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)
CHARLES A. ETHERINGTON, 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
-----------------------------
Date of fiscal year end: 06-30
--------------------------------------------------------
Date of reporting period: 06-30-2008
-------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
[front cover]
ANNUAL REPORT
JUNE 30, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
INTERNATIONAL BOND FUND
PRESIDENT'S LETTER
[photo of Jonathan Thomas]
JONATHAN THOMAS
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance. That's
why we focus on achieving superior investment results and building long-term
relationships with investors like you.
Part of that relationship is to clearly communicate investment results and what
influenced them. To help you monitor your investment with us, we take pride in
providing you with the annual report for the American Century® International
Bond Fund for the 12 months ended June 30, 2008. We also recommend
americancentury.com, where we provide company news, quarterly portfolio
commentaries, investment views, and other useful information.
As noted on the website, 2008 marks the 50th anniversary of American Century
Investments. Since 1958, we've worked to make wise decisions with your interests
as our guide. Fifty years also means that we've met the challenges of previous
economic downturns. As we've crossed those hurdles and earned your trust, our
assets under management have grown to nearly $100 billion, putting us in the top
5% of our industry. This growth has given us the resources to offer a wide array
of financial products and services, including a well-diversified lineup of
portfolios that provides you with many choices in these uncertain times.
Though our offerings are diverse, they share several key qualities, including
our disciplined investment approach and active, team-based management. Strict
adherence to our processes and long-term strategies allows us to stay focused
during volatile periods. Investors in our portfolios also benefit from the sum
of our investment teams' expertise as they share research and information.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/ Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
TABLE OF CONTENTS
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Influential Currency & Global Fixed-Income Returns . . . . . . . . . 2
INTERNATIONAL BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 5
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . 5
Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . 5
Bond Holdings by Country . . . . . . . . . . . . . . . . . . . . . . 6
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . 7
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 9
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 15
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 17
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 18
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 19
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 25
Report of Independent Registered Public Accounting Firm . . . . . . . 31
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Approval of Management Agreement for International Bond . . . . . . . 35
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 40
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 41
The opinions expressed in the Market Perspective and 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 Investments or any
other person in the American Century Investments organization. Any such opinions
are subject to change at any time based upon market or other conditions and
American Century Investments disclaims any responsibility to update such
opinions. These opinions may not be relied upon as investment advice and,
because investment decisions made by American Century Investments funds are
based on numerous factors, may not be relied upon as an indication of trading
intent on behalf of any American Century Investments fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century Investments by third party
vendors. To the best of American Century Investments' knowledge, such
information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of chief investment officer]
By David MacEwen, Chief Investment Officer, Fixed Income
TERRIFIC 12-MONTH RETURNS DESPITE SECOND-QUARTER STRUGGLES IN '08
Talk about a tough act to follow: After dazzling investors with double-digit
figures in the second half of 2007, international bond returns (in dollar terms)
slowed to single digits in the first half of 2008, which still produced
remarkable double-digit performance for the 12 months ended June 30, 2008. The
JPMorgan Government Bond Index-Global (excluding the United States), which is
representative of the holdings in American Century International Bond, returned
18.58% for the 12 months, its best fiscal-year results in five years.
But the strong 12-month returns masked a market reversal in the second quarter
of 2008 from factors that could influence future quarters as well. The reversal
came after a stretch of unsustainably strong performance, and was inevitable
from that perspective, given the volatile history of the international bond and
currency markets. From the start of the 12-month reporting period in July 2007
to mid-March 2008, the JPMorgan index jumped over 25%. Credit tightening,
contagion from the U.S. economic downturn, and flight-to-quality demand produced
positive bond total returns. Meanwhile, the dollar reached an all-time low on a
trade-weighted basis versus major trading partners as investors sought to reduce
exposure to the housing slump, credit crisis, and economic downturn in the U.S.
INFLATION FOCUS & DOLLAR STABILIZATION TURNED THE TIDE
Conditions changed in the spring of 2008. From mid-March to the end of the
reporting period, the JPMorgan index turned negative as inflation concerns
gripped the bond markets, flight to quality eased as financial market liquidity
issues were addressed, and the U.S. dollar stabilized. Soaring commodity prices
and the resulting focus on inflation caused government bond yields to rise and
yield curves to flatten as bond markets priced in interest rate hikes and
investors sought riskier assets with more inflation protection potential.
Meanwhile, growing expectations of Federal Reserve interest rate hikes steadied
the dollar.
Influential Currency & Global Fixed-Income Returns
For the 12 months ended June 30, 2008
CURRENCY RETURNS
U.S. Dollar vs. Euro -14.04%
U.S. Dollar vs. Japanese Yen -13.78%
INTERNATIONAL BOND MARKET RETURNS (IN DOLLARS)
JPMorgan Government Bond Index -- Global, excluding U.S. 18.58%
JPMorgan Global Traded Government Bond Index 16.72%
- ------
2
PERFORMANCE
International Bond
Total Returns as of June 30, 2008
Average Annual Returns
Since Inception
1 year 5 years 10 years Inception Date
INVESTOR CLASS 15.03% 6.90% 6.62% 6.80% 1/7/92
FUND BENCHMARK(1) 18.10% 8.36% 7.87% 7.49%(2) --
JPMORGAN GLOBAL TRADED
GOVERNMENT BOND INDEX 16.72% 6.25% 6.41% 6.64%(2) --
Institutional Class 15.29% -- -- 7.38% 8/2/04
A Class(3)
No sales charge* 14.50% 6.61% -- 5.34%
With sales charge* 9.38% 5.64% -- 4.84% 10/27/98
B Class
No sales charge* -- -- -- 6.38%(4)
With sales charge* -- -- -- 1.38%(4) 9/28/07
C Class
No sales charge* -- -- -- 6.38%(4)
With sales charge* -- -- -- 5.38%(4) 9/28/07
R Class -- -- -- 6.76%(4) 9/28/07
* Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 4.50% maximum initial
sales charge for fixed-income funds and may be subject to a maximum CDSC of
1.00%. B Class shares redeemed within six years of purchase are subject to a
CDSC that declines from 5.00% during the first year after purchase to 0.00% the
sixth year after purchase. C Class shares redeemed within 12 months of purchase
are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds
provide performance information net of maximum sales charges in all cases where
charges could be applied.
(1) See Index Definitions page.
(2) Since 12/31/91, the date nearest the Investor Class's inception for which
data are available.
(3) Prior to September 4, 2007, the A Class was referred to as the Advisor
Class. Performance, with sales charge, prior to that date has been adjusted to
reflect the A Class's current sales charge.
(4) Total 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 index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
- ------
3
International Bond
Growth of $10,000 Over 10 Years
$10,000 investment made June 30, 1998
One-Year Returns Over 10 Years
Periods ended June 30
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Investor
Class 2.76% -2.64% -6.23% 18.64% 22.17% 6.93% 8.30% 0.74% 4.08% 15.03%
Fund
benchmark 3.42% -1.18% -5.97% 19.78% 24.06% 7.90% 9.81% 1.94% 4.75% 18.10%
JPMorgan
Global
Traded
Government
Bond Index 3.63% 2.70% -2.55% 13.73% 16.57% 5.36% 7.82% -0.58% 2.70% 16.72%
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 index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
- ------
4
PORTFOLIO COMMENTARY
International Bond
Portfolio Manager: Jon Jonsson, J.P. Morgan Investment Management
PERFORMANCE SUMMARY
International Bond returned 15.03%* for the 12 months ended June 30, 2008, its
best fiscal-year performance since 2003. By comparison, the JPMorgan Global
Traded Government Bond Index (JPM GTGBI) returned 16.72% and the fund's
benchmark -- the JPM GTGBI with the U.S. excluded and Japan weighted at 15% --
returned 18.10%. Of course, the fund's results reflect operating expenses, while
the returns of the indices do not.
The unusually strong absolute performance of the fund and the indices -- over
double their average annual total returns since the fund's Investor Class
inception date -- reflected U.S. dollar weakness and a favorable investment
climate for high-quality bonds for most of the reporting period (see the Market
Perspective on page 2). In relative terms, the fund trailed the indices
primarily because of its exposure to spread (non-Treasury) sectors that
experienced exceptional volatility.
PORTFOLIO POSITIONING AND STRATEGY
Our strategy results were mixed, with positioning across spread sectors
dominating portfolio returns versus the benchmark. Our spread sector exposure
dragged significantly on portfolio performance as subprime mortgage fallout was
felt across all fixed income sectors, regardless of issuer market or quality,
but especially in spread products.
The bond market selloff and yield curve flattening that occurred in the spring
of 2008 (see the Market Perspective on page 2) also hurt relative performance.
The portfolio was positioned for yield curve steepening in the United Kingdom
(U.K.) and the euro-zone, which we believe will resume as global economic growth
slows and central banks are forced to cut short-term interest rates. Similarly,
we had a bias toward the Japanese yen in our currency positioning because of our
expectations of relative economic strength in Japan compared with the U.S. and
the euro-zone. The yen bias worked against us toward the end of the reporting
period, but we still have conviction in that position going forward.
Portfolio at a Glance
As of As of
6/30/08 6/30/07
Weighted Average Maturity 9.0 years 8.4 years
Average Duration (Modified) 6.7 years 6.7 years
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
6/30/08 12/31/07
Government Bonds 70.9% 61.6%
Credit 26.3% 31.3%
Short-Term Investments 0.5% 3.7%
Temporary Cash Investments 2.6% 3.4%
Other Assets and Liabilities (0.3)% --(1)
(1) Category is less than 0.05% of total net assets.
