UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-6441
----------------------------------------------
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
DAVID C. TUCKER, ESQ., 4500 MAIN STREET, 9TH FLOOR, KANSAS CITY, MISSOURI 64111
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
--------------------------------
Date of fiscal year end: DECEMBER 31
-------------------------------------------------------
Date of reporting period: DECEMBER 31, 2004
-------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
[front cover]
DECEMBER 31, 2004
American Century Investments
Annual Report
[photo of market line chart]
[photo of starfish]
[photo of bridge]
International Bond Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTERNATIONAL BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . 4
Bond Holdings by Country . . . . . . . . . . . . . . . . . . . . . . . . 5
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . .11
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .12
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . .13
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . .14
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Report of Independent Registered Public Accounting Firm . . . . . . . . . .22
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .27
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .28
Index Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III
WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the annual report for the International Bond
fund for the 12 months ended December 31, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, we provide quarterly commentaries on
all American Century portfolios, the views of our senior investment officers,
and other communications about investments, portfolio strategy, and the markets.
We also have many informative resources available in the Education & Planning
section of our site to help you with your investment strategy.
Your next shareholder report for this fund will be the semiannual report dated
June 30, 2005, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER AND CHAIRMAN
/s/James E. Stowers III
James E. Stowers III
CO-CHAIRMAN OF THE BOARD
WITH JAMES E. STOWERS, JR.
- ------
1
International Bond - Performance
TOTAL RETURNS AS OF DECEMBER 31, 2004
--------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 13.10% 10.24% 7.91% 7.65% 1/7/92
- --------------------------------------------------------------------------------
FUND BENCHMARK 14.39% 11.50% 8.81% 8.12%(1) --
- --------------------------------------------------------------------------------
J.P. MORGAN GLOBAL TRADED
GOVERNMENT BOND INDEX 10.11% 8.85% 7.76% 7.34%(1) --
- --------------------------------------------------------------------------------
Institutional Class -- -- -- 15.25%(2) 8/2/04
- --------------------------------------------------------------------------------
Advisor Class 12.93% 9.99% -- 6.43% 10/27/98
- --------------------------------------------------------------------------------
(1) Since 12/31/91, the date nearest the Investor Class's inception for which
data are available.
(2) Returns for periods less than one year are not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
International investing involves special risks, such as political instability
and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. From the fund's inception to December 31, 1997, the
fund benchmark was the J.P. Morgan ECU-Weighted European Index. Since January 1,
1998, the fund benchmark has been the J.P. Morgan Global Traded Government Bond
Index (excluding the U.S. and with Japan weighted at 15%). The fund's total
returns include operating expenses (such as transaction costs and management
fees) that reduce returns, while the total returns of the indices do not.
(continued)
- ------
2
International Bond - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made December 31, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended December 31
- --------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------------
Investor Class 24.40% 6.38% -5.88% 17.87% -10.36% -1.20% -1.66% 23.53% 19.91% 13.10%
- --------------------------------------------------------------------------------------------------
Fund benchmark 25.65% 5.98% -5.33% 18.49% -9.61% -0.23% -1.16% 25.26% 21.97% 14.39%
- --------------------------------------------------------------------------------------------------
J.P. Morgan
Global Traded
Government
Bond Index 19.31% 4.40% 1.40% 15.31% -5.08% 2.32% -0.80% 19.37% 14.53% 10.11%
- --------------------------------------------------------------------------------------------------
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
International investing involves special risks, such as political instability
and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. From the fund's inception to December 31, 1997, the
fund benchmark was the J.P. Morgan ECU-Weighted European Index. Since January 1,
1998, the fund benchmark has been the J.P. Morgan Global Traded Government Bond
Index (excluding the U.S. and with Japan weighted at 15%). The fund's total
returns include operating expenses (such as transaction costs and management
fees) that reduce returns, while the total returns of the indices do not.
- ------
3
International Bond - Portfolio Commentary
PORTFOLIO MANAGER: JULIAN LE BERON
PERFORMANCE SUMMARY
International Bond returned 13.10%* for the 12 months ended December 31, 2004.
By comparison, the fund's benchmark returned 14.39%. (Please see pages 2 and 3.)
Unlike the fund benchmark, fees reduce International Bond's returns.
International bonds faced challenging conditions during the first half of 2004,
but the last half of the year was a very different story as global economic
growth moderated. International Bond produced an appealing return in that
environment, and we discuss the strategies that we employed for the portfolio
later on in this commentary.
ECONOMIC PERSPECTIVE
Global economic growth remained fairly robust during 2004, although slowing from
the uncommonly swift early year expansion that took place in spite of higher
commodity prices, terrorism-related concerns, and unsettled times in the Middle
East. Although crude oil prices finished out 2004 at significantly elevated
levels, the further decline in December helped to mitigate the dampening effect
on economic activity.
The 12-nation euro zone provided a prime example as the region's economy
continued to expand, but at a slower rate as higher oil prices dampened consumer
spending. Economic activity in the euro zone increased at a seasonally adjusted
0.7% during the first quarter, but tapered off to 0.3% by the third quarter (the
most recently measured quarter currently available). Longer-term inflationary
pressures appeared largely under control amid that backdrop, giving the European
Central Bank room to keep its short-term interest rate benchmark at 2.00%.
Other European countries faced slower-growth scenarios, too. In the United
Kingdom, economic activity slowed noticeably amid fewer exports and less
investment. The U.K.'s economy expanded at a seasonally adjusted 0.5% during the
third quarter, down from 0.7% during the year's first three months. Sweden's
economy remained comparatively vibrant, however, growing by a seasonally
adjusted 0.9% during the first and third quarters.
In Japan, the economic recovery slowed amid still-present deflationary pressures
and signs of weak activity in both manufacturing and service sectors. For the
third quarter of 2004, Japan's economy grew by a seasonally adjusted 0.1%, down
substantially from the first quarter's 1.9%.
BOND AND CURRENCY PERSPECTIVE
Government-issued international bonds performed well. In local-currency terms,
benchmark bond indexes from Italy (a member of the euro zone) and Sweden
returned approximately 8.6%, while bond indexes for France and Germany (also
members of the euro zone) produced returns of 7.5% and 7.4%, respectively. By
comparison,
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
AS OF AS OF
12/31/04 12/31/03
- --------------------------------------------------------------------------------
Weighted Average
Maturity 8.4 yrs 7.2 yrs
- --------------------------------------------------------------------------------
Average Duration
(Modified) 5.9 yrs 5.1 yrs
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary
are for Investor Class shares. (continued)
- ------
4
International Bond - Portfolio Commentary
local-currency benchmark bond indexes for the U.K. and Japan returned
approximately 6.6% and 1.3%, respectively.
Once converted into U.S. dollars, those bond returns increased substantially.
Helped along by a sharp decrease in demand from overseas investors late in the
year, the dollar fell approximately 7.8% versus the euro in 2004, 8.3% against
the krona, 7.3% compared with pound sterling, and 4.6% versus the yen.
