As
Filed with the U.S. Securities and Exchange Commission on October 28,
2008
1933
Act File No. 33-43321
1940
Act File No. 811-6441
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
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__________________
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FORM
N-1A
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__________________
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REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
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Pre-Effective Amendment
No.
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£
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Post-Effective Amendment No.
27
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and/or
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REGISTRATION
STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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Amendment No. 28
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(Check
appropriate box or boxes.)
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__________________
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AMERICAN
CENTURY INTERNATIONAL BOND FUNDS
(Exact
Name of Registrant as Specified in Charter)
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__________________
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4500
MAIN STREET, KANSAS CITY, MISSOURI
64111
(Address
of Principal Executive
Offices) (Zip
Code)
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REGISTRANT'S
TELEPHONE NUMBER, INCLUDING AREA CODE: (816) 531-5575
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CHARLES
A. ETHERINGTON
4500
MAIN STREET, KANSAS CITY,
MISSOURI 64111
(
Name and Address of
Agent for Service)
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Approximate
Date of Proposed Public Offering: November 1, 2008
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It
is proposed that this filing will become effective (check appropriate
box)
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£
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immediately
upon filing pursuant to paragraph (b)
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on
November 1, 2008 pursuant to paragraph (b)
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£
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60
days after filing pursuant to paragraph (a)(1)
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£
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on
(date) pursuant to paragraph (a)(1)
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£
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75
days after filing pursuant to paragraph (a)(2)
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£
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on
(date) pursuant to paragraph (a)(2) of rule 485.
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If
appropriate, check the following box:
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£
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this
post-effective amendment designates a new effective date for a previously
filed post-effective amendment.
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November 1,
2008
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American Century
Investments
Prospectus
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International Bond
Fund
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The Securities and Exchange
Commission
has not approved or disapproved
these
securities or passed upon
the
adequacy of this
prospectus.
Any representation
to
the contrary is a
criminal offense.
American Century
Investment
Services, Inc.,
Distributor
Table of
Contents
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An
Overview of the Fund
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2
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Fund
Performance History
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3
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Fees
and Expenses
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6
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Objectives,
Strategies and Risks
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8
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Basics
of Fixed-Income Investing
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10
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Management
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12
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Investing
Directly with American Century Investments
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14
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Investing
Through a Financial Intermediary
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17
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Additional
Policies Affecting Your Investment
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23
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Share
Price and Distributions
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28
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Taxes
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30
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Multiple
Class Information
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32
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Financial
Highlights
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34
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u
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This symbol is
used throughout the book to highlight
definitions
of key
investment terms and to provide other helpful
information.
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American Century Investment Services,
Inc., Distributor
©2008 American Century Proprietary
Holdings, Inc. All rights r
e
served.
An Overview of the
Fund
What is the fund’s investment
objective?
The fund seeks high total return by
investing in high-quality, non-dollar-denominated government and corporate debt
securities outside the
United States
.
What are the fund’s primary investment
strategies and
principal risks?
The fund invests all of its assets in
high-quality debt securities, and at least 80% of its net assets (plus any
borrowings for investment purposes) are invested in debt securities issued by
foreign corporations and governments. The advisor expects the fund’s
dollar-weighted average maturity to range from two to 10
years.
The fund’s primary investment risks
include
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•
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Foreign
Securities Risk
–
Foreign securities have certain unique risks, such as currency risk,
political and economic risk, and foreign market and trading
risk.
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•
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Interest Rate
Risk
– Generally,
when interest rates rise, the value of the fund’s debt securities will
decline. The opposite is true when interest rates
decline.
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•
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Nondiversification
– The fund is
classified as
nondiversified
.
This gives the portfolio managers
the flexibility to hold large positions in a smaller number of securities.
If so, a price change in any one of those securities may have a greater
impact on the fund’s share price than would be the case in a diversified
fund.
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u
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A
nondiversified
fund may
invest a greater percentage of its assets in a smaller number of
securities than a diversified
fund.
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•
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Principal
Loss
– At any given
time your shares may be worth less than the price you paid for them. In
other words, it is possible to lose money b
y
investing in the
fund.
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A more detailed description of the
fund’s investment strategies and risks may be found under the heading
Objectives,
Strategies and Risks,
which
begins on page
8
.
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u
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An investment
in the fund is not a bank deposit, and it is not insured or guaranteed by
the Federal Deposit Insurance Corporation (FDIC) or any other government
agency.
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Fund Performance
History
Annual Total Returns
The following bar chart shows the
performance of the fund’s Investor Class shares for each of the last 10 calendar
years. It indicates the volatility of the fund’s historical returns from year to
year. Account fees and sales charges, if applicable, are not reflected in the
chart below. If they had been included, returns would be lower than those shown.
The returns of the fund’s other classes of shares will differ from those shown
in the chart, depending on the expenses of those classes.
Investor
Class
(1)
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1
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As of
September 30, 2008, the year-to-date return for the Investor Class was
-1.87%.
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The highest and lowest quarterly returns
for the periods reflected in the bar chart are:
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Highest
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Lowest
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International
Bond
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14.36% (2Q
2002)
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-5.86% (1Q
1999)
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Average Annual Total
Returns
The following table shows the average
annual total returns of the fund’s Investor Class shares calculated three
different ways. Additional tables show the average annual total returns of the
fund’s other share classes calculated before the impact of taxes. Returns assume
the deduction of all sales loads, charges and other fees associated with a
particular class. Your actual returns may vary depending on the circumstances of
your investment. Because the B, C and R Classes (which commenced operations
September 28, 2007) do not have investment results for a full calendar year,
they are not included.
Return Before Taxes shows the actual
change in the value of fund shares over the time periods shown, but does not
reflect the impact of taxes on fund distributions or the sale of fund shares.
The two after-tax returns take into account taxes that may be associated with
owning fund shares. Return After Taxes on Distributions is a fund’s actual
performance, adjusted by the effect of taxes on distributions made by the fund
during the period shown. Return After Taxes on Distributions and Sale of Fund
Shares is further adjusted to reflect the tax impact on any change in the value
of fund shares as if they had been sold on the last day of the
period.
After-tax returns are calculated using
the historical highest federal marginal income tax rates and do not reflect the
impact of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns
shown are not relevant to investors who hold fund shares through tax-deferred
arrangements such as 401(k) plans or IRAs. After-tax returns are shown only for
Investor Class shares. After-tax returns for other share classes will
vary.
The
benchmarks are unmanaged indices that have no operating costs and are included
in the table for performance comparison. 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
. Since
January 1998, the fund benchmark has been the JPM GTGBI with the
U.S.
excluded
and
Japan
weighted
at 15%.
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Investor
Class
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For the calendar year ended
December 31, 2007
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1
year
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5
years
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10
years
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Return Before
Taxes
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9.89%
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8.16%
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6.50%
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Return After Taxes on
Distributions
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8.30%
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6.59%
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5.24%
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Return After Taxes on
Distributions
and
Sale
of
Fund Shares
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6.41%
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6.13%
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4.89%
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Fund
Benchmark
(reflects
no deduction for fees, e
x
penses
or taxes)
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11.98%
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9.52%
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7.62%
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JPMorgan Global Traded
Government Bond Index
(reflects
no deduction for fees, e
x
penses
or taxes)
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10.81%
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6.71%
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6.26%
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Institutional
Class
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For the calendar year ended
December 31, 2007
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1
year
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Life
of Class
(1)
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Return Before
Taxes
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10.13%
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7.17%
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Fund
Benchmark
(reflects no
deduction for fees, expenses or taxes)
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11.98%
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8.38%
(2
)
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JPMorgan Global Traded
Government Bond Index
(reflects no
deduction for fees, expenses or taxes)
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10.81%
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6.30%
(2
)
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1
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The inception date for the
Institutional Class of the fund is August 2, 2004. Only classes with
performance history for less than 10 years show returns for life of
class.
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2
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From July 31, 2004, the date
closest to the class’s inception for which data is
available.
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A
Class
(1)
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For the calendar year ended
December 31, 2007
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1
year
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5
years
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Life of
Class
(2)
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Return Before
Taxes
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4.38%
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6.87%
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4.64%
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Fund
Benchmark
(reflects no
deduction for fees, expenses or taxes)
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11.98%
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9.52%
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6.53%
(
3
)
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JPMorgan Global Traded
Government Bond Index
(reflects no
deduction for fees, expenses or taxes)
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10.81%
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6.71%
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5.28%
(
3
)
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1
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Prior to September 4, 2007, this
class was referred to as the Advisor Class and did not have a front-end
sales charge. Performance has been restated to reflect this
charge.
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2
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The inception date for the A Class
of the fund is October 27, 1998. Only classes with performance history for
less than 10 years show returns for life of
class.
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3
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From October 31, 1998, the date
closest to the class’s inception for which data is
available.
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Performance information is designed to
help you see how fund returns can vary. Keep in mind that past performance
(before and after taxes) does not predict how the fund will perform in the
future.
For current performance information,
including yields, please call us or visit
americancentury.com.
Fees and Expenses
The following tables describe the fees
and expenses you may pay if you buy and hold shares of the
fund.
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1
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Investments of $1 million or more
in A Class shares may be subject to a contingent deferred sales charge of
1.00% if the shares are redeemed within one year of the date of
purchase.
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2
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The charge is 5.00% during the
first year after purchase, declines over the next five years as shown on
page
19
, and is eliminated after six
years.
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3
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The charge is 1.00% during the
first year after purchase, and is eliminated
thereafter.
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4
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Applies only
to investors whose total eligible investments with American Century
Investments are less than $10,000. See
Account Maintenance
Fee
under
Investing Directly
with American Century Investments
for more
details.
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5
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The fund pays
the advisor a single, unified management fee for arranging all services
necessary for the fund to operate. The fee shown is based on assets during
the fund’s most recent fiscal year. The fund has a stepped fee schedule.
As a result, the fund’s unified management fee rate generally decreases as
assets increase and increases as assets decrease. For more information
about the unified management fee, see
The Investment Adviso
r
under
Management.
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6
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The 12b-1 fee
is designed to permit investors to purchase shares through broker-dealers,
banks, insurance companies and other financial intermediaries. The fee may
be used to compensate such financial intermediaries for distribution and
other shareholder services. For more information, see
Multiple Class
Information
and
Service, Distribution
and Administrative Fees
,
page
32
.
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7
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Other expenses, which include
the fees and expenses of the fund’s independent trustees and their legal
counsel, interest, and, if applicable, acquired fund fees and expenses,
were less than 0.005% for the most recent fiscal
year.
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8
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The unified management fee has
been restated to reflect the increase in the fee approved by the fund’s
shareholders effective September 4,
2007.
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9
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The 12b-1 fee has been restated to
reflect the decrease in the fee effective September 4,
2007.
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Example
The examples in the table below are
intended to help you compare the costs of investing in the fund with the costs
of investing in other mutual funds. Of course, your actual costs may be higher
or lower. Assuming you . . .
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•
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invest $10,000 in the
fund
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•
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redeem all of your shares at the
end of the periods shown below
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•
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earn a 5% return each
year
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•
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incur the same operating expenses
as shown above
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. . . your cost of investing in the fund
would be:
The table above reflects a deduction for
charges payable upon redemption. You would pay the following expenses if you did
not redeem your shares and thus did not incur such charges:
Objectiv
es,
Strategies and Risks
What is the fund’s investment
objective?
The fund seeks high total return by
investing in high-quality, non-dollar-denominated government and corporate debt
securities outside the
United States
.
How does the fund pursue its investment
objective?
The fund
invests all of its assets in
high-quality
debt securities
, and at
least 80% of its net assets (plus any borrowings for investment purposes) are
invested
in
non-dollar-denominated
foreign government and foreign corporate debt securities. The fund may change
this 80% policy only upon 60 days’ prior written notice to
shareholders.
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u
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High-quality
debt securities
are
fixed-income investments, such as notes, bonds, commercial paper,
debentures, and mortgage and asset-backed securities that have been rated
by an independent rating agency in its top two credit quality categories
or determined by the advisor to be of comparable credit quality. The
details of the fund’s credit quality standards are described in the
statement of additional
information.
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The portfolio manager, who is
responsible for selecting the fund’s investments, determines whether to buy and
sell securities for the fund by using a combination of fundamental research and
bond and currency valuation models.
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•
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Economic/Political
Fundamentals.
The
portfolio manager evaluates each country’s economic climate and political
discipline for controlling deficits and inflation.
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•
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Expected
Return.
Using
economic forecasts, the portfolio manager projects the expected return for
each country.
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•
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Relative
Value.
By contrasting
expected risks and returns for investments in each country, the portfolio
manager selects those countries expected to produce the best return at
reasonable risk.
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Generally, the fund will purchase only
bonds denominated in foreign currencies. Because the fund is designed for
U.S.
investors seeking currency and interest
rate diversification, the fund limits its use of hedging strategies that may
minimize the effect of currency fluctuations. The fund may hedge up to 25% of
its total assets into U.S. dollars when the portfolio manager considers the
dollar to be attractive relative to foreign currencies.
The fund also may invest in futures
contracts and foreign currency exchange contracts
, provided that such investments are in
keeping with the fund’s investment objective.
The weighted average maturity of the
fund is expected to be between two and 10 years.
A description of the policies and
procedures with respect to the disclosure of the fund’s portfolio securities is
available in the statement of additional information.
What are the principal risks of
investing in the fund?
Investing in foreign securities has
certain unique risks that make it generally riskier than investing in
U.S.
securities. These risks are summarized
below.
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•
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Currency
Risk.
In addition to
changes in the value of the fund’s investments, changes in the value of
foreign currencies against the U.S. dollar also could result in gains or
losses to the fund. The value of a share of the fund is determined in U.S.
dollars. The fund’s investments, however, generally are held in the
foreign currency of the country where i
n
vestments are made. As a result,
the fund could recognize a gain or loss based solely upon a change in the
exchange rate between the foreign currency and the U.S.
dollar.
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•
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Political and
Economic Risk.
The
fund invests in foreign debt securities, which are generally riskier than
U.S.
debt securities. As a result, the
fund is subject to foreign political and ec
o
nomic risk not associated with
U.S. investments, meaning that political events (civil unrest, national
elections, changes in political conditions and foreign relations,
imposition of exchange controls and repatriation restrictions), social and
economic events (labor strikes, rising inflation) and natural disasters
occurring in a country where the fund invests could cause the fund’s
investments in that country to experience gains or losses. The fund also
could be unable to e
n
force its ownership rights or
pursue legal remedies in countries where it invests.
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•
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Foreign Market
and Trading Risk.
The
trading markets for many foreign securities are not as active as
U.S.
markets and may have less
governmental regulation and oversight. Foreign markets also may have
clearance and settlement procedures that make it difficult for the fund to
buy and sell securities. These factors could result in a loss to the fund
by causing the fund to be unable to dispose of an investment or to miss an
attractive investment opportunity, or by cau
s
ing fund assets to be uninvested
for some period of time.
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•
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Availability of
Information.
Generally, foreign companies are
not subject to the regulatory controls or uniform accounting, auditing and
financial reporting standards imposed on
U.S.
iss
u
ers. As a result, there may be
less publicly available information about foreign issuers than is
available regarding
U.S.
issuers.
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When interest rates change, the fund’s
share value will be affected. Generally, when interest rates rise, the fund’s
share value will decline. The opposite is true when interest rates decline. The
interest rate risk for International Bond is higher than for funds that have
shorter weighted average maturities, such as money market and short-term bond
funds.
The fund is classified as
nondiversified. This means that the fund’s portfolio manager may choose to
invest in a relatively small number of securities. If so, a price change in any
one of these securities may have a greater impact on the fund’s share price than
would be the case if the fund were diversified.
At any given time your shares may be
worth less than the price you paid for them. In other words, it is possible to
lose money by investing in the fund.
Basics of Fixed-Income
Investing
Debt Securities
When a fund buys a debt security, also
called a fixed-income security, it is essentially lending money to the
security’s issuer. Notes, bonds, commercial paper and debentures are examples of
debt securities. After the debt security is first sold by the issuer, it may be
bought and sold by other investors. The price of the debt security may rise or
fall based on many factors, including changes in interest rates, liquidity and
credit quality.
The portfolio manager decides which debt
securities to buy and sell by
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•
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determining which debt securities
help a fund meet its maturity requirements
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•
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identifying debt securities that
satisfy a fund’s credit quality standards
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•
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evaluating the current economic
conditions and assessing the risk of inflation
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•
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evaluating special features of the
debt securities that may make them more or
less
attractive
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Weighted Average
Maturity
Like most loans, debt securities
eventually must be repaid or refinanced at some date. This date is called the
maturity date. The number of days left to a debt security’s maturity date is
called the remaining maturity. The longer a debt security’s remaining maturity,
generally the more sensitive its price is to changes in interest
rates.
Because a bond fund will own many debt
securities, the portfolio manager calculates the average of the remaining
maturities of all the debt securities the fund owns to evaluate the interest
rate sensitivity of the entire portfolio. This average is weighted according to
the size of the fund’s individual holdings and is called the weighted average
maturity. The following chart shows how the portfolio manager would calculate
the weighted average maturity for a fund that owned only two debt
securities.
|
Amount of
Security
Owned
|
Percent of
Portfolio
|
Remaining
Maturity
|
Weighted
Maturity
|
|
|
Debt Security
A
|
$100,000
|
25%
|
4 years
|
1 year
|
|
Debt Security
B
|
$300,000
|
75%
|
12 years
|
9 years
|
|
Weighted Average
Maturity
|
10
years
|
Types of Risk
The basic types of risk the fund faces
are described below.
Interest Rate Risk
Generally, interest rates and the prices
of debt securities move in opposite directions. When interest rates fall, the
prices of most debt securities rise; when interest rates rise, prices fall.
Because the fund invests primarily in debt securities, changes in interest rates
will affect the fund’s performance. This sensitivity to interest rate changes is
called interest rate risk.
The degree to which interest rate
changes affect a fund’s performance varies and is related to the weighted
average maturity of a particular fund. For example, when interest rates rise,
you can expect the share value of a long-term bond fund to fall more than that
of a short-term bond fund. When rates fall, the opposite is
true.
The following table shows the likely
effect of a 1% (100 basis points) increase in interest rates on the price of 7%
coupon bonds of differing maturities:
|
Remaining
Maturity
|
Current
Price
|
Price After 1%
Increase
|
Change in
Price
|
|
1 year
|
$100.00
|
$99.06
|
-0.94%
|
|
3 years
|
$100.00
|
$97.38
|
-2.62%
|
|
10 years
|
$100.00
|
$93.20
|
-6.80%
|
|
30 years
|
$100.00
|
$88.69
|
-11.31%
|
Credit Risk
Credit risk is the risk that an
obligation won’t be paid and a loss will result. A high credit rating indicates
a high degree of confidence by the rating organization that the issuer will be
able to withstand adverse business, financial or economic conditions and make
interest and principal payments on time. Generally, a lower credit rating
indicates a greater risk of non-payment. A lower rating also may indicate that
the issuer has a more senior series of debt securities, which means that if the
issuer has difficulties making its payments, the more senior series of debt is
first in line for payment.
The portfolio manager does not invest
solely on the basis of a debt security’s credit rating; he also considers other
factors, including potential returns. Higher credit ratings usually mean lower
interest rate payments, so investors often purchase debt securities that aren’t
the highest rated to increase return. If a fund purchases lower-rated debt
securities, it assumes additional credit risk.
Credit quality may be lower when the
issuer has a high debt level, a short operating history, a difficult,
competitive environment, or a less stable cash flow.
Liquidity Risk
Debt securities can become difficult to
sell, or less liquid, for a variety of reasons, such as lack of an active
trading market. The chance that a fund will have difficulty selling its debt
securities is called liquidity risk.
Management
Who manages the
fund?
The Board of Trustees, investment
advisor and fund management team play key roles in the management of the
fund.
The Board of
Trustees
The Board of Trustees oversees the
management of the fund and meets at least quarterly to review reports about fund
operations. Although the Board of Trustees does not manage the fund, it has
hired an investment advisor to do so. More than three-fourths of the trustees
are independent of the fund’s advisor; that is, they have never been employed by
and have no financial interest in the advisor or any of its affiliated companies
(other than as shareholders of American Century Investments
funds).
The Investment
Advisor
The fund’s investment advisor is
American Century Investment Management, Inc. (the advisor). The advisor has been
managing mutual funds since 1958 and is headquartered at
4500 Main Street
,
Kansas City
,
Missouri
64111
.
The advisor is responsible for managing
the investment portfolio of the fund and directing the purchase and sale of its
investment securities. The advisor also arranges for transfer agency, custody
and all other services necessary for the fund to operate. The advisor has hired
J.P. Morgan Investment Management, Inc. (JPMIM) to make the day-to-day
investment decisions for the fund. JPMIM performs this function under the
supervision of the fund’s Board of Trustees. JPMIM and its predecessor companies
have managed investments for clients for over eighty years. JPMIM is
headquartered at
245 Park
Avenue
,
New York
,
New York
10167
.
For the services it provides to the
fund, the advisor receives a unified management fee based on a percentage of the
daily net assets of each class of shares of the fund. The management fee is
calculated daily and paid monthly in arrears. Out of the fund’s fee, the advisor
pays all expenses of managing and operating the fund except brokerage expenses,
taxes, interest, fees and expenses of the independent trustees (including legal
counsel fees), and extraordinary expenses. A portion of the fund’s management
fee may be paid by the fund’s advisor to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed by
an affiliate of the advisor.