*All fund returns referenced in this commentary are for Investor Class shares.
- ------
5
International Bond
GLOBAL ECONOMIC AND INTEREST RATE OUTLOOK
We tend to look at the global, developed-nation fixed-income markets that we
typically invest in on a three-part regional basis -- euro-zone, U.K., and
Japan. The main theme going forward is slowing global growth and expected
central bank interest rate cuts like we saw in the U.S. That is why we are
maintaining our steepening yield curve biases.
Similar to the U.S., where the Fed now appears boxed in by conflicting recession
and inflation threats, the euro-zone has its own inflation-growth debate. The
European Central Bank (ECB) raised rates once this summer, and the risk of
further rate-hike action clearly exists. Despite weakening growth, the ECB has
reiterated that its mandate is inflation. However, we expect inflation to peak
in the next few months (oil prices permitting) and then the focus of the ECB
will turn to growth. Some of the peripheral euro-zone economies are already
showing negative growth. We expect the ECB to remain on hold for now, with the
next rate move being a cut, most likely in the early part of next year.
Our growth outlook for the U.K. is the worst of the major economies. The U.K.
economy is slowing rapidly, and the contraction is not just limited to the
housing and mortgage markets. We believe it's only a matter of time before we
see rate cuts in the U.K., despite inflation pressures.
In Japan, the economy is clearly softening in both the corporate and household
sectors. Earnings forecasts are fairly weak due to a margin squeeze from
cost-push inflation and weakening overseas demand. Consumer sentiment remains at
its lowest level since 2002. While overseas central banks still seem focused
more on inflation, the Bank of Japan is focusing more on recession risk.
Therefore, we consider a rate hike unlikely this year, though one has been
priced in by the markets (similar to the U.S.).
Bond Holdings by Country
% of net % of net
assets as of assets as of
6/30/08 12/31/07
United Kingdom 19.5% 18.4%
Germany* 13.5% 16.0%
Japan 13.4% 12.6%
France* 8.7% 10.8%
Spain* 8.5% 9.1%
Italy* 6.6% 7.2%
Belgium* 4.7% 4.7%
Netherlands* 4.4% 4.7%
Denmark 4.3% 1.7%
Canada 3.8% 1.8%
Multi-National 3.8% 4.1%
Sweden 2.7% 1.5%
Ireland* 2.1% 0.7%
Finland* 1.4% 3.0%
Australia 0.3% 0.3%
Cash and Equivalents** 2.3% 3.4%
* These countries are members of the euro-zone.
** Includes temporary cash investments and other assets and liabilities.
- ------
6
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 January 1, 2008 to June 30, 2008.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or
Institutional Class shares of the American Century Diversified Bond Fund, in an
American Century Investments account (i.e., not a financial intermediary or
retirement plan account), American Century Investments may charge you a $12.50
semiannual account maintenance fee if the value of those shares is less than
$10,000. We will redeem shares automatically in one of your accounts to pay the
$12.50 fee. In determining your total eligible investment amount, we will
include your investments in all PERSONAL ACCOUNTS (including American Century
Investments Brokerage accounts) registered under your Social Security number.
PERSONAL ACCOUNTS include individual accounts, joint accounts, UGMA/UTMA
accounts, personal trusts, Coverdell Education Savings Accounts and IRAs
(including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and
certain other retirement accounts. If you have only business, business
retirement, employer-sponsored or American Century Investments Brokerage
accounts, you are currently not subject to this fee. 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.
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.
- ------
7
Beginning Ending
Account Account Expenses Paid Annualized
Value Value During Period* Expense
1/1/08 6/30/08 1/1/08 - 6/30/08 Ratio*
ACTUAL
Investor Class $1,000 $1,042.00 $4.16 0.82%
Institutional Class $1,000 $1,043.40 $3.15 0.62%
A Class $1,000 $1,041.50 $5.43 1.07%
B Class $1,000 $1,037.20 $9.22 1.82%
C Class $1,000 $1,037.20 $9.22 1.82%
R Class $1,000 $1,039.30 $6.69 1.32%
HYPOTHETICAL
Investor Class $1,000 $1,020.79 $4.12 0.82%
Institutional Class $1,000 $1,021.78 $3.12 0.62%
A Class $1,000 $1,019.54 $5.37 1.07%
B Class $1,000 $1,015.81 $9.12 1.82%
C Class $1,000 $1,015.81 $9.12 1.82%
R Class $1,000 $1,018.30 $6.62 1.32%
* 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
182, the number of days in the most recent fiscal half-year, divided by 366, to
reflect the one-half year period.
- ------
8
SCHEDULE OF INVESTMENTS
International Bond
JUNE 30, 2008
Principal Amount Value
Government Bonds -- 70.9%
BELGIUM -- 4.7%
Euro 14,550,000 Kingdom of Belgium, 8.00%, 3/28/15 $ 26,918,531
Euro 52,000,000 Kingdom of Belgium, 4.00%, 3/28/18 75,936,217
--------------
102,854,748
--------------
CANADA -- 2.9%
Euro 3,500,000 Government of Canada, 4.875%, 7/7/08 5,512,619
Euro 20,000,000 Government of Canada, 4.50%, 11/5/12 30,288,865
CAD 22,001,000 Government of Canada, 5.75%, 6/1/33 27,128,045
--------------
62,929,529
--------------
DENMARK -- 4.3%
DKK 437,000,000 Kingdom of Denmark, 6.00%, 11/15/09 93,459,864
--------------
FINLAND -- 1.4%
Euro 20,000,000 Government of Finland, 4.25%, 9/15/12 30,830,525
--------------
FRANCE -- 4.3%
Euro 28,100,000 Government of France, 5.50%, 4/25/29 46,921,246
Euro 10,700,000 Government of France, 5.75%, 10/25/32 18,531,055
Euro 18,180,000 Government of France, 4.75%, 4/25/35 27,551,448
--------------
93,003,749
--------------
GERMANY -- 6.6%
Euro 43,000,000 German Federal Republic, 3.50%, 1/4/16 62,924,462
Euro 21,640,000 German Federal Republic, 5.625%, 1/4/28 36,831,628
Euro 4,650,000 German Federal Republic, 4.75%, 7/4/28 7,145,766
Euro 23,880,000 German Federal Republic, 4.75%, 7/4/34 36,597,783
--------------
143,499,639
--------------
ITALY -- 6.6%
Euro 44,550,000 Republic of Italy, 5.25%, 8/1/17 71,076,511
Euro 32,070,000 Republic of Italy, 5.00%, 8/1/34 47,737,476
Euro 20,100,000 Republic of Italy, 4.00%, 2/1/37 25,232,291
--------------
144,046,278
--------------
Principal Amount Value
JAPAN -- 12.8%
JPY 6,670,000,000 Government of Japan, 1.20%, 3/20/12 $ 63,320,055
JPY 9,186,400,000 Government of Japan, 1.30%, 3/20/15 86,627,140
JPY 4,118,000,000 Government of Japan, 1.70%, 12/20/16 39,626,784
JPY 2,191,000,000 Government of Japan, 1.70%, 9/20/17 20,972,190
JPY 3,710,286,000 Government of Japan, 1.40%, 3/10/18 35,777,116
JPY 660,000,000 Government of Japan, 1.90%, 6/20/25 6,076,612
JPY 2,951,000,000 Government of Japan, 2.10%, 12/20/26 27,477,015
--------------
279,876,912
--------------
NETHERLANDS -- 4.4%
Euro 42,500,000 Kingdom of Netherlands, 3.75%, 7/15/09 66,312,719
Euro 22,450,000 Kingdom of Netherlands, 4.00%, 1/15/37 30,189,327
--------------
96,502,046
--------------
SPAIN -- 4.5%
Euro 62,250,000 Government of Spain, 5.40%, 7/30/11 99,403,416
--------------
SWEDEN -- 2.7%
SEK 352,860,000 Government of Sweden, 5.50%, 10/8/12 60,373,056
--------------
UNITED KINGDOM -- 15.7%
GBP 128,000,000 Government of United Kingdom, 5.00%,
3/7/12 253,595,159
GBP 11,100,000 Government of United Kingdom, 8.00%,
6/7/21 27,838,142
GBP 850,000 Government of United Kingdom, 4.25%,
6/7/32 1,543,359
GBP 31,600,000 Government of United Kingdom, 4.50%,
12/7/42 61,373,058
--------------
344,349,718
--------------
TOTAL GOVERNMENT BONDS
(Cost $1,474,997,334) 1,551,129,480
--------------
- ------
9
International Bond
Principal Amount Value
Credit -- 26.3%
AUSTRALIA -- 0.3%
AUD 8,100,000 New South Wales Treasury Corp., 5.50%,
3/1/17 $ 7,007,501
--------------
CANADA -- 0.9%
CAD 19,630,000 Canada Housing Trust, 4.55%, 12/15/12 19,786,245
--------------
FRANCE -- 3.9%
JPY 2,750,000,000 Compagnie de Financement Foncier, MTN,
1.25%, 12/1/11 25,857,625