PORTFOLIO STRATEGIES
On the portfolio front, we used the forward currency market to adjust
International Bond's foreign-exchange positions, which we consider separately
from bond allocations. For example, we increased pound sterling exposure toward
year-end due to our expectations for better economic news out of the U.K. That
played out as we hoped, with the pound rallying by more than 6.0% versus the
dollar during last year's final quarter.
From a bond standpoint, we added Japanese government debt securities during the
latter half of 2004 due to concern that they might rally if Japan's economic
prospects appeared to diminish. Although we were largely on track regarding
late-year economic news, Japanese government bonds posted very limited returns.
We also increased our holdings of bonds from the euro zone during 2004's final
six months because we believe their prospects are favorable in light of the
region's current economic, interest rate, and legislative climate. Meanwhile, we
decreased the portfolio's holdings of U.K. government bonds, believing that what
might help the pound could also depress the value of Gilts (U.K. government
bonds).
Finally, we maintained the portfolio's overweight position--compared with the
benchmark--in non-government fixed-income securities, and kept on the lookout
for European corporate bonds and mortgage-backed securities in particular.
OUR COMMITMENT
We remain committed to seeking a high total return by investing in high-quality
non-dollar-denominated government and corporate debt securities outside the U.S.
And we'll attempt to do so by employing a combination of fundamental research
and bond and currency valuation models.
BOND HOLDINGS BY COUNTRY
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
12/31/04 6/30/04
- --------------------------------------------------------------------------------
Germany* 27.6% 22.3%
- --------------------------------------------------------------------------------
France* 22.9% 13.8%
- --------------------------------------------------------------------------------
Japan 8.9% 4.7%
- --------------------------------------------------------------------------------
Netherlands* 6.8% 4.4%
- --------------------------------------------------------------------------------
Multi-National 6.8% 6.5%
- --------------------------------------------------------------------------------
Spain* 4.5% 4.4%
- --------------------------------------------------------------------------------
Italy* 4.4% 3.0%
- --------------------------------------------------------------------------------
Belgium* 4.3% 4.7%
- --------------------------------------------------------------------------------
Austria* 2.5% 4.5%
- --------------------------------------------------------------------------------
Denmark 2.4% 3.5%
- --------------------------------------------------------------------------------
Sweden 1.9% 2.7%
- --------------------------------------------------------------------------------
Australia 1.1% 1.2%
- --------------------------------------------------------------------------------
Canada 0.5% 2.0%
- --------------------------------------------------------------------------------
United Kingdom -- 4.3%
- --------------------------------------------------------------------------------
United States
(temporary cash
investments) 5.4% 18.0%
- --------------------------------------------------------------------------------
*These are euro zone member countries.
- ------
5
Shareholder Fee Example (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from July 1, 2004 to December 31, 2004.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
(continued)
- ------
6
Shareholder Fee Example (Unaudited)
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD(1) ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 7/1/04 -- EXPENSE
7/1/04 12/31/04 12/31/04 RATIO(1)
- --------------------------------------------------------------------------------
INTERNATIONAL BOND SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,148.20 $4.48 0.83%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,152.50(2) $2.80(3) 0.63%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,147.10 $5.83 1.08%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,020.96 $4.22 0.83%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,021.97(4) $3.20(4) 0.63%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,019.71 $5.48 1.08%
- --------------------------------------------------------------------------------
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 184, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
(2) Ending account value based on actual return from August 2, 2004
(commencement of sale) through December 31, 2004.
(3) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 151, the number of days in the period from August 2, 2004
(commencement of sale) through December 31, 2004, divided by 366, to reflect
the period ended. Had the class been available for the full period, the
expenses paid during the period would have been higher.
(4) Ending account value and expenses paid during period assumes the class had
been available throughout the entire period and are calculated using the
class's annualized expense ratio listed in the table above.
- ------
7
International Bond - Schedule of Investments
DECEMBER 31, 2004
Principal Amount Value
- --------------------------------------------------------------------------------
GOVERNMENT BONDS -- 67.7%
AUSTRALIA -- 1.1%
- --------------------------------------------------------------------------------
AUD 13,100,000 Australia
Commonwealth,
7.50%, 9/15/09 $ 11,203,801
- --------------------------------------------------------------------------------
AUSTRIA -- 2.4%
- --------------------------------------------------------------------------------
EURO 18,150,000 Republic of Austria,
3.90%, 10/20/05 24,936,288
- --------------------------------------------------------------------------------
BELGIUM -- 4.2%
- --------------------------------------------------------------------------------
EURO 21,520,000 Kingdom of Belgium,
3.75%, 3/28/09 30,106,404
- --------------------------------------------------------------------------------
EURO 7,010,000 Kingdom of Belgium,
8.00%, 3/28/15 12,960,401
- --------------------------------------------------------------------------------
43,066,805
- --------------------------------------------------------------------------------
CANADA -- 0.5%
- --------------------------------------------------------------------------------
EURO 3,500,000 Government of Canada,
4.875%, 7/7/08 5,068,516
- --------------------------------------------------------------------------------
DENMARK -- 2.4%
- --------------------------------------------------------------------------------
DKK 79,600,000 Kingdom of Denmark,
8.00%, 3/15/06 15,431,830
- --------------------------------------------------------------------------------
DKK 42,000,000 Kingdom of Denmark,
6.00%, 11/15/09 8,631,626
- --------------------------------------------------------------------------------
24,063,456
- --------------------------------------------------------------------------------
FRANCE -- 18.2%
- --------------------------------------------------------------------------------
EURO 49,990,000 Government of France,
4.50%, 7/12/06 69,947,562
- --------------------------------------------------------------------------------
EURO 7,200,000 Government of France,
4.00%, 4/25/09 10,178,695
- --------------------------------------------------------------------------------
EURO 5,680,000 Government of France,
5.50%, 10/25/10 8,649,337
- --------------------------------------------------------------------------------
EURO 15,910,000 Government of France,
4.00%, 4/25/14 22,204,806
- --------------------------------------------------------------------------------
EURO 13,300,000 Government of France,
5.50%, 4/25/29 21,454,953
- --------------------------------------------------------------------------------
EURO 31,470,000 Government of France,
5.75%, 10/25/32 52,810,151
- --------------------------------------------------------------------------------
185,245,504
- --------------------------------------------------------------------------------
GERMANY -- 15.6%
- --------------------------------------------------------------------------------
EURO 4,360,000 German Federal Republic,
4.50%, 8/18/06 6,108,553
- --------------------------------------------------------------------------------
EURO 5,160,000 German Federal Republic,
3.25%, 4/17/09 7,082,097
- --------------------------------------------------------------------------------
EURO 27,190,000 German Federal Republic,
5.25%, 7/4/10 40,763,171
- --------------------------------------------------------------------------------
EURO 38,640,000 German Federal Republic,
4.50%, 1/4/13 56,015,371
- --------------------------------------------------------------------------------
EURO 5,900,000 German Federal Republic,
6.25%, 1/4/24 10,234,412
- --------------------------------------------------------------------------------
EURO 15,290,000 German Federal Republic,
5.625%, 1/4/28 24,952,330