The percentage rate used to calculate
the management fee for each class of shares of the fund is determined daily
using a two-component formula that takes into account (i) the daily net assets
of the accounts managed by the advisor that are in the same broad investment
category as the fund (the “Category Fee”) and (ii) the assets of all funds in
the American Century Investments family of funds (the “Complex Fee”). The
statement of additional information contains detailed information about the
calculation of the fund’s management fee.
|
Management Fees Paid by the
Fund
to the Advisor as a Percentage
of
Average Net Assets for the
Fiscal
Year Ended June 30,
2008
|
Investor
Class
|
Institutional
Class
|
A
Class
(
1
)
|
B
Class
|
C
Class
|
R
Class
|
|
International
Bond
|
0.82%
|
0.62%
|
0.79%
|
0.82%
(2)
|
0.82%
(2)
|
0.82%
(2)
|
|
1
|
Prior to September 4, 2007, the
A Class was referred to as the Advisor Class. From July 1, 2007 to
September 3, 2007, the management fee was 0.57% of average net assets.
From September 4, 2007 to June 30, 2008, the management fee was 0.82% of
average net assets.
|
|
2
|
Annualized.
|
A discussion regarding the basis for
the Board of Trustees’ approval of the fund’s investment advisory agreement with
the advisor, as well as the subadvisory agreement between the advisor and
subadvisor, is available in the fund’s report to shareholders dated June 30,
2008.
The
Portfolio Manager
JPMIM employs a portfolio manager to
manage the fund. The portfolio manager regularly reviews portfolio holdings and
buys and sells securities for the fund as he sees fit, guided by the fund’s
investment objective and strategy.
The portfolio manager who is primarily
responsible for the day-to-day management of the fund is identified
below.
Jon B.
Jonsson
Mr.
Jonsson,
managing
director,
is
JPMIM's
head
of Portfolio Management and lead portfolio manager for
London
short
term and
London
broad
market strategies, working with the Macro team and sector teams to deliver
account-specific portfolio strat
egy. A
JPMIM employee since 1998, Mr. Jonsson's
team
is responsible for the portfolio management of broad market, short
duration
and
enhanced cash strategies.
Previously
he was a senior quantitative analyst responsible for preparing reports on
relative value, conceiving and analy
z
ing trade
ideas, and designing analytical models supporting portfolio manage
ment
strategies and decisions. Mr. Jonsson
holds
a B.S. in applied mathematics from
University
of
Iceland
and
an M.S. with specialization in financial engineering from
New
York
University
's Stern
School of Business.
The statement of additional
information provides additional information about the accounts managed by the
portfolio manager, the structure of his compensation, and his ownership of fund
securities.
Fundamental Investment
Policies
Fundamental investment policies
contained in the statement of additional information and the investment
objective of the fund may not be changed without shareholder approval. The Board
of Trustees and/or the advisor may change any other policies and investment
strategies.
Investing Directly with American Century
Inves
t
ments
Services Automatically Available to
You
Most accounts automatically will have
access to the services listed under
Ways to Manage Your
Account
when the account is
opened. If you do not want these services, see
Conducting Business
in Writing.
If you have
questions about the services that apply to your account type, please call
us.
Conducting Business in
Writing
If you
prefer to conduct business in writing only, please call us. If you choose this
option, you must provide written instructions to invest, exchange and redeem.
All account owners must sign transaction instructions (with signatures
guaranteed for redemptions in excess of $100,000). By choosing this option, you
are not eligible to enroll for exclusive online account management to waive the
account maintenance fee. See
Account
Maintenance Fee
in this
section. If you want to add online and telephone services later, you can
complete a Full Services Option form.
Account Maintenance
Fee
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), we may charge you a $12.50 semiannual account
maintenance fee if the value of those shares is less than $10,000. We will
determine the amount of your total eligible investments twice per year,
generally the last Friday in October and April. If the value of those
investments is less than $10,000 at that time, we will automatically redeem
shares in one of your accounts to pay the $12.50 fee. Please note that you may
incur tax liability as a result of the redemption. 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. We will not charge the fee as long as you choose to manage your
accounts exclusively online. You may enroll for exclusive online account
management by visiting americancentury.com.
|
|
u
|
Personal
accounts
include
individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts,
Coverdell Education Savings Accounts, 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 cu
r
rently not
subject to this fee, but you may be subject to other
fees.
|
Wire Purchases
Current
Investors:
If you would like to make a wire
purchase into an existing account, your bank will need the following
information. (To invest in a new fund, please call us first to set up the new
account.)
|
•
|
American Century Investments' bank
information: Commerce Bank N.A., Routing No. 101000019, Account No.
2804918
|
|
•
|
Your American Century Investments
account number and fund name
|
|
•
|
Your name
|
|
•
|
The contribution year (for IRAs
only)
|
|
•
|
Dollar
amount
|
New
Investors:
To make a wire purchase
into a new account, please complete an application prior to wiring
money.
Ways to Manage Your
Account
ONLINE
americancentury.com
Open an
account:
If you are a
current or new investor, you can open an account by completing and submitting
our online application. Current investors also can open an account by exchanging
shares from another American Century Investments account.
Exchange shares:
Exchange shares from
another American Century Investments account.
Make additional
investments:
Make an
additional investment into an established American Century Investments account
if you have authorized us to invest from your bank account.
Sell
shares*:
Redeem shares and
proceeds will be electronically transferred to your authorized bank
account.
* Online redemptions up to $25,000 per
day.
IN PERSON
If you prefer to handle your transactions in person, visit one of our Investor Centers and a representative can help you open an account, make additional investments, and sell or exchange shares.
|
•
|
4500 Main Street
,
Kansas City
,
MO
— 8 a.m. to 5 p.m., Monday –
Friday
|
|
•
|
4917 Town Center Drive
,
Leawood
,
KS
— 8 a.m. to 5 p.m., Monday –
Friday,
8 a.m. to noon,
Saturday
|
|
•
|
1665 Charleston Road
,
Mountain View
,
CA
— 8 a.m. to 5 p.m., Monday –
Friday
|
BY TELEPHONE
Investor Services Representative: 1-800-345-2021
Institutional Service
Representative:
1-800-345-3533
Business,
Not-For-Profit and Employer-Sponsored Retirement Plans:
1-800-345-3533
Automated Information
Line:
1-800-345-8765
Open an account:
If you are a current
investor, you can open an account by exchanging shares from another American
Century Investments account.
Exchange shares:
Call or use our Automated
Information Line if you have authorized us to accept telephone instructions. The
Automated Information Line is available only to Investor Class
shareholders.
Make additional
investments:
Call or use
our Automated Information Line if you have authorized us to
invest from your bank account. The
Automated Information Line is available only to Investor Class
shareholders.
Sell shares:
Call a Service
Representative.
BY MAIL OR FAX
P.O. Box 419200 , Kansas City , MO 64141-6200 — Fax: 816-340-7962
Open
an account:
Send a signed,
completed application and check or money order payable to American Century
Investments.
Exchange
shares:
Send written
instructions to exchange your shares from one American Century Investments
account to another.
Make additional
investments:
Send your
check or money order for at least $50 with an investment slip or $250 without an
investment slip. If you don’t have an investment slip, include your name,
address and account number on your check or money order.
Sell shares:
Send written instructions
or a redemption form to sell shares. Call a Service Representative to request a
form.
AUTOMATICALLY
Open an account: Not available.
Exchange
shares:
Send written
instructions to set up an automatic exchange of your shares from one American
Century Investments account to another.
Make additional
investments:
With the
automatic investment service, you can purchase shares on a regular basis. You
must invest at least $50 per month per account.
Sell shares:
You may sell shares
automatically by establishing Check-A-Month or Automatic Redemption
plans.
See
Additional Policies
Affecting Your Investment
for more information about inves
t
ing with us.
Investing Through a Financial
Intermediary
The fund’s A, C and R Classes are
intended for purchase by participants in employer-sponsored retirement plans.
Additionally the fund’s A, B and C Classes are intended for persons purchasing
shares through
financial
intermediaries
that provide
various administrative and distribution services. For more information regarding
employer-sponsored retirement plan types, please see
Buying and Selling
Fund Shares
in the
statement of additional information.
|
|
u
|
Financial
intermediaries
include banks,
broker-dealers, insurance companies, plan sponsors and
financial professionals.
|
Although each class of shares represents
an interest in the same fund, each has a different cost structure, as described
below. Which class is right for you depends on many factors, including how long
you plan to hold the shares, how much you plan to invest, the fee structure of
each class, and how you wish to compensate your financial professional for the
services provided to you. Your financial professional can help you choose the
option that is most appropriate.
The following table provides a summary
description of these classes.
|
1
|
The sales charge for A Class
shares decreases depending on the size of your investment, and may be
waived for some purchases. There is no sales charge for purchases of
$1,000,000 or more.
|
|
2
|
A contingent deferred sales charge
(CDSC) of 1.00% will be charged on certain purchases of $1,000,000 or more
that are redeemed within one year of
purchase.
|
|
3
|
This class is not available for
employer-sponsored retirement plan
accounts.
|
|
4
|
The R Class is available for
employer-sponsored retirement plans only after August 1,
2006.
|
Calculation of Sales
Charges
The information regarding sales charges
provided herein is included free of charge and in a clear and prominent format
at americancentury.com in the
Investors Using
Advisors
and
Investment
Professionals
portions of
the Web site. From the description of A, B or C Class shares, a hyperlink will
take you directly to this disclosure.
A Class
A Class shares are sold at their
offering price, which is net asset value plus an initial sales charge. This
sales charge varies depending on the amount of your investment, and is deducted
from your purchase before it is invested. The sales charges and the amounts paid
to your financial professional are:
|
Purchase
Amount
|
Sales Charge
as a % of
O
f
fering
Price
|
Sales Charge
as a % of Net
Amount I
n
vested
|
Amount paid to
Financial
Professional
as a % of O
f
fering
Price
|
|
Less than
$50,000
|
4.50%
|
4.71%
|
4.00%
|
|
$50,000 -
$99,999
|
4.50%
|
4.71%
|
4.00%
|
|
$100,000 -
$249,999
|
3.
50%
|
3.63%
|
3.00%
|
|
$250,000 -
$499,999
|
2.50%
|
2.56%
|
2.00%
|
|
$500,000 -
$999,999
|
2.00%
|
2.04%
|
1.75%
|
|
$1,000,000 -
$3,999,999
|
0.00%
|
0.00%
|
1.00%
(1)
|
|
$4,000,000 -
$9,999,999
|
0.00%
|
0.00%
|
0.50%
(1)
|
|
$10,000,000 or
more
|
0.00%
|
0.00%
|
0.25%
(1)
|
|
1
|
For purchases over $1,000,000 by
employer-sponsored retirement plans, no upfront amount will be paid to
financial professionals.
|
There is no front-end sales charge for
purchases of $1,000,000 or more, but if you redeem
your shares within one year of purchase
you will pay a 1.00% deferred sales charge, subject to the exceptions listed
below. No sales charge applies to reinvested dividends.
Reductions and Waivers of Sales Charges
for A Class
You may qualify for a reduction or
waiver of certain sales charges, but you or your financial professional must
provide certain information, including the account numbers of any accounts to be
aggregated, to American Century Investments at the time of purchase in order to
take advantage of such reduction or waiver. If you hold assets among multiple
intermediaries, it is your responsibility to inform your intermediary and/or
American Century Investments at the time of the purchase of any accounts to be
aggregated.
You and your immediate family (your
spouse and your children under the age of 21) may combine investments in any
share class of any American Century Investments fund (excluding 529 account
assets and certain assets in money market accounts) to reduce your A Class sales
charge in the following ways:
Account
Aggregation.
Investments
made by you and your immediate family may be aggregated at each account’s
current market value if made for your own account(s) and/or certain other
accounts, such as:
|
•
|
Certain trust
accounts
|
|
•
|
Solely controlled business
accounts
|
|
•
|
Single-participant retirement
plans
|
|
•
|
Endowments or foundations
established and controlled by you or an immediate
family me
m
ber
|
For purposes of aggregation, only
investments made through individual-level accounts may be combined. Assets held
in multiple participant employer-sponsored retirement plans may be aggregated at
a plan level.
Concurrent
Purchases.
You may combine
simultaneous purchases in any share class of any American Century Investments
fund to qualify for a reduced A Class sales charge.
Rights of
Accumulation.
You may take
into account the current value of your existing holdings, less any
commissionable shares in the money market funds, in any share class of any
American Century Investments fund to qualify for a reduced A Class sales
charge.
Letter of
Intent.
A Letter of Intent
allows you to combine all non-money market fund purchases of any share class of
any American Century Investments fund you intend to make over a 13-month period
to determine the applicable sales charge. At your request, existing holdings may
be combined with new purchases and sales charge amounts may be adjusted for
purchases made within 90 days prior to our receipt of the Letter of Intent.
Capital appreciation,
capital gains and reinvested dividends earned during the Letter of Intent period
do not apply toward its completion. A portion of your account will be held in
escrow to cover additional A Class sales charges that will be due if your total
investments over the 13-month period do not qualify for the applicable sales
charge reduction.
Waivers for Certain
Investors.
The sales charge
on A Class shares may be waived for:
|
•
|
Purchases by registered
representatives and other employees of certain financial intermediaries
(and their immediate family members) having selling agreements with the
advisor or distrib
u
tor
|
|
•
|
Broker-dealer sponsored wrap
program accounts and/or fee-based accounts maintained for clients of
certain financial intermediaries who have entered into selling agreements
with
American Century
Investments
|
|
•
|
Present or former officers,
trustees, and employees (and their families) of
American Century
Investments
|
|
•
|
Employer-sponsored retirement plan
purchases. For plans under $1 million in assets, purchases with sales
charges are allowed, but may be subject to the retirement plan
recordkeeper’s policies. Refer to
Buying and
Selling Fund Shares
in the statement of additional i
n
formation.
|
|
•
|
IRA Rollovers from any
American Century
Investments
fund held
in an employer-sponsored retirement plan
|
|
•
|
Shares purchased in accounts that
held Advisor Class shares of this fund prior to
September 4,
2007
|
|
•
|
Certain other investors as deemed
appropriate by
American Century
Investments
|
B Class
B Class shares are sold at their net
asset value without an initial sales charge. For sales of B Class shares, the
amount paid to your financial professional is 4.00% of the amount invested. If
you redeem your shares within six years of purchase date, you will pay a
contingent deferred sales charge (CDSC) as set forth below. The purpose of the
CDSC is to permit the fund’s distributor to recoup all or a portion of the
up-front payment made to your financial professional. There is no CDSC on shares
acquired through reinvestment of dividends or capital gains.
|
Redemption
During
|
CDSC as a % of Original Purchase
Price
|
|
1st year
|
5.00%
|
|
2nd year
|
4.00%
|
|
3rd year
|
3.00%
|
|
4th year
|
3.00%
|
|
5th year
|
2.00%
|
|
6th year
|
1.00%
|
|
After 6th
year
|
None
|
B Class shares (which carry a 1.00%
12b-1 fee) will automatically convert to A Class shares (which carry a 0.25%
12b-1 fee) within 31 days after the eight-year anniversary of the purchase
date.
American Century Investments generally
limits purchases of B Class shares to investors whose aggregate investments in
American Century Investments funds are less than $50,000. However, it is your
responsibility to inform your financial intermediary and/or American Century
Investments at the time of purchase of any accounts to be aggregated, including
investments in any share class of any American Century Investments fund
(excluding 529 account assets and certain assets in money market accounts) in
accounts held by you and your immediate family members (your spouse and children
under the age of 21). Once you reach this limit, you should work with your
financial intermediary to determine what share class is most appropriate for
additional purchases.
C Class
C Class shares are sold at their net
asset value without an initial sales charge. For sales of C Class shares, the
amount paid to your financial professional is 1.00% of the amount invested. If
you redeem your shares within 12 months of purchase, you will pay a CDSC of
1.00% of the original purchase price or the current market value at redemption,
whichever is less. The purpose of the CDSC is to permit the fund’s distributor
to recoup all or a portion of the up-front payment made to your financial
professional. There is no CDSC on shares acquired through reinvestment of
dividends or capital gains.
American Century Investments generally
limits purchases of C Class shares to investors whose aggregate investments in
American Century Investments funds are less than $1,000,000. However, it is your
responsibility to inform your financial intermediary and/or American Century
Investments at the time of purchase of any accounts to be aggregated, including
investments in any share class of any American Century Investments fund
(excluding 529 account assets and certain assets in money market accounts) in
accounts held by you and your immediate family members (your spouse and children
under the age of 21). Once you reach this limit, you should work with your
financial intermediary to determine what share class is most appropriate for
additional purchases.
Calculation of Contingent Deferred Sales
Charge (CDSC)
To minimize the amount of the CDSC you
may pay when you redeem shares, the fund will first redeem shares acquired
through reinvested dividends and capital gain distributions, which are not
subject to a CDSC. Shares that have been in your account long enough that they
are not subject to a CDSC are redeemed next. For any remaining redemption
amount, shares will be sold in the order they were purchased (earliest to
latest).
CDSC Waivers
Any applicable CDSC may be waived in the
following cases:
|
•
|
redemptions through systematic
withdrawal plans not exceeding annually:
|
|
¢
12% of the lesser of the original
purchase cost or current market value for
A Class shares
|
|
|
¢
12% of the original purchase cost
for B Class shares
|
|
|
¢
12% of the lesser of the original
purchase cost or current market value for
C Class shares
|
|
|
•
|
distributions from IRAs due to
attainment of age 59 1/2
for A Class shares and
for
C Class shares
|
|
•
|
required minimum distributions
from retirement accounts upon reaching age 70
1/2
|
|
•
|
tax-free returns of excess
contributions to IRAs
|
|
•
|
redemptions due to death or
post-purchase disability
|
|
•
|
exchanges, unless the shares
acquired by exchange are redeemed within the original
CDSC period
|
|
•
|
IRA Rollovers from any
American Century
Investments
fund held
in an employer-sponsored retirement plan, for A Class shares
only
|
|
•
|
if no broker was compensated for
the sale
|
Reinstatement
Privilege
Within 90 days of a redemption of any A
or B Class shares, you may reinvest all of the redemption proceeds in A Class
shares of any American Century Investments fund at the then-current net asset
value without paying an initial sales charge. At your request, any CDSC you paid
on an A Class redemption that you are reinvesting will be credited to your
account. You or your financial professional must notify the funds’ transfer
agent in writing at the time of the reinvestment to take advantage of this
privilege, and you may use it only once per account. This privilege applies only
if the new account is owned by the original account owner.
Exchanging Shares
You may exchange shares of the fund for
shares of the same class of another American Century Investments fund without a
sales charge if you meet the following criteria:
|
•
|
The exchange is for a minimum of
$100
|
|
•
|
For an exchange that opens a new
account, the amount of the exchange must meet or exceed the minimum
account size requirement for the fund receiving the
exchange
|
For purposes of computing any applicable
CDSC on shares that have been exchanged, the holding period will begin as of the
date of purchase of the original fund owned. Exchanges from a money market fund
are subject to a sales charge on the fund being purchased, unless the money
market fund shares were acquired by exchange from a fund with a sales charge or
by reinvestment of dividends or capital gains distributions.
Exchanges Between Funds (C
Class)
You may exchange C Class shares of a
fund for C Class shares of any other American Century Investments fund. You may
not exchange from the C Class to any other class. We will not charge a CDSC on
the shares you exchange, regardless of the length of time you have owned them.
When you do redeem shares that have been exchanged, the CDSC will be based on
the date you purchased the original shares.
Buying and Selling
Shares
Your ability to purchase, exchange,
redeem and transfer shares will be affected by the policies of the financial
intermediary through which you do business. Some policy differences may
include
|
•
|
minimum investment
requirements
|
|
•
|
exchange
policies
|
|
•
|
fund choices
|
|
•
|
cutoff time for
investments
|
|
•
|
trading
restrictions
|
In addition, your financial intermediary
may charge a transaction fee for the purchase or sale of fund shares. Those
charges are retained by the financial intermediary and are not shared with
American Century Investments or the fund. Please contact your financial
intermediary or plan sponsor for a complete description of its policies. Copies
of the fund’s annual report, semiannual report and statement of additional
information are available from your financial intermediary or plan
sponsor.
The fund has authorized certain
financial intermediaries
to accept orders on the fund’s behalf.
American Century Investments has selling agreements with these financial
intermediaries requiring them to track the time investment orders are received
and to comply with procedures relating to the transmission of orders. Orders
must be received by the financial intermediary on the fund’s behalf before the
time the net asset value is determined in order to receive that day’s share
price. If those orders are transmitted to American Century Investments and paid
for in accordance with the selling agreement, they will be priced at the net
asset value next determined after your request is received in the form required
by the financial intermediary.
See
Additional Policies
Affecting Your Investment
for more information about inves
t
ing with us.
Additional Policies Affecting Your
Investment
Eligibility for Investor Class
Shares
The fund’s Investor Class shares are
available for purchase through financial intermediaries in the following types
of accounts:
|
•
|
employer-sponsored retirement
plans
|
|
•
|
broker-dealer sponsored fee-based
wrap programs or other fee-based advisory accounts
|
|
•
|
insurance products and bank/trust
products where fees are being
charged
|
The fund’s Investor Class shares also
are available for purchase directly from American Century Investments
by:
|
•
|
shareholders who held any account
directly with
American Century
Investments
as of
September 28, 2007, and have continuously maintained such account (this
includes anyone listed in the registration of an account, such as joint
owners, trustees or custodians, and the immediate family members of such
persons)
|
|
•
|
current or retired employees of
American Century
Investments
and their
immediate family members, and trustees of the
fund
|
Investors may be required to demonstrate
eligibility to purchase Investor Class shares of the fund before an investment
is accepted. The fund reserves the right, when in the judgment of American
Century Investments it is not adverse to the fund’s interest, to permit all or
only certain types of investors to open new accounts in the fund, to impose
further restrictions, or to close the fund to any additional investments, all
without notice.