Euro 37,900,000 Dexia Municipal Agency, MTN, 3.25%,
7/12/08 59,667,816
--------------
85,525,441
--------------
GERMANY -- 6.9%
Euro 44,300,000 Eurohypo AG, (Covered Bond), 3.75%,
4/11/11 67,157,236
GBP 21,900,000 KfW, 5.50%, 9/15/09 43,578,274
JPY 1,100,000,000 KfW, 2.60%, 6/20/37 10,689,353
Euro 19,000,000 Landesbank Baden-Wuerttemberg, 4.50%,
10/5/12 29,182,522
--------------
150,607,385
--------------
IRELAND -- 2.1%
Euro 19,800,000 AIB Mortgage Bank, 3.50%, 4/30/09 30,611,942
Euro 10,000,000 Ulster Bank Finance plc, VRN, 5.05%,
9/29/08, resets quarterly off the
3-month Euribor plus 0.09% with no caps 15,597,448
--------------
46,209,390
--------------
JAPAN -- 0.6%
JPY Development Bank of Japan, 2.30%,
1,280,000,000 3/19/26 12,392,925
--------------
MULTI-NATIONAL -- 3.8%
GBP 10,550,000 European Investment Bank, 4.75%, 6/6/12 20,248,837
Euro 39,000,000 European Investment Bank, 5.375%,
10/15/12 62,178,986
--------------
82,427,823
--------------
Principal Amount Value
SPAIN -- 4.0%
Euro 43,400,000 AYT Cedulas Cajas VII, 4.00%, 6/23/11 $ 64,958,843
Euro 2,950,343 FTA Santander Auto, VRN, 4.91%,
8/25/08, resets quarterly off the
3-month Euribor plus 0.06% with no caps 4,594,662
Euro 13,021,292 UCI, VRN, 5.10%, 9/18/08, resets
quarterly off the 3-month Euribor plus
0.14% with no caps 18,707,407
--------------
88,260,912
--------------
UNITED KINGDOM -- 3.8%
Euro 10,000,000 Barclays Bank plc, MTN, VRN, 4.96%,
7/21/08, resets quarterly off the
3-month Euribor plus 0.18% with no caps 14,760,765
Euro 10,000,000 HBOS Treasury Services plc, MTN, VRN,
5.06%, 9/15/08, resets quarterly off
the 3-month Euribor plus 0.10% with no
caps 15,003,355
GBP 12,550,000 Network Rail Infrastructure Finance
plc, MTN, 4.75%, 11/29/35 24,062,062
Euro 20,000,000 Royal Bank of Scotland Group plc,
3.25%, 1/25/13 28,362,136
--------------
82,188,318
--------------
TOTAL CREDIT
(Cost $509,087,524) 574,405,940
--------------
Short-Term Investments -- 0.5%
FRANCE -- 0.5%
Euro 7,159,000 Government of France Treasury Bill,
3.75%, 7/31/08(1)(2)
(Cost $10,606,215) 11,240,424
--------------
Temporary Cash Investments -- 2.6%
USD 57,534,000 FHLB Discount Notes, 2.00%, 7/1/08(1)
(Cost $57,534,000) 57,534,000
--------------
TOTAL INVESTMENT SECURITIES -- 100.3%
(Cost $2,052,225,073) 2,194,309,844
--------------
OTHER ASSETS AND LIABILITIES -- (0.3)% (6,203,275)
--------------
TOTAL NET ASSETS -- 100.0% $2,188,106,569
==============
- ------
10
International Bond
Futures Contracts
Underlying
Expiration Face Amount Unrealized
Contracts Purchased Date at Value Gain (Loss)
1,408 Euro-Bobl September 2008 $234,585,352 $(3,818,864)
5-year 6% Future
Euro-Bund
103 10-year 6% Future September 2008 17,937,801 16,042
778 U.K. Treasury September 2008 161,894,968 (2,807,753)
10-year 6% Future
------------
------------
$414,418,121 $(6,610,575)
============
============
Underlying
Expiration Face Amount Unrealized
Contracts Sold Date at Value Gain (Loss)
205 Canada 10-year September 2008 $ 23,663,686 $139,969
6% Bond Future
540 Euro-Schatz September 2008 87,030,241 104,170
2-year 6% Future
5 Japan 10-year September 2008 6,387,042 (48,698)
6% Bond Future
------------
------------
$117,080,969 $195,441
============ ============
Forward Foreign Currency Exchange Contracts
Settlement Unrealized
Contracts to Sell Date Value Gain (Loss)
2,508,862 Euro for AUD 7/11/08 $ 3,947,154 $ (56,914)
2,276,469 Euro for AUD 7/11/08 3,581,534 (72,635)
1,643,050 GBP for AUD 7/11/08 3,269,213 (34,876)
1,595,516,825 JPY for AUD 7/11/08 15,031,637 (254,252)
2,107,251,089 JPY for AUD 7/11/08 19,852,773 (266,252)
28,560,230 NOK for AUD 7/11/08 5,548,528 136,999
19,307,587 Euro for CAD 7/11/08 30,376,333 (475,870)
1,715,401 GBP for CAD 7/11/08 3,413,171 (4,986)
1,418,095 Euro for CHF 7/11/08 2,231,068 (54,592)
36,390,866 Euro for CHF 7/11/08 57,253,195 (896,918)
4,426,184 CAD for Euro 7/11/08 4,344,711 18,651
27,545,844 CHF for Euro 7/11/08 26,975,373 (470,963)
2,500,000 GBP for Euro 7/11/08 4,974,304 (53,066)
15,236,664 GBP for Euro 7/11/08 30,316,722 (751,136)
15,972,521 GBP for Euro 7/11/08 31,780,871 (486,050)
1,788,081 GBP for Euro 7/11/08 3,557,783 (74,886)
341,261,696 JPY for Euro 7/11/08 3,215,085 76,577
2,876,190,658 JPY for Euro 7/11/08 27,097,084 (324,889)
7,583,988,714 JPY for Euro 7/11/08 71,450,055 336,170
32,459,212 NOK for Euro 7/11/08 6,306,002 157,220
365,183,921 SEK for Euro 7/11/08 60,603,961 (356,996)
4,354,377 CHF for GBP 7/11/08 4,264,199 (118,676)
348,108,027 JPY for GBP 7/11/08 3,279,585 (51,991)
393,367,655 JPY for GBP 7/11/08 3,705,984 74,550
30,155,168 SEK for GBP 7/11/08 5,004,390 (32,767)
15,199,004 AUD for JPY 7/11/08 14,544,059 (2,014)
30,921,401 Euro for JPY 7/11/08 48,648,169 (845,882)
7,934,225 Euro for JPY 7/11/08 12,482,796 (170,862)
2,504,547 Euro for JPY 7/11/08 3,940,366 852
5,350,593 GBP for JPY 7/11/08 10,646,192 (172,357)
65,429,104 NOK for JPY 7/11/08 12,711,216 3,799
17,942,923 NOK for JPY 7/11/08 3,485,855 66,523
- ------
11
International Bond
Settlement Unrealized
Contracts to Sell Date Value Gain (Loss)
31,773,796 SEK for JPY 7/11/08 $ 5,273,008 $ 38,247
7,886,712 Euro for NOK 7/11/08 12,408,043 (237,969)
1,931,174 GBP for NOK 7/11/08 3,842,498 (30,511)
398,100,581 JPY for NOK 7/11/08 3,750,574 29,397
449,027,513 JPY for NOK 7/11/08 4,230,365 118,930
429,886,044 JPY for NOK 7/11/08 4,050,030 114,269
29,756,302 Euro for SEK 7/11/08 46,815,136 (83,083)
4,080,075 AUD for USD 7/11/08 3,904,259 (84,632)
6,813,449 CAD for USD 7/11/08 6,688,033 28,853
73,600,000 DKK for USD 7/11/08 15,528,580 (139,461)
105,000,000 DKK for USD 7/11/08 22,153,545 (346,945)
32,516,921 DKK for USD 7/11/08 6,860,620 (114,888)
1,500,000 Euro for USD 7/11/08 2,359,927 (36,712)
3,618,744 Euro for USD 7/11/08 5,693,314 (127,694)
5,457,976 Euro for USD 7/11/08 8,586,951 (201,043)
90,687,796 Euro for USD 7/11/08 142,677,726 (2,226,560)
9,493,884 Euro for USD 7/11/08 14,936,583 (289,787)
2,852,423 Euro for USD 7/11/08 4,487,674 (58,945)
21,000,000 GBP for USD 7/11/08 41,784,157 (529,237)
63,446,690 GBP for USD 7/11/08 126,241,258 (1,612,924)
2,500,000 GBP for USD 7/11/08 4,974,304 (75,874)
10,470,000 GBP for USD 7/11/08 20,832,387 (399,050)
2,830,808,730 JPY for USD 7/11/08 26,669,533 422,397
364,137,604 JPY for USD 7/11/08 3,430,603 (55,208)
572,050,919 JPY for USD 7/11/08 5,389,390 187,351
18,687,582 NOK for USD 7/11/08 3,630,523 (77,751)
23,067,859 SEK for USD 7/11/08 3,828,218 (49,946)
-------------- --------------
$1,088,866,607 $ (10,997,265)
============== ==============
(Value on Settlement Date $1,077,869,342)
Settlement Unrealized
Contracts to Buy Date Value Gain (Loss)
4,116,540 AUD for Euro 7/11/08 $ 3,939,153 $ 48,913
3,787,937 AUD for Euro 7/11/08 3,624,710 115,811
3,389,650 AUD for GBP 7/11/08 3,243,586 9,250
15,754,145 AUD for JPY 7/11/08 15,075,279 297,894
20,450,985 AUD for JPY 7/11/08 19,569,725 (16,796)
5,965,279 AUD for NOK 7/11/08 5,708,228 22,700
30,531,860 CAD for Euro 7/11/08 29,969,860 69,397
3,436,258 CAD for GBP 7/11/08 3,373,006 (35,179)
2,303,065 CHF for Euro 7/11/08 2,255,369 78,892
58,667,170 CHF for Euro 7/11/08 57,452,181 1,095,900
2,797,523 Euro for CAD 7/11/08 4,401,300 37,938
17,060,000 Euro for CHF 7/11/08 26,840,238 335,828
3,159,238 Euro for GBP 7/11/08 4,970,381 49,144
19,089,497 Euro for GBP 7/11/08 30,033,215 467,629
20,247,855 Euro for GBP 7/11/08 31,855,642 560,821
2,256,865 Euro for GBP 7/11/08 3,550,692 67,795
2,099,258 Euro for JPY 7/11/08 3,302,731 11,070
17,253,678 Euro for JPY 7/11/08 27,144,950 372,754
- ------
12
International Bond
Settlement Unrealized
Contracts to Buy Date Value Gain (Loss)
46,230,206 Euro for JPY 7/11/08 $ 72,733,279 $ 947,054
4,116,708 Euro for NOK 7/11/08 6,476,754 13,532
39,240,000 Euro for SEK 7/11/08 61,735,695 1,488,730
2,132,908 GBP for CHF 7/11/08 4,243,894 98,371
1,638,814 GBP for JPY 7/11/08 3,260,784 33,189