- --------------------------------------------------------------------------------
EURO 9,080,000 German Federal Republic,
4.75%, 7/4/34 13,269,680
- --------------------------------------------------------------------------------
158,425,614
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
ITALY -- 4.2%
- --------------------------------------------------------------------------------
EURO 22,490,000 Republic of Italy,
7.25%, 11/1/26 $ 43,296,696
- --------------------------------------------------------------------------------
JAPAN -- 8.6%
- --------------------------------------------------------------------------------
JPY 2,500,600,000 Government of Japan,
0.30%, 6/20/08 24,299,433
- --------------------------------------------------------------------------------
JPY 4,475,000,000 Government of Japan,
1.50%, 12/20/14 43,807,495
- --------------------------------------------------------------------------------
JPY 1,795,000,000 Government of Japan,
2.40%, 6/20/24 18,556,327
- --------------------------------------------------------------------------------
JPY 150,000,000 Government of Japan,
2.10%, 9/20/24 1,480,046
- --------------------------------------------------------------------------------
88,143,301
- --------------------------------------------------------------------------------
NETHERLANDS -- 4.2%
- --------------------------------------------------------------------------------
EURO 12,780,000 Kingdom of Netherlands,
3.00%, 7/15/07 17,468,738
- --------------------------------------------------------------------------------
EURO 17,170,000 Kingdom of Netherlands,
5.00%, 7/15/11 25,655,273
- --------------------------------------------------------------------------------
43,124,011
- --------------------------------------------------------------------------------
SPAIN -- 4.4%
- --------------------------------------------------------------------------------
EURO 11,680,000 Government of Spain,
4.25%, 10/31/07 16,499,196
- --------------------------------------------------------------------------------
EURO 17,700,000 Government of Spain,
6.15%, 1/31/13 28,445,921
- --------------------------------------------------------------------------------
44,945,117
- --------------------------------------------------------------------------------
SWEDEN -- 1.9%
- --------------------------------------------------------------------------------
SEK 34,400,000 Kingdom of Sweden,
3.50%, 4/20/06 5,244,450
- --------------------------------------------------------------------------------
SEK 84,700,000 Kingdom of Sweden,
6.50%, 5/5/08 14,127,737
- --------------------------------------------------------------------------------
19,372,187
- --------------------------------------------------------------------------------
TOTAL GOVERNMENT BONDS
(Cost $607,982,196) 690,891,296
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 24.4%
FRANCE -- 4.1%
- --------------------------------------------------------------------------------
EURO 30,400,000 Dexia Municipal Agency,
3.50%, 9/21/09 41,896,634
- --------------------------------------------------------------------------------
GERMANY -- 11.3%
- --------------------------------------------------------------------------------
EURO 27,400,000 DEPFA Deutsche
Pfandbriefbank AG,
5.50%, 2/12/08 40,113,094
- --------------------------------------------------------------------------------
EURO 26,050,000 Eurohypo AG,
5.25%, 9/21/07 37,644,510
- --------------------------------------------------------------------------------
EURO 25,200,000 Kreditanstalt fuer
Wiederaufbau,
5.25%, 1/4/10 37,557,911
- --------------------------------------------------------------------------------
115,315,515
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
International Bond - Schedule of Investments
DECEMBER 31, 2004
Principal Amount Value
- --------------------------------------------------------------------------------
MULTI-NATIONAL -- 6.6%
- --------------------------------------------------------------------------------
GBP 5,000,000 European Investment
Bank, 4.50%,
10/23/08 $ 9,508,056
- --------------------------------------------------------------------------------
GBP 3,550,000 European Investment
Bank, 5.50%,
12/7/09 7,024,116
- --------------------------------------------------------------------------------
EURO 11,700,000 European Investment
Bank, 5.625%,
10/15/10 17,851,639
- --------------------------------------------------------------------------------
GBP 4,920,000 European Investment
Bank, 6.25%,
4/15/14 10,412,231
- --------------------------------------------------------------------------------
GBP 3,430,000 International Bank
for Reconstruction &
Development (the
World Bank),
6.125%, 12/7/09 6,955,631
- --------------------------------------------------------------------------------
GBP 6,300,000 International Bank
for Reconstruction &
Development (the
World Bank),
5.375%, 1/15/14 12,541,837
- --------------------------------------------------------------------------------
GBP 1,600,000 International Finance
Corp., 5.375%,
12/7/28 3,334,168
- --------------------------------------------------------------------------------
67,627,678
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
NETHERLANDS -- 2.4%
- --------------------------------------------------------------------------------
EURO 18,000,000 NV Bank Nederlandse
Gemeenten, 3.25%,
10/29/09 $ 24,542,075
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $221,459,122) 249,381,902
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 5.2%
UNITED STATES - 5.2%
- --------------------------------------------------------------------------------
USD 53,450,000 FHLB Discount Notes,
1.25%, 1/3/05(1) 53,446,288
(Cost $53,446,288)
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 97.3%
(Cost $882,887,606) 993,719,486
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 2.7% 27,107,462
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $1,020,826,948
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
Unrealized
Contracts to Sell Settlement Date Value Gain (Loss)
- --------------------------------------------------------------------------------
309,980,000 JPY for AUD 1/28/05 $ 3,034,145 $ 12,138
- --------------------------------------------------------------------------------
6,939,687 EURO for GBP 1/28/05 9,426,900 (228,721)
- --------------------------------------------------------------------------------
1,410,000 GBP for CAD 1/28/05 2,699,910 (117,505)
- --------------------------------------------------------------------------------
3,364,350 AUD for USD 1/28/05 2,626,282 (29,626)
- --------------------------------------------------------------------------------
7,931,100 AUD for USD 1/28/05 6,191,183 11,651
- --------------------------------------------------------------------------------
2,666,024 CAD for USD 1/28/05 2,222,868 15,570
- --------------------------------------------------------------------------------
8,927,137 CAD for USD 1/28/05 7,443,237 66,763
- --------------------------------------------------------------------------------
716,164 CAD for USD 1/28/05 597,121 6,376
- --------------------------------------------------------------------------------
967,296 CHF for USD 1/28/05 850,556 (2,389)
- --------------------------------------------------------------------------------
109,063,020 DKK for USD 1/28/05 19,909,887 (730,599)
- --------------------------------------------------------------------------------
62,706,860 EURO for USD 1/28/05 85,181,258 (2,949,123)
- --------------------------------------------------------------------------------
28,007,432 EURO for USD 1/28/05 38,045,411 (631,790)
- --------------------------------------------------------------------------------
750,561 EURO for USD 1/28/05 1,019,565 (69,222)
- --------------------------------------------------------------------------------
2,852,195 EURO for USD 1/28/05 3,874,434 (162,587)
- --------------------------------------------------------------------------------
5,012,353 EURO for USD 1/28/05 6,808,802 (158,461)
- --------------------------------------------------------------------------------
4,803,480 EURO for USD 1/28/05 6,525,067 (146,286)
- --------------------------------------------------------------------------------
1,903,690,445 JPY for USD 1/28/05 18,633,707 (258,317)
- --------------------------------------------------------------------------------
40,119,078 SEK for USD 1/28/05 6,043,651 (176,573)
- --------------------------------------------------------------------------------
$221,133,984 $(5,548,701)
=================================
(Value on Settlement Date $215,585,283)
*FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's
investments against declines in foreign currencies (also known as hedging) or
to increase exposure to a foreign currency, or to shift exposure to the
fluctuations in the value of foreign currencies from one foreign currency to
another. The contracts are called "forward" because they allow the fund to
exchange a foreign currency for U.S. dollars on a specific date in the
future -- and at a prearranged exchange rate.