Minimum Initial
Investment Amounts
(other
than Institutional Class)
Unless otherwise specified below, the
minimum initial investment amount to open an account is $2,500. Financial
intermediaries may open an account with $250, but may require their clients to
meet different investment minimums. See
Investing Through a
Financial Intermediary
for
more information.
|
Broker-dealer sponsored wrap
program accounts
and/or fee-based a
c
counts
|
No
minimum
|
|
Coverdell Education Savings
Account (CESA)
|
$2,000
(1)
|
|
Employer-sponsored retirement
plans
|
No
minimum
|
|
1
|
The minimum initial investment for
financial intermediaries is $250. Financial intermediaries may have
different minimums for their
clients.
|
Subsequent Purchases
There is a $50 minimum for subsequent
purchases. See
Ways to Manage Your
Account
for more
information about making additional investments directly with American Century
Investments. However, there is no subsequent purchase minimum for financial
intermediaries or employer-sponsored retirement plans, but financial
intermediaries may require their clients to meet different subsequent purchase
requirements.
Eligibility for Institutional Class
Shares
The Institutional Class shares are
made available for purchase by individuals and large institutional shareholders
such as bank trust departments, corporations, retirement plans, endowments,
foundations and financial advisors that meet the fund’s minimum investment
requirements. Institutional Class shares are not available for purchase by
insurance companies for variable annuity and variable life
products.
Minimum Initial Investment Amounts
(Institutional Class)
The minimum initial investment amount
is $5 million ($3 million for endowments and foundations) per fund. If you
invest with us through a financial intermediary, this requirement may be met if
your financial intermediary aggregates your investments with those of other
clients into a single group, or omnibus, account that meets the minimum. The
minimum investment requirement may be waived if you, or your financial
intermediary if you invest through an omnibus account, have an aggregate
investment in our family of funds of $10 million or more ($5 million for
endowments and foundations), or in other situations as determined by American
Century Investments. In addition, financial intermediaries or plan recordkeepers
may require retirement plans to meet certain other conditions, such as plan size
or a minimum level of assets per participant, in order to be eligible to
purchase Institutional Class shares.
Redemptions
If you sell B, C or, in certain cases, A
Class shares, you may pay a sales charge, depending on how long you have held
your shares, as described above. Your redemption proceeds will be calculated
using the
net
asset value
(NAV) next
determined after we receive your transaction request in good
order.
|
|
u
|
A fund’s
net
asset value
,
or NAV, is
the price of the fund’s
shares.
|
However, we reserve the right to delay
delivery of redemption proceeds up to seven days. For example, each time you
make an investment with American Century Investments, there is a seven-day
holding period before we will release redemption proceeds from those shares,
unless you provide us with satisfactory proof that your purchase funds have
cleared. Investments by wire generally require only a one-day holding period. If
you change your address, we may require that any redemption request made within
15 days be submitted in writing and be signed by all authorized signers with
their signatures guaranteed. If you change your bank information, we may impose
a 15-day holding period before we will transfer or wire redemption proceeds to
your bank. Please remember, if you request redemptions by wire, $10 will be
deducted from the amount redeemed. Your bank also may charge a
fee.
In addition, we reserve the right to
honor certain redemptions with securities, rather than cash, as described in the
next section.
Special Requirements for Large
Redemptions
If, during any 90-day period, you redeem
fund shares worth more than $250,000 (or 1% of the value of a fund’s assets if
that amount is less than $250,000), we reserve the right to pay part or all of
the redemption proceeds in excess of this amount in readily marketable
securities instead of in cash. The portfolio managers would select these
securities from the fund’s portfolio.
We will value these securities in the
same manner as we do in computing the fund’s net asset value. We may provide
these securities in lieu of cash without prior notice. Also, if payment is made
in securities, you may have to pay brokerage or other transaction costs to
convert the securities to cash.
If your redemption would exceed this
limit and you would like to avoid being paid in securities, please provide us
with an unconditional instruction to redeem at least 15 days prior to the date
on which the redemption transaction is to occur. The instruction must specify
the dollar amount or number of shares to be redeemed and the date of the
transaction. This minimizes the effect of the redemption on a fund and its
remaining investors.
Redemption of Shares in Accounts Below
Minimum
If your account balance falls below
the minimum initial investment amount for any reason, American Century
Investments reserves the right to redeem the shares in the account and send the
proceeds to your address of record. Prior to doing so, we will notify you and
give you 60 days to meet the minimum. Please note that A, B and C Class shares
redeemed in this manner may be subject to a sales charge if held less than the
applicable time period. You may also incur tax liability as a result of the
redemption. For Institutional Class shares, we reserve the right to convert your
shares to Investor Class shares of the same fund. The Investor Class shares have
a unified management fee that is 0.20% higher than the Institutional
Class.
Signature Guarantees
A signature guarantee — which is
different from a notarized signature — is a warranty that the signature
presented is genuine. We may require a signature guarantee for the following
transactions.
|
•
|
You have chosen to conduct
business in writing only and would like to redeem
over $100,000.
|
|
•
|
Your redemption or distribution
check, Check-A-Month or automatic redemption is made pa
y
able to someone other than the
account owners.
|
|
•
|
Your redemption proceeds or
distribution amount is sent by EFT (ACH or wire) to a destin
a
tion other than your personal bank
account.
|
|
•
|
You are transferring ownership of
an account over $100,000.
|
|
•
|
You change your address and
request a redemption over $100,000 within 15 days.
|
|
•
|
You change your bank information
and request a redemption within 15
days.
|
We reserve the right to require a
signature guarantee for other transactions, at our
discretion.
Modifying or Canceling an
Investment
Investment instructions are irrevocable.
That means that once you have mailed or otherwise transmitted your investment
instruction, you may not modify or cancel it. The fund reserves the right to
suspend the offering of shares for a period of time and to reject any specific
investment (including a purchase by exchange). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
Abusive Trading
Practices
Short-term trading and other so-called
market timing practices are not defined or explicitly prohibited by any federal
or state law. However, short-term trading and other abusive trading practices
may disrupt portfolio management strategies and harm fund performance. If the
cumulative amount of short-term trading activity is significant relative to a
fund’s net assets, the fund may incur trading costs that are higher than
necessary as securities are first purchased then quickly sold to meet the
redemption request. In such case, the fund’s performance could be negatively
impacted by the increased trading costs created by short-term trading if the
additional trading costs are significant.
Because of the potentially harmful
effects of abusive trading practices, the fund’s Board of Trustees has approved
American Century Investments' abusive trading policies and procedures, which are
designed to reduce the frequency and effect of these activities in our funds.
These policies and procedures include monitoring trading activity, imposing
trading restrictions on certain accounts, imposing redemption fees on certain
funds, and using fair value pricing when current market prices are not readily
available. Although these efforts are designed to discourage abusive trading
practices, they cannot eliminate the possibility that such activity will occur.
American Century Investments seeks to exercise its judgment in implementing
these tools to the best of its ability in a manner that it believes is
consistent with shareholder interests.
American Century Investments uses a
variety of techniques to monitor for and detect abusive trading practices. These
techniques may vary depending on the type of fund, the class of shares or
whether the shares are held directly or indirectly with American Century
Investments. They may change from time to time as determined by American Century
Investments in its sole discretion. To minimize harm to the funds and their
shareholders, we reserve the right to reject any purchase order (including
exchanges) from any shareholder we believe has a history of abusive trading or
whose trading, in our judgment, has been or may be disruptive to the funds. In
making this judgment, we may consider trading done in multiple accounts under
common ownership or control.
Currently, for shares held directly with
American Century Investments, we may deem the sale of all or a substantial
portion of a shareholder’s purchase of fund shares to be abusive if the sale is
made
|
•
|
within seven days of the purchase,
or
|
|
•
|
within 30 days of the purchase, if
it happens more than once per
year.
|
To the extent practicable, we try to use
the same approach for defining abusive trading for shares held through financial
intermediaries. American Century Investments reserves the right, in its sole
discretion, to identify other trading practices as abusive and to modify its
monitoring and other practices as necessary to deal with novel or unique abusive
trading practices.
In addition, American Century
Investments reserves the right to accept purchases and exchanges in excess of
the trading restrictions discussed above if it believes that such transactions
would not be inconsistent with the best interests of fund shareholders or this
policy.
American Century Investments'
policies do not permit us to enter into arrangements with fund shareholders that
permit such shareholders to engage in frequent purchases and redemptions of fund
shares. Due to the complexity and subjectivity involved in identifying abusive
trading activity and the volume of shareholder transactions American Century
Investments handles, there can be no assurance that American Century
Investments' efforts will identify all trades or trading practices that may be
considered abusive. American Century Investments monitors aggregate trades
placed in omnibus accounts and works with financial intermediaries to identify
shareholders engaging in abusive trading practices and impose restrictions to
discourage such practices. Because American Century Investments relies on
financial intermediaries to provide information and impose restrictions, our
ability to monitor and discourage abusive trading practices in omnibus accounts
may be dependent upon the intermediaries' timely performance of such
duties.
Your Responsibility for Unauthorized
Transactions
American Century Investments and its
affiliated companies use procedures reasonably designed to confirm that
telephone, electronic and other instructions are genuine. These procedures
include recording telephone calls, requesting personalized security codes or
other information, and sending confirmation of transactions. If we follow these
procedures, we are not responsible for any losses that may occur due to
unauthorized instructions. For transactions conducted over the Internet, we
recommend the use of a secure Internet browser. In addition, you should verify
the accuracy of your confirmation statements immediately after you receive
them.
A Note About Mailings to
Shareholders
To reduce the amount of mail you receive
from us, we may deliver a single copy of certain investor documents (such as
shareholder reports and prospectuses) to investors who share an address, even if
accounts are registered under different names. If you prefer to receive multiple
copies of these documents individually addressed, please call us or your
financial professional. For American Century Investments Brokerage accounts,
please call
1-888-345-2071.
Right to Change
Policies
We reserve the right to change any
stated investment requirement, including those that relate to purchases,
exchanges and redemptions. We also may alter, add or discontinue any service or
privilege. Changes may affect all investors or only those in certain classes or
groups. In addition, from time to time we may waive a policy on a case-by-case
basis, as the advisor deems appropriate.
Share Price and
Distributions
Share Price
American Century Investments will price
the fund shares you purchase, exchange or redeem at the net asset value (NAV)
next determined after your order is received and accepted by the fund’s transfer
agent, or other financial intermediary with the authority to accept orders on
the fund’s behalf. We determine the fund’s NAV as of the close of regular
trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on
each day the NYSE is open. On days when the NYSE is closed (including certain
U.S.
national holidays), we do not calculate
the NAV. A fund’s NAV is the current value of the fund’s assets, minus any
liabilities, divided by the number of shares outstanding.
The fund values portfolio securities for
which market quotations are readily available at their market price. The fund
may use pricing services to assist in the determination of market value.
Unlisted securities for which market quotations are readily available are valued
at the last quoted sale price or the last quoted ask price, as applicable,
except that debt obligations with 60 days or less remaining until maturity may
be valued at amortized cost.
If the fund determines that the
market price for 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 in good faith by the fund’s board or its
designee, in accordance with procedures adopted by the fund's board.
Circumstances that may cause the fund to use alternate procedures to value a
security include, but are not limited to:
|
•
|
if, after the close of the foreign
exchange on which a portfolio security is principally traded, but before
the close of the NYSE, an event occurs that may materially affect the
value of the sec
u
rity;
|
|
•
|
a debt security has been declared
in default; or
|
|
•
|
trading in a security has been
halted during the trading
day.
|
If such circumstances occur, the fund
will fair value the security if the fair valuation would materially impact the
fund’s NAV. While fair value determinations involve judgments that are
inherently subjective, these determinations are made in good faith in accordance
with procedures adopted by the fund’s board.
The effect of using fair value
determinations is that the fund’s NAV will be based, to some degree, on security
valuations that the board or its designee believes are fair rather than being
solely determined by the market.
With respect to any portion of the
fund’s assets that are invested in one or more open-end management investment
companies that are registered with the SEC (known as registered investment
companies, or RICs), the fund’s NAV will be calculated based upon the NAVs of
such RICs. These RICs are required by law to explain the circumstances under
which they will use fair value pricing and the effects of using fair value
pricing in their prospectuses.
Securities and other assets quoted in
foreign currencies are valued in U.S. dollars based on the prevailing exchange
rates on that day.
Trading of securities in foreign markets
may not take place every day the NYSE is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when the fund’s NAV is not calculated. So, the value of the fund’s
portfolio may be affected on days when you will not be able to purchase,
exchange or redeem fund shares.
Distributions
Federal tax laws require the fund to
make distributions to its shareholders in order to qualify as a regulated
investment company. Qualification as a regulated investment company means that
the fund should not be subject to state or federal income tax on amounts
distributed. The distributions generally consist of dividends and interest
received by the fund, as well as
capital
gains
realized by the fund
on the sale of its investment securities.
|
|
u
|
Capital
gains
are increases
in the values of capital assets, such as stock, from the time the assets
are purchased.
|
The fund pays distributions of
substantially all its income each year. These distributions may be paid
quarterly, but may be paid less frequently. Distributions from realized capital
gains, if any, are paid annually, usually in December. It may make more frequent
distributions, if necessary, to comply with Internal Revenue Code provisions.
Distributions may be taxable as ordinary income, capital gains or a combination
of the two. Capital gains are taxed at different rates depending on the length
of time the fund held the securities that were sold.
You will participate in fund
distributions when they are declared, starting the next business day after your
purchase is effective. For example, if you purchase shares on a day that a
distribution is declared, you will not receive that distribution. If you redeem
shares, you will receive any distribution declared on the day you redeem. If you
redeem all shares, we will include any distributions received with your
redemption proceeds.
Participants in tax-deferred retirement
plans must reinvest all distributions. For investors investing through taxable
accounts, we will reinvest distributions unless you elect to have dividends
and/or capital gains sent to another American Century Investments account, to
your bank electronically, or to your home address or to another person or
address by check.
Taxes
The tax consequences of owning shares of
the fund will vary depending on whether you own them through a taxable or
tax-deferred account. Tax consequences result from distributions by the fund of
dividend and interest income it has received or capital gains it has generated
through its investment activities. Tax consequences also may result when
investors sell fund shares after the net asset value has increased or
decreased.
Tax-Deferred
Accounts
If you purchase fund shares through a
tax-deferred account, such as an IRA or employer-sponsored retirement or savings
plan, income and capital gains distributions usually will not be subject to
current taxation but will accumulate in your account under the plan on a
tax-deferred basis. Likewise, moving from one fund to another fund within a plan
or tax-deferred account generally will not cause you to be taxed. For
information about the tax consequences of making purchases or withdrawals
through a tax-deferred account, please consult your plan administrator, your
summary plan description or a tax advisor.
Taxable Accounts
If you own fund shares through a taxable
account, you may be taxed on your investments if the fund makes distributions or
if you sell your fund shares.
Taxability of
Distributions
Fund distributions may consist of
income, such as dividends and interest earned by a fund from its investments, or
capital gains generated by a fund from the sale of investment securities.
Distributions of income are taxed as ordinary income, unless they are designated
as
qualified
dividend income
and you
meet a minimum required holding period with respect to your shares of the fund,
in which case distributions of income are taxed as long-term capital
gains.
|
|
u
|
Qualified
dividend income
is a dividend
received by a fund from the stock of a domestic or qualifying foreign
corporation, provided that the fund has held the stock for a r
e
quired holding
period.
|
For capital gains and for income
distributions designated as qualified dividend income, the following rates
apply:
|
Type of
Distribution
|
Tax Rate for
10%
and 15%
Brackets
|
Tax Rate for
All Other
Brackets
|
|
Short-term capital
gains
|
Ordinary
Income
|
Ordinary
Income
|
|
Long-term capital gains (> 1
year) and Qualified Dividend Income
|
5%
|
15%
|
If a fund’s distributions exceed its
taxable income and capital gains realized during the tax year, all or a portion
of the distributions made by the fund in that tax year will be considered a
return of capital. A return of capital distribution is generally not subject to
tax, but will reduce your cost basis in the fund and result in higher realized
capital gains (or lower realized capital losses) upon the sale of fund
shares.
The tax status of any distributions of
capital gains is determined by how long the fund held the underlying security
that was sold, not by how long you have been invested in the fund, or whether
you reinvest your distributions in additional shares or take them in cash. For
taxable accounts, American Century Investments or your financial intermediary
will inform you of the tax status of fund distributions for each calendar year
in an annual tax mailing.
Distributions also may be subject to
state and local taxes. Because everyone’s tax situation is unique, you may want
to consult your tax professional about federal, state and local tax
consequences.
Taxes on
Transactions
Your redemptions — including exchanges
to other American Century Investments funds — are subject to capital gains tax.
The table above can provide a general guide for your potential tax liability
when selling or exchanging fund shares. Short-term capital gains are gains on
fund shares you held for 12 months or less. Long-term capital gains are gains on
fund shares you held for more than 12 months. If your shares decrease in value,
their sale or exchange will result in a long-term or short-term capital loss.
However, you should note that loss realized upon the sale or exchange of shares
held for six months or less will be treated as a long-term capital loss to the
extent of any distribution of long-term capital gain to you with respect to
those shares. If a loss is realized on the redemption of fund shares, the
reinvestment in additional fund shares within 30 days before or after the
redemption may be subject to the wash sale rules of the Internal Revenue Code.
This may result in a postponement of the recognition of such loss for federal
income tax purposes.
If you have not certified to us that
your Social Security number or tax identification number is correct and that you
are not subject to withholding, we are required to withhold and pay to the IRS
the applicable federal withholding tax rate on taxable dividends, capital gains
distributions and redemption proceeds.
Buying a Dividend
Purchasing fund shares in a taxable
account shortly before a distribution is sometimes known as buying a dividend.
In taxable accounts, you must pay income taxes on the distribution whether you
reinvest the distribution or take it in cash. In addition, you will have to pay
taxes on the distribution whether the value of your investment decreased,
increased or remained the same after you bought the fund
shares.
The risk in buying a dividend is that a
fund’s portfolio may build up taxable gains throughout the period covered by a
distribution, as securities are sold at a profit. The fund distributes those
gains to you, after subtracting any losses, even if you did not own the shares
when the gains occurred.
If you buy a dividend, you incur the
full tax liability of the distribution period, but you may not enjoy the full
benefit of the gains realized in the fund’s portfolio.
Multiple Class
Information
American Century Investments offers the
following classes of shares of the fund: Investor Class, Institutional Class, A
Class, B Class, C Class and R Class.
The classes have different fees,
expenses and/or minimum investment requirements. The difference in the fee
structures between the classes is the result of their separate arrangements for
shareholder and distribution services. It is not the result of any difference in
advisory or custodial fees or other expenses related to the management of the
fund’s assets, which do not vary by class. The Institutional Class is made
available to institutional shareholders or through financial intermediaries
whose clients do not require the same level of shareholder and administrative
services from the advisor as shareholders of the other classes. As a result, the
advisor is able to charge this class a lower unified management fee. Different
fees and expenses will affect performance.
Except as described below, all classes
of shares of a fund have identical voting, dividend
, liquidation and other rights,
preferences, terms and conditions. The only differences among the classes are
(a) each class may be subject to different expenses specific to that class;
(b) each class has a different identifying designation or name; (c) each
class has exclusive voting rights with respect to matters solely affecting such
class; (d) each class may have different exchange privileges; (e) the
Institutional Class may provide for automatic conversion from that class into
shares of the Investor Class of the same fund; and (f) the B Class provides
for automatic conversion from that class into shares of A Class of the same fund
after eight years.
Service, Distribution and Adm
inistrative Fees
Investment Company Act Rule 12b-1
permits mutual funds that adopt a written plan to pay certain expenses
associated with the distribution of their shares out of fund assets. Each class,
except the Investor Class and Institutional Class, offered by this prospectus
has a 12b-1 plan. The plans provide for the fund to pay annual fees of 0.25% for
A Class, 1.00% for B and C Classes and 0.50% for R Class to the distributor for
distribution and individual shareholder services, including past distribution
services. The distributor pays all or a portion of such fees to the financial
intermediaries that make the classes available. Because these fees may be used
to pay for services that are not related to prospective sales of the fund, each
class will continue to make payments under its plan even if it is closed to new
investors. Because these fees are paid out of the fund’s assets on an ongoing
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. The higher fees for B
and C Class shares may cost you more over time than paying the initial sales
charge for A Class shares. For additional information about the plans and their
terms, see
Multiple Class
Structure
in the statement
of additional information.
Certain financial intermediaries perform
recordkeeping and administrative services for their clients that would otherwise
be performed by American Century Investments' transfer agent. In some
circumstances, the advisor will pay such service providers a fee for performing
those services. Also, the advisor and the fund’s distributor may make payments
to intermediaries for various additional services, other expenses and/or the
intermediaries’ distribution of the fund out of their profits or other available
sources. Such payments may be made for one or more of the following: (1)
distribution, which may include expenses incurred by intermediaries for their
sales activities with respect to the fund, such as preparing, printing and
distributing sales literature and advertising materials and compensating
registered representatives or other employees of such financial intermediaries
for their sales activities, as well as the opportunity for the fund to be made
available by such intermediaries; (2) shareholder services, such as providing
individual and custom investment advisory services to clients of the financial
intermediaries; and (3) marketing and promotional services, including business
planning assistance, educating personnel about the fund, and sponsorship of
sales meetings, which may include covering costs of providing speakers, meals
and other entertainment. The distributor may sponsor seminars and conferences
designed to educate intermediaries about the fund and may cover the expenses
associated with attendance at such meetings, including travel costs. These
payments and activities are intended to provide an incentive to intermediaries
to sell the fund by educating them about the fund and helping defray the costs
associated with offering the fund. The amount of any payments described by this
paragraph is determined by the advisor or the distributor, and all such amounts
are paid out of the available assets of the advisor and distributor, and not by
you or the fund. As a result, the total expense ratio of the fund will not be
affected by any such payments.