1,942,208 GBP for JPY 7/11/08 3,864,454 83,920
2,543,667 GBP for SEK 7/11/08 5,061,189 89,566
1,531,682,623 JPY for AUD 7/11/08 14,430,244 (111,800)
5,034,435,107 JPY for Euro 7/11/08 47,430,274 (372,013)
1,273,046,421 JPY for Euro 7/11/08 11,993,588 (318,346)
407,699,966 JPY for Euro 7/11/08 3,841,011 (100,207)
1,108,550,827 JPY for GBP 7/11/08 10,443,847 (29,987)
1,314,208,985 JPY for NOK 7/11/08 12,381,388 (333,627)
374,858,160 JPY for NOK 7/11/08 3,531,603 (20,775)
565,220,874 JPY for SEK 7/11/08 5,325,043 13,787
62,393,983 NOK for Euro 7/11/08 12,121,569 (48,505)
19,342,244 NOK for GBP 7/11/08 3,757,708 (54,280)
19,526,125 NOK for JPY 7/11/08 3,793,431 13,460
22,351,353 NOK for JPY 7/11/08 4,342,301 (6,994)
20,875,348 NOK for JPY 7/11/08 4,055,551 (108,748)
277,123,412 SEK for Euro 7/11/08 45,989,912 (742,141)
13,480,261 CAD for USD 7/11/08 13,232,130 (72,247)
4,494,821 CHF for USD 7/11/08 4,401,734 80,954
2,297,434 CHF for USD 7/11/08 2,249,855 39,855
34,000,000 Euro for USD 7/11/08 53,491,683 822,623
2,521,496 Euro for USD 7/11/08 3,967,032 48,011
10,000,000 Euro for USD 7/11/08 15,732,848 332,448
7,000,000 Euro for USD 7/11/08 11,012,993 137,814
5,000,000 Euro for USD 7/11/08 7,866,424 128,624
4,691,221 Euro for USD 7/11/08 7,380,627 88,180
3,969,836 GBP for USD 7/11/08 7,898,868 141,027
1,517,763 GBP for USD 7/11/08 3,019,926 29,192
1,970,000 GBP for USD 7/11/08 3,919,752 74,903
2,934,902 GBP for USD 7/11/08 5,839,639 118,883
2,000,000 GBP for USD 7/11/08 3,979,443 37,687
2,346,411 GBP for USD 7/11/08 4,668,704 117,043
1,161,765,499 JPY for USD 7/11/08 10,945,191 4,132
1,174,963,747 JPY for USD 7/11/08 11,069,534 (106,993)
468,726,504 JPY for USD 7/11/08 4,415,953 (113,090)
919,380,145 JPY for USD 7/11/08 8,661,638 (140,470)
1,420,903,510 JPY for USD 7/11/08 13,386,575 (338,248)
12,595,720,524 JPY for USD 7/11/08 118,666,435 (1,982,227)
24,746,462 NOK for USD 7/11/08 4,807,610 (29,935)
602,701,453 NOK for USD 7/11/08 117,089,609 (1,096,184)
450,220,398 SEK for USD 7/11/08 74,716,157 (77,807)
-------------- --------------
$1,129,544,125 $ 2,368,122
============== ==============
(Value on Settlement Date $1,127,176,003)
- ------
13
International Bond
Notes to Schedule of Investments
AUD = Australian Dollar
CAD = Canadian Dollar
CHF = Swiss Franc
DKK = Danish Krone
Euribor = Euro Interbank Offered Rate
FHLB = Federal Home Loan Bank
GBP = British Pound
JPY = Japanese Yen
MTN = Medium Term Note
NOK = Norwegian Krona
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a security resets,
the less risk the investor is taking that the coupon will vary significantly
from current market rates.
SEK = Swedish Krona
USD = United States Dollar
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective June 30, 2008.
(1) The rate indicated is the yield to maturity at purchase.
(2) Security, or a portion thereof, has been segregated for the initial margin
on futures contracts.
See Notes to Financial Statements.
- ------
14
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008
ASSETS
Investment securities, at value (cost of $2,052,225,073) $2,194,309,844
Foreign currency holdings, at value (cost of $6,712,668) 6,759,354
Receivable for forward foreign currency exchange contracts 10,435,506
Receivable for capital shares sold 3,779,368
Interest receivable 39,933,536
--------------
2,255,217,608
--------------
LIABILITIES
Disbursements in excess of demand deposit cash 4,341
Payable for investments purchased 41,965,906
Payable for forward foreign currency exchange contracts 19,064,649
Payable for variation margin on futures contracts 505,848
Payable for capital shares redeemed 4,149,879
Accrued management fees 1,393,586
Distribution fees payable 1,071
Service fees (and distribution fees - A Class and
R Class) payable 25,759
--------------
67,111,039
--------------
NET ASSETS $2,188,106,569
==============
See Notes to Financial Statements.
- ------
15
JUNE 30, 2008
NET ASSETS CONSIST OF:
Capital paid in $1,977,253,389
Undistributed net investment income 56,689,087
Undistributed net realized gain on investment and foreign
currency transactions 26,068,342
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 128,095,751
--------------
$2,188,106,569
==============
INVESTOR CLASS
Net assets $1,811,299,290
Shares outstanding 119,682,604
Net asset value per share $15.13
INSTITUTIONAL CLASS
Net assets $250,179,243
Shares outstanding 16,514,905
Net asset value per share $15.15
A CLASS
Net assets $124,844,181
Shares outstanding 8,283,472
Net asset value per share $15.07
Maximum offering price (net asset value divided by 0.955) $15.78
B CLASS
Net assets $258,475
Shares outstanding 17,173
Net asset value per share $15.05
C CLASS
Net assets $1,497,495
Shares outstanding 99,502
Net asset value per share $15.05
R CLASS
Net assets $27,885
Shares outstanding 1,848
Net asset value per share $15.09
See Notes to Financial Statements.
- ------
16
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2008
INVESTMENT INCOME (LOSS)
INCOME:
Interest (net of foreign taxes withheld of $1,528,247) $ 75,367,622
------------
EXPENSES:
Management fees 15,675,716
Distribution fees:
A Class 32,303
B Class 826
C Class 4,515
Service fees:
A Class 32,303
B Class 275
C Class 1,505
Distribution and service fees:
A Class 219,467
R Class 102
Trustees' fees and expenses 107,164
Other expenses 6,858
------------
16,081,034
------------
NET INVESTMENT INCOME (LOSS) 59,286,588
------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
Investment transactions (4,480,485)
Futures transactions (11,365,566)
Foreign currency transactions 107,768,530
------------
91,922,479
------------
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments (27,450,040)
Futures (2,744,443)
Translation of assets and liabilities in foreign currencies 130,555,577
------------
100,361,094
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 192,283,573
------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $251,570,161
============
See Notes to Financial Statements.
- ------
17
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2008, SIX MONTHS ENDED JUNE 30, 2007
AND YEAR ENDED DECEMBER 31, 2006
Increase (Decrease)
in Net Assets June 30, 2008 June 30, 2007(1) December 31, 2006
OPERATIONS
Net investment income (loss) $ 59,286,588 $ 22,512,074 $ 31,933,654
Net realized gain (loss) 91,922,479 (7,994,593) 5,424,329
Change in net unrealized
appreciation
(depreciation) 100,361,094 (22,363,495) 63,355,704
-------------- -------------- --------------
Net increase (decrease) in
net assets resulting from
operations 251,570,161 (7,846,014) 100,713,687
-------------- -------------- --------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Investor Class (66,007,588) (2,803,583) (28,566,512)
Institutional Class (6,253,078) (219,137) (1,936,362)
A Class (3,465,855) (109,979) (1,235,411)
B Class (1,894) -- --
C Class (9,293) -- --
R Class (738) -- --
From net realized gains:
Investor Class -- -- (998,578)
Institutional Class -- -- (6,505)
A Class -- -- (48,079)
-------------- -------------- --------------
Decrease in net assets
from distributions (75,738,446) (3,132,699) (32,791,447)
-------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in
net assets from capital
share transactions 389,376,027 162,108,115 295,279,553
-------------- -------------- --------------
NET INCREASE (DECREASE)
IN NET ASSETS 565,207,742 151,129,402 363,201,793
NET ASSETS
Beginning of period 1,622,898,827 1,471,769,425 1,108,567,632
-------------- -------------- --------------
End of period $2,188,106,569 $1,622,898,827 $1,471,769,425
============== ============== ==============
Undistributed net investment
income $56,689,087 $18,789,999 $5,906,220
============== ============== ==============
(1) The fund's fiscal year end was changed from December 31 to June 30,
resulting in a six-month annual reporting period.