See Notes to Financial Statements. (continued)
- ------
9
International Bond - Schedule of Investments
DECEMBER 31, 2004
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* (CONTINUED)
Unrealized
Contracts to Buy Settlement Date Value Gain (Loss)
- --------------------------------------------------------------------------------
3,855,569 AUD for JPY 1/28/05 $ 3,009,739 $ (36,546)
- --------------------------------------------------------------------------------
4,855,838 GBP for EURO 1/28/05 9,298,102 99,925
- --------------------------------------------------------------------------------
3,112,702 CAD for GBP 1/28/05 2,595,298 12,893
- --------------------------------------------------------------------------------
33,322,066 CAD for USD 1/28/05 27,783,153 566,137
- --------------------------------------------------------------------------------
3,271,403 CAD for USD 1/28/05 2,727,619 52,058
- --------------------------------------------------------------------------------
967,296 CHF for USD 1/28/05 850,556 12,490
- --------------------------------------------------------------------------------
447,743 EURO for USD 1/28/05 608,216 2,932
- --------------------------------------------------------------------------------
4,104,323 EURO for USD 1/28/05 5,575,330 215,330
- --------------------------------------------------------------------------------
31,488,265 EURO for USD 1/28/05 42,773,790 1,086,298
- --------------------------------------------------------------------------------
2,370,000 EURO for USD 1/28/05 3,219,418 51,984
- --------------------------------------------------------------------------------
8,190,000 EURO for USD 1/28/05 11,125,330 128,945
- --------------------------------------------------------------------------------
1,693,304 GBP for USD 1/28/05 3,242,389 76,379
- --------------------------------------------------------------------------------
6,290,794 GBP for USD 1/28/05 12,045,798 159,606
- --------------------------------------------------------------------------------
3,672,238 GBP for USD 1/28/05 7,031,709 (28,383)
- --------------------------------------------------------------------------------
7,318,805 GBP for USD 1/28/05 14,014,265 321,646
- --------------------------------------------------------------------------------
930,000 GBP for USD 1/28/05 1,780,792 (1,256)
- --------------------------------------------------------------------------------
549,491,120 JPY for USD 1/28/05 5,378,530 18,530
- --------------------------------------------------------------------------------
304,213,860 JPY for USD 1/28/05 2,977,707 87,707
- --------------------------------------------------------------------------------
326,225,350 JPY for USD 1/28/05 3,193,160 3,160
- --------------------------------------------------------------------------------
6,013,292,480 JPY for USD 1/28/05 58,859,323 19,867
- --------------------------------------------------------------------------------
810,410,930 JPY for USD 1/28/05 7,932,466 132,466
- --------------------------------------------------------------------------------
386,820,200 JPY for USD 1/28/05 3,786,274 86,274
- --------------------------------------------------------------------------------
2,444,000 NZD for USD 1/28/05 1,746,908 11,350
- --------------------------------------------------------------------------------
1,866,000 NZD for USD 1/28/05 1,333,768 8,908
- --------------------------------------------------------------------------------
29,847,156 SEK for USD 1/28/05 4,496,259 47,104
- --------------------------------------------------------------------------------
33,743,200 SEK for USD 1/28/05 5,083,170 751
- --------------------------------------------------------------------------------
$242,469,069 $3,136,555
=================================
(Value on Settlement Date $239,332,514)
*FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's
investments against declines in foreign currencies (also known as hedging) or
to increase exposure to a foreign currency, or to shift exposure to the
fluctuations in the value of foreign currencies from one foreign currency to
another. The contracts are called "forward" because they allow the fund to
exchange a foreign currency for U.S. dollars on a specific date in the
future -- and at a prearranged exchange rate.
NOTES TO SCHEDULE OF INVESTMENTS
AUD = Australian Dollar JPY = Japanese Yen
CAD = Canadian Dollar NZD = New Zealand Dollar
CHF = Swiss Franc SEK = Swedish Krona
DKK = Danish Krone USD = United States Dollar
FHLB = Federal Home Loan Bank (1) The rate indicated is the yield to
GBP = British Pound maturity at purchase.
See Notes to Financial Statements.
- ------
10
Statement of Assets and Liabilities
DECEMBER 31, 2004
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (cost of $882,887,606) $ 993,719,486
- --------------------------------------------------------------
Cash 95,058
- --------------------------------------------------------------
Foreign currency holdings, at value (cost of $9,960,356) 9,915,912
- --------------------------------------------------------------
Receivable for forward foreign currency exchange contracts 3,315,238
- --------------------------------------------------------------
Receivable for capital shares sold 9,699,854
- --------------------------------------------------------------
Interest receivable 21,611,397
- --------------------------------------------------------------------------------
1,038,356,945
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for investments purchased 10,805,323
- --------------------------------------------------------------
Payable for forward foreign currency exchange contracts 5,727,384
- --------------------------------------------------------------
Payable for capital shares redeemed 325,404
- --------------------------------------------------------------
Accrued management fees 654,316
- --------------------------------------------------------------
Distribution fees payable 8,785
- --------------------------------------------------------------
Service fees payable 8,785
- --------------------------------------------------------------------------------
17,529,997
- --------------------------------------------------------------------------------
NET ASSETS $1,020,826,948
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital paid-in $ 893,429,508
- --------------------------------------------------------------
Undistributed net investment income 16,603,301
- --------------------------------------------------------------
Undistributed net realized gain on investment
and foreign currency transactions 1,286,780
- --------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 109,507,359
- --------------------------------------------------------------------------------
$1,020,826,948
================================================================================
INVESTOR CLASS
- --------------------------------------------------------------------------------
Net assets $976,827,941
- --------------------------------------------------------------
Shares outstanding 66,159,233
- --------------------------------------------------------------
Net asset value per share $14.76
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
Net assets $1,263,305
- --------------------------------------------------------------
Shares outstanding 85,530
- --------------------------------------------------------------
Net asset value per share $14.77
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
Net assets $42,735,702
- --------------------------------------------------------------
Shares outstanding 2,898,108
- --------------------------------------------------------------
Net asset value per share $14.75
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
11
Statement of Operations
YEAR ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- --------------------------------------------------------------
Interest (net of foreign taxes withheld $61,029) $24,497,402
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------
Management fees 5,792,890
- --------------------------------------------------------------
Distribution fees -- Advisor Class 78,595
- --------------------------------------------------------------
Service fees -- Advisor Class 78,595
- --------------------------------------------------------------
Trustees' fees and expenses 72,629
- --------------------------------------------------------------
Other expenses 5,942
- --------------------------------------------------------------------------------
6,028,651
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 18,468,751
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON:
- --------------------------------------------------------------
Investment transactions 3,713,596
- --------------------------------------------------------------
Foreign currency transactions 32,594,485
- --------------------------------------------------------------------------------
36,308,081
- --------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION ON:
- --------------------------------------------------------------
Investments 18,692,224
- --------------------------------------------------------------
Translation of assets and liabilities in foreign currencies 20,697,244
- --------------------------------------------------------------------------------
39,389,468
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 75,697,549
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $94,166,300
================================================================================
See Notes to Financial Statements.