Financial Highlights
Understanding the Financial
Highlights
The tables on the next pages itemize
what contributed to the changes in share price during the most recently ended
fiscal year. They also show the changes in share price for this period in
comparison to changes over the last five fiscal years (or a shorter period if
the share class is not five years old).
On a per-share basis, each table
includes as appropriate
|
•
|
share price at the beginning of
the period
|
|
•
|
investment income and capital
gains or losses
|
|
•
|
distributions of income and
capital gains paid to investors
|
|
•
|
share price at the end of the
period
|
Each table also includes some key
statistics for the period as appropriate
|
•
|
Total
Return
– the overall
percentage of return of the fund, assuming the
reinvestment
of all
distributions
|
|
•
|
Expense
Ratio
– the operating
expenses of the fund as a percentage of average net
assets
|
|
•
|
Net Income
Ratio
– the net
investment income of the fund as a percentage of
average
net
assets
|
|
•
|
Portfolio
Turnover
– the
percentage of the fund’s investment portfolio that is
replaced
du
r
ing the
period
|
The Financial Highlights that follow
have been audited by PricewaterhouseCoopers
LLP
,
independent registered public
accounting firm. Their Report of Independent Registered Public Accounting Firm
and the financial statements are included in the fund’s annual report, which is
available upon request.
International Bond
Fund
|
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.
|
International Bond
Fund
|
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.
|
International Bond
Fund
|
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.
|
International Bond
Fund
|
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.
|
International Bond
Fund
|
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.
|
International Bond
Fund
|
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.
|
Notes
Where to Find More
Information
Annual and Semiannual
Reports
Annual and semiannual reports contain
more information about the fund’s investments and the market conditions and
investment strategies that significantly affected the fund’s performance during
the most recent fiscal period.
Statement of Additional Information
(SAI)
The SAI contains a more detailed legal
description of the fund’s operations, investment restrictions, policies and
practices. The SAI is incorporated by reference into this prospectus. This means
that it is legally part of this prospectus, even if you don’t request a
copy.
You may obtain a free copy of the SAI or
annual and semiannual reports, and ask questions about the fund or your
accounts, online at americancentury.com, by contacting American Century
Investments at the addresses or telephone numbers listed below or by contacting
your financial intermediary.
From the SEC
You also can get information about the
fund (including the SAI) from the Securities and Exchange Commission (SEC). The
SEC charges a duplicating fee to provide copies of this
information.
|
In person
|
SEC Public Reference
Room
Washington,
D.C.
Call 202-942-8090 for location and
hours.
|
|
On the
Internet
|
• EDGAR database at
sec.gov
• By email request at
publicinfo@sec.gov
|
|
By mail
|
SEC Public Reference
Section
Washington
,
D.C.
20549-0102
|
This prospectus shall not constitute an
offer to sell securities of a fund in any state, territory, or other
jurisdiction where the fund’s shares have not been registered or qualified for
sale, unless such registration or qualification is not required, or under any
circumstances in which such offer or solicitation would be
unlawful.
|
Fund
Reference
|
Fund
Code
|
Ticker
|
Newspaper
Listing
|
|
International
Bond
|
|||
|
Investor
Class
|
992
|
BEGBX
|
IntlBnd
|
|
Institutional
Class
|
392
|
AIDIX
|
IntlBnd
|
|
A
Class
|
792
|
AIBDX
|
IntlBnd
|
|
B
Class
|
292
|
AIQBX
|
IntlBnd
|
|
C
Class
|
492
|
AIQCX
|
IntlBnd
|
|
R
Class
|
192
|
AIBRX
|
IntlBnd
|
Investment Company Act File No.
811-6441
|
American Century
Investments
americancentury.com
|
|
|
Self-Directed
Retail Investors
P.O. Box
419200
Kansas City
,
Missouri
64141-6200
1-800-345-2021 or
816-531-5575
|
Banks
and Trust Companies, Broker-Dealers,
Financial
Professionals, Insurance Companies
P.O. Box
419786
Kansas City
,
Missouri
64141-6786
1-800-345-6488
|
CL-PRS-61632 0811
|
November 1,
2008
|
|
American Century
International Bond
Funds
International Bond
Fund
|
This
statement of additional information adds to the discussion in the fund's
prospe
c
tus
dated
November 1, 2008, but is not a prospectus. The statement of additional
info
r
mation
should be read in conjunction with
the fund's current prospectus. If you would like
a copy of the prospectus, please
contact us at one of the addresses or telephone numbers
listed
on the
back cover or visit American Century Investments' web site at
americance
n
tury.com.
This statement of additional
information incorporates by reference
certain information that appears in
the fund's annual report,
which is delivered to all investors.
You may obtain a free copy
of the
fund's annual r
e
port by
calling 1-800-345-2021
American Century Investment Services,
Inc., Distributor
American Century Investment Services,
Inc., Distributor
©2008 American Century Proprietary
Holdings, Inc. All rights reserved.
Table of
Contents
THE FUND’S HISTORY
American Century International Bond
Funds is a registered open-end management investment company that was organized
as a
Massachusetts
business trust in 1991 under the name
Benham International Funds. In October 1996, it changed its name to American
Century International Bond Funds. Throughout this statement of additional
information we refer to American Century International Bond Funds as the trust.
The trust’s fiscal year end was changed from December 31 to June 30 beginning on
January 1, 2007.
The fund is a separate series of the
trust and operates for many purposes as if it were an indepen
d
ent company.
The fund’s ticker symbols and inception
dates of each class of the fund are:
|
Fund/Class
|
Ticker
Symbol
|
Inception
Date
|
|
International
Bond
|
||
|
Investor
Class
|
BEGBX
|
01/07/1992
|
|
Institutional
Class
|
AIDIX
|
08/02/2004
|
|
A Class
|
AIBDX
|
10/27/1998
|
|
B Class
|
AIQBX
|
09/28/2007
|
|
C Class
|
AIQCX
|
09/28/2007
|
|
R Class
|
AIBRX
|
09/28/2007
|
FUND INVESTMENT
GUIDELINES
This section explains the extent to
which the fund’s advisor, American Century Investment Ma
n
agement, Inc., can use various
investment vehicles and strategies in managing the fund’s assets. Descriptions
of the investment tec
h
niques and risks associated with each
appear in the section
Investment
Strategies and Risks,
which
begins on page
4
. In the case of the fund’s principal
investment strategies, these descriptions elaborate upon the discussion
co
n
tained in the
prospectus.
The fund is nondiversified as defined in
the Investment Company Act of 1940 (the Investment Company Act). Diversified
means that, with respect to 75% of its total assets, the fund will not invest
more than 5% of its total assets in the securities of a single issuer or own
more than 10% of the outstanding voting securities of a single issuer (other
than U.S. government securities and s
e
curities of other investment companies).
Nondiversified means that a fund may invest a greater percentage of its assets
in a smaller number of securities than a diversified fund.
To meet federal tax requirements for
qualification as a regulated investment company, the fund must limit its
inves
t
ments so that at the close of each
quarter of its taxable year
|
(1)
|
no more than 25% of its total
assets are invested in the securities of a single issuer (other than the
U.S.
go
v
ernment or a regulated investment
company); and
|
|
(2)
|
with respect to at least 50% of
its total assets, no more than 5% of its total assets are invested in the
securities of a single
issuer.
|
The fund does not invest in
securities issued by companies assigned the Global Industry Classification
Standard (GICS) for the tobacco industry. If the issuer of a security purchased
by the fund is subsequently found to be classified in the tobacco industry (due
to acquisition, merger or otherwise), the fund will sell the security as soon as
reasonably possible.
PORTFOLIO
COMPOSITION
The portfolio manager intends to keep
the fund fully invested in foreign debt securities. Under normal market
conditions, the fund will invest at least 65% of its total assets in bonds
issued or guaranteed by foreign governments or their agencies and by foreign
authorities, provinces and municipalities. The fund may invest up to 35% of its
total assets in high-quality (i.e., rated “AA” or higher) foreign corporate debt
securities.
The fund’s investments may include but
shall not be limited to: (1) debt obligations issued or guaranteed by (a) a
foreign sovereign government or one of its agencies, authorities,
instrumentalities or political subdivisions including a foreign state, province
or municipality, and (b) supranational organizations such as the World Bank,
Asian Development Bank, European Investment Bank, and European Economic
Community; (2) debt obligations of (a) foreign banks and bank holding companies,
and (b) domestic banks and corporations issued in foreign currencies; and (3)
foreign corporate debt securities and commercial paper. All of these investments
must satisfy the credit quality standards (i.e., “AA” or higher) established by
the trustees of the fund.
The fund’s credit quality requirements
effectively limit the countries in which the fund may i
n
vest. As of the date of this statement
of additional information, the fund expects to invest in the securities of
issuers located in and governments of the following countries: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Liechtenstein, Luxembourg, Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switze
r
land, Taiwan and the United Kingdom. To
limit the possibility that the fund will become unduly co
n
centrated in
Japan
, the fund currently limits its
investment in issuers located in
Japan
to no more than 25% of total
assets.
Some securities will also have the
country of issue reported as ‘Supranational.’ These are organiz
a
tions that cannot be aligned with one
particular country, such as the International Finance Corporation or the
European Deve
l
opment Bank.
For an explanation of the securities
ratings referred to in the prospectus and this statement of additional
information, see
Explanation of
Fixed-Income Securities Ratings
on page
56
.
CURRENCY MANAG
EMENT
The rate of exchange between U.S.
dollars and foreign currencies fluctuates, which results in gains and losses to
the fund. Even if the fund’s foreign security holdings perform well, an increase
in the value of the dollar relative to the currencies in which portfolio
securities are denominated can offset net investment income.
Because the fund is designed for
U.S.
investors seeking currency and interest
rate diversification, the fund’s subadvisor, J.P. Morgan Investment Management
Inc. (JPMIM), limits its use of hed
g
ing strategies intended to minimize the
effect of currency fluctuations. Although hedging strat
e
gies (if they are successful) reduce
exchange rate risk, they also reduce the potential for share price appreciation
when foreign currencies increase in value rel
a
tive to the U.S.
dollar.
When the subadvisor considers the U.S.
dollar to be attractive relative to foreign currencies, as much as 25% of the
fund’s total assets may be hedged into U.S. dollars. For temporary defensive
purposes and under extraordinary circumstances (such as significant political
events), more than 25% of the fund’s total assets may be hedged in this
manner.
In managing the fund’s currency
exposure, the subadvisor will buy and sell foreign currencies regularly, either
in the spot (i.e., cash) market or the forward market. Forward foreign currency
exchange contracts (forward co
n
tracts) are individually negotiated and
privately traded between currency traders (usually large commercial banks) and
their customers. In most cases, no deposit requirements exist, and these
contracts are traded at a net price without commission. Forward co
n
tracts involve an obligation to purchase
or sell a specific currency at an agreed-upon price on a future date. Most
contracts expire in less than one year. The fund also may use futures and
options for currency management purposes. For more information on futures and
options, please see
F
u
tures and Options
on page
7
.
FUND INVESTMENTS AND
RISKS
INVESTMENT STRA
TEGIES AND RISKS
This section describes investment
vehicles and techniques the portfolio manager can use in managing the fund’s
a
s
sets. It also details the risks
associated with each, because each investment vehicle and technique contributes
to the fund’s overall risk profile.
Asset-Backed Securities
(ABS)
To the extent permitted by its
investment objective, the fund may invest in asset-backed securities. ABS are
stru
c
tured like mortgage-backed securities,
but instead of mortgage loans or interest in mortgage loans, the underlying
assets may include, for example, such items as motor vehicle i
n
stallment sales or installment loan
contracts, leases of various types of real and personal property, home equity
loans, student loans, small business loans, and receivables from credit card
agreements. The ability of an issuer of asset-backed securities to enforce its
security interest in the underlying assets may be limited. The value of an ABS
is affected by changes in the market’s pe
r
ception of the assets backing the
security, the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, the financial institution providing any credit
enhancement, and subordination levels.
Payments of principal and interest
passed through to holders of ABS are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guara
n
tee by another entity or a priority to
certain of the borrower’s other securities. The degree of credit e
n
hancement varies, and generally applies
to only a fraction of the asset-backed security’s par value until exhausted. If
the credit enhancement of an ABS held by the fund has been exhausted, and if any
required payments of principal and interest are not made with respect to the
underlying loans, the fund may experience losses or delays in receiving
payment.
Some types of ABS may be less effective
than other types of securities as a means of “locking in” attractive long-term
interest rates. One reason is the need to reinvest prepayments of principal;
another is the possibility of significant unscheduled prepayments resulting from
declines in inte
r
est rates. These prepayments would have
to be reinvested at lower rates. As a result, these secur
i
ties may have less potential for capital
appreciation during per
i
ods of declining interest rates than
other securities of comparable maturities, although they may have a similar risk
of decline in ma
r
ket value during periods of rising
interest rates. Prepayments may also significantly shorten the effective
maturities of these securities, especially during periods of declining interest
rates. Co
n
versely, during periods of rising
interest rates, a reduction in prepayments may increase the effe
c
tive maturities of these securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates than traditional debt securities, and, therefore,
potentially increa
s
ing the volatility of the
fund.
The risks of investing in ABS are
ultimately dependent upon the repayment of loans by the ind
i
vidual or corporate borrowers. Although
the fund would generally have no recourse against the entity that originated the
loans in the event of default by a borrower, ABS typically are structured to
mitigate this risk of default.
ABS are generally issued in more than
one class, each with different payment terms. Multiple class ABS may be used as
a method of providing credit support through creation of one or more classes
whose right to payments is made subordinate to the right to such payments of the
remaining class or classes. Multiple classes also may permit the issuance of
secur
i
ties with payment terms, interest rates
or other characteristics differing both from those of each other and from those
of the underlying assets. Examples include so-called strips (ABS entitling the
holder to disproportionate interests with respect to the allocation of interest
and principal of the assets backing the security), and securities with classes
having characteristics such as floating interest rates or scheduled amortization
of principal.
Foreign Currency Exchange
Transactions
The fund expects to exchange dollars for
the fund’s underlying currencies, and vice versa, in the normal course of
managing the fund’s underlying investments. The fund’s subadvisor does not
expect that the fund will hold cu
r
rency that is not earning income on a
regular basis, although the fund may do so temporarily when suitable
i
n
vestments are not available. The fund
may purchase and sell currencies on a spot basis (i.e., for prompt delivery and
settlement), or by entering into forward currency exchange contracts (also
called forward contracts) or other contracts to purchase and sell currencies for
settlement at a future date. The fund will incur costs in converting assets from
one currency to another. Foreign exchange dealers may charge a fee for
conversion; in add
i
tion, they realize a profit based on the
difference (i.e., the spread) between the prices at which they buy and sell
various cu
r
rencies in the spot and forward markets.
Thus, a dealer may offer to sell a foreign currency to the fund at one rate and
repurchase it at a lesser rate should the fund desire to resell the currency to
the dealer.
The fund may use foreign currency
forward contracts to increase exposure to a foreign currency, or to shift
exp
o
sure to the fluctuations in the value of
foreign currencies from one foreign currency to another foreign currency. Open
positions in forwards used for non-hedging purposes will be covered by the
segregation of liquid assets, marked to market daily. Forward contracts are
agre
e
ments to exchange a specific amount of
one
currency for a
specified amount of another at a future date. The date may be any agreed fixed
number of days in the future. The amount of currency to be exchanged, the price
at which the exchange will take place, and the date of the exchange are
negot
i
ated when the fund enters into the
contract and are fixed for the term of the contract. Forward co
n
tracts
are traded in an interbank market
conducted directly between currency traders (usually
large commercial banks) and their
customers. A forward contract generally has no deposit
requirement and is consummated without
payment of any commission. However, the fund may enter into forward contracts
with deposit requirements or co
m
missions.
At the maturity of a forward contract,
the fund may complete the contract by paying for and receiving the
underl
y
ing currency, or may seek to roll
forward its contractual obligation by entering into an offsetting transaction
with the same currency trader and paying or receiving the difference between the
contractual exchange rate and the current exchange rate. The fund also may be
able to enter into an offsetting contract prior to the maturity of the
underlying contract. This practice is sometimes referred to as “cross hedging”
and may be employed if, for exa
m
ple, JPMIM believes that one foreign
currency (in which a portion of the fund’s foreign currency holdings are
denom
i
nated) will change in value relative to
the U.S. dollar differently than another foreign currency. There is no assurance
that offsetting transactions, or new forward contracts, will always be
avai
l
able to the fund.
Investors should realize that the use of
forward contracts does not eliminate fluctuations in the underlying prices of
the securities. Such contracts simply establish a rate of exchange that the fund
can achieve at some future point in time. Additionally, although such contracts
tend to minimize the risk of loss due to fluctuations in the value of the hedged
currency when used as a hedge against foreign currency declines, at the same
time they tend to limit any potential gain that might result from the change in
the value of such currency.
Because investments in, and redemptions
from, the fund will be in U.S. dollars, JPMIM expects that the fund’s normal
investment activity will involve a significant amount of currency exchange. For
example, the fund may exchange its underlying foreign currencies for U.S.
dollars in order to meet shareholder redemption requests or to pay expenses.
These transactions may be executed in the spot or forward
markets.
In addition, the fund may combine
forward transactions in its underlying currency with investments in U.S.
dollar-denominated instruments, in an attempt to construct an investment
position whose overall performance will be similar to that of a security
denominated in its underlying cu
r
rency. If the amount of dollars to be
exchanged is properly matched with the anticipated value of the
dollar-denominated securities, the fund should be able to lock in the foreign
currency value of the securities, and the fund’s overall
investment
return from the combined position should
be similar to the return from purchasing a foreign currency-denominated
instrument. This is som
e
times referred to as a synthetic
investment position or a position hedge.
The execution of a synthetic investment
position may not be successful. It is impossible to forecast with absolute
precision what the market value of a particular security will be at any given
time. If the value of a dollar-denominated security is not exactly matched with
the fund’s obligation under the forward contract on the co
n
tract’s maturity date, the fund may be
exposed to some risk of loss from fluctuation of the dollar. Although JPMIM will
attempt to hold such mismatchings to a minimum, there can be no assurance that
JPMIM will be su
c
cessful in doing so.
Foreign Securities
Investments in foreign securities may
present certain risks, including:
Currency Risk
– The value of the foreign
investments held by the fund may be significantly a
f
fected by changes in currency exchange
rates. The dollar value of a foreign security generally decreases when the value
of the dollar rises against the foreign currency in which the security is
denominated, and tends to increase when the value of the dollar falls against
such currency. In addition, the value of fund assets may be affected by losses
and other expenses incurred in converting between various currencies in order to
purchase and sell foreign securities, and by currency restrictions, exchange
control regulation, currency devaluations and political develo
p
ments. Please see
Currency Management
on page
3
for more
information.
Political and
Economic Risk
– The
economies of many of the countries in which the fund invests are not as
deve
l
oped as the economy of the United States
and may be subject to significantly different forces. Political or social
instability, expropriation, nationalization, confiscatory taxation and
limit
a
tions on the removal of funds or other
assets also could adversely affect the value of investments. Further, the fund
may find it difficult or be unable to enforce ownership rights, pursue legal
remedies or obtain judgments in foreign courts.
Regulatory Risk
– Foreign companies
generally are not subject to the regulatory controls imposed on
U.S.
issuers and, in general, there is less
publicly available information about foreign securities than is available about
dome
s
tic securities. Many foreign companies
are not subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies. Income from foreign securities owned by the fund may be reduced by a
withholding tax at the source, which would reduce dividend income payable to
shareholders.
Market and Trading
Risk
– Brokerage commission
rates in foreign countries, which generally are fixed rather than subject to
negotiation as in the
United States
, are likely to be higher. The
securities markets in many of the countries in which the fund invests will have
substa
n
tially less trading volume than the
principal
U.S.
markets. As a result, the securities of
some companies in these countries may be less liquid and more volatile than
comparable
U.S.
securities. Furthermore, one securities
broker may represent all or a significant part of the trading volume in a
particular cou
n
try, resulting in higher trading costs
and decreased liquidity due to a lack of alternative trading partners. There
generally is less government regulation and supervision of foreign stock
e
x
changes, brokers and issuers, which may
make it difficult to enforce contractual obligations.
Clearance and
Settlement Risk
– Foreign
securities markets also have different clearance and se
t
tlement procedures, and in certain
markets there have been times when settlements have been unable to keep pace
with the vo
l
ume of securities transactions, making
it difficult to conduct such transactions. Delays in clearance and settlement
could result in temporary periods when assets of the fund are uninvested and no
return is earned. The inability of the fund to make intended sec
u
rity purchases due to clearance and
settlement problems could cause the fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to clearance and
settl
e
ment problems could result either in
losses to the fund due to subsequent declines in the value of the portfolio
security or, if the fund has entered into a contract to sell the security,
liability to the purchaser.
Ownership
Risk
– Evidence of
securities ownership may be uncertain in many foreign countries. As a result,
there is a risk that a fund’s trade details could be incorrectly or fraudulently
entered at the time of the transaction, resul
t
ing in a loss to the
fund.
