. In response
to a hostile takeover attempt, the board could issue such stock to a friendly
party or “white knight” or could establish conversion or other rights in the
preferred stock which would dilute the common stock and make an acquisition
impossible or less attractive. The argument in favor of blank check preferred
stock is that it gives the board flexibility in pursuing financing, acquisitions
or other proper corporate purposes without incurring the time or expense of a
shareholder vote. Generally, the Adviser will vote against blank check preferred
stock. However, the Adviser may vote in favor of blank check preferred if the
proxy statement discloses that such stock is limited to use for a specific,
proper corporate objective as a financing instrument.
4. Elimination
of Preemptive Rights
When
a company grants preemptive rights, existing shareholders are given an
opportunity to maintain their proportional ownership when new shares are issued.
A proposal to eliminate preemptive rights is a request from management to revoke
that right.
While
preemptive rights will protect the shareholder from having its equity diluted,
it may also decrease a company’s ability to raise capital through stock
offerings or use stock for acquisitions or other proper corporate purposes.
Preemptive rights may therefore result in a lower market value for the company’s
stock. In the long term, shareholders could be adversely affected by preemptive
rights. The Adviser generally votes against proposals to grant preemptive
rights, and for proposals to eliminate preemptive rights.
5. Non-targeted
Share Repurchase
A
non-targeted share repurchase is generally used by company management to prevent
the value of stock held by existing shareholders from deteriorating. A
non-targeted share repurchase may reflect management’s belief in the favorable
business prospects of the company. The Adviser finds no disadvantageous effects
of a non-targeted share repurchase and will generally vote for the approval of a
non-targeted share repurchase subject to analysis of the company’s financial
condition.
6. Increase
in Authorized Common Stock
The
issuance of new common stock can also be viewed as an anti-takeover measure,
although its effect on shareholder value would appear to be less significant
than the adoption of blank check preferred. The Adviser will evaluate the amount
of the proposed increase and the purpose or purposes for which the increase is
sought. If the increase is not excessive and is sought for proper corporate
purposes, the increase will be approved. Proper corporate purposes might
include, for example, the creation of additional stock to accommodate a stock
split or stock dividend, additional stock required for a proposed acquisition,
or additional stock required to be reserved upon exercise of employee stock
option plans or employee stock purchase plans. Generally, the Adviser will vote
in favor of an increase in authorized common stock of up to 100%; increases in
excess of 100% are evaluated on a case-by-case basis, and will be voted
affirmatively if management has provided sound justification for the
increase.
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7. “Supermajority”
Voting Provisions or Super Voting Share Classes
A
“supermajority” voting provision is a provision placed in a company’s charter
documents which would require a “supermajority” (ranging from 66 to 90%) of
shareholders and shareholder votes to approve any type of acquisition of the
company. A super voting share class grants one class of shareholders a greater
per-share vote than those of shareholders of other voting classes. The Adviser
believes that these are standard anti-takeover measures and will generally vote
against them. The supermajority provision makes an acquisition more
time-consuming and expensive for the acquiror. A super voting share class favors
one group of shareholders disproportionately to economic interest. Both are
often proposed in conjunction with other anti-takeover measures.
8. “Fair
Price” Amendments
This
is another type of charter amendment that would require an offeror to pay a
“fair” and uniform price to all shareholders in an acquisition. In general, fair
price amendments are designed to protect shareholders from coercive, two-tier
tender offers in which some shareholders may be merged out on disadvantageous
terms. Fair price amendments also have an anti-takeover impact, although their
adoption is generally believed to have less of a negative effect on stock price
than other anti-takeover measures. The Adviser will carefully examine all fair
price proposals. In general, the Adviser will vote against fair price proposals
unless the Adviser concludes that it is likely that the share price will not be
negatively affected and the proposal will not have the effect of discouraging
acquisition proposals.
9. Limiting
the Right to Call Special Shareholder Meetings.
The
corporation statutes of many states allow minority shareholders at a certain
threshold level of ownership (frequently 10%) to call a special meeting of
shareholders. This right can be eliminated (or the threshold increased) by
amendment to the company’s charter documents. The Adviser believes that the
right to call a special shareholder meeting is significant for minority
shareholders; the elimination of such right will be viewed as an anti-takeover
measure and the Adviser will generally vote against proposals attempting to
eliminate this right and for proposals attempting to restore it.