- ------
12
Statement of Changes in Net Assets
YEARS ENDED DECEMBER 31, 2004 AND DECEMBER 31, 2003
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2004 2003
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 18,468,751 $ 14,059,244
- --------------------------------------------
Net realized gain 36,308,081 28,587,322
- --------------------------------------------
Change in net unrealized appreciation 39,389,468 44,366,484
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 94,166,300 87,013,050
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income:
- --------------------------------------------
Investor Class (12,226,892) (13,511,035)
- --------------------------------------------
Institutional Class (11,715) --
- --------------------------------------------
Advisor Class (534,099) (422,220)
- --------------------------------------------
From net realized gains:
- --------------------------------------------
Investor Class (24,424,453) (27,492,399)
- --------------------------------------------
Institutional Class (23,556) --
- --------------------------------------------
Advisor Class (1,072,872) (870,833)
- --------------------------------------------------------------------------------
Decrease in net assets from distributions (38,293,587) (42,296,487)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase in net assets
from capital share transactions 321,159,940 280,394,380
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 377,032,653 325,110,943
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 643,794,295 318,683,352
- --------------------------------------------------------------------------------
End of period $1,020,826,948 $643,794,295
================================================================================
Undistributed net investment income $16,603,301 $1,426,892
================================================================================
See Notes to Financial Statements.
- ------
13
Notes to Financial Statements
DECEMBER 31, 2004
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century International Bond Funds (the trust) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. International Bond Fund (the fund) is
the sole fund issued by the trust. The fund is non-diversified under the 1940
Act. The fund's investment objective is to seek high total return. The fund
pursues its objective by investing in high-quality debt securities,
substantially all of which are nondollar-denominated foreign government and
corporate debt securities issued outside the United States. The following is a
summary of the fund's significant accounting policies.
MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the
Institutional Class and the Advisor Class. The share classes differ principally
in their respective shareholder servicing and distribution expenses and
arrangements. All shares of the fund represent an equal pro rata interest in the
assets of the class to which such shares belong, and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
for class specific expenses and exclusive rights to vote on matters affecting
only individual classes. Income, non-class specific expenses, and realized and
unrealized capital gains and losses of the fund are allocated to each class of
shares based on their relative net assets. Sale of the Institutional Class
commenced on August 2, 2004.
SECURITY VALUATIONS -- Securities are valued through a commercial pricing
service or at the mean of the most recent bid and asked prices. Debt securities
maturing within 60 days may be valued at cost, plus or minus any amortized
discount or premium. If the fund determines that the market price of a portfolio
security is not readily available, or that the valuation methods mentioned above
do not reflect the security's fair value, such security is valued at its fair
value as determined by, or in accordance with procedures adopted by, the Board
of Trustees or its designee if such fair value determination would materially
impact the fund's net asset value. Circumstances that may cause the fund to fair
value a security include: an event occurred after the close of the exchange on
which a portfolio security principally trades (but before the close of the New
York Stock Exchange) that was likely to have changed the value of the security;
a security has been declared in default; or trading in a security has been
halted during the trading day.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income less foreign taxes withheld, if any, is
recorded on the accrual basis and includes accretion of discounts and
amortization of premiums.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed
in foreign currencies are translated into U.S. dollars at prevailing exchange
rates at period end. Purchases and sales of investment securities, dividend and
interest income, and certain expenses are translated at the rates of exchange
prevailing on the respective dates of such transactions. Realized and unrealized
gains and losses from foreign currency translations arise from changes in
currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses occurring
during the holding period of investment securities are a component of realized
gain (loss) on foreign currency transactions and unrealized appreciation
(depreciation) on translation of assets and liabilities in foreign currencies,
respectively. Certain countries may impose taxes on the contract amount of
purchases and sales of foreign currency contracts in their currency. The fund
records the foreign tax expense, if any, as a reduction to the net realized gain
(loss) on foreign currency transactions.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The fund may enter into forward
foreign currency exchange contracts to facilitate transactions of securities
denominated in a foreign currency or to hedge the fund's exposure to foreign
currency exchange rate fluctuations. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the fund and the
resulting unrealized appreciation or depreciation are determined daily using
prevailing exchange rates. The fund bears the risk of an unfavorable change in
the foreign currency exchange rate underlying the forward contract.
Additionally, losses may arise if the counterparties do not perform under the
contract terms.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) has
determined are creditworthy pursuant to criteria adopted by the Board of
Trustees. Each repurchase agreement is recorded at cost. The fund requires that
the collateral, represented by securities, received in a repurchase transaction
be transferred to the custodian in a manner sufficient to enable the fund to
obtain those securities in the event of a default under the repurchase
agreement. ACIM monitors, on a daily basis, the securities transferred to ensure
the value, including accrued interest, of the
(continued)
- ------
14
Notes to Financial Statements
DECEMBER 31, 2004
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
INCOME TAX STATUS -- It is the fund's policy to distribute substantially all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income are expected to
be declared and paid quarterly. Distributions from net realized gains, if any,
are generally declared and paid twice a year.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with ACIM,
under which ACIM provides the fund with investment advisory and management
services in exchange for a single, unified management fee (the fee) per class.
The Agreement provides that all expenses of the fund, except brokerage
commissions, taxes, interest, fees and expenses of those trustees who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee is computed and
accrued daily based on the daily net assets of the fund and paid monthly in
arrears. The fee consists of (1) an Investment Category Fee based on the daily
net assets of the fund and certain other accounts managed by the investment
manager that are in the same broad investment category as the fund and (2) a
Complex Fee based on the assets of all the funds in the American Century family
of funds. The rates for the Investment Category Fee range from 0.4925% to
0.6100% and the rates for the Complex Fee (Investor Class) range from 0.2500% to
0.3100%. The Institutional Class and the Advisor Class is 0.2000% and 0.2500%,
respectively, less at each point within the Complex Fee range. The effective
annual management fee for the fund for the year ended December 31, 2004 was
0.82%, 0.62% and 0.57% for the Investor, Institutional and Advisor Classes,
respectively.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a Master
Distribution and Shareholder Services Plan (the plan) for the Advisor Class,
pursuant to Rule 12b-1 of the 1940 Act. The plan provides that the Advisor Class
will pay American Century Investment Services, Inc. (ACIS) an annual
distribution fee equal to 0.25% and an annual service fee equal to 0.25%. The
fees are computed and accrued daily based on the Advisor Class's daily net
assets and paid monthly in arrears. The distribution fee provides compensation
for expenses incurred by financial intermediaries in connection with
distributing shares of the Advisor Class including, but not limited to, payments
to brokers, dealers, and financial institutions that have entered into sales
agreements with respect to shares of the fund. The service fee provides
compensation for shareholder and administrative services rendered by ACIS, its
affiliates or independent third party providers. Fees incurred under the plan
during the year ended December 31, 2004, are detailed in the Statement of
Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment manager, ACIM, the
distributor of the trust, American Century Investment Services, Inc., and the
trust's transfer agent, American Century Services Corporation.