See Notes to Financial Statements.
- ------
18
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
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 nondiversified 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, non-dollar-denominated
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, the A Class (formerly Advisor Class), the B Class, the C
Class and the R Class. The A Class may incur an initial sales charge. The A
Class, B Class and C Class may be subject to a contingent deferred sales charge.
The share classes differ principally in their respective sales charges and
distribution and shareholder servicing expenses and arrangements. All shares of
the fund represent an equal pro rata interest in the net assets of the class to
which such shares belong, and have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except for class specific
expenses and exclusive rights to vote on matters affecting only individual
classes. Income, non-class specific expenses, and realized and unrealized
capital gains and losses of the fund are allocated to each class of shares based
on their relative net assets. Sale of the B Class, C Class and R Class commenced
on September 28, 2007.
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 in greater than 60 days at the time of purchase are valued at current
market value as provided by a commercial pricing service or at the mean of the
most recent bid and asked prices. Debt securities maturing within 60 days at the
time of purchase may be valued at cost, plus or minus any amortized discount or
premium. Discount notes may be valued through a commercial pricing service or at
amortized cost, which approximates fair value. Securities traded on foreign
securities exchanges and over-the-counter markets are normally completed before
the close of business on days that the New York Stock Exchange (the Exchange) is
open and may also take place on days when the Exchange is not open. If an event
occurs after the value of a security was established but before the net asset
value per share was determined that was likely to materially change the net
asset value, that security would be valued as determined in accordance with
procedures adopted by the Board of Trustees. 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 as determined by the Board of Trustees or its designee, in
accordance with procedures adopted by the Board of Trustees, if such
determination would materially impact a fund's net asset value. Certain other
circumstances may cause the fund to use alternative procedures to value a
security such as: a security has been declared in default; trading in a security
has been halted during the trading day; or there is a foreign market holiday and
no trading will commence.
SECURITY TRANSACTIONS -- For financial reporting purposes, 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.
FUTURES CONTRACTS -- The fund may enter into futures contracts in order to
manage the fund's exposure to changes in market conditions. One of the risks of
entering into futures contracts is the possibility that the change in value of
the contract may not correlate with the changes in value of the underlying
securities. Upon entering into a futures contract, the fund is required to
deposit either cash or securities in an amount equal to a certain percentage of
the contract value (initial margin). Subsequent payments (variation margin) are
made or received daily, in cash, by the fund. The variation margin is equal to
the daily change in the contract value and is recorded as unrealized gains and
losses. The fund recognizes a realized gain or loss when the contract is closed
or expires. Net realized and unrealized gains or losses occurring during the
holding period of futures contracts are a component of realized gain (loss) on
futures transactions and unrealized appreciation (depreciation) on futures,
respectively.
- ------
19
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) (the
investment advisor) 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 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. The fund is no longer subject to examination by tax authorities
for years prior to 2004. At this time, management has not identified any
uncertain tax positions for which it is reasonably possible that the total
amounts of unrecognized tax benefits will significantly change in the next
twelve months. Accordingly, no provision has been made for federal or state
income taxes. Interest and penalties associated with any federal or state income
tax obligations, if any, are recorded as interest expense.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income, if any, are
generally declared and paid quarterly, but may be paid less frequently.
Distributions from net realized gains, if any, are generally declared and paid
twice a year.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the fund. In addition, in the normal course of
business, the fund enters into contracts that provide general indemnifications.
The fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the fund. The risk of material
loss from such claims is considered by management to be remote.
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.
- ------
20
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
On July 27, 2007, the A Class (formerly Advisor Class) shareholders of the fund
approved a change to the class's fee structure. The change was approved by the
Board of Trustees on December 8, 2006. Effective September 4, 2007, the fee
structure change resulted in an increase of 0.25% in the unified management fee
and a simultaneous decrease of 0.25% in the total distribution and service fee,
resulting in no change to the total operating expense ratio of the class.
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 specific class of shares 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 advisor 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 Investments 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, A Class, B Class, C Class and R Class) range from
0.2500% to 0.3100%. The Institutional Class is 0.2000% less at each point within
the Complex Fee range. Prior to September 4, 2007, the A Class was 0.2500% less
at each point within the Complex Fee range. The effective annual management fee
for each class of the fund for the year ended June 30, 2008 was 0.82% for the
Investor Class, B Class, C Class and R Class, 0.62% for the Institutional Class
and 0.79% for the A Class.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a separate
Master Distribution and Individual Shareholder Services Plan for each of the A
Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule
12b-1 of the 1940 Act. The plans provide that the A Class will pay American
Century Investment Services, Inc. (ACIS) an annual distribution and service fee
of 0.25%. The plans provide that the B Class and the C Class will each pay ACIS
an annual distribution fee of 0.75% and service fee of 0.25%. The plans provide
that the R Class will pay ACIS an annual distribution and service fee of 0.50%.
Prior to September 4, 2007, the Board of Trustees had adopted a Master
Distribution and Shareholder Services Plan for the A Class, pursuant to Rule
12b-1 of the 1940 Act, in which the A Class paid ACIS an annual distribution fee
of 0.25% and service fee of 0.25%. The fees are computed and accrued daily based
on each class's daily net assets and paid monthly in arrears. The fees are used
to pay financial intermediaries for distribution and individual shareholder
services. Fees incurred under the plans during the year ended June 30, 2008, 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 advisor, ACIM, the
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services, LLC.
ACIM has entered into a Subadvisory Agreement with J.P. Morgan Investment
Management, Inc. (JPMIM) (the subadvisor) 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 JPMorgan Chase &
Co. (JPM). JPM is an equity investor in ACC. Prior to December 12, 2007, the
fund had a bank line of credit agreement with JPMorgan Chase Bank (JPMCB). JPMCB
is a wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term investments,
for the year ended June 30, 2008, were $1,758,406,724 and $1,315,178,078,
respectively.
- ------
21
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows (unlimited number of shares
authorized):
Year ended Six months ended Year ended
June 30, 2008(1) June 30, 2007(2) December 31, 2006
Shares Amount Shares Amount Shares Amount
INVESTOR CLASS
Sold 58,703,188 $ 880,473,144 28,075,839 $386,025,344 49,493,925 $ 665,869,821
Issued in
reinvestment
of
distributions 3,769,662 54,589,092 169,543 2,349,870 1,822,331 24,837,596
Redeemed (48,003,046) (719,473,998) (18,645,420) (255,394,968) (35,547,787) (477,989,458)
------------ ------------- ------------ ------------- ------------ -------------
14,469,804 215,588,238 9,599,962 132,980,246 15,768,469 212,717,959
------------ ------------- ------------ ------------- ------------ -------------
INSTITUTIONAL
CLASS
Sold 11,397,882 170,946,406 2,604,644 35,832,758 6,167,371 85,229,598
Issued in
reinvestment
of
distributions 119,470 1,730,588 1,939 26,878 13,040 179,168
Redeemed (2,981,828) (45,027,507) (1,071,340) (14,550,687) (221,727) (3,075,151)
------------ ------------- ------------ ------------- ------------ -------------
8,535,524 127,649,487 1,535,243 21,308,949 5,958,684 82,333,615
------------ ------------- ------------ ------------- ------------ -------------
A CLASS
Sold 5,580,843 83,449,898 1,482,936 20,383,125 2,635,884 35,416,680
Issued in
reinvestment
of
distributions 223,013 3,221,526 7,622 105,566 90,030 1,226,226
Redeemed (2,844,388) (42,344,326) (920,813) (12,669,771) (2,709,605) (36,414,927)
------------ ------------- ------------ ------------- ------------ -------------
2,959,468 44,327,098 569,745 7,818,920 16,309 227,979
------------ ------------- ------------ ------------- ------------ -------------
B CLASS N/A N/A
Sold 20,724 314,737
Issued in
reinvestment
of
distributions 75 1,085
Redeemed (3,626) (56,152)
------------ -------------
17,173 259,670
------------ -------------
C CLASS N/A N/A
Sold 131,172 2,009,242
Issued in
reinvestment
of
distributions 524 7,632
Redeemed (32,194) (492,185)
------------ -------------
99,502 1,524,689
------------ -------------
R CLASS N/A N/A
Sold 1,872 27,300
Issued in
reinvestment
of
distributions 51 738
Redeemed (75) (1,193)
------------ -------------
1,848 26,845
------------ -------------
Net increase
(decrease) 26,083,319 $ 389,376,027 11,704,950 $162,108,115 21,743,462 $ 295,279,553
============ ============= ============ ============= ============ =============
(1) September 28, 2007 (commencement of sale) through June 30, 2008 for the B
Class, C Class and R Class.
(2) The fund's fiscal year end was changed from December 31 to June 30,
resulting in a six-month annual reporting period.
- ------
22
5. BANK LINE OF CREDIT
Effective December 12, 2007, the fund, along with certain other funds managed by
ACIM or American Century Global Investment Management, Inc. (ACGIM), has a
$500,000,000 unsecured bank line of credit agreement with Bank of America, N.A.