10. Poison
Pills or Shareholder Rights Plans
Many
companies have now adopted some version of a poison pill plan (also known as a
shareholder rights plan). Poison pill plans generally provide for the issuance
of additional equity securities or rights to purchase equity securities upon the
occurrence of certain hostile events, such as the acquisition of a large block
of stock.
The
basic argument against poison pills is that they depress share value, discourage
offers for the company and serve to “entrench” management. The basic argument in
favor of poison pills is that they give management more time and leverage to
deal with a takeover bid and, as a result, shareholders may receive a better
price. The Adviser believes that the potential benefits of a poison pill plan
are outweighed by the potential detriments. The Adviser will generally vote
against all forms of poison pills.
The
Adviser will, however, consider on a case-by-case basis poison pills that are
very limited in time and preclusive effect. The Adviser will generally vote in
favor of such a poison pill if it is linked to a business strategy that will -
in our view - likely result in greater value for shareholders, if the term is
less than three years, and if shareholder approval is required to reinstate the
expired plan or adopt a new plan at the end of this term.
11. Golden
Parachutes
Golden
parachute arrangements provide substantial compensation to executives who are
terminated as a result of a takeover or change in control of their company. The
existence of such plans in reasonable amounts probably has only a slight
anti-takeover effect. In voting, the Adviser will evaluate the specifics of the
plan presented.
12. Reincorporation
Reincorporation
in a new state is often proposed as one part of a package of anti-takeover
measures. Several states (such as Pennsylvania, Ohio and Indiana) now provide
some type of legislation that greatly discourages takeovers. Management believes
that Delaware in particular is beneficial as a corporate domicile because of the
well-developed body of statutes and case law dealing with corporate
acquisitions.
The
Adviser will examine reincorporation proposals on a case-by-case basis.
Generally, if the Adviser believes that the reincorporation will result in
greater protection from takeovers, the reincorporation proposal will be opposed.
The Adviser will also oppose reincorporation proposals involving jurisdictions
that specify that directors can recognize non-shareholder interests over those
of shareholders. When
E-4
reincorporation
is proposed for a legitimate business purpose and without the negative effects
identified above, the Adviser will generally vote affirmatively.
13. Confidential
Voting
Companies
that have not previously adopted a “confidential voting” policy allow management
to view the results of shareholder votes. This gives management the opportunity
to contact those shareholders voting against management in an effort to change
their votes.
Proponents
of secret ballots argue that confidential voting enables shareholders to vote on
all issues on the basis of merit without pressure from management to influence
their decision. Opponents argue that confidential voting is more expensive and
unnecessary; also, holding shares in a nominee name maintains shareholders’
confidentiality. The Adviser believes that the only way to insure anonymity of
votes is through confidential voting, and that the benefits of confidential
voting outweigh the incremental additional cost of administering a confidential
voting system. Therefore, the Adviser will generally vote in favor of any
proposal to adopt confidential voting.
14. Opting
In or Out of State Takeover Laws
State
takeover laws typically are designed to make it more difficult to acquire a
corporation organized in that state. The Adviser believes that the decision of
whether or not to accept or reject offers of merger or acquisition should be
made by the shareholders, without unreasonably restrictive state laws that may
impose ownership thresholds or waiting periods on potential acquirors.
Therefore, the Adviser will generally vote in favor of opting out of restrictive
state takeover laws.
D. Transaction
Related Proposals
The
Adviser will review transaction related proposals, such as mergers,
acquisitions, and corporate reorganizations, on a case-by-case basis, taking
into consideration the impact of the transaction on each client account. In some
instances, such as the approval of a proposed merger, a transaction may have a
differential impact on client accounts depending on the securities held in each
account. For example, whether a merger is in the best interest of a client
account may be influenced by whether an account holds, and in what proportion,
the stock of both the acquirer and the acquiror. In these circumstances, the
Adviser may determine that it is in the best interests of the accounts to vote
the accounts’ shares differently on proposals related to the same
transaction.