Futures and O
ptions
The fund may enter into futures
contracts, options or options on futures contracts. Futures co
n
tracts provide for the sale by one party
and purchase by another party of a specific security at a specified future time
and price. Gene
r
ally, futures transactions will be used
to:
|
•
|
protect against a decline in
market value of the fund’s securities (taking a short
futures pos
i
tion),
|
|
•
|
protect against the risk of an
increase in market value for securities in which the fund generally
invests at a time when the fund is not fully-invested (taking a long
futures position), or
|
|
•
|
provide a temporary substitute for
the purchase of an individual security that may not be purchased in an
o
r
derly
fashion.
|
Some futures and options strategies,
such as selling futures, buying puts and writing calls, hedge the fund’s
i
n
vestments against price fluctuations.
Other strategies, such as buying futures, writing puts and buying calls, tend to
increase market exposure.
Although other techniques may be used to
control the fund’s exposure to market fluctuations, the use of futures contracts
may be a more effective means of hedging this exposure. While the fund pays
brokerage commissions in connection with opening and closing out futures
positions, these costs are lower than the transaction costs incurred in the
purchase and sale of the underlying sec
u
rities.
For example, the sale of a future by the
fund means the fund becomes obligated to deliver the security (or
secur
i
ties, in the case of an index future) at
a specified price on a specified date. The purchase of a future means the fund
becomes obligated to buy the security (or securities) at a specified price on a
specified date. The portfolio manager may engage in futures and options
transactions based on securities indices provided that the transactions are
co
n
sistent with the fund’s investment
objectives. Examples of indices that may be used include the Morgan Stanley
Capital International Europe,
Australasia
, Far East Index (MSCI EAFE) and Morgan
Stanley Capital International Emerging Markets Free Index (MSCI EMF). The
portfolio manager also may engage in futures and options tran
s
actions based on specific securities,
such as U.S. Treasury bonds or notes. Futures contracts are traded on national
futures exchanges. Domestic futures e
x
changes and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission (CFTC), a
U.S.
government agency.
Index futures contracts differ from
traditional futures contracts in that when delivery takes place, no stocks or
bonds change hands. Instead, these contracts settle in cash at the spot market
value of the index. Although other types of futures contracts by their terms
call for actual delivery or a
c
ceptance of the underlying securities,
in most cases the contracts are closed out before the settlement date. A futures
position may be closed by taking an opp
o
site position in an identical contract
(i.e., buying a contract that has previously been sold or selling a contract
that has prev
i
ously been bought).
Unlike when the fund purchases or sells
a bond, no price is paid or received by the fund upon the purchase or sale of
the future. Initially, the fund will be required to deposit an amount of cash or
securities equal to a varying specified percentage of the contract amount. This
amount is known as initial margin. The margin deposit is intended to ensure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. A margin deposit
does not constitute a margin transaction for purposes of the fund’s investment
restrictions. Minimum initial margin requirements are established by the futures
exchanges and may be revised. In addition, brokers may establish margin deposit
requirements that are higher than the exchange minimums. Cash held in the margin
accounts generally is not income-producing. However, coupon bearing securities,
such as Treasury bills and bonds, held in margin accounts generally will earn
income. Subsequent payments to and from the broker, called variation margin,
will be made on a
daily basis as the price of the
underlying debt securities or index fluctuates, making the future more or less
valuable, a process known as marking the contract to market. Changes in
variation margin are recorded by the fund as unrealized gains or
losses.
At any time prior to expiration of the
future, the fund may elect to close the position by taking an opposite position.
A final determination of variation margin is then made; additional cash is
r
e
quired to be paid by or released to the
fund and the fund realizes a loss or gain.
Purchasing Put and Call
Options
By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option’s underlying
instrument at a fixed strike price. In return for this right, the fund pays the
current ma
r
ket price for the option (known as the
option premium). Options have various types of underlying instruments, including
specific secur
i
ties, indices of securities prices, and
futures contracts. The fund may terminate its position in a put option it has
purchased by allowing it to expire or by e
x
ercising the option. If the option is
allowed to expire, the fund will lose the entire premium it paid. If the fund
exercises the option, it completes the sale of the underlying instrument at the
strike price. The fund also may terminate a put option position by closing it
out in the secondary market at its current price if a liquid secondary market
exists.
The buyer of a typical put option can
expect to realize a gain if security prices fall substantially. However, if the
underlying instrument’s price does not fall enough to offset the cost of
purchasing the option, a put buyer can e
x
pect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are
essentially the same as those of put options, except that the pu
r
chaser of a call option obtains the
right to purchase, rather than sell, the underlying instrument at the option’s
strike price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if security prices do not rise sufficiently to offset the cost of the
option.
Writing Put and Call
Options
If the fund writes a put option, it
takes the opposite side of the transaction from the option’s pu
r
chaser. In return for receipt of the
premium, the fund assumes the obligation to pay the strike price for the
option’s underlying instrument if the other party chooses to exercise the
option. When wri
t
ing an option on a futures contract, the
fund will be required to make margin payments to a broker or custodian as
described above
for futures
contracts. The fund may seek to terminate its position in a put option it writes
before exercise by closing
out the option in the secondary market at its current price.
However, if the secondary market is not
liquid for a put option the fund has written, the fund must continue to be
prepared to pay the strike price while the option is ou
t
standing, regardless of price changes,
and must continue to set aside assets to cover its position.
If security prices rise, a put writer
would generally expect to profit, although the gain would be limited to the
amount of the premium received. If security prices remain the same over time,
the writer also would likely profit by being able to close out the option at a
lower price. If security prices fall, the put writer would expect to suffer a
loss. This loss should be less than the loss from purchasing the underlying
instrument directly, however, because the premium received for writing the
option should mitigate the effects of the decline.
Writing a call option obligates the fund
to sell or deliver the option’s underlying instrument in return for the strike
price upon exercise of the option. The characteristics of writing call options
are similar to those of writing put options, except that writing calls generally
is a profitable stra
t
egy if prices remain the same or fall.
Through receipt of the option premium, a call writer mit
i
gates the effects of a price decline. At
the same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price even
if its current value is greater, a call
writer gives up some ability to participate in security price
increases.
Combined Positions
The fund may purchase and write options
in combination with one another, or in combination with futures or
fo
r
ward contracts, to adjust the risk and
return characteristics of the overall position. For example, the fund may
purchase a put option and write a call option on the same underlying instrument
to construct a combined position whose risk and return characteristics are
similar to sel
l
ing a futures contract. Another possible
combined position would involve writing a call option at one strike price and
buying a call option at a lower price to reduce the risk of the written call
o
p
tion in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
Over-the-Counter
Options
Unlike exchange-traded options, which
are standardized with respect to the underlying instrument, expiration date,
contract size, and strike price, the terms of over-the-counter (OTC) options
(options not traded on exchanges) generally are established through negotiation
with the other party to the option contract. While this type of
arrang
e
ment allows the fund greater flexibility
to tailor an option to its needs, OTC options generally involve greater credit
risk than exchange-traded options, which are guaranteed by the clearing
organizations of the exchanges where they are traded. The risk of illiquidity
also is greater with OTC options because these options generally can be closed
out only by negotiation with the other party to the option.
Risks Related to Futures and Options
Transactions
Futures and options prices can be
volatile, and trading in these markets involves certain risks. If the portfolio
manager applies a hedge at an inappropriate time or judges interest rate trends
incorrectly, futures and options strat
e
gies may lower a fund’s
return.
The fund could suffer losses if it is
unable to close out its position because of an illiquid secondary market.
Futures contracts may be closed out only on an exchange that provides a
secondary ma
r
ket for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when the portfolio manager considers it a
p
propriate or desirable to do so. In the
event of adverse price movements, a fund would be required to continue making
daily cash pa
y
ments to maintain its required margin.
If the fund had insufficient cash, it might have to sell portfolio securities to
meet daily margin requirements at a time when the portfolio manager would not
otherwise elect to do so. In addition, the fund may be required to deliver or
take delivery of i
n
struments underlying futures contracts
it holds. The portfolio manager will seek to minimize these risks by limiting
the futures contracts entered into on behalf of the fund to those traded on
national futures exchanges and for which there appears to be a liquid secondary
market.
The fund could suffer losses if the
prices of its futures and options positions were poorly corr
e
lated with its other investments, or if
securities underlying futures contracts purchased by the fund had different
maturities than those of the portfolio securities being hedged. Such imperfect
corr
e
lation may give rise to circumstances in
which the fund loses money on a futures contract at the same time that it
experiences a decline in the value of its hedged portfolio securities. The fund
also could lose margin payments it has deposited with a margin broker if, for
example, the broker b
e
came bankrupt.
Most futures exchanges limit the amount
of fluctuation permitted in futures contract prices during a single trading day.
The daily limit establishes the maximum amount that the price of a futures
co
n
tract may vary either up or down from
the previous day’s settlement price at the end of the trading session. Once the
daily limit has been reached in a particular type of contract, no trades may be
made on that day at a price beyond the limit. However, the daily limit governs
only price movement during a particular trading day and, therefore, does not
limit potential losses. In add
i
tion, the daily limit may prevent
liquidation of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby pr
e
venting prompt liquidation of futures
positions and subjecting some futures traders to substantial
losses.
Options on Futures
By purchasing an option on a futures
contract, the fund obtains the right, but not the obligation, to sell the
futures contract (a put option) or to buy the contract (a call option) at a
fixed strike price. The fund can terminate its pos
i
tion in a put option by allowing it to
expire or by exercising the option. If the option is exercised, the fund
co
m
pletes the sale of the underlying
security at the strike price. Purchasing an option on a futures contract does
not require a fund to make margin pa
y
ments unless the option is
exercised.
Correlation of Price
Changes
Because there are a limited number of
types of exchange-traded futures and options contracts, it is likely that the
standardized contracts available will not match the fund’s current or
anticipated i
n
vestments exactly. The fund may invest
in futures and options contracts based on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests (for example, by hedging intermediate-term securities with a futures
contract based on an index of long-term bond prices); this involves a risk that
the futures position will not track the performance of the fund’s other
investments.
Options and futures prices can diverge
from the prices of their underlying instruments even if the underlying
i
n
struments correlate well with the fund’s
investments. Options and futures prices are affected by factors such as current
and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correl
a
tion also may result from differing
levels of demand in the options and futures markets and securities markets, from
structural differences in how options and futures and securities are traded, or
from the imposition of daily price fluctuation limits or trading halts. The fund
may purchase or sell options and futures contracts with a greater or lesser
value than the securities it wishes to hedge or intends to purchase in an effort
to compensate for differences in volatility between the contract and the
securities, a
l
though this may not be successful in all
cases. If price changes in the fund’s options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
antic
i
pated gains or result in losses that are
not offset by gains in other investments.
Futures and Options Contracts Relating
to Foreign Currencies
The fund may purchase and sell currency
futures and purchase and write currency options to i
n
crease or decrease its exposure to
different foreign currencies. The fund also may purchase and write currency
options in connection with currency futures or forward
contracts.
Currency futures contracts are similar
to forward currency exchange contracts, except that they are traded on
e
x
changes and have standard contract sizes
and delivery dates. Most currency futures contracts call for payment or delivery
in U.S. dollars.
The uses and risks of currency futures
are similar to those of futures relating to securities or indices, as described
above. Currency futures values can be expected to correlate with exchange rates
but may not reflect other factors that affect the value of the fund’s
investments. A currency hedge, for example, should protect a
German-mark-denominated security from a decline in the German mark, but it will
not protect the fund against a price decline resulting from a deterioration in
the issuer’s creditworthiness.
Liquidity of Futures Contracts and
Options
There is no assurance that a liquid
secondary market will exist for any particular futures contract or option at any
particular time. Options may have relatively low trading volume and liquidity if
their strike prices are not close to the underlying instrument’s current price.
In addition, exchanges may establish daily price fluctuation limits for futures
contracts and options and may halt trading if a contract’s price moves upward or
downward more than the limit on a given day. On volatile trading days when the
price fluctuation limit is reached or a trading halt is i
m
posed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
seco
n
dary market for a contract was not
liquid, because of price fluctuation limits or otherwise, prompt li
q
uidation of unfavorable positions could
be
difficult or impossible, and the fund
could be required to continue holding a pos
i
tion until delivery or expiration
regardless of changes in its value. Under these circumstances, the fund’s access
to assets held to cover its future positions also could be
impaired.
Futures and options trading on foreign
exchanges may not be regulated as effectively as similar transactions in the
U.S.
and may not involve clearing mechanisms
or guarantees similar to those available in the
U.S.
The value of a futures contract or
option traded on a foreign exchange may be adversely affected by the imposition
of different exercise and settlement terms, trading proc
e
dures, margin requirements and lesser
trading volume.
Restrictions on the Use of Futures
Contracts and Options
The fund
may enter into futures contracts, options or options on futures contracts as
permitted under the Commodity Futures Trading Commission rules. The fund has
claimed exclusion from the definition of the term "commodity pool operator"
under the Commodity Exchange Act and, therefore, is not subject to registration
or regulation as a commodity pool operator under that Act. To the extent
required by law, the fund will segregate cash, cash equivalents or other
appropriate liquid securities on its records in an amount sufficient to cover
its obligations under the futures co
n
tracts
and options.
Mortgage-Related
Securities
To the extent permitted by its
investment objective, the fund may invest in mortgage-related sec
u
rities.
Background
A mortgage-backed security represents an
ownership interest in a pool of mortgage loans. The loans are made by financial
institutions to finance home and other real estate purchases. As the loans are
repaid, investors receive payments of both interest and
principal.
Like fixed-income securities,
mortgage-backed securities pay a stated rate of interest during the life of the
sec
u
rity. However, unlike a bond, which
returns principal to the investor in one lump sum at maturity, mortgage-backed
securities return principal to the investor in increments during the life of the
security.
Because the timing and speed of
principal repayments vary, the cash flow on mortgage-backed securities is
irreg
u
lar. If mortgage holders sell their
homes, refinance their loans, prepay their mortgages or default on their loans,
the principal is distributed pro rata
to investors.
As with other fixed-income securities,
the prices of mortgage-backed securities fluctuate in r
e
sponse to changing interest rates; when
interest rates fall, the prices of mortgage-backed securities rise, and vice
versa. Changing interest rates have additional significance for mortgage-backed
securities investors, however, because they influence prepayment rates (the
rates at which mor
t
gage holders prepay their mortgages),
which in turn affect the yields on mortgage-backed securities. When interest
rates decline, prepayment rates generally increase. Mortgage holders take
advantage of the opportunity to refinance their mortgages at lower rates with
lower monthly payments. When interest rates rise, mortgage holders are less
inclined to refinance their mortgages. The effect of prepayment acti
v
ity on yield depends on whether the
mortgage-backed security was purchased at a premium or at a
discount.
The fund may receive principal sooner
than it expected because of accelerated prepayments. Under these
circu
m
stances, the fund might have to reinvest
returned principal at rates lower than it would have earned if principal
payments were made on schedule. Conversely, a mortgage-backed security may
exceed its anticipated life if pr
e
payment rates decelerate unexpectedly.
Under these circumstances, the fund might miss an opportunity to earn interest
at higher prevailing rates.
The fund may invest in covered bonds
or covered mortgages. Covered bonds are securities issued by a bank and backed
by a dedicated group of loans known as a cover pool.
Collateralized Mortgage Obligations
(CMOs)
A CMO is a multiclass bond backed by a
pool of mortgage pass-through certificates or mortgage loans. In
stru
c
turing a CMO, an issuer distributes cash
flow from the underlying collateral over a series of classes called tranches.
Each CMO is a set of two or more tranches, with average lives and cash flow
patterns designed to meet specific investment objectives. The average life
expectancies of the different tranches in a four-part deal, for e
x
ample, might be two, five, seven and 20
years.
As payments on the underlying mortgage
loans are collected, the CMO issuer pays the coupon rate of interest to the
bondholders in each tranche. At the outset, scheduled and unscheduled principal
payments go to investors in the first tranches. Investors in later tranches do
not begin receiving principal payments until the prior tranches are paid off.
This basic type of CMO is known as a sequential pay or plain vanilla
CMO.
Some CMOs are structured so that the
prepayment or market risks are transferred from one tranche to another.
Prepayment stability is improved in some tranches if other tranches absorb more
prepayment variability.
The final tranche of a CMO often takes
the form of a Z-bond, also known as an accrual bond or accretion bond. Holders
of these securities receive no cash until the earlier tranches are paid in full.
During the period that the other tranches are outstanding, periodic interest
payments are added to the initial face amount of the Z-bond but are not paid to
investors. When the prior tranches are retired, the Z-bond receives coupon
payments on its higher principal balance plus any principal prepayments from the
underlying mortgage loans. The existence of a Z-bond tranche helps stabilize
cash flow patterns in the other tranches. In a changing interest rate
environment, however, the value of the Z-bond tends to be more
volatile.
As CMOs have evolved, some classes of
CMO bonds have become more prevalent. The planned amortization class (PAC) and
targeted amortization class (TAC), for example, were designed to r
e
duce prepayment risk by establishing a
sinking-fund structure. PAC and TAC bonds assure to varying degrees that
investors will receive payments over a predetermined period under various
prepayment scenarios. Although PAC and TAC bonds are similar, PAC bonds are
better able to provide stable cash flows under various prepayment scenarios than
TAC bonds because of the order in which these tranches are
paid.
The existence of a PAC or TAC tranche
can create higher levels of risk for other tranches in the CMO because the
stability of the PAC or TAC tranche is achieved by creating at least one other
tranche — known as a companion bond, support or non-PAC bond — that absorbs the
variability of principal cash flows. Because companion bonds have a high degree
of average life variability, they generally pay a higher yield. A TAC bond can
have some of the prepayment variability of a co
m
panion bond if there is also a PAC bond
in the CMO issue.
Floating-rate CMO tranches (floaters)
pay a variable rate of interest. Institutional investors with short-term
liabilities, such as commercial banks, often find floating-rate CMOs attractive
inves
t
ments. Super floaters and inverse
floaters are variations on the floater structure that have highly variable cash
flows.
Commercial Mortgage-Backed Securities
(CMBS)
CMBS are securities created from a pool
of commercial mortgage loans, such as loans for hotels, shopping centers, office
buildings, apartment buildings, and the like. Interest and principal
pa
y
ments from these loans are passed on to
the investor according to a particular schedule of pa
y
ments. The credit quality of CMBS
depends primarily on the quality of the underlying loans and on the structure of
the particular deal. Generally, deals are structured with senior and subordinate
classes. Multiple classes may permit the issuance of securities with
pa
y
ment terms, interest rates, or other
characteristics differing both from those of each other and those of the
underl
y
ing assets. Examples include classes
having characteristics such as floating interest rates or scheduled
amo
r
tization of principal. Rating agencies
rate the individual classes of the deal based on the degree of seniority or
subordin
a
tion of a particular class and other
factors. The value of these securities may change because of actual or perceived
changes in the creditworthiness of individual borrowers, their tenants, the
servicing agents, or the general state of commercial real estate and other
factors.
CMBS may
be partially stripped so that each investor class receives some interest and
some principal. When sec
u
rities
are completely stripped, however, all of the interest is distributed to holders
of one type of security, known as an interest-only security (IO), and all of the
principal is distri
b
uted to
holders of another type of security known as a principal-only security
(
PO
). The
fund is permitted to invest in IO classes of CMBS. As interest rates rise and
fall, the value of IOs tends to move in the same direction as interest rates.
The cash flows and yields on IO classes are extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets. In the cases of IOs, prepayments affect the amount of cash flows
provided to the investor. If the underlying mortgage assets experience greater
than anticipated prepayments of principal, an investor may fail to fully recoup
its initial investment in an IO class of a stripped mortgage-backed security,
even if the IO class is rated AAA or Aaa or is derived from a full faith and
credit obligation. However, because commercial mortgages are often locked out
from prepayment, or have high prepayment penalties or a defeasance mechanism,
the prepayment risk a
s
sociated
with a CMBS IO class is generally less than that of a residential
IO.
Adjustable-Rate Mortgage Loans
(ARMs)
ARMs
eligible for inclusion in a mortgage pool generally will provide for a fixed
initial mortgage interest rate for a specified period of time, generally for
either the first 3, 6, 12, 24, 36, 60 or 84 scheduled monthly pa
y
ments.
Thereafter, the interest rates are subject to periodic adjustment based on
changes in an index.
ARMs have minimum and maximum rates
beyond which the mortgage interest rate may not vary over the lifetime of the
loan. Certain ARMs provide for additional limitations on the maximum amount by
which the mortgage interest rate may adjust for any single adjustment period.
Neg
a
tively amortizing ARMs may provide
limitations on changes in the required monthly payment. Limitations on monthly
payments can result in monthly payments that are greater or less than the amount
necessary to amortize a negatively amortizing ARM by its maturity at the
inte
r
est rate in effect during any particular
month.
Other Investment
Companies
The fund may invest in other investment
companies, such as mutual funds, provided that the investment is
consi
s
tent with the fund’s investment policies
and restrictions. Under the Investment Company Act, a fund’s investment in such
securities, subject to certain exceptions, currently is limited
to
|
•
|
3% of the total voting stock of
any one investment company
|
|
•
|
5% of the fund’s total assets with
respect to any one investment company and
|
|
•
|
10% of the fund’s total assets in
the aggregate.
|
A fund’s investments in other investment
companies may include money market funds managed by the advisor. Investments in
money market funds are not subject to the percentage limitations set forth
above.
Such purchases will be made in the open
market where no commission or profit to a sponsor or dealer results from the
purchase other than the customary brokers’ commissions. As a shareholder of
another investment company, a fund would bear, along with other shareholders,
its pro rata portion of the other investment company’s expenses, including
advisory fees. These expenses would be in addition to the management fee that
the fund bears directly in connection with its own
operations.