Prior to December 12, 2007, the fund, along with certain other funds managed by
ACIM or ACGIM, had a $500,000,000 unsecured bank line of credit agreement with
JPMCB. The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement, which is subject to
annual renewal, bear interest at the Federal Funds rate plus 0.40%. The fund did
not borrow from either line during the year ended June 30, 2008.
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 year ended June 30, 2008, six
months ended June 30, 2007 and year ended December 31, 2006, respectively were
as follows:
June 30, 2008 June 30, 2007(1) December 31, 2006
DISTRIBUTIONS PAID FROM
Ordinary income $75,738,446 $3,132,699 $31,738,285
Long-term capital gains -- -- $1,053,162
(1) The fund's fiscal year end was changed from December 31 to June 30,
resulting in a six-month annual reporting period.
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect the
differing character of foreign currency gains, 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 June 30, 2008, the components of distributable earnings on a tax-basis and
the federal tax cost of investments were as follows:
Federal tax cost of investments $2,053,511,161
==============
Gross tax appreciation of investments $151,092,396
Gross tax depreciation of investments (10,293,713)
--------------
Net tax appreciation (depreciation) of investments $140,798,683
==============
Net tax appreciation (depreciation) on derivatives and
translation of assets and liabilities in foreign currencies $ (6,101,140)
--------------
Net tax appreciation (depreciation) $134,697,543
==============
Undistributed ordinary income $81,478,077
Accumulated long-term gains $806,483
Currency loss deferral $(6,128,923)
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 and the realization for tax purposes of unrealized gains on certain
forward foreign currency contracts.
The currency loss deferral listed above represents net foreign currency losses
incurred in the eight-month period ended June 30, 2008. The fund has elected to
treat such losses as having been incurred in the following fiscal year for
federal income tax purposes.
- ------
23
8. RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" (FAS 157), in September
2006, which is effective for fiscal years beginning after November 15, 2007. FAS
157 defines fair value, establishes a framework for measuring fair value and
expands the required financial statement disclosures about fair value
measurements. The adoption of FAS 157 does not materially impact the
determination of fair value.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for fiscal
years beginning after November 15, 2008. FAS 161 amends and expands disclosures
about derivative instruments and hedging activities. FAS 161 requires
qualitative disclosures about the objectives and strategies of derivative
instruments, quantitative disclosures about the fair value amounts of and gains
and losses on derivative instruments, and disclosures of credit-risk-related
contingent features in hedging activities. Management is currently evaluating
the impact that adopting FAS 161 will have on the financial statement
disclosures.
- ------
24
FINANCIAL HIGHLIGHTS
International Bond
Investor Class
For a Share Outstanding Throughout the Years Ended June 30 (except as noted)
2008 2007(1) 2006 2005 2004(2) 2003(2)
PER-SHARE DATA
Net Asset
Value,
Beginning
of Period $13.69 $13.78 $13.03 $14.76 $13.64 $12.19
-------- -------- -------- -------- -------- --------
Income From
Investment
Operations
Net
Investment
Income
(Loss)(3) 0.45 0.20 0.34 0.30 0.36 0.37
Net
Realized
and
Unrealized
Gain
(Loss) 1.58 (0.26) 0.73 (1.49) 1.40 2.03
-------- -------- -------- -------- -------- --------
Total From
Investment
Operations 2.03 (0.06) 1.07 (1.19) 1.76 2.40
-------- -------- -------- -------- -------- --------
Distributions
From Net
Investment
Income (0.59) (0.03) (0.31) (0.41) (0.59) (0.85)
From Net
Realized
Gains -- -- (0.01) (0.13) (0.05) (0.10)
-------- -------- -------- -------- -------- --------
Total
Distributions (0.59) (0.03) (0.32) (0.54) (0.64) (0.95)
-------- -------- -------- -------- -------- --------
Net Asset
Value,
End of Period $15.13 $13.69 $13.78 $13.03 $14.76 $13.64
======== ======== ======== ======== ======== ========
TOTAL RETURN(4) 15.03% (0.45)% 8.25% (8.23)% 13.10% 19.91%
RATIOS/SUPPLEMENTAL DATA
Ratio of
Operating
Expenses to
Average Net
Assets 0.82% 0.83%(5) 0.82% 0.82% 0.83% 0.84%
Ratio of Net
Investment
Income (Loss)
to Average
Net Assets 3.01% 2.95%(5) 2.51% 2.17% 2.60% 2.80%
Portfolio
Turnover Rate 74% 37% 206% 226% 104% 112%
Net Assets,
End of Period
(in thousands) $1,811,299 $1,440,762 $1,317,505 $1,040,576 $976,828 $622,657
(1) January 1, 2007 through June 30, 2007. The fund's fiscal year end was
changed from December 31 to June 30, resulting in a six-month annual reporting
period. For the years before June 30, 2007, the fund's fiscal year end was
December 31.
(2) Certain distributions in 2004 and 2003 were reclassified between net
investment income and net realized gains to conform to current year
presentation.
(3) Computed using average shares outstanding throughout the period.
(4) 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.
(5) Annualized.
See Notes to Financial Statements.
- ------
25
International Bond
Institutional Class
For a Share Outstanding Throughout the Years Ended June 30 (except as noted)
2008 2007(1) 2006 2005 2004(2)(3)
PER-SHARE DATA
Net Asset Value,
Beginning of Period $13.70 $13.78 $13.04 $14.77 $13.37
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss)(4) 0.48 0.21 0.35 0.36 0.17
Net Realized and
Unrealized Gain (Loss) 1.58 (0.26) 0.74 (1.52) 1.84
-------- -------- -------- -------- --------
Total From
Investment Operations 2.06 (0.05) 1.09 (1.16) 2.01
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.61) (0.03) (0.34) (0.44) (0.57)
From Net
Realized Gains -- -- (0.01) (0.13) (0.04)
-------- -------- -------- -------- --------
Total Distributions (0.61) (0.03) (0.35) (0.57) (0.61)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $15.15 $13.70 $13.78 $13.04 $14.77
======== ======== ======== ======== ========
TOTAL RETURN(5) 15.29% (0.34)% 8.43% (7.98)% 15.25%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 0.62% 0.63%(6) 0.62% 0.62% 0.63%(6)
Ratio of Net Investment
Income (Loss)
to Average Net Assets 3.21% 3.15%(6) 2.71% 2.37% 2.88%(6)
Portfolio Turnover Rate 74% 37% 206% 226% 104%(7)
Net Assets, End of
Period (in thousands) $250,179 $109,350 $88,812 $6,329 $1,263
(1) January 1, 2007 through June 30, 2007. The fund's fiscal year end was
changed from December 31 to June 30, resulting in a six-month annual reporting
period. For the years before June 30, 2007, the fund's fiscal year end was
December 31.
(2) August 2, 2004 (commencement of sale) through December 31, 2004.
(3) Certain distributions in 2004 were reclassified between net investment
income and net realized gains to conform to current year presentation.
(4) Computed using average shares outstanding throughout the period.
(5) 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.
(6) Annualized.
(7) Portfolio turnover is calculated at the fund level. Percentage indicated was
calculated for the year ended December 31, 2004.
See Notes to Financial Statements.
- ------
26
International Bond
A Class(1)
For a Share Outstanding Throughout the Years Ended June 30 (except as noted)
2008 2007(2) 2006 2005 2004(3) 2003(3)
PER-SHARE DATA
Net Asset Value,
Beginning of
Period $13.67 $13.77 $13.01 $14.75 $13.62 $12.16
-------- -------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss)(4) 0.41 0.18 0.30 0.27 0.32 0.29
Net Realized
and Unrealized
Gain (Loss) 1.54 (0.26) 0.74 (1.51) 1.42 2.08
-------- -------- -------- -------- -------- --------
Total From
Investment
Operations 1.95 (0.08) 1.04 (1.24) 1.74 2.37
-------- -------- -------- -------- -------- --------
Distributions
From Net
Investment
Income (0.55) (0.02) (0.27) (0.37) (0.56) (0.81)
From Net
Realized Gains -- -- (0.01) (0.13) (0.05) (0.10)
-------- -------- -------- -------- -------- --------
Total
Distributions (0.55) (0.02) (0.28) (0.50) (0.61) (0.91)
-------- -------- -------- -------- -------- --------
Net Asset Value,
End of Period $15.07 $13.67 $13.77 $13.01 $14.75 $13.62
======== ======== ======== ======== ======== ========
TOTAL RETURN(5) 14.50% (0.57)% 8.03% (8.47)% 12.93% 19.60%
RATIOS/SUPPLEMENTAL DATA
Ratio of
Operating
Expenses to
Average Net
Assets 1.07% 1.08%(6) 1.07% 1.07% 1.08% 1.09%
Ratio of Net
Investment Income
(Loss) to
Average Net
Assets 2.76% 2.70%(6) 2.26% 1.92% 2.35% 2.55%
Portfolio
Turnover Rate 74% 37% 206% 226% 104% 112%
Net Assets, End
of Period
(in thousands) $124,844 $72,787 $65,452 $61,663 $42,736 $21,137
(1) Prior to September 4, 2007, the A Class was referred to as the Advisor Class.
(2) January 1, 2007 through June 30, 2007. The fund's fiscal year end was
changed from December 31 to June 30, resulting in a six-month annual reporting
period. For the years before June 30, 2007, the fund's fiscal year end was
December 31.