E. Other
Matters
1. Proposals
Involving Environmental, Social, and Governance (ESG”) Matters
The
Adviser believes that certain ESG issues can potentially impact an issuer's
long-term financial performance and has developed an analytical framework, as
well as a proprietary assessment tool, to integrate risks and opportunities
stemming from ESG issues into our investment process. This ESG integration
process extends to our proxy voting practices in that our Sustainable Research
Team analyzes on a case-by-case basis the financial materiality and potential
risks or economic impact of the ESG issues underpinning proxy proposals and
makes voting recommendations based thereon for the Adviser's consideration. The
Sustainable Research Team evaluates ESG-related proposals based on a rational
linkage between the proposal, its potential economic impact, and its potential
to maximize long-term shareholder value.
Where
the economic effect of such proposals is unclear and there is not a specific
written client-mandate, the Adviser believes it is generally impossible to know
how to vote in a manner that would accurately reflect the views of the Adviser’s
clients, and, therefore, the Adviser will generally rely on management’s
assessment of the economic effect if the Adviser believes the assessment is not
unreasonable.
Shareholders
may also introduce proposals which are the subject of existing law or
regulation. Examples of such proposals would include a proposal to require
disclosure of a company’s contributions to political action committees or a
proposal to require a company to adopt a non-smoking workplace policy. The
Adviser believes that such proposals may be better addressed outside the
corporate arena and, absent a potential economic impact, will generally vote
with management’s recommendation. In addition, the Adviser will generally vote
against any proposal which would require a company to adopt practices or
procedures which go beyond the requirements of existing, directly applicable
law.
2. Anti-Greenmail
Proposals
“Anti-greenmail”
proposals generally limit the right of a corporation, without a shareholder
vote, to pay a premium or buy out a 5% or greater shareholder. Management often
argues that they should not be restricted from negotiating a deal to buy out a
significant shareholder at a premium if they believe it is in the best interest
of the company. Institutional shareholders generally believe that all
shareholders should be
E-5
able
to vote on such a significant use of corporate assets. The Adviser believes that
any repurchase by the company at a premium price of a large block of stock
should be subject to a shareholder vote. Accordingly, it will generally vote in
favor of anti-greenmail proposals.
3. Indemnification
The
Adviser will generally vote in favor of a corporation’s proposal to indemnify
its officers and directors in accordance with applicable state law.
Indemnification arrangements are often necessary in order to attract and retain
qualified directors. The adoption of such proposals appears to have little
effect on share value.
4. Non-Stock
Incentive Plans
Management
may propose a variety of cash-based incentive or bonus plans to stimulate
employee performance. In general, the cash or other corporate assets required
for most incentive plans is not material, and the Adviser will vote in favor of
such proposals, particularly when the proposal is recommended in order to comply
with IRC Section 162(m) regarding salary disclosure requirements. Case-by-case
determinations will be made of the appropriateness of the amount of shareholder
value transferred by proposed plans.
5. Director
Tenure
These
proposals ask that age and term restrictions be placed on the board of
directors. The Adviser believes that these types of blanket restrictions are not
necessarily in the best interests of shareholders and therefore will vote
against such proposals, unless they have been recommended by
management.
6. Directors’
Stock Options Plans
The
Adviser believes that stock options are an appropriate form of compensation for
directors, and the Adviser will generally vote for director stock option plans
which are reasonable and do not result in excessive shareholder dilution.
Analysis of such proposals will be made on a case-by-case basis, and will take
into account total board compensation and the company’s total exposure to stock
option plan dilution.
7. Director
Share Ownership
The
Adviser will generally vote against shareholder proposals which would require
directors to hold a minimum number of the company’s shares to serve on the Board
of Directors, in the belief that such ownership should be at the discretion of
Board members.
8. Non-U.S.
Proxies
The
Adviser will generally evaluate non-U.S. proxies in the context of the voting
policies expressed herein but will also, where feasible, take into consideration
differing laws, regulations, and practices in the relevant foreign market in
determining if and how to vote. There may also be circumstances when
practicalities and costs involved with non-U.S. investing make it
disadvantageous to vote shares. For instance, the Adviser generally does not
vote proxies in circumstances where share blocking restrictions apply, when
meeting attendance is required in person, or when current share ownership
disclosure is required.
III. Use
of Proxy Advisory Services
The
Adviser may retain proxy advisory firms to provide services in connection with
voting proxies, including, without limitation, to provide information on
shareholder meeting dates and proxy materials, translate proxy materials printed
in a foreign language, provide research on proxy proposals and voting
recommendations in accordance with the voting policies expressed herein, provide
systems to assist with casting the proxy votes, and provide reports and assist
with preparation of filings concerning the proxies voted.