The fund may invest in exchange traded
funds (ETFs), such as Standard & Poor’s Depositary Receipts (SPDRs) and the
Lehman Aggregate Bond ETF, with the same percentage limitations as investments
in registered inves
t
ment companies. ETFs are a type of fund
bought and sold on a securities exchange. An ETF trades like common stock and
usually represents a fixed portfolio of securities designed to track the
performance and dividend yield of a particular domestic or foreign market index.
A fund may purchase an ETF to temporarily gain exposure to a portion of the
U.S.
or a foreign market while
awaiting
purchase of underlying securities. The
risks of owning an ETF generally reflect the risks of owning the underlying
securities they are designed to track, although the lack of liquidity on an ETF
could result in it being more volatile. Additionally, ETFs have management fees,
which i
n
crease their cost.
Portfolio Lending
In order to realize additional income,
the fund may lend its portfolio securities. Such loans may not exceed one-third
of the fund’s total net assets valued at market except
|
•
|
through the purchase of debt
securities in accordance with its investment objectives, policies and
limitations; or
|
|
•
|
by engaging in repurchase
agreements with respect to portfolio
securities.
|
Repurchase
Agreements
The fund may invest in repurchase
agreements when they present an attractive short-term return on cash that is not
otherwise committed to the purchase of securities pursuant to the investment
policies of the fund.
A repurchase agreement occurs when, at
the time the fund purchases an interest-bearing oblig
a
tion, the seller (a bank or a
broker-dealer registered under the Securities Exchange Act of 1934) agrees to
purchase it on a specified date in the future at an agreed-upon price. The
repurchase price reflects an agreed-upon interest rate during the time the
fund’s money is invested in the sec
u
rity.
Because the security purchased
constitutes collateral for the repurchase obligation, a repurchase agreement can
be considered a loan collateralized by the security purchased. The fund’s risk
is the seller’s ability to pay the agreed-upon repurchase price on the
repurchase date. If the seller d
e
faults, the fund may incur costs in
disposing of the collateral, which would reduce the amount realized thereon. If
the seller seeks relief under the bankruptcy laws, the disposition of the
colla
t
eral may be delayed or limited. To the
extent the value of the security decreases, the fund could experience a
loss.
The fund will limit repurchase agreement
transactions to securities issued by the
U.S.
government and its agencies and
instrumentalities, and will enter into such transactions with those banks and
securities dealers who are deemed creditworthy pursuant to criteria adopted by
the fund’s advisor.
Repurchase agreements maturing in more
than seven days would count toward the fund’s 15% limit on illiquid
securities.
Short-Term
Securities
In order to meet anticipated
redemptions, anticipated purchases of additional securities
for the fund’s portfolio, or, in some
cases, for temporary defensive purposes, the fund may invest a portion of its
assets in money market and other short-term securities.
Examples of those securities
include:
|
•
|
Securities issued or guaranteed by
the
U.S.
government and its
agencies
and instrumental
i
ties;
|
|
•
|
Commercial
Paper;
|
|
•
|
Certificates of Deposit and Euro
Dollar Certificates of Deposit;
|
|
•
|
Bankers’
Acceptances;
|
|
•
|
Short-term notes, bonds,
debentures or other debt instruments;
|
|
•
|
Repurchase agreements;
and
|
|
•
|
Money market
funds.
|
U.S.
Government
Securities
The fund may invest in U.S. government
securities including bills, notes and bonds issued by the U.S. Treasury and
securities issued or guaranteed by agencies or instrumentalities of the U.S.
go
v
ernment.
Some U.S. government securities are
supported by the direct full faith and credit of the U.S. government; others are
supported by the right of the issuer to borrow from the U.S. Treasury; others,
such as securities issued by the Federal National Mortgage Association (FNMA),
are supported by the discretionary authority of the U.S. government to purchase
the agencies’ obligations; and others are supported only by the credit of the
issuing or guarante
e
ing instrumentality. There is no
assurance that the
U.S.
government will provide financial
support to an instrume
n
tality it sponsors when it is not
obligated by law to do so.
When-Issued and Forward Commitment
Agreements
The fund may sometimes purchase new
issues of securities on a when-issued or forward commi
t
ment basis in which the transaction
price and yield are each fixed at the time the commitment is made, but payment
and delivery occur at a future date.
For example, a fund may sell a security
and at the same time make a commitment to purchase the same or a comparable
security at a future date and specified price. Conversely, a fund may purchase a
security and at the same time make a commitment to sell the same or a comparable
security at a future date and specified price. These types of transactions are
executed simultan
e
ously in what are known as dollar-rolls,
buy/sell back transactions, cash and carry, or financing transa
c
tions. For example, a broker-dealer may
seek to purchase a particular security that a fund owns. The fund will sell that
security to the broker-dealer and simultaneously enter into a forward
co
m
mitment agreement to buy it back at a
future date. This type of transaction generates income for the fund if the
dealer is willing to execute the transaction at a favorable price in order to
acquire a specific security.
When purchasing securities on a
when-issued or forward commitment basis, a fund assumes the rights and risks of
ownership, including the risks of price and yield fluctuations. Market rates of
interest on debt securities at the time of delivery may be higher or lower than
those contracted for on the when-issued security. Accordingly, the value of the
security may decline prior to delivery, which could result in a loss to the
fund. While the fund will make commitments to purchase or sell securities with
the intention of actually receiving or delivering them, it may sell the
securities b
e
fore the settlement date if doing so is
deemed advisable as a matter of investment strategy.
In purchasing securities on a
when-issued or forward commitment basis, a fund will segregate cash, cash
equivalents or other appropriate liquid securities on its record in an amount
sufficient to meet the purchase price. To the extent a fund remains fully
invested or almost fully invested at the same time it has purchased securities
on a when-issued basis, there will be greater fluctuations in its net asset
value than if it solely set aside cash to pay for when-issued securities. When
the time comes to pay for the when-issued securities, the fund will meet its
obligations with available cash, through the sale of securities, or, although it
would not normally expect to do so, by selling the when-issued securities
themselves (which may have a market value greater or less than the fund’s
payment obligation). Selling securities to meet when-issued or forward
commitment obligations may generate taxable capital gains or
losses.
INVESTMENT POLICIES
Unless otherwise indicated, with the
exception of the percentage limitations on borrowing, the policies described
below apply at the time the fund enters into a transaction. Accordingly, any
later increase or decrease beyond the specified limitation resulting from a
change in the fund’s assets will not be considered in determining whether it has
complied with its investment policies.
Fundamental Investment
Policies
The
fund’s fundamental investment policies are set forth below. These investment
policies, a fund’s inves
t
ment
objectives set forth in its prospectus, and a fund's status as diversified may
not be changed without approval of a majority of the outstanding votes of
shareholders of the fund, as determined in acco
r
dance
with the Investment Company Act.
|
Subject
|
Policy
|
|
Senior
Securities
|
The fund may not issue senior
secur
i
ties, except as permitted under
the Investment Company Act.
|
|
Borrowing
|
The fund may not borrow money,
except that the fund may borrow for temporary or emergency purposes (not
for leveraging or investment) in an amount not exceeding 331⁄3% of the
fund’s total assets (including the amount borrowed) less liabilities
(other than borrowings).
|
|
Lending
|
The fund may not lend any security
or make any other loan if, as a result, more than 331⁄3% of the fund’s
total assets would be lent to other parties, except, (i) through the
pu
r
chase of debt securities in
accordance with its investment objective, policies and
limitations
or (ii) by engaging in repurchase
agreements with respect to
portfolio
securities.
|
|
Real Estate
|
The fund may not purchase or sell
real estate unless acquired as a result of ownership of securities or
other instruments. This policy shall not prevent a fund from investing in
securities or other instruments backed by real estate or securities of
comp
a
nies that deal in real estate or
are engaged in the real estate business.
|
|
Concentration
|
The fund may not concentrate its
investments in securities of issuers in a particular industry (other than
securities issued or guaranteed by the
U.S.
government or any of its agencies
or instrumentalities).
|
|
Underwriting
|
The fund may not act as an
underwriter of securities issued by others, except to the extent that the
fund may be consi
d
ered an underwriter within the
meaning of the Securities Act of 1933 in the disposition of restricted
securities.
|
|
Commodities
|
The fund may not purchase or sell
physical commodities unless acquired as a result of ownership of
securities or other instr
u
ments provided that this
limitation shall not prohibit the fund from purchasing or selling options
and futures contracts or from investing in securities or other instruments
backed by physical commodities.
|
|
Control
|
The fund may not invest for
purposes of exercising control over manag
e
ment.
|
For purposes of the investment policies
relating to lending and borrowing, the fund has received an exemptive order from
the SEC regarding an interfund lending program. Under the terms of the exemptive
order, the fund may borrow money from or lend money to other American Century
Investments-advised funds that permit such transactions. All such transactions
will be subject to the limits for borrowing and lending set forth above. The
fund will borrow money through the program only when the costs are equal to or
lower than the costs of short-term bank loans. Interfund loans and borrowings
normally extend only overnight but can have a maximum duration of seven days.
The fund will lend through the program only when the returns are higher than
those available from other short-term instruments (such as repurchase
agreements). The fund may have to borrow from a bank at a higher interest rate
if an interfund loan is called or not renewed. Any delay in repa
y
ment to a lending fund could result in a
lost investment opportunity or additional borrowing costs.
For purposes of the investment policy
relating to concentration, the fund shall not
purchase any securities that would cause
25% or more of the value of the fund’s total
assets at the time of purchase to be
invested in the securities of one or more issuers conducting their principal
business activities in the same industry, pr
o
vided that
|
(a)
|
there is no limitation with
respect to obligations issued or guaranteed by the U.S. government, any
state, terr
i
tory or possession of the United
States, the District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions and repu
r
chase agreements secured by such
obligations,
|
|
(b)
|
wholly owned finance companies
will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their
parents,
|
|
(c)
|
utilities will be divided
according to their services, for example, gas, gas transmission, electric
and gas, electric, and telephone will each be considered a separate
industry, and
|
|
(d)
|
personal credit and business
credit businesses will be considered separate
industries.
|
Nonfundamental Investment
Policies
In addition, the fund is subject to the
following investment policies that are not fundamental and may be changed by the
Board of Trustees.
|
Subject
|
Policy
|
|
Leveraging
|
The fund may not purchase
additional investment securities at any time during which outstanding
borrowings exceed 5% of the total assets of the
fund.
|
|
Liquidity
|
The fund may not purchase any
security or enter into a repurchase agreement if, as a result, more than
15% of its net assets would be invested in illiquid securities. Illiquid
securities include repurchase agreements not entitling the holder to
payment of principal and interest within seven days and in securities that
are illiquid by virtue of legal or contra
c
tual restrictions on resale or the
absence of a readily available market.
|
|
Short Sales
|
The fund may not sell securities
short, unless it owns or has the right to obtain securities equivalent
in-kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
|
|
Margin
|
The fund may not purchase
securities on margin, except to obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on
margin.
|
|
Futures and
Options
|
The fund may enter into futures
contracts and write and buy put and call options relating to futures
contracts. A fund may not, however, enter into leveraged futures
transactions if it would be possible for the fund to lose more than the
notional value of the investment.
|
|
Issuers with
Limited
Operating
Histories
|
A fund may invest a portion of its
assets in the securities of issuers with limited operating histories. An
issuer is considered to have a limited ope
r
ating history if that issuer has a
record of less than three years of continuous operation. Periods of
capital formation, incubation, consolidations, and research and
development may be considered in determining whether a particular issuer
has a record of three years of continuous o
p
eration.
|
The Investment Company Act imposes
certain additional restrictions upon the fund’s ability to acquire securities
issued by insurance companies, broker-dealers, underwriters or investment
advisors, and upon transactions with affiliated persons as defined by the Act.
It also defines and fo
r
bids the creation of cross and circular
ownership. Neither the SEC nor any other agency of the federal or state
government participates in or supervises the management of the fund or its
inves
t
ment practices or
policies.
TEMPORARY DEFENSIVE
MEASURES
For temporary defensive purposes, the
fund may invest in securities that may not fit its investment objective or its
stated market. During a temporary defensive period, the fund may direct its
assets to the following investment vehicles:
|
•
|
interest-bearing bank accounts or
Certificates of Deposit;
|
|
•
|
U.S.
government securities and
repurchase agreements collateralized by
U.S.
government sec
u
rities; and
|
|
•
|
money market
funds.
|
To the extent the fund assumes a
defensive position, it will not be pursuing its investment obje
c
tive.
PORTFOLIO TURNOVER
The portfolio turnover rate of the fund
is listed in the
Financial
Highlights
table in the
prospectus.
The portfolio manager will sell
securities without regard to the length of time the security has been held.
Accor
d
ingly, the fund’s rate of portfolio
turnover may be substantial.
The portfolio manager intends to
purchase a particular security whenever he believes it will co
n
tribute to the stated objective of the
fund. In order to achieve the fund’s investment objective, the portfolio manager
may sell a given security, regardless of the length of time it has been held in
the portfolio, and, regardless of the gain or loss realized on the sale. The
manager may sell a portfolio security if he believes that the security is not
fulfilling its purpose because, among other things, it did not live up to the
manager’s expectations, because it may be replaced with another security holding
greater promise, because it has reached its optimum potential, because of a
change in the circumstances of a particular company or industry or in general
economic cond
i
tions, or because of some combination of
such reasons.
Because investment decisions are based
on a particular security’s anticipated contribution to the fund’s objectives,
the manager believes that the rate of portfolio turnover is irrelevant when he
determines that a change is required to pursue the fund’s investment objective.
As a result, the fund’s annual portfolio turnover rate cannot be anticipated and
may be higher than other mutual funds with similar investment objectives.
Portfolio turnover also may affect the character of capital gains realized and
distributed by the fund, if any, since short-term capital gains are taxable as
ordinary income.
Because the manager does not take
portfolio turnover rate into account in making investment dec
i
sions, (1) the manager has no intention
of maintaining any particular rate of portfolio turnover, whether high or low,
and (2) the portfolio turnover rates in the past should not be considered as
representative of the rates that will be attained in the
future.
Variations in a fund’s portfolio
turnover rate from year to year may be due to a fluctuating volume of
shareholder purchase and redemption activity, varying market conditions, and/or
changes in the manager’s investment outlook. Market conditions over 2007
inclined the subadvisor towards increasing its buy and hold period on its cash
bond positions. The subadvisor increased its use of futures over 2007 to express
its strategic views and therefore did not need to raise cash by selling bond
positions.
TRANSACTIONS WITH SUBADVISOR
AFFILIATES
As described in further detail under the
section titled
Investment
Advisor,
J.P. Morgan
Investment Management, Inc. (JPMIM) is the subadvisor to the fund pursuant to an
agreement with American Century Investment Ma
n
agement, Inc.
JPMIM was
incorporated in the State of
Delaware
on
February 7, 1994. JPMIM, an SEC registered investment advisor, is a wholly owned
subsidiary of J.P. Morgan Asset Management Holdings, Inc., which is a wholly
owned subsidiary of J.P. Morgan Chase & Co. (JPMorgan Chase), a publicly
traded corporation that is listed on the New York Stock Exchange with a market
capitalization of $117 billion as of June 30, 2008. The subadvisor is a
corporation organized under the laws of the State of
Delaware
and
is a registered investment adviser under the Investment Advi
s
ers Act
of 1940, as amended. The subadvisor is located at
245 Park
Avenue
,
New
York
,
New
York
10017
.
J.P. Morgan Chase, a bank holding
company organized under the laws of the State of
Delaware
, was formed from the merger of J.P.
Morgan & Co. Incorporated with and into The Chase Manha
t
tan Corporation. J.P. Morgan Chase,
together with its predecessors, has been in the banking and investment advisory
business for over 100 years and today, through JPMIM and its other
subsid
i
aries (such as, Morgan Guaranty Trust
Company of New York [Morgan Guaranty], J. P. Morgan Securities Inc., and J.P.
Morgan Securities Ltd.), offers a wide range of banking and investment
management services to governmental, institutional, corporate and individual
clients. These su
b
sidiaries are hereafter referred to as
Morgan affiliates.
J.P. Morgan Securities Inc. is a
broker-dealer registered with the SEC and is a member of the Financial Industry
Regulatory Authority. It is active as a dealer in
U.S.
government securities and an
underwriter of and dealer in
U.S.
government agency securities and money
market instruments.
J.P. Morgan Securities Ltd. underwrites,
distributes, and trades international securities,
including Eurobonds, commercial paper,
and foreign government bonds. J.P. Morgan Chase issues comme
r
cial paper and long-term debt
securities. Morgan Guaranty and some of its affiliates issue certif
i
cates of deposit and create bankers’
acceptances.
As a general matter, in order to
comply with applicable law and to avoid potential conflicts of interest, JPMIM
would not purchase or sell securities or other assets from or to a Morgan
affiliate on behalf of client accounts. In the case of offerings of securities
in which J.P. Morgan Securities, Inc. is a manager of the offering, JPMIM would
seek a client's blanket consent to be able to purchase securities in such
offerings, but in any event would purchase the securities from an underwriter or
seller that is not affiliated with JPMIM. Generally, JPMIM would not purchase
securities of which a Morgan affiliate is the issuer or obligor on more than 5%
of the underlying obligations. However, JPMIM may purchase securities in
offerings in which a Morgan affiliate serves as trustee, paying agent, custodian
or in a similar capacity so long as JPMIM is satisfied that the firm is not
receiving any incremental benefit as a result of the purchase of the securities
on behalf of our clients.
Certain activities of Morgan affiliates
may affect the fund’s portfolio or the markets for securities in which the fund
invests. In particular, activities of Morgan affiliates may affect the prices of
securities held by the fund and the supply of issues available for purchase by
the fund. Where a Morgan affiliate holds a large portion of a given issue, the
price at which that issue is traded may influence the price of similar
securities the fund holds or is considering purchasing.
The fund will not purchase securities
directly from Morgan affiliates, and the size of Morgan a
f
filiates’ holdings may limit the
selection of available securities in a particular maturity, yield, or price
range. The fund will not ex
e
cute any transactions with Morgan
affiliates and will use only unaffiliated broker-dealers. In addition, the fund
will not purchase any securities of
U.S.
gover
n
ment agencies during the existence of an
underwriting or selling group of which a Morgan affiliate is a member, except to
the extent permitted by law.
The fund’s ability to engage in
transactions with Morgan affiliates is restricted by the SEC and the Federal
Reserve Board. In JPMIM’s opinion, these limitations should not significantly
impair the fund’s ability to pursue its investment objectives. However, there
may be circumstances in which the fund is disadvantaged by these
limit
a
tions compared to other funds with
similar investment objectives that are not subject to these
limitations.
In acting for its fiduciary accounts,
including the fund, JPMIM will not discuss its investment decisions or
pos
i
tions with the personnel of any Morgan
affiliate. JPMIM has informed the fund that, in making investment
dec
i
sions, it will not obtain or use
material, non-public information in the possession of any division or department
of JPMIM or other Morgan affiliates.
The commercial banking divisions of
Morgan Guaranty and its affiliates may have deposit, loan, and other commercial
banking relationships with issuers of securities the fund purchases, including
loans that may be repaid in whole or in part with the proceeds of securities
purchased by the fund. Except as may be permitted by applicable law, the fund
will not purchase securities in any primary public offering when the prospectus
discloses that the proceeds will be used to repay a loan from Morgan Guaranty.
JPMIM will not cause the fund to make investments for the direct purpose of
benefiting other commercial interests of Morgan affiliates at the fund’s
expense.
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 ind
e
pendent 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 ind
e
pendent 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
Comp
a
nies, Inc. (ACC) or its wholly owned,
direct or indirect, subsidiaries, including the fund’s investment
adv
i
sor, 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 e
m
ployees, directors or officers of, and
have no financial interest in, ACC or any of its wholly owned, direct or
ind
i
rect, subsidiaries, including ACIM, ACIS
and ACS. The trustees serve in this capacity for eight registered
inves
t
ment 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 inves
t
ment 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
ot
h
erwise 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 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,
Mo
r
gan Stanley
(March 2000 to November
2005)
Number
of Portfolios in Fund Complex Overseen by Trustee:
111
Other
Directorships Held by Trustee:
None
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
(ve
n
ture
capital firm) (1976 to 2006)
Number
of Portfolios in Fund Complex Overseen by Trustee:
41
Other Directorships
Held by Trustee:
None
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
Bus
i
ness,
Stanford
Law
School
(1979 to present); Marc and Eva Stern
Professor of Law and Bus
i
ness,
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:
Tru
stee
(since 2008)
Principal
Occupation(s) During Past 5 Years:
Senior
Advisor,
Barclays
Global Investors
(a
s
set
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 F
i
nancial Officer,
Commerce One,
Inc.
(software and services
provider)
Number
of Portfolios in Fund Complex Overseen by Trustee:
41
Other
Directorships Held by Trustee:
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)
(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:
Dimensional
Fund Advisors
(investment
a
d
visor)
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:
Cadence
Design Systems
;
E
x
ponent
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
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); Ma
n
aging
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
Trea
s
urer 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 pr
e
sent).
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, Corp
o
rate 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 BOARD OF
TRUSTEES
The Board of Trustees oversees the
management of the fund and meets at least quarterly to review reports about fund
operations. Although the Board of Trustees does not manage the fund,
it has hired the advisor to do so. The trustees, in carrying out
their fiduciary duty under the Investment Company Act of 1940, are responsible
for approving new and existing management contracts with the fund’s
advisor.