(3) Certain distributions in 2004 and 2003 were reclassified between net
investment income and net realized gains to conform to current year
presentation.
(4) Computed using average shares outstanding throughout the period.
(5) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. 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.
(6) Annualized.
See Notes to Financial Statements.
- ------
27
International Bond
B Class
For a Share Outstanding Throughout the Period Indicated
2008(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $14.55
--------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.22
Net Realized and Unrealized Gain (Loss) 0.69
--------
Total From Investment Operations 0.91
--------
Distributions
From Net Investment Income (0.41)
--------
Net Asset Value, End of Period $15.05
========
TOTAL RETURN(3) 6.38%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.82%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 1.96%(4)
Portfolio Turnover Rate 74%(5)
Net Assets, End of Period (in thousands) $258
(1) September 28, 2007 (commencement of sale) through June 30, 2008
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. 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 value 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 June 30, 2008.
See Notes to Financial Statements.
- ------
28
International Bond
C Class
For a Share Outstanding Throughout the Period Indicated
2008(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $14.55
--------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.22
Net Realized and Unrealized Gain (Loss) 0.69
--------
Total From Investment Operations 0.91
--------
Distributions
From Net Investment Income (0.41)
--------
Net Asset Value, End of Period $15.05
========
TOTAL RETURN(3) 6.38%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.82%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 1.93%(4)
Portfolio Turnover Rate 74%(5)
Net Assets, End of Period (in thousands) $1,497
(1) September 28, 2007 (commencement of sale) through June 30, 2008
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. 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 value 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 June 30, 2008.
See Notes to Financial Statements.
- ------
29
International Bond
R Class
For a Share Outstanding Throughout the Period Indicated
2008(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $14.55
--------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.28
Net Realized and Unrealized Gain (Loss) 0.69
--------
Total From Investment Operations 0.97
--------
Distributions
From Net Investment Income (0.43)
--------
Net Asset Value, End of Period $15.09
========
TOTAL RETURN(3) 6.76%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.32%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 2.45%(4)
Portfolio Turnover Rate 74%(5)
Net Assets, End of Period (in thousands) $28
(1) September 28, 2007 (commencement of sale) through June 30, 2008
(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 value 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 June 30, 2008.
See Notes to Financial Statements.
- ------
30
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 statement 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 June 30, 2008, the results of its operations for
the year then ended, the changes in its net assets 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 June 30, 2008 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
August 20, 2008
- ------
31
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. Those listed as interested trustees are "interested"
primarily by virtue of their engagement as directors and/or officers of, or
ownership interest in, American Century Companies, Inc. (ACC) or its wholly
owned, direct or indirect, subsidiaries, including the fund's investment
advisor, American Century Investment Management, Inc. (ACIM or the advisor); the
fund's principal underwriter, American Century Investment Services, Inc. (ACIS);
and the fund's transfer agent, American Century Services, LLC (ACS).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers of,
and have no financial interest in, ACC or any of its wholly owned, direct or
indirect, subsidiaries, including ACIM, ACIS, and ACS. The trustees serve in
this capacity for eight registered investment companies in the American Century
Investments family of funds.
All persons named as officers of the fund also serve in similar capacities for
the other 14 investment companies in the American Century Investments family of
funds advised by ACIM or American Century Global Investment Management, Inc.
(ACGIM), a wholly owned subsidiary of 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.
INTERESTED TRUSTEE
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Trustee (since 2007) and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM, ACGIM,
ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley (March 2000
to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 111
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
INDEPENDENT TRUSTEES
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Trustee (since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (money management firm) (April 2004 to present); Partner
and Founder, Bay Partners (venture capital firm) (1976 to 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 41
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- ------
32
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of Law
and Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 41
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
FREDERICK L.A. GRAUER, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 2008)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Advisor, Barclays Global
Investors (asset manager) (2003 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 41
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
PETER F. PERVERE, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Vice President
and Chief Financial Officer, Commerce One, Inc. (software and services provider)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 41
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Intraware, Inc.
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Platinum Grove Asset
Management, L.P. (asset manager), and a Partner, Oak Hill Capital Management
(asset manager) (1999 to present); Frank E. Buck Professor of Finance-Emeritus,
Stanford Graduate School of Business (1996 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 41
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2002)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1973 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 41
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present)
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee (since 1984)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 41
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
- ------
33
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as: Director,
ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief
Compliance Officer, ACIM, ACGIM and ACS (August 2006 to present); Assistant
Treasurer, ACC (January 1995 to August 2006); and Treasurer and Chief Financial
Officer, various American Century Investments funds (July 2000 to August 2006).
Also serves as: Senior Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: General Counsel (since 2007) and Senior Vice
President (since 2006) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney,
ACC (February 1994 to present); Vice President, ACC (November 2005 to present);
General Counsel, ACC (March 2007 to present). Also serves as: General Counsel,
ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President,
ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Vice President, Treasurer and Chief Financial
Officer (all since 2006) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice
President, ACS (February 2000 to present); and Controller, various American
Century Investments funds (1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the fund's trustees and is available
without charge, upon request, by calling 1-800-345-2021.
- ------
34
APPROVAL OF MANAGEMENT AGREEMENT
International Bond
Under Section 15(c) of the Investment Company Act, contracts for investment
advisory services are required to be reviewed, evaluated and approved by a
majority of a fund's independent directors or trustees (the "Directors") each
year. At American Century Investments, this process is referred to as the "15(c)
Process." The board oversees on a continuous basis and evaluates at its
quarterly meetings, directly and through the committees of the board, the nature
and quality of significant services provided by the advisor, the investment
performance of the funds, shareholder services, audit and compliance functions
and a variety of other matters relating to fund operations. Each year, it also
holds a special meeting in connection with determining whether to renew the
contracts for advisory services, to review fund performance, shareholder
services, adviser profitability, audit and compliance matters, and other fund
operational matters.
Under a Securities and Exchange Commission rule, each fund is required to
disclose in its annual or semiannual report, as appropriate, the material
factors and conclusions that formed the basis for the board's approval or
renewal of any advisory agreements within the fund's most recently completed
fiscal half-year period.
ANNUAL CONTRACT REVIEW PROCESS
As part of the annual 15(c) Process, the Directors reviewed extensive data and
information compiled by the advisor and certain independent providers of
evaluative data (the "15(c) Providers") concerning International Bond (the
"fund") and the services provided to the fund under the management agreement.
The information considered and the discussions held at the meetings included,
but were not limited to:
* the nature, extent and quality of investment management, shareholder services
and other services provided to the fund;
* reports on the wide range of programs and services the advisor provides to the
fund and its shareholders on a routine and non-routine basis;
* information about the compliance policies, procedures, and regulatory
experience of the advisor;
* data comparing the cost of owning the fund to the cost of owning a similar
fund;
* data comparing the fund's performance to appropriate benchmarks and/or a peer
group of other mutual funds with similar investment objectives and strategies;
* financial data showing the profitability of the fund to the advisor and the
overall profitability of the advisor; and
* data comparing services provided and charges to other investment management
clients of the advisor.
In keeping with its practice, the Directors at a special meeting and at a
regularly scheduled quarterly meeting reviewed and discussed the information
provided by the advisor throughout the year and to negotiate with the advisor
the renewal of the management agreement, including the setting of the applicable
advisory fee. The board had the benefit of the advice of its independent counsel
throughout the period.
- ------
35
FACTORS CONSIDERED
The Directors considered all of the information provided by the advisor, an
independent data provider, and the board's independent counsel, and evaluated
such information for each fund for which the board has responsibility. The
Directors did not identify any single factor as being all-important or
controlling, and each Director may have attributed different levels of
importance to different factors. In deciding to renew the agreement under the
terms ultimately determined by the board to be appropriate, the Directors'
decision was based on the following factors.
NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management
agreement, the advisor is responsible for providing or arranging for all
services necessary for the operation of the fund. The board noted that under the
management agreement, the advisor provides or arranges at its own expense a wide
variety of services including:
* fund construction and design
* portfolio security selection
* initial capitalization/funding
* securities trading
* custody of fund assets
* daily valuation of the fund's portfolio
* shareholder servicing and transfer agency, including shareholder
confirmations, recordkeeping and communications
* legal-services
* regulatory and portfolio compliance
* financial reporting
* marketing and distribution
The Directors noted that many of these services have expanded over time both in
terms of quantity and complexity in response to shareholder demands, competition
in the industry, changing distribution channels and the changing regulatory
environment. In performing their evaluation, the Directors considered
information received in connection with the annual review, as well as
information provided on an ongoing basis at their regularly scheduled board and
committee meetings.
INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services
provided is quite complex and allows fund shareholders access to professional
money management, instant diversification of their investments within an asset
class, the opportunity to easily diversify among asset classes, and liquidity.
In evaluating investment performance, the board expects the advisor to manage
the fund in accordance with its investment objectives and approved strategies.
In providing these services, the advisor utilizes teams of investment
professionals (portfolio managers, analysts, research assistants, and securities
traders) who require extensive information technology, research, training,
compliance and other systems to conduct their business.
- ------
36
At each quarterly meeting and at the special meeting to consider renewal of the
advisory contract, the Directors, directly and through its Portfolio Committee,
reviews investment performance information for the fund, together with
comparative information for appropriate benchmarks and peer groups of funds
managed similarly to the fund. If performance concerns are identified, the
Directors discuss with the advisor the reasons for such results (e.g., market
conditions, security and sector selection) and any efforts being undertaken to
improve performance. The fund's performance fell below its benchmark for both
the one- and three-year periods during the past year. The board discussed the
fund's performance with the advisor and was satisfied with the efforts being
undertaken by the advisor.