Prior
to the selection of a proxy advisory firm and periodically thereafter, the
Adviser will consider whether the proxy advisory firm has the capacity and
competency to adequately analyze proxy issues and the ability to make
recommendations based on material accurate information in an impartial manner.
Such considerations may include some or all of the following (i) periodic
sampling of votes cast through the firm’s systems to determine that votes are in
accordance with the Adviser’s policies and its clients best interests, (ii)
onsite visits to the proxy advisory firm’s office and/or discussions with the
firm to determine whether the firm continues to have the resources (e.g.,
staffing, personnel, technology, etc.) capacity and competency to carry out its
obligations to the Adviser, (iii) a review of the firm’s policies and
procedures, with a focus on those relating to identifying and addressing
conflicts of interest and monitoring that current and accurate information is
used in creating recommendations, (iv) requesting that the firm notify the
Adviser if there is a change in the firm’s material policies and procedures,
particularly with respect to conflicts, or material business practices (e.g.,
entering or exiting new lines of business), and reviewing any such change, and
(v) in case of an error made by the firm, discussing the error with the
E-6
firm
and determining whether appropriate corrective and preventative action is being
taken. In the event the Adviser discovers an error in the research or voting
recommendations provided by the firm, it will take reasonable steps to
investigate the error and seek to determine whether the firm is taking
reasonable steps to reduce similar errors in the future.
While
the Adviser takes into account information from many different sources,
including independent proxy advisory services, the decision on how to vote
proxies will be made in accordance with these policies.
IV.
Monitoring Potential Conflicts of Interest
Corporate
management has a strong interest in the outcome of proposals submitted to
shareholders. As a consequence, management often seeks to influence large
shareholders to vote with their recommendations on particularly controversial
matters. In the vast majority of cases, these communications with large
shareholders amount to little more than advocacy for management’s positions and
give the Adviser’s staff the opportunity to ask additional questions about the
matter being presented. Companies with which the Adviser has direct business
relationships could theoretically use these relationships to attempt to unduly
influence the manner in which the Adviser votes on matters for its clients. To
ensure that such a conflict of interest does not affect proxy votes cast for the
Adviser’s clients, our proxy voting personnel regularly catalog companies with
whom the Adviser has significant business relationships; all discretionary
(including case-by-case) voting for these companies will be voted by the client
or an appropriate fiduciary responsible for the client (e.g., a committee of the
independent directors of a fund or the trustee of a retirement
plan).
In
addition, to avoid any potential conflict of interest that may arise when one
American Century fund owns shares of another American Century fund, the Adviser
will “echo vote” such shares, if possible. Echo voting means the Adviser will
vote the shares in the same proportion as the vote of all of the other holders
of the fund’s shares. So, for example, if shareholders of a fund cast 80% of
their votes in favor of a proposal and 20% against the proposal, any American
Century fund that owns shares of such fund will cast 80% of its shares in favor
of the proposal and 20% against. When this is not possible where American
Century funds are the only shareholders, the shares of the underlying fund will
be voted in the same proportion as the vote of the shareholders of a
corresponding American Century policy portfolio for proposals common to both
funds. In the case where there is no policy portfolio or the policy portfolio
does not have a common proposal, shares will be voted in consultation with a
committee of the independent directors.
************************************************************
The
voting policies expressed above are of course subject to modification in certain
circumstances and will be reexamined from time to time. With respect to matters
that do not fit in the categories stated above, the Adviser will exercise its
best judgment as a fiduciary to vote in the manner which will most enhance
shareholder value.
Case-by-case
determinations will be made by the Adviser’s staff, which is overseen by the
General Counsel of the Adviser, in consultation with equity managers. Electronic
records will be kept of all votes made.
E-7
Notes
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American
Century Investments
americancentury.com |
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| Retail
Investors P.O. Box 419200 Kansas City, Missouri 64141-6200 1-800-345-2021 or 816-531-5575 |
Financial
Professionals P.O. Box 419385 Kansas City, Missouri 64141-6385 1-800-345-6488 | ||||
Investment
Company Act File No. 811-06247
CL-SAI-91821
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