ACIM has entered into a Subadvisory Agreement with J.P. Morgan Investment
Management, Inc. (JPMIM) on behalf of the fund. The subadvisor makes investment
decisions for the fund in accordance with the fund's investment objectives,
policies, and restrictions under the supervision of ACIM and the Board of
Trustees. ACIM pays all costs associated with retaining JPMIM as the subadvisor
of the fund. JPMIM is a wholly owned subsidiary of J.P. Morgan Chase & Co.
(JPM). JPM is an equity investor in ACC. The fund has a bank line of credit
agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a wholly owned subsidiary
of JPM.
(continued)
- ------
15
Notes to Financial Statements
DECEMBER 31, 2004
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term investments,
for the year ended December 31, 2004, were $973,659,120 and $687,570,548,
respectively.
4. CAPITAL SHARE TRANSACTIONS
The trust has an unlimited number of shares authorized. Transactions in shares
of the fund were as follows:
- --------------------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2004
- ------------------------------------------------
Sold 47,993,169 $ 675,846,991
- ------------------------------------------------
Issued in reinvestment of distributions 1,995,138 28,736,799
- ------------------------------------------------
Redeemed (29,463,343) (403,535,285)
- --------------------------------------------------------------------------------
Net increase 20,524,964 $ 301,048,505
================================================================================
YEAR ENDED DECEMBER 31, 2003
- ------------------------------------------------
Sold 58,294,262 $ 763,965,167
- ------------------------------------------------
Issued in reinvestment of distributions 2,529,876 34,452,587
- ------------------------------------------------
Redeemed (41,073,613) (535,200,227)
- --------------------------------------------------------------------------------
Net increase 19,750,525 $ 263,217,527
================================================================================
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
PERIOD ENDED DECEMBER 31, 2004(1)
- ------------------------------------------------
Sold 87,758 $1,253,555
- ------------------------------------------------
Issued in reinvestment of distributions 170 2,476
- ------------------------------------------------
Redeemed (2,398) (35,204)
- --------------------------------------------------------------------------------
Net increase 85,530 $1,220,827
================================================================================
ADVISOR CLASS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2004
- ------------------------------------------------
Sold 1,832,224 $25,482,888
- ------------------------------------------------
Issued in reinvestment of distributions 97,856 1,407,282
- ------------------------------------------------
Redeemed (583,641) (7,999,562)
- --------------------------------------------------------------------------------
Net increase 1,346,439 $18,890,608
================================================================================
YEAR ENDED DECEMBER 31, 2003
- ------------------------------------------------
Sold 1,505,909 $19,998,856
- ------------------------------------------------
Issued in reinvestment of distributions 93,733 1,278,566
- ------------------------------------------------
Redeemed (310,436) (4,100,569)
- --------------------------------------------------------------------------------
Net increase 1,289,206 $17,176,853
================================================================================
(1) August 2, 2004 (commencement of sale) through December 31, 2004.
(continued)
- ------
16
Notes to Financial Statements
DECEMBER 31, 2004
5. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $575,000,000
unsecured bank line of credit agreement with JPMCB, which was renewed from
$650,000,000 effective December 15, 2004. The fund may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund
did not borrow from the line during the year ended December 31, 2004.
6. RISK FACTORS
There are certain risks involved in investing in foreign securities. These risks
include those resulting from future adverse political, social, and economic
developments, fluctuations in currency exchange rates, the possible imposition
of exchange controls, and other foreign laws or restrictions.
7. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended December 31, 2004
and December 31, 2003 were as follows:
- --------------------------------------------------------------------------------
2004 2003
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $36,394,564 $39,741,884
- --------------------------------------------------------------------------------
Long-term capital gains $1,899,023 $2,554,603
- --------------------------------------------------------------------------------
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts on the financial statements.
As of December 31, 2004, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
- --------------------------------------------------------------------------------
COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST
- --------------------------------------------------------------------------------
Federal tax cost of investments $883,437,334
================================================================================
Gross tax appreciation of investments $110,359,202
- ---------------------------------------------------------------
Gross tax depreciation of investments (77,050)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $110,282,152
================================================================================
Net tax appreciation on derivatives and translation
of assets and liabilities in foreign currencies $ 357,026
- --------------------------------------------------------------------------------
Net tax appreciation $110,639,178
================================================================================
Undistributed ordinary income $16,349,341
- ---------------------------------------------------------------
Accumulated long-term gains $408,921
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
(continued)
- ------
17
Notes to Financial Statements
DECEMBER 31, 2004
8. SUBSEQUENT EVENT
Effective January 1, 2005, American Century Services Corporation's name will
change to American Century Services, LLC.
9. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code. During the fiscal year ended December 31, 2004, the fund
distributed $1,899,023, which was designated as capital gains dividends.
- ------
18
International Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended December 31
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $13.64 $12.19 $10.08 $10.25 $10.55
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ------------------------
Net Investment
Income(1) 0.36 0.37 0.36 0.39 0.38
- ------------------------
Net Realized and
Unrealized Gain (Loss) 1.40 2.03 2.01 (0.56) (0.51)
- --------------------------------------------------------------------------------
Total From
Investment Operations 1.76 2.40 2.37 (0.17) (0.13)
- --------------------------------------------------------------------------------
Distributions
- ------------------------
From Net
Investment Income (0.21) (0.31) (0.26) -- (0.11)
- ------------------------
From Net
Realized Gains (0.43) (0.64) -- -- (0.06)
- --------------------------------------------------------------------------------
Total Distributions (0.64) (0.95) (0.26) -- (0.17)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $14.76 $13.64 $12.19 $10.08 $10.25
================================================================================
TOTAL RETURN(2) 13.10% 19.91% 23.53% (1.66)% (1.20)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.83% 0.84% 0.85% 0.86% 0.87%
- ------------------------
Ratio of Net
Investment Income
to Average Net Assets 2.60% 2.80% 3.28% 3.87% 3.85%
- ------------------------
Portfolio
Turnover Rate 104% 112% 137% 147% 221%
- ------------------------
Net Assets,
End of Period
(in thousands) $976,828 $622,657 $315,491 $115,172 $111,320
- --------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
19
International Bond - Financial Highlights
For a Share Outstanding Throughout the Period Ended December 31
- --------------------------------------------------------------------------------
INSTITUTIONAL
CLASS
- --------------------------------------------------------------------------------
2004(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.37
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------------------
Net Investment Income(2) 0.17
- -----------------------------------------------------------------
Net Realized and Unrealized Gain 1.84
- --------------------------------------------------------------------------------
Total From Investment Operations 2.01
- --------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------------------
From Net Investment Income (0.18)
- -----------------------------------------------------------------
From Net Realized Gains (0.43)
- --------------------------------------------------------------------------------
Total Distributions (0.61)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $14.77
================================================================================
TOTAL RETURN(3) 15.25%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.63%(4)
- -----------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.88%(4)
- -----------------------------------------------------------------
Portfolio Turnover Rate 104%(5)
- -----------------------------------------------------------------
Net Assets, End of Period (in thousands) $1,263
- --------------------------------------------------------------------------------
(1) August 2, 2004 (inception) through December 31, 2004.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended December 31, 2004.