The board has the authority to manage
the business of the fund on behalf of their investors, and it has all powers
necessary or convenient to carry out that responsibility. Consequently, the
trustees may adopt bylaws providing for the regulation and management of the
affairs of the fund and may amend and repeal them to the extent that such bylaws
do not reserve that right to the fund’s investors. They may fill vacancies in or
reduce the number of board members, and may elect and r
e
move such officers and appoint and
terminate such agents as they consider appropriate. They may appoint from their
own number and establish and terminate one or more committees co
n
sisting of two or more trustees who may
exercise the
powers and authority of the board to the
extent that the tru
s
tees determine. They may, in general,
delegate such authority as they consider desirable to any officer of the fund,
to any committee of the board and to any agent or employee of the fund or to any
custodian, transfer or investor servicing agent, or principal underwriter. Any
determination as to what is in the interests of the fund made by the trustees in
good faith shall be conclusive.
The Advisory Board
The fund also has an Advisory Board.
Members of the Advisory Board, if any, function like fund trustees in many
respects, but do not possess voting power. Advisory Board members attend all
meetings of the Board of Trustees and the independent trustees and receive any
materials distri
b
uted in connection with such meetings.
Advisory Board members may be considered as candidates to fill vacancies on the
Board of Trustees.
Committees
The board has four standing committees
to oversee specific functions of the fund’s operations. Information about these
committees appears in the table below. The trustee first named serves as
chairman of the committee.
Committee: Audit and Compliance
Members:
Peter F. Pervere, Jeanne D. Wohlers,
Ronald J. Gilson
Function:
The Audit and Compliance Committee
approves the engagement of the fund’s independent registered public accounting
firm, recommends approval of such engagement to the independent trustees, and
oversees the activities of the fund’s independent registered public accounting
firm. The committee receives reports from the advisor’s Internal Audit
Department, which is accountable to the committee. The committee also receives
reporting about compliance matters affecting the fund.
Number
of Meetings Held During Last Fiscal Year:
6
Committee:
Corporate
Governance
Members:
Ronald J. Gilson, John Freidenrich, John
B. Shoven
Function:
The Corporate Governance Committee
reviews board procedures and committee structures. It also considers and
recommends individuals for nomination as trustees. The names of potential
trustee candidates may be drawn from a number of sources, including
recommendations from members of the board, management (in the case of interested
trustees only) and shareholders. Shareholders may submit trustee nominations to
the Corporate Secr
e
tary, American Century Funds,
P.O. Box 410141
,
Kansas City
,
MO
64141
. All such nominations will be forwarded
to the committee for consideration. The committee also may recommend the
creation of new committees, evaluate the membership structure of new and
existing commi
t
tees, consider the frequency and
duration of board and committee meetings and otherwise evaluate the
responsibilities, processes, resources, performance and compensation of the
board.
Number
of Meetings Held During Last Fiscal Year:
2
Committee: Portfolio
Members:
Myron S.
Scholes, John Freidenrich, Frederick L.A. Grauer
Function:
The Portfolio Committee reviews
quarterly the investment activities and strategies used to manage fund assets.
The committee regularly receives reports from portfolio managers, credit
analysts and other investment personnel concerning the fund’s
investments.
Number
of Meetings Held During Last Fiscal Year:
4
Committee:
Quality of Service
Members:
John B. Shoven, Ronald J. Gilson, Peter
F. Pervere
Function:
The Quality of Service Committee
reviews the level and quality of transfer agent and administrative services
provided to the fund and its shareholders. It receives and reviews reports
comparing those services to those of fund competitors and seeks to improve such
services where feasible and a
p
propriate.
Number
of Meetings Held During Last Fiscal Year:
4
Compensation of
Trustees
The
independent trustees serve as trustees or directors for eight investment
companies in the American Century Investments family of funds. Jonathan S.
Thomas, interested trustee, serves as trustee or director for 15 investment
companies in the American Century Investments family of funds. As an interested
trustee, Mr. Thomas does not receive any compensation from the fund for his
service as a trustee. Each trustee who is not an interested person as defined in
the Investment Company Act receives compensation for service as a member of the
board of all such companies based on a schedule that takes into account the
number of meetings attended and the assets of the fund for which the meetings
are held. These fees and expenses are divided among these investment
comp
a
nies
based, in part, upon their relative net assets. Under the terms of the
management agreement with the advisor, the fund is responsible for paying such
fees and expenses.
The
following table shows the aggregate compensation paid by the fund for the
periods indicated and by the investment companies served by the board to each
trustee who is not an interested person as defined in the Inves
t
ment Company Act.
|
1
|
Includes
compensation paid to the trustees for the fiscal year ended June 30, 2008,
and also includes amounts deferred at the election of the trustees under
the American Century Mutual Funds’ Indepen
d
ent
Directors Deferred Compensation
Plan.
|
|
2
|
Includes
compensation paid by the investment companies of the American Century
Investments family of funds served by this board. The total amount of
deferred compensation included in the preceding table is as follows: Mr.
Gi
l
son,
$201,875; Mr. Pervere, $33,729; Mr. Scholes, $110,583; Mr. Shoven,
$120,583; and Ms. Wohlers, $91,975
.
|
|
3
|
Mr. Grauer joined the board on
March 11, 2008.
|
|
4
|
Ms. Hall retired from the board
on December 6, 2007.
|
The fund has adopted the American
Century Mutual Funds’ Independent Directors Deferred Compensation Plan. Under
the plan, the independent trustees may defer
receipt of all or any part of the fees
to be paid to them for serving as trustees of the fund.
All deferred fees are credited to an
account established in the name of the trustees. The amounts credited to the
account then increase or decrease, as the case may be, in accordance with the
performance of one or more of the American Century Investments funds that are
selected by the trustee. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds until final
payment of all amounts credited to the account. Tru
s
tees are allowed to change their
designation of mutual funds from time to time.
No deferred fees are payable until such
time as a trustee resigns, retires or otherwise ceases to be a member of the
Board of Trustees. Trustees may receive deferred fee account balances either in
a lump sum payment or in su
b
stantially equal installment payments to
be made over a period not to exceed 10 years. Upon the death of a trustee, all
remaining deferred fee account balances are paid to the trustee’s beneficiary
or, if none, to the trustee’s estate.
The plan is an unfunded plan and,
accordingly, the fund has no obligation to segregate assets to secure or fund
the deferred fees. To date, the fund has voluntarily funded its obligations. The
rights of trustees to receive their deferred fee account balances are the same
as the rights of a ge
n
eral unsecured creditor of the fund. The
plan may be terminated at any time by the administrative committee of the plan.
If terminated, all deferred fee account balances will be paid in a lump
sum.
OWNERSHIP OF FUND
SHARES
The trustees owned shares in the fund
as of December 31, 2007, as shown in the table below. Because Frederick L.A.
Grauer was not a trustee as of December 31, 2007, he is not included in the
table.
|
Name of
Trustees
|
|||
|
Jonathan
S.
Thomas
|
John
Freidenrich
|
Ronald
J.
Gilson
|
|
|
Dollar
Range
of
Equity Securities in the Fund:
|
|||
|
International
Bond
|
A
|
A
|
A
|
|
Aggregate Dollar Range of
Equity
Securities in all Registered
Investment
Companies Overseen by Trustees
in
Family of Investment
Companies
|
E
|
C
|
E
|
Ranges:
A—none, B—$1-$10,000, C—$10,001-$50,000, D—$50,001-$100,000, E—More than
$100,000
|
Name of
Trustees
|
||||
|
Peter F.
Pervere
|
Myron S.
Scholes
|
John B.
Shoven
|
Jeanne D.
Wohlers
|
|
|
Dollar
Range
of Equity Securities in the
Fund:
|
||||
|
International
Bond
|
A
|
A
|
A
|
A
|
|
Aggregate Dollar Range of
Equity
Securities in all Registered
Investment
Companies Overseen by Trustees
in
Family of Investment
Companies
|
A
|
E
|
E
|
E
|
Ranges: A—none, B—$1-$10,000,
C—$10,001-$50,000, D—$50,001-$100,000, E—More than $100,000
CODE OF ETHICS
The fund, its investment advisor,
principal underwriter and subadvisor have adopted codes of et
h
ics under Rule 17j-1 of the Investment
Company Act. They permit personnel subject to the codes to invest in securities,
including securities that may be purchased or held by the fund, provided that
they first obtain approval from the compliance department before making such
investments.
PROXY VOTING
GUIDELINES
The advisor is responsible for
exercising the voting rights associated with the securities purchased and/or
held by the fund. In exercising its voting obligations, the advisor is guided by
general fid
u
ciary principles. It must act prudently,
solely in the interest of the fund, and for the exclusive purpose of providing
benefits to it. The advisor a
t
tempts to consider all factors of its
vote that could affect the value of the investment. The fund’s Board of Trustees
has approved the advisor’s proxy voting guidelines to govern the advisor’s proxy
voting activities.
The advisor and the board have agreed on
certain significant contributors to shareholder value with respect to a number
of matters that are often the subject of proxy solicitations for shareholder
meetings. The proxy voting guidelines specifically address these considerations
and establish a framework for the advisor’s consideration of the vote that would
be appropriate for the fund. In particular, the proxy voting guidelines outline
principles and factors to be considered in the exercise of voting authority for
proposals addressing:
|
•
|
Election of
Directors
|
|
•
|
Ratification of Selection of
Auditors
|
|
•
|
Equity-Based Compensation
Plans
|
|
•
|
Anti-Takeover
Proposals
|
|
¢
Cumulative
Voting
|
|
|
¢
Staggered
Boards
|
|
|
¢
“Blank Check”
Preferred Stock
|
|
|
¢
Elimination of
Preemptive Rights
|
|
|
¢
Non-targeted Share
Repurchase
|
|
|
¢
Increase in Authorized
Common Stock
|
|
|
¢
“Supermajority” Voting
Provisions or Super Voting Share Classes
|
|
|
¢
“Fair Price”
Amendments
|
|
|
¢
Limiting the Right to
Call Special Shareholder Meetings
|
|
|
¢
Poison Pills or
Shareholder Rights Plans
|
|
|
¢
Golden
Parachutes
|
|
|
¢
Reincorporation
|
|
|
¢
Confidential
Voting
|
|
|
¢
Opting In or Out of
State Takeover Laws
|
|
|
•
|
Shareholder Proposals Involving
Social, Moral or Ethical Matters
|
|
•
|
Anti-Greenmail
Proposals
|
|
•
|
Changes to Indemnification
Provisions
|
|
•
|
Non-Stock Incentive
Plans
|
|
•
|
Director
Tenure
|
|
•
|
Directors’ Stock Options
Plans
|
|
•
|
Director Share
Ownership
|
Finally, the proxy voting guidelines
establish procedures for voting of proxies in cases in which the advisor may
have a potential conflict of interest. Companies with which the advisor has
direct business relationships could theoretically use these relationships to
attempt to unduly influence the manner in which American Century Investments
votes on matters for the fund. To ensure that such a conflict of interest does
not affect proxy votes cast for the fund, all discretionary (including
case-by-case) voting for these companies will be voted in direct consultation
with a committee of the indepen
d
ent trustees of the
fund.
A copy of the advisor’s proxy voting
guidelines and information regarding how the advisor voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 are
available on the
“About
Us”
page at
americancentury.com. The advisor’s proxy voting record also is available on the
SEC’s Web site at sec.gov.
DISCLOSURE OF PORTFOLIO
HOLDINGS
The advisor (ACIM) has adopted policies
and procedures with respect to the disclosure of fund portfolio holdings and
characteristics, which are described below.
Distribution to the
Public
Full portfolio holdings for each fund
will be made available for distribution 30 days after the end of each calendar
quarter, and will be posted on americancentury.com at approximately the same
time. This disclosure is in addition to the portfolio disclosure in annual and
semi-annual shar
e
holder reports, and on Form N-Q, which
disclosures are filed with the Securities and Exchange Commission within 60 days
of each fiscal quarter end and also posted on americancentury.com at the time
the filings are made.
Top 10 holdings for each fund will be
made available for distribution 30 days after the end of each month, and will be
posted on americancentury.com at approximately the same
time.
Portfolio
characteristics that are derived from portfolio holdings but do not identify any
specific security will be made available for distribution 15 days after the end
of the peri
od to
which such data relates.
Characteristics
that identify any specific security will be made available 30 days after the end
of the period to wh
ich such
data relates.
Characteristics
in both categories will generally be posted on americancentury.com at
approximately the time they are made available for distrib
u
tion.
Data derived from portfolio returns and any other characteristics not deemed
confidential will be available for distribution at any time. The advisor may
make determinations of confidentiality on a fund-by-fund basis, and may add or
delete characteristics to or from those considered confidential at any
time.
Any
American Century Investments fund that sells securities short as an
inves
t
ment
strategy will disclose full portfolio holdings only in annual and semi-annual
shareh
older
reports and on form N-Q.
These
funds will make long holdings available for distribution 30 days after the end
of each calendar quarter, but the funds will kee
p short
holdings confidential.
Top 10
long holdings and portfolio characteristics will be made available for
distribution in accordance with the policies set forth
above.
So long
as portfolio holdings are disclosed in accordance with the above parameters, the
advisor makes no distinction among different categories of recipients, such as
individual investors, institutional investors, intermediaries that distribute
the fund’s shares, third-party service providers, ra
t
ing and ranking organizations, and fund
affiliates. Because this information is publicly available and widely
disseminated, the advisor places no conditions or restri
c
tions on, and does not monitor, its use.
Nor does the advisor require special authorization for its
disclosure.
Accelerated
Disclosure
The advisor recognizes that certain
parties, in addition to the advisor and its affiliates, may have legitimate
needs for information about portfolio holdings and characteristics prior to the
times prescribed above. Such accelerated disclosure is permitted under the
circumstances described b
e
low.
Ongoing Arrangements
Certain parties, such as investment
consultants who provide regular analysis of fund portfolios for their clients
and intermediaries who pass through information to fund shareholders, may have
legitimate needs for accelerated di
s
closure. These needs may include, for
example, the preparation of reports for customers who invest in the funds, the
creation of analyses of fund characteristics for intermediary or consultant
clients, the reformatting of data for distribution to the intermed
i
ary’s or consultant’s clients, and the
review of fund performance for ERISA fiduciary purposes.
In such cases, accelerated disclosure is
permitted if the service provider enters an appropriate non-disclosure agreement
with the fund’s distributor in which it agrees to treat the information
confidentially until the public distribution date and represents that the
information will be used only for the legitimate services provided to its
cl
i
ents (i.e., not for trading).
Non-disclosure agreements require the approval of an attorney in the advisor’s
legal department. The advisor’s compliance department receives quarterly reports
detailing which clients received a
c
celerated disclosure, what they
received, when they received it and the purposes of such disclosure. Compliance
personnel are required to confirm that an appropriate non-disclosure agreement
has been obtained from each r
e
cipient identified in the
reports.
Those
parties who have entered into non-disclosure agreements as of October 20, 2008
are as fo
l
lows:
|
•
|
AIG
Retirement Advisors
,
Inc.
|
|
•
|
AIG Retirement Services
Company
|
|
•
|
American Fidelity Assurance
Co.
|
|
•
|
Ameritas Life Insurance
Corporation
|
|
•
|
Annuity Investors Life
Insurance Company
|
|
•
|
Asset Services Company
L.L.C.
|
|
•
|
AUL/American United Life
Insurance Company
|
|
•
|
Bell
Globemedia
Publishing
|
|
•
|
Bellwether Consulting,
LLC
|
|
•
|
Bidart &
Ross
|
|
•
|
Callan Associates,
Inc.
|
|
•
|
Cambridge
Financial
Services, Inc.
|
|
•
|
Capital
Cities
,
LLC
|
|
•
|
Charles
Schwab & Co.
,
Inc.
|
|
•
|
Cleary Gull
Inc.
|
|
•
|
Commerce Bank,
N.A.
|
|
•
|
Connecticut General Life
Insurance Company
|
|
•
|
Consulting Services Group,
LLC
|
|
•
|
CRA RogersCasey,
Inc.
|
|
•
|
Defined Contribution Advisors,
Inc.
|
|
•
|
DWS
Scudder
Distributors, Inc.
|
|
•
|
EquiTrust Life Insurance
Company
|
|
•
|
Evaluation Associates,
LLC
|
|
•
|
Evergreen
Investments
|
|
•
|
Farm Bureau Life Insurance
Company
|
|
•
|
First MetLife Investors
Insurance Company
|
|
•
|
Fund Evaluation Group,
LLC
|
|
•
|
The Guardian Life Insurance
& Annuity Company, Inc.
|
|
•
|
Hammond Associates,
Inc.
|
|
•
|
Hewitt Associates
LLC
|
|
•
|
ICMA Retirement
Corporation
|
|
•
|
ING Life Insurance Company
& Annuity Co.
|
|
•
|
Iron Capital
Advisors
|
|
•
|
J.P. Morgan Retirement Plan
Services LLC
|
|
•
|
Jefferson National Life
Insurance Company
|
|
•
|
Jeffrey Slocum &
Associates, Inc.
|
|
•
|
John
Hancock Financial Services
,
Inc.
|
|
•
|
Kansas City Life Insurance
Company
|
|
•
|
Kmotion,
Inc.
|
|
•
|
Liberty Life Insurance
Company
|
|
•
|
The Lincoln National Life
Insurance Company
|
|
•
|
Lipper
Inc.
|
|
•
|
Massachusetts Mutual Life
Insurance Company
|
|
•
|
Merrill
Lynch
|
|
•
|
MetLife Investors Insurance
Company
|
|
•
|
MetLife
Investors Insurance Company of
California
|
|
•
|
Midland National Life Insurance
Company
|
|
•
|
Minnesota Life Insurance
Company
|
|
•
|
Morgan Keegan & Co.,
Inc.
|
|
•
|
Morgan Stanley & Co.,
Incorporated
|
|
•
|
Morningstar Associates
LLC
|
|
•
|
Morningstar Investment
Services, Inc.
|
|
•
|
M
utual
of America Life Insurance Company
|
|
•
|
National Life Insurance
Company
|
|
•
|
Nationwide
Financial
|
|
•
|
New
England
Pension
Consultants
|
|
•
|
Northwestern Mutual Life
Insurance Co.
|
|
•
|
NT Global Advisors,
Inc.
|
|
•
|
NYLIFE Distributors,
LLC
|
|
•
|
Principal Life Insurance
Company
|
|
•
|
Prudential
Financial
|
|
•
|
RiverSource
Investments
|
|
•
|
Rocaton Investment Advisors,
LLC
|
|
•
|
S&P Financial
Communications
|
|
•
|
Security Benefit Life Insurance
Co.
|
|
•
|
Smith
Barney
|
|
•
|
SunTrust
Bank
|
|
•
|
Symetra Life Insurance
Company
|
|
•
|
Trusco Capital
Management
|
|
•
|
Union
Bank of
California
,
N.A.
|
|
•
|
The Union Central Life
Insurance Company
|
|
•
|
Vestek Systems,
Inc.
|
|
•
|
Wachovia Bank,
N.A.
|
|
•
|
Wells Fargo Bank,
N.A.
|
Once a
party has executed a non-disclosure agreement, it may receive any or all of the
following data for funds in which its clients have investments or are actively
considering investment:
|
(1)
|
Full holdings quarterly as soon as
reasonably available;
|
|
(2)
|
Full holdings monthly as soon as
reasonably available;
|
|
(3)
|
Top 10 holdings monthly as soon as
reasonably available; and
|
|
(4)
|
Portfolio characteristics monthly
as soon as reasonably
available.
|
The types, frequency and timing of
disclosure to such parties vary. In most situations, the inform
a
tion provided pursuant to a
non-disclosure agreement is limited to certain portfolio characteristics and/or
top 10 holdings, which information is provided on a monthly basis. In limited
situations, and when approved by a member of the legal department and
responsible chief investment officer, full holdings may be
provided.
Single Event
Requests
In certain circumstances, the advisor
may provide fund holding information on an accelerated basis outside of an
ongoing arrangement with manager-level or higher authorization. For example,
from time to time the advisor may receive requests for proposals (RFPs) from
consultants or p
o
tential clients that request information
about a fund’s holdings on an accelerated basis. As long as such requests are on
a one-time basis, and do not result in continued receipt of data, such
inform
a
tion may be provided in the RFP as of
the most recent month end regardless of lag time. Such information will be
provided with a confidentiality legend and only in cases where the advisor has
re
a
son to believe that the data will be
used only for legitimate purposes and not for trading.
In addition, the advisor occasionally
may work with a transition manager to move a large account into or out of a
fund. To reduce the impact to the fund, such transactions may be conducted on an
in-kind basis using shares of portfolio securities rather than cash. The advisor
may provide acce
l
erated holdings disclosure to the
transition manager with little or no lag time to facilitate such transactions,
but only if the transition manager enters into an appropriate non-disclosure
agre
e
ment.
Service Providers
Various service providers to the fund
and the fund’s advisor must have access to some or all of the fund’s portfolio
holdings information on an accelerated basis from time to time in the ordinary
course of providing services to the funds. These service providers include the
fund’s custodian (daily, with no lag), auditors (as needed) and brokers involved
in the execution of fund trades (as needed). Additional information about these
service providers and their relationships with the fund and the advisor are
provided elsewhere in this statement of additional inform
a
tion.