SHAREHOLDER AND OTHER SERVICES. The advisor provides the fund with a
comprehensive package of transfer agency, shareholder, and other services. The
Directors, directly and through the various Committees of the Board, review
reports and evaluations of such services at their regular quarterly meetings and
at its special meeting to consider renewal of the Advisory Contract, including
the annual meeting concerning contract review, and reports to the board. These
reports include, but are not limited to, information regarding the operational
efficiency and accuracy of the shareholder and transfer agency services
provided, staffing levels, shareholder satisfaction (as measured by external as
well as internal sources), technology support, new products and services offered
to fund shareholders, securities trading activities, portfolio valuation
services, auditing services, and legal and operational compliance activities.
Certain aspects of shareholder and transfer agency service level efficiency and
the quality of securities trading activities are measured by independent third
party providers and are presented in comparison to other fund groups not managed
by the advisor.
COSTS OF SERVICES PROVIDED AND PROFITABILITY. The advisor provides detailed
information concerning its cost of providing various services to the fund, its
profitability in managing the fund, its overall profitability, and its financial
condition. The Directors have reviewed with the advisor the methodology used to
prepare this financial information. This financial information regarding the
advisor is considered in order to evaluate the advisor's financial condition,
its ability to continue to provide services under the management agreement, and
the reasonableness of the current management fee.
ETHICS. The Directors generally consider the advisor's commitment to providing
quality services to shareholders and to conducting its business ethically. They
noted that the advisor's practices generally meet or exceed industry best
practices.
ECONOMIES OF SCALE. The Directors review reports provided by the advisor on
economies of scale for the complex as a whole and the year-over-year changes in
revenue, costs, and profitability. The Directors concluded that economies of
scale are difficult to measure and predict with precision, especially on a
fund-by-fund basis. This analysis is also complicated by the additional services
and content provided by the advisor and its reinvestment in its ability to
provide and expand those services. Accordingly, the Directors also seek to
evaluate economies of scale by reviewing other information, such as
year-over-year profitability of the advisor generally, the profitability of its
management of the fund specifically, and the expenses incurred by the advisor in
providing various functions to the fund. The Directors believe the advisor is
appropriately sharing economies of scale through its competitive fee structure,
fee breakpoints as the fund complex and the fund increases in size, and through
reinvestment in its business to provide shareholders additional content and
services. In particular, separate breakpoint schedules based on the size of the
entire fund complex and on the size of the fund reflect the complexity of
assessing economies of scale.
- ------
37
COMPARISON TO OTHER FUNDS' FEES. The fund pays the advisor a single,
all-inclusive (or unified) management fee for providing all services necessary
for the management and operation of the fund, other than brokerage expenses,
taxes, interest, extraordinary expenses, and the fees and expenses of the fund's
independent directors (including their independent legal counsel). Under the
unified fee structure, the advisor is responsible for providing all investment
advisory, custody, audit, administrative, compliance, recordkeeping, marketing
and shareholder services, or arranging and supervising third parties to provide
such services. By contrast, most other funds are charged a variety of fees,
including an investment advisory fee, a transfer agency fee, an administrative
fee, distribution charges and other expenses. Other than their investment
advisory fees and Rule 12b-1 distribution fees, all other components of the
total fees charged by these other funds may be increased without shareholder
approval. The board believes the unified fee structure is a benefit to fund
shareholders because it clearly discloses to shareholders the cost of owning
fund shares, and, since the unified fee cannot be increased without a vote of
fund shareholders, it shifts to the advisor the risk of increased costs of
operating the fund and provides a direct incentive to minimize administrative
inefficiencies. Part of the Directors' analysis of fee levels involves reviewing
certain evaluative data compiled by an independent provider and comparing the
fund's unified fee to the total expense ratio of other funds in the fund's peer
group. The unified fee charged to shareholders of the fund was in the lowest
quartile of the total expense ratios of its peer group.
COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The
Directors also requested and received information from the advisor concerning
the nature of the services, fees, and profitability of its advisory services to
advisory clients other than the fund. They observed that these varying types of
client accounts require different services and involve different regulatory and
entrepreneurial risks than the management of the fund. The Directors analyzed
this information and concluded that the fees charged and services provided to
the fund were reasonable by comparison.
COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information
from the advisor concerning collateral benefits it receives as a result of its
relationship with the fund. They concluded that the advisor's primary business
is managing mutual funds and it generally does not use fund or shareholder
information to generate profits in other lines of business, and therefore does
not derive any significant collateral benefits from them. The Directors noted
that the advisor receives proprietary research from broker-dealers that execute
fund portfolio transactions and concluded that this research is likely to
benefit fund shareholders. The Directors also determined that the advisor is
able to provide investment management services to certain clients other than the
fund, at least in part, due to its existing infrastructure built to serve the
fund complex. The Directors concluded, however, that the assets of those other
clients are not material to the analysis and, in any event, are included with
the assets of the fund to determine breakpoints in the fund's fee schedule,
provided they are managed using the same investment team and strategy.
- ------
38
CONCLUSIONS OF THE DIRECTORS
As a result of this process, the Directors, in the absence of particular
circumstances and assisted by the advice of legal counsel that is independent of
the advisor, taking into account all of the factors discussed above and the
information provided by the advisor and others concluded that the investment
management agreement between the fund and the advisor is fair and reasonable in
light of the services provided and should be renewed.
As a part of the 15(c) Process, the board of directors also unanimously approved
the renewal of the investment subadvisory agreement by which J.P. Morgan
Investment Management, Inc. (the "subadvisor") is engaged to manage the
investments of the fund. In approving the subadvisory agreement, the board
considered all material factors including the nature, extent, and quality of
investment management services provided by the subadvisor to the fund under the
agreement. As a part of this review the board evaluated the subadvisor's
investment performance and capabilities, as well as its compliance policies,
procedures, and regulatory experience. The Directors noted that the management
fees paid to the subadvisor under the subadvisory agreement were subject to
arm's length negotiation between the advisor and the subadvisor and are paid by
the advisor out of its unified fee.
- ------
39
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 advisor, 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 advisor uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century Investments' website at americancentury.com and on the Securities and
Exchange Commission's website at sec.gov. Information regarding how the
investment advisor voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The fund's Form N-Q is available on the SEC's website at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of
portfolio holdings for the most recent quarter of its fiscal year available on
its website at americancentury.com and, upon request, by calling 1-800-345-2021.
- ------
40
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or style
performance or to serve as fund performance comparisons. They are not investment
products available for purchase.
The JPMORGAN 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.
The JPMORGAN GOVERNMENT BOND INDEX - GLOBAL (GBI GLOBAL), EXCLUDING U.S. is a
market-capitalization weighted index consisting of returns from investing in 13
developed government bond markets with the U.S. excluded.
The FUND BENCHMARK is the JPM GTGBI with the U.S. excluded and Japan weighted at
15%.
- ------
41
NOTES
- ------
42
NOTES
- ------
43
NOTES
- ------
44
[back cover]
[american century investments logo and text logo reg;]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE . . . . . . . . . . . . . . . 1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE . . . . . . . . . . . . 1-800-345-2021 or
816-531-5575
INVESTORS USING ADVISORS . . . . . . . . . . . . . . . . 1-800-378-9878
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . 1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL PROFESSIONALS, INSURANCE COMPANIES . . . . . . 1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF . . . . . . . . . 1-800-634-4113
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0808
CL-ANN-61137N
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 12 (a)(1) to American Century Asset Allocation Portfolios, Inc.'s
Annual Certified Shareholder Report on Form N-CSR, File No. 811-21591, on
September 29, 2005, 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) Peter F. Pervere, Jeanne D. Wohlers and Ronald J. Gilson are the
registrant's designated audit committee financial experts. They are
"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 2007: $19,635
FY 2008: $20,136
(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 2007: $0
FY 2008: $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 2007: $0
FY 2008: $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 2007: $0*
FY 2008: $0
* This amount has been restated as certain prior year services related
to review of federal and state income tax forms and federal excise tax
forms that were paid in advance were refunded as management changed
service providers.
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 2007: $0
FY 2008: $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 2007: $0
FY 2008: $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 2007: $0
FY 2008: $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 2007: $14,400*
FY 2008: $90,000
* This amount has been restated as certain prior year services related
to review of federal and state income tax forms and federal excise tax
forms that were paid in advance were refunded as management changed
service providers.
(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. INVESTMENTS.
(a) The schedule of investments is included as part of the report to
stockholders filed under Item 1 of this Form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by
which shareholders may recommend nominees to the registrant's board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) are effective based on their evaluation of these controls and
procedures as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) 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 12(a)(1) to American Century Asset Allocation
Portfolios, Inc.'s Certified Shareholder Report on Form N-CSR, File
No. 811-21591, on September 29, 2005.
(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/ Jonathan S. Thomas
---------------------------------------------
Name: Jonathan S. Thomas
Title: President
Date: August 29, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Jonathan S. Thomas
---------------------------------------------
Name: Jonathan S. Thomas
Title: President
(principal executive officer)
Date: August 29, 2008
By: /s/ Robert J. Leach
---------------------------------------------
Name: Robert J. Leach
Title: Vice President, Treasurer, and
Chief Financial Officer
(principal financial officer)
Date: August 29, 2008