See Notes to Financial Statements.
- ------
20
International Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended December 31
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $13.62 $12.16 $10.03 $10.23 $10.52
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ------------------------
Net Investment
Income(1) 0.32 0.29 0.33 0.36 0.35
- ------------------------
Net Realized and
Unrealized Gain (Loss) 1.42 2.08 2.00 (0.56) (0.50)
- --------------------------------------------------------------------------------
Total From
Investment Operations 1.74 2.37 2.33 (0.20) (0.15)
- --------------------------------------------------------------------------------
Distributions
- ------------------------
From Net
Investment Income (0.18) (0.27) (0.20) -- (0.08)
- ------------------------
From Net
Realized Gains (0.43) (0.64) -- -- (0.06)
- --------------------------------------------------------------------------------
Total Distributions (0.61) (0.91) (0.20) -- (0.14)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $14.75 $13.62 $12.16 $10.03 $10.23
================================================================================
TOTAL RETURN(2) 12.93% 19.60% 23.24% (1.96)% (1.35)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.08% 1.09% 1.10% 1.11% 1.12%
- ------------------------
Ratio of Net
Investment Income
to Average Net Assets 2.35% 2.55% 3.03% 3.62% 3.60%
- ------------------------
Portfolio
Turnover Rate 104% 112% 137% 147% 221%
- ------------------------
Net Assets,
End of Period
(in thousands) $42,736 $21,137 $3,192 $1,983 $918
- --------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
21
Report of Independent Registered Public Accounting Firm
To the Trustees of the American Century International Bond Funds
and Shareholders of the International Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the International Bond Fund (the
sole fund comprising the American Century International Bond Funds, hereafter
referred to as the "Fund") at December 31, 2004, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2004 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
February 23, 2005
- ------
22
Management
The individuals listed below serve as trustees or officers of the fund. Each
trustee serves until his or her successor is duly elected and qualified or until
he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the remaining
independent trustees. The independent trustees have extended the mandatory
retirement age of Mr. Eisenstat to 75. Mr. Scott may serve until age 77 based on
an extension granted under retirement guidelines in effect prior to March 2004.
Those listed as interested trustees are "interested" primarily by virtue of
their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly-owned subsidiaries, including the fund's investment advisor, American
Century Investment Management, Inc. (ACIM); the fund's principal underwriter,
American Century Investment Services, Inc. (ACIS); and the fund's transfer
agent, American Century Services Corporation (ACSC).
The other trustees (more than three-fourths of the total numbers) are
independent; that is, they have never been employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM, ACIS, and ACSC. The trustees serve in this capacity for six registered
investment companies in the American Century family of funds.
All persons named as officers of the fund also serve in a similar capacity for
the other 13 investment companies advised by ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated for
his or her service as an officer of the fund. The listed officers are interested
persons of the fund and are appointed or re-appointed on an annual basis.
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
ALBERT EISENSTAT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1930
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Private Investor
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Independent Director, Sungard Data Systems
(1991 to present); Independent Director, Business Objects S/A (1994 to present);
Independent Director, Commercial Metals (1983 to 2001)
- --------------------------------------------------------------------------------
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Advisory Board Member
LENGTH OF TIME SERVED (YEARS): less than 1 year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to present); Partner and Founder, Ware &
Freidenrich (1968 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
(continued)
- ------
23
Management
INDEPENDENT TRUSTEES (CONTINUED)
- --------------------------------------------------------------------------------
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Lead Trustee
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of Law
and Business, Stanford Law School (1979 to present); Mark and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present); Counsel, Marron, Reid & Sheehy (a San Francisco law firm, 1984 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
KATHRYN A. HALL, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Co-Chief Executive Officer and
Chief Investment Officer, Offit Hall Capital Management, LLC (April 2002 to
present); President and Managing Director, Laurel Management Company, L.L.C.
(1996 to April 2002)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Princeton University Investment
Company (1997 to present); Director, Stanford Management Company (2001 to
present); Director, UCSF Foundation (2000 to present); Director, San Francisco
Day School (1999 to present)
- --------------------------------------------------------------------------------
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 23
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Oak Hill Platinum
Partners, and a Partner, Oak Hill Capital Management (1999 to present); Frank E.
Buck Professor of Finance-Emeritus, Stanford Graduate School of Business (1981
to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
- --------------------------------------------------------------------------------
KENNETH E. SCOTT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1928
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 32
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Ralph M. Parsons Professor of Law
and Business, Stanford Law School (1972 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 1
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1977 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present); Director, Watson Wyatt Worldwide (2002 to present); Director,
Palmsource Inc. (2002 to present)
- --------------------------------------------------------------------------------
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 19
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Director and Partner,
Windy Hill Productions, LP (educational software, 1994 to 1998)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Quintus Corporation (automation
solutions, 1995 to present)
- --------------------------------------------------------------------------------
(continued)
- ------
24
Management
INTERESTED TRUSTEE
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Trustee, Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC and
other ACC subsidiaries (September 2000 to present); President, ACC (June 1997 to
present); President, ACIM (September 2002 to present); President, ACIS (July
2003 to present); Chief Operating Officer, ACC (June 1996 to September 2000);
Also serves as: Executive Vice President, ACSC and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- --------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: See entry under "Interested
Trustee."
- --------------------------------------------------------------------------------
ROBERT T. JACKSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Executive Vice President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC
(August 1997 to present); Chief Financial Officer, ACC (May 1995 to October
2002); Chairman, American Century Ventures, Inc. (April 2004 to present);
President, ACSC (January 1999 to present); Executive Vice President, ACC (May
1995 to present); Also serves as: Executive Vice President and Chief Financial
Officer, ACIM, ACIS and other ACC subsidiaries; and Treasurer, ACIM
- --------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer and Chief
Accounting Officer
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President (April 1998
to present) and Assistant Treasurer, ACIM, ACIS and ACSC (September 1985 to
present)
- --------------------------------------------------------------------------------
DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1958
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
LENGTH OF TIME SERVED (YEARS): 5
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President and General
Counsel, ACIM, ACIS, ACSC, and other ACC subsidiaries (June 1998 to present);
Vice President and General Counsel, ACC (June 1998 to present)
- --------------------------------------------------------------------------------
DAVID H. REINMILLER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer
LENGTH OF TIME SERVED (YEARS): 3 and less than 1 year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACSC and
ACIM (March 2001 to present); Vice President, ACSC (March 2000 to present); Vice
President, ACIM (March 2002 to present); Vice President, ACIS (March 2003 to
present); Assistant General Counsel, ACSC (December 1996 to January 2001);
Associate General Counsel, ACSC (July 2001 to present)
- --------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Controller
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
- --------------------------------------------------------------------------------
(continued)
- ------
25
Management
OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------
C. JEAN WADE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1964
POSITION(S) HELD WITH FUND: Controller(1)
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, Corporate Tax, ACSC
(April 1998 to present); Vice President, ACIM, ACIS and other ACC subsidiaries
(April 1999 to present); President, American Century Employee Benefit Services,
Inc. (January 2000 to December 2000); Director, American Century Employee
Benefit Services, Inc. (February 2000 to December 2003); Treasurer, American
Century Employee Benefit Services, Inc. (December 2000 to December 2003);
Treasurer, American Century Ventures, Inc. (December 1999 to April 2001)
- --------------------------------------------------------------------------------
(1) Ms. Wade serves in a similar capacity for seven other investment companies
advised by ACIM.
The SAI has additional information about the fund's trustees and is available
without charge upon request by calling 1-800-345-2021.
- ------
26
Share Class Information
Three classes of shares are authorized for sale by the fund: Investor Class,
Institutional Class and Advisor Class. The total expense ratio for Advisor Class
shares is higher than that of Investor Class shares. The total expense ratio for
Institutional Class shares is lower than that of Investor Class shares.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) in an American Century fund or at least $10
million in multiple funds. In recognition of the larger investments and account
balances and comparatively lower transaction costs, the total expense ratio of
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as investment
advisors, banks, broker-dealers, insurance companies, and financial advisors.
Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and
distribution fee. The total expense ratio of Advisor Class shares is 0.25%
higher than the total expense ratio of Investor Class shares.
All classes of shares represent a pro rata interest in the fund and generally
have the same rights and preferences.
- ------
27
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment manager, is
responsible for exercising the voting rights associated with the securities
purchased and/or held by the fund. A description of the policies and procedures
the manager uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century's Web site at americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
manager voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The fund's form N-Q is available on the SEC's Web site at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of
portfolio holdings for the most recent quarter of its fiscal year available on
its Web site at americancentury.com and, upon request, by calling
1-800-345-2021.
- ------
28
Index Definition
The following index is used to illustrate investment market, sector, or style
performance or to serve as a fund performance comparison. It is not an
investment product available for purchase.
The J.P. MORGAN GLOBAL TRADED GOVERNMENT BOND INDEX (JPM GTGBI) is a
market-capitalization weighted index consisting of regularly traded, fixed-rate
government bonds from certain developed foreign countries in North America,
Europe, Asia, and Australia.
Since January 1998, the FUND BENCHMARK has been the JPM GTGBI with the U.S.
excluded and Japan weighted at 15%.
Prior to January 1998, the FUND BENCHMARK was the J.P. Morgan ECU-Weighted
European Index.
- ------
29
Notes
- ------
30
Notes
- ------
31
Notes
- ------
32
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
The American Century Investments logo, American Century
and American Century Investments are service marks
of American Century Proprietary Holdings, Inc.
American Century Investment Services, Inc., Distributor
(c)2005 American Century Proprietary Holdings, Inc. All rights reserved.
0502
SH-ANN-41846N
ITEM 2. CODE OF ETHICS.
a. The registrant has adopted a Code of Ethics for Senior Financial
Officers that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer, and persons
performing similar functions.
b. No response required.
c. None.
d. None.
e. Not applicable.
f. The registrant's Code of Ethics for Senior Financial Officers was
filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s Annual
Certified Shareholder Report on Form N-CSR, File No. 811-0816, on
December 23, 2003, and is incorporated herein by reference.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board has determined that the registrant has at least
one audit committee financial expert serving on its audit committee.
(a)(2) Albert Eisenstat is the registrant's designated audit committee
financial expert. He is "independent" as defined in Item 3 of Form
N-CSR.
(a)(3) Not applicable.
(b) No response required.
(c) No response required.
(d) No response required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit of the
registrant's annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements for those fiscal years were as follows:
FY 2003: $20,076
FY 2004: $26,851
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit of the registrant's financial statements
and are not reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2003: $0
FY 2004: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit services
with the registrant's investment adviser and its affiliates):
FY 2003: $0
FY 2004: $0
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning were as follows:
For services rendered to the registrant:
FY 2003: $4,200
FY 2004: $4,324
These services included review of federal and state income tax forms
and federal excise tax forms.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit services
with the registrant's investment adviser and its affiliates):
FY 2003: $0
FY 2004: $0
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than the
services reported in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2003: $0
FY 2004: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit services
with the registrant's investment adviser and its affiliates):
FY 2003: $0
FY 2004: $0
(e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation
S-X, before the accountant is engaged by the registrant to render
audit or non-audit services, the engagement is approved by the
registrant's audit committee. Pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X, the registrant's audit committee also
pre-approves its accountant's engagements for non-audit services with
the registrant's investment adviser, its parent company, and any
entity controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant, if the
engagement relates directly to the operations and financial reporting
of the registrant.
(e)(2) All services described in each of paragraphs (b) through (d) of this
Item were pre-approved before the engagement by the registrant's audit
committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of
Regulation S-X. Consequently, none of such services were required to
be approved by the audit committee pursuant to paragraph (c)(7)(i)(C).
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years of
the registrant were as follows:
FY 2003: $89,650
FY 2004: $159,324
(h) The registrant's investment adviser and accountant have notified the
registrant's audit committee of all non-audit services that were
rendered by the registrant's accountant to the registrant's investment
adviser, its parent company, and any entity controlled by, or under
common control with the investment adviser that provides services to
the registrant, which services were not required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The
notification provided to the registrant's audit committee included
sufficient details regarding such services to allow the registrant's
audit committee to consider the continuing independence of its
principal accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedule of investments is included as part of the report to stockholders
filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
As of the end of the reporting period, the registrant did not have in place
procedures by which shareholders may recommend nominees to the registrant's
board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) are effective based on their evaluation of these controls
and procedures as of a date within 90 days of the filing date of this
report.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) that occurred during the registrant's second
fiscal quarter of the period covered by this report that have
materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Registrant's Code of Ethics for Senior Financial Officers, which is
the subject of the disclosure required by Item 2 of Form N-CSR, was
filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s
Certified Shareholder Report on Form N-CSR, File No. 811-3706, on
December 23, 2003.
(a)(2) Separate certifications by the registrant's principal executive
officer and principal financial officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are filed and attached hereto as Exhibit
99.302CERT.
(a)(3) Not applicable.
(b) A certification by the registrant's chief executive officer and chief
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AMERICAN CENTURY INTERNATIONAL BOND FUNDS
By: /s/ William M. Lyons
-------------------------------------------------------
Name: William M. Lyons
Title: President
Date: March 1, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ William M. Lyons
-------------------------------------------------------
Name: William M. Lyons
Title: President
(principal executive officer)
Date: March 1, 2005
By: /s/ Maryanne L. Roepke
-------------------------------------------------------
Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer, and
Chief Accounting Officer
(principal financial officer)
Date: March 1, 2005