Additional
Safeguards
The advisor’s policies and procedures
include a number of safeguards designed to control discl
o
sure of portfolio holdings and
characteristics so that such disclosure is consistent with the best interests of
fund shareholders. First, the frequency with which this information is disclosed
to the public, and the length of time between the date of the information and
the date on which the information is disclosed, are selected to minimize the
possibility of a third party improperly benefiting from fund investment
decisions to the detriment of fund shareholders. Second, distrib
u
tion of portfolio holdings information,
including compliance with the advisor’s policies and the resolution of any
potential conflicts that may arise, is monitored quarterly. Finally, the fund’s
Board of Trustees
exercises ove
r
sight of disclosure of the fund’s
portfolio securities. The board has received and reviewed a summary of the
adv
i
sor’s policy and is informed on a
quarterly basis of any changes to or violations of such policy detected during
the prior quarter.
Neither the advisor nor the funds
receive any compensation from any party for the distribution of portfolio
hol
d
ings information.
The advisor reserves the right to change
its policies and procedures with respect to the distribution of portfolio
holdings information at any time. There is no guarantee that these policies and
proc
e
dures will protect the funds from the
potential misuse of holdings information by individuals or firms in possession
of such information.
THE FUND’S PRINCIPAL
SHAREHOLDERS
As of September 30, 2008, the
following shareholders owned more than 5% of the outstanding shares of a class
of the fund. The table shows shares owned of record. Beneficial ownership of
which American Century Investments is aware appears in a footnote to the
table.
|
Fund/
Class
|
Shareholder
|
Percentage
of
Outstanding
Shares
Owned of
Record
|
|
International
Bond
|
||
|
Investor
Class
|
||
|
Citigroup Global Markets
Inc.
New
York
,
New
York
|
26%
|
|
|
Charles Schwab & Co.
Inc.
San
Francisco
,
California
|
19%
|
|
|
National Financial Services
Corp.
New
York
,
New
York
|
16%
|
|
|
Fund/
Class
|
Shareholder
|
Percentage
of
Outstanding
Shares
Owned of
Record
|
|
International
Bond
|
||
|
Institutional
Class
|
||
|
SEI Private Trust
Co.
c/o Frost National
Bank
Oaks,
Pennsylvania
|
17%
|
|
|
McWood &
Co
Raleigh
,
North
Carolina
|
10%
|
|
|
Commerce FBO Mori &
Co.
Kansas
City
,
Missouri
|
10%
|
|
|
Charles Schwab & Co.
Inc
San
Francisco
,
California
|
9%
|
|
|
National Financial Services
Corp.
New
York
,
New
York
|
8%
|
|
|
Fiduciary
Trust Co. of
New
Hampshire
Topeka
,
Kansas
|
8%
|
|
|
American Century Serv.
Corp.
Livestrong 2015
Portfolio
Kansas
City
,
Missouri
|
5%
(1)
|
|
|
A
Class
|
||
|
Charles Schwab & Co.
Inc.
San
Francisco
,
California
|
61%
|
|
|
B
Class
|
||
|
MLPF&S
Jacksonville
,
Florida
|
27%
|
|
|
LPL Financial
Services
San
Diego
,
California
|
14%
|
|
|
IRA Rollover Thomas J.
Gottschalk
Lenexa
,
Kansas
|
8%
(1)
|
|
|
American
Enterprise
Investment
Svcs
Minneapolis
,
Minnesota
|
7%
|
|
|
C
Class
|
||
|
MLPF&S
Jacksonville
,
Florida
|
27%
|
|
|
Pershing
LLC
Jersey
City
,
New
Jersey
|
11%
|
|
|
MG Trust Company
Cust
FBO Igor Precision
Refrigeration, Inc.
Denver
,
Colorado
|
5%
|
|
|
1
|
Shares owned of record and
beneficially.
|
|
Fund/
Class
|
Shareholder
|
Percentage
of
Outstanding
Shares
Owned of
Record
|
|
International
Bond
|
||
|
R
Class
|
||
|
American Century Investment
Management Inc.
Kansas
City
,
Missouri
|
76%
(1)
|
|
|
PIMS/Prudential
Retirement
as
Nominee for the
TTEE/Cust
Pl
701
Kehe Food Distributors Inc.
401K
Romeoville
,
Illinois
|
15%
|
|
|
MG Trust Company
Cust
FBO Johnson Lumber
Company
Denver
,
Colorado
|
5%
|
|
|
1
|
Shares owned of record and
beneficially.
|
The fund
is unaware of any other shareholders, beneficial or of record, who own more than
5% of any class of the fund’s outstanding shares. The fund is unaware of any
shareholder, beneficial or of record, who owns more than 25% of the voting
securities of the trust. A shareholder owning of record or beneficially more
than 25% of the trust’s outstanding shares may be considered a controlling
person. The vote of any such person could have a more significant effect on
matters presented at a shareholders’ meeting than votes of other shareholders.
As of September 30, 2008, the officers and trustees of the fund, as a group,
owned less than 1% of any class of the fund’s ou
t
standing
shares.
SERVICE PROVIDERS
The fund has no employees. To conduct
its day-to-day activities, the trust has hired a number of service providers.
Each service provider has a specific function to fill on behalf of the fund that
is described below.
ACIM, ACS and ACIS are wholly owned,
directly or indirectly, by ACC. James E. Stowers, Jr. controls ACC by virtue of
his ownership of a majority of its voting stock.
INVE
STMENT
ADVISOR
American Century Investment Management,
Inc. (ACIM) serves as the investment advisor for the fund. Currently, JPMIM
serves as the subadvisor for the fund. A description of the responsibilities of
the advisor (ACIM or JPMIM) appears in the prospectus under the heading
Management.
For the
services provided to the fund, the advisor receives a unified management fee
based on a percentage of the daily net assets of each class of shares of the
fund. For more information about the unified management fee, see
The
Investment Advisor
under
the heading
Manag
e
ment
in
the fund’s prospectus. The annual rate at which this fee is assessed is
determined daily in a multi-step process. First, the trust’s fund is categorized
according to the broad asset class in which it invests (e.g., money market, bond
or equity), and the assets of the fund in each category are totaled (“Fund
Category A
s
sets”).
Second, the assets are totaled for certain other accounts managed by the advisor
(“Other Account Category Assets”). To be included, these accounts must have the
same management team and investment objective as a fund in the same category
with the same Board of Trustees as the trust. Together, the Fund Category Assets
and the Other Account Category Assets comprise the “Investment Cat
e
gory
Assets.” The Investment Category Fee Rate is then calculated by applying the
fund’s Investment Category Fee Schedule to the Investment Category Assets and
dividing the result by the Inves
t
ment
Category Assets.
Finally, a separate Complex Fee Schedule
is applied to the assets of all of the funds in the American Century Investments
fa
m
ily of funds (the “Complex Assets”), and
the Complex Fee Rate is calculated based on the resulting total. The
I
n
vestment Category Fee Rate and the
Complex Fee Rate are then added to determine the Management Fee Rate payable by
a class of the fund to the advisor.
For purposes of determining the assets
that comprise the Fund Category Assets, Other Account Category Assets and
Complex Assets, the assets of registered investment companies managed by the
advisor that invest primarily in the shares of other registered
inves
t
ment companies shall not be
included.
The schedules by which the unified
management fee is determined are shown below.
The Complex Fee is determined according
to the schedule below.
On each calendar day, each class of the
fund accrues a management fee that is equal to the class’s Ma
n
agement Fee Rate times the net assets of
the class divided by 365 (366 in leap years). On the first business day of each
month, the fund pays a management fee to the adv
i
sor for the previous month. The fee for
the previous month is the sum of the calculated daily fees for each class of the
fund during the previous month.
The management agreement between the
trust and the advisor shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of fund shareholders following such execution and for as long thereafter
as its contin
u
ance is specifically approved at least
annually by
|
(1)
|
the fund’s Board of Trustees, or a
majority of outstanding shareholder votes (as defined in the Investment
Company Act); and
|
|
(2)
|
the vote of a majority of the
trustees of the fund who are not parties to the agreement, or
i
n
terested persons of the advisor,
cast in person at a meeting called for the purpose of voting on such
approval.
|
The management agreement states that the
fund’s Board of Trustees or a majority of outstanding shareholder votes may
terminate the management agreement at any time without payment of any penalty on
60 days’ written notice to the advisor. The management agreement shall be
automat
i
cally terminated if it is
assigned.
The management agreement states that the
advisor shall not be liable to the fund or its sharehol
d
ers for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
The management agreement also provides
that the advisor and its officers, trustees or directors and employees may
engage in other business, render services to others, and devote time and
attention to any other business whether of a similar or dissimilar
nature.
Certain investments may be appropriate
for the fund and also for other clients advised by the advisor or the
subadv
i
sor. Investment decisions for the fund
and other clients are made with a view to achieving their respective
inves
t
ment objectives after consideration of
such factors as their current holdings, availability of cash for investment and
the size of their investment generally. A particular security may be bought or
sold for only one client or fund, or in different amounts and at different times
for more than one but less than all clients or funds. A particular security may
be bought for one client or fund on the same day it is sold for another client
or fund, and a client or fund may hold a short position in a particular security
at the same time another client or fund holds a long position. In
add
i
tion, purchases or sales of the same
security may be made for two or more clients or funds on the same date. The
advisor has adopted procedures designed to ensure such transactions will be
allocated among clients and funds in a manner believed by the advisor to be
equitable to each. In some cases this procedure could have an adverse effect on
the price or amount of the securities purchased or sold by the
fund.
The subadvisor may aggregate purchase
and sale orders of the fund with purchase and sale orders of its other
cl
i
ents when the subadvisor believes that
such aggregation provides the best execution for the fund. The Board of Trustees
has approved the policy of the advisor and subadvisor with respect to the
aggregation of portfolio tran
s
actions.
Unified management fees incurred by
the fund for the fiscal year ended June 30, 2008, the six-month fiscal period
ended June 30, 2007, and the fiscal years ended December 31, 2006 and 2005, are
indicated in the following table.
|
Unified Management
Fees
|
||||
|
Fund
|
2008
|
2007
(1)
|
2006
|
2005
|
|
International
Bond
|
$15,675,716
|
$6,155,259
|
$10,145,324
|
$9,511,642
|
|
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
2007, the fund’s fiscal year end was December
31.
|
SUBADVISOR
The investment management agreement
provides that the advisor may delegate certain respons
i
bilities under the agreement to a
subadvisor. Currently, JP Morgan Investment Management, Inc. (“JPMIM”) serves as
subadvisor to the fund under a subadvisory agreement between ACIM and JPMIM
dated August 1, 1997, that was approved by shareholders on July 30, 1997. This
supe
r
sedes subadvisory agreements dated June
1, 1995, June 1, 1994 and December 31, 1991. The subadvisory agreement continues
for an initial period of two years and thereafter so long as co
n
tinuance is specifically approved by
vote of a majority of the fund’s outstanding voting securities or by vote of a
majority of the fund’s trustees, including a majority of those trustees who are
ne
i
ther parties to the agreement nor
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. The subadvisory agreement is subject to
term
i
nation without penalty on 60 days’
written notice by the advisor, the Board of Trustees, or a m
a
jority of the fund’s outstanding
shareholder votes or 12 months’ written notice by JPMIM and will terminate
automatically in the event of (i) its assignment or (ii) termination of the
investment advisory agreement between the fund and the
advisor.
The subadvisory agreement provides that
JPMIM will make investment decisions for the fund in accordance with the fund’s
investment objective, policies, and restrictions, and whatever additional
written guidelines it may receive from the advisor from time to time. For these
services, the advisor pays JPMIM a monthly fee at an annual rate of 0.20% of the
fund’s average daily net assets up to $200 million; and 0.15% of average daily
net assets over $200 million. Under the 1991 subadv
i
sory agreement, the advisor paid JPMIM a
monthly fee at an annual rate of 0.25% of average daily net assets up to $200
million, and 0.05% of average daily net assets in excess of $200 million, with a
minimum annual fee of $250,000.
For the
fiscal year ended June 30, 2008, the six-month fiscal period ended June 30,
2007, and the fiscal years ended December 31, 2006 and 2005, the advisor paid
JPMIM subadvisory fees as listed in the follo
w
ing
table:
|
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
2007, the fund’s fiscal year end was December
31.
|
PORTFOLIO MANAGER
The information provided under this
heading has been provided by the subadvisor.
Accounts
Managed
The
portfolio manager is responsible for the day-to-day management of various
a
c
counts,
as indicated by the following table.
|
1
|
Includes $2,193.82 million in
International Bond Fund.
|
|
2
|
One of the other pooled
investment vehicles, totaling $22.42 million in assets, and two of the
other accounts, totaling $944.91 million in assets, have an advisory fee
that is based on the performance of the
account.
|
Potential Conflicts of
Interest
The chart
above shows the number, type and market value as of June 30, 2008, of the
accounts other than the fund that are managed by the fund’s portfolio manager.
The potential for conflicts of interest exists when portfolio managers manage
other accounts with similar investment objectives and strategies as the fund
(“Similar A
c
counts”).
Potential conflicts may include, for example, conflicts between investment
strategies and conflicts in the
allocation
of investment opportunities.
Responsibility for managing client
portfolios of the subadvisor and its affiliates is organized according to
inves
t
ment strategies within asset classes.
Generally, client portfolios with similar strategies are managed by portfolio
managers in the same portfolio management group using the same objectives,
approach and philosophy. Underl
y
ing sectors or strategy allocations
within a larger portfolio are likewise managed by portfolio managers who use the
same approach and ph
i
losophy as similarly managed portfolios.
Therefore, portfolio holdings, relative position sizes and industry and sector
exposures tend to be similar across similar portfolios and strategies, which
minimizes the potential for conflicts of interest.
The subadvisor and/or its affiliates may
receive more compensation with respect to certain Similar Accounts than that
received with respect to the fund or may receive compensation based in part on
the performance of certain Similar Accounts. This may create a potential
conflict of interest for the subadvisor and its affiliates or its
portf
o
lio managers by providing an incentive
to favor these Similar Accounts when, for example, placing securities
transactions. In addition, the subadvisor or its affiliates could be viewed as
having a conflict of interest to the e
x
tent that the subadvisor or an affiliate
has a proprietary investment in Similar Accounts, the portfolio managers have
personal investments in Similar Accounts or the Similar Accounts are investment
options in the subadv
i
sor’s and its affiliates’ employee
benefit plans. Potential conflicts of interest may arise with both the
aggregation and allocation of securities transactions and allocation of limited
investment opport
u
nities because of market factors or
investment restrictions imposed upon the subadvisor and its affiliates by law,
regulation, contract or internal policies. Allocations of aggregated trades,
partic
u
larly trade orders that were only
partially completed due to limited availability, and allocation of investment
opportunities generally, could raise a potential conflict of interest, as the
subadvisor or its affiliates may have an incentive to allocate securities that
are expected to increase in value to favored accounts. Initial public offerings,
in particular, are frequently of very limited availability. The subadvisor and
its affiliates may be perceived as causing accounts they manage to participate
in an offering to increase the subadvisor’s or its affiliates overall allocation
of securities in that offering.
A potential conflict of interest also
may be perceived to arise if transactions in one account closely follow related
transactions in a different account, such as when a purchase increases the value
of securities previously purchased by another account, or when a sale in one
account lowers the sale price received in a sale by a second account. If the
subadvisor or its affiliates manage accounts that engage in short sales of
securities of the type in which the fund invests, the subadvisor could be seen
as harming the performance of the fund for the benefit of the accounts engaging
in short sales if the short sales cause the market value of the securities to
fall.
As an internal policy matter, the
subadvisor may from time to time maintain certain overall i
n
vestment limitations on the securities
positions or positions in other financial instruments the subadvisor or its
affiliates will take on behalf of its various clients due to, among other
things, liquidity concerns and regulatory restrictions. It should be
recognized that such policies may preclude an account from purchasing particular
securities or financial instruments, even if such sec
u
rities or financial instruments would
otherwise meet the account’s objectives.
The goal of the subadvisor and its
affiliates is to meet their fiduciary obligation with respect to all clients.
The subadvisor and its affiliates have policies and procedures designed to
manage the co
n
flicts. The subadvisor and its
affiliates monitor a variety of areas, including compliance with fund
guidelines, review of allocation decisions and compliance with JP Morgan’s Codes
of Ethics and JPMC’s Code of Conduct. With respect to the allocation
of investment opportunities, the subadv
i
sor and its affiliates also have certain
policies designed to achieve fair and equitable allocation of investment
opportunities among its clients over time. For
example:
Orders for the same equity security are
aggregated on a continual basis throughout each trading day consistent with the
subadvisor’s duty of best execution for its clients. If aggregated trades are
fully executed, accounts participating in the trade will be allocated their pro
rata share on an ave
r
age price basis. Partially completed
orders generally will be allocated among the participating accounts on a
pro-rata average price basis, subject to certain limited exceptions. For
example, accounts that would receive a
de
minimis
allocation relative
to their size may be excluded from the order. Another exception may occur when
thin markets or price volatility require that an aggr
e
gated order be completed in multiple
executions over several days. If partial completion of the order would result in
an uneconomic allocation to an account due to fixed transaction or custody
costs, the subadvisor or its affiliates may exclude small orders until 50% of
the total order is completed. Then the small orders will be executed.
Fo
l
lowing this procedure, small orders will
lag in the early execution of the order, but will be completed before
co
m
pletion of the total
order.
Purchases of money market instruments
and fixed income securities cannot always be allocated pro-rata across the
accounts with the same investment strategy and objective. However, the
subadvisor and its affiliates attempt to mitigate any potential unfairness by
basing non-pro rata alloc
a
tions traded through a single trading
desk or system upon an objective predetermined criteria for the selection of
investments and a disciplined process for allocating securities with similar
duration, credit quality and liquidity in the good faith judgment of the
subadvisor so that fair and equitable allocation will occur over
time.
Compensation
The subadvisor’s portfolio managers
participate in a competitive compensation program that is designed to attract
and retain outstanding people and closely link the performance of investment
professionals to client investment objectives. The total compensation program
includes a base salary fixed from year to year and a variable perfor
m
ance bonus consisting of cash incentives
and restricted stock and, in some cases, mandatory deferred compensation. These
elements reflect individual performance and the performance of the subadvisor’s
business as a whole.
Each portfolio manager’s performance is
formally evaluated annually based on a variety of factors including the
aggregate size and blended performance of the portfolios such portfolio manager
manages. Individual contribution relative to client goals carries the highest
impact. Portfolio ma
n
ager compensation is primarily driven by
meeting or exceeding clients’ risk
and return objectives, relative
performance to competitors or competitive indices and compliance with firm
policies and regulatory requirements. In evaluating each portfolio manager’s
performance with respect to the mutual funds he or she manages, the funds’
pre-tax performance is compared to the appropriate market peer group and to each
fund’s benchmark index listed in the fund’s prospectus over one, three and five
year periods (or such shorter time as the portfolio manager has managed the
fund). Investment performance is generally more heavily weighted to the
long-term.
Awards of restricted stock are granted
as part of an employee’s annual performance bonus and comprise from 0% to 35% of
a portfolio manager’s total bonus. As the level of incentive compe
n
sation increases, the percentage of
compensation awarded in restricted stock also increases. Up to 50% of the
restricted stock portion of a portfolio manager’s bonus may instead be subject
to a mandatory notional investment in selected mutual funds advised by the
subadvisor. When these deferred amounts vest, the portfolio manager
receives cash equal to the market value of the n
o
tional investment in the selected mutual
funds.
Ownership of
Securities
The fund’s portfolio manager did not
beneficially own any shares of the fund as of June 30, 2008, the fund’s most
recent fiscal year end.
TRANSFER AGENT AND
ADMINISTRATOR
American Century Services, LLC (ACS),
4500 Main
Street
,
Kansas City
,
Missouri
64111
, serves as transfer agent and
dividend-paying agent for the fund. It provides physical facilities, computer
hardware and software and personnel, for the day-to-day administration of the
fund and the adv
i
sor. The advisor pays ACS’s costs for
serving as transfer agent and dividend-payment agent for the fund out of the
advisor’s unified management fee. For a d
e
scription of this fee and the terms of
its payment, see the above discussion under the caption
Investment
Advisor
on page
32
.
From time to time, special services may
be offered to shareholders who maintain higher share balances in our
fa
m
ily of funds. These services may include
the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the
a
d
visor.
SUB-ADMINISTRATOR
The
advisor has entered into a Mutual Funds Services Agreement with J.P. Morgan
Investor Services Co. (JPMIS) to provide certain fund accounting, fund financial
reporting, tax and treasury/tax c
ompliance
services for the fund
,
including striking the daily
net asset
value for the fund.
The
advisor pay
s
JPMIS
a monthly fee on a per fund basis as compens
a
tion for
these services.
While
ACS
continue
s
to
serve as the administrator of the fund, JPMIS
provides
sub-administrative
services that
were
previously undertaken by ACS.
DISTRIBUTOR
The fund’s shares are distributed by
American Century Investment Services, Inc. (ACIS),
a registered broker-dealer. The
distributor is a wholly owned subsidiary of ACC, and its principal business
address is
4500 Main
Street
,
Ka
n
sas City
,
Missouri
64111
.
The distributor is the principal
underwriter of the fund’s shares. The distributor makes a contin
u
ous, best-efforts underwriting of the
fund’s shares. This means the distributor has no liability for unsold shares.
The advisor pays ACIS’s costs for serving as principal underwriter of the fund’s
shares out of the advisor’s unified management fee. For a description of this
fee and the terms of its payment, see the above discussion under the caption
Investment
Advisor
on page
32
. ACIS does not earn commissions for
distributing the fund’s shares.
Certain financial intermediaries
unaffiliated with the distributor or the fund may perform various administrative
and shareholder services for their clients who are invested in the fund. These
services may include assisting with fund purchases, redemptions and exchanges,
distributing information about the fund and its performance, preparing and
distributing client account statements, and other administrative and shareholder
services that would otherwise be provided by the distributor or its affiliates.
The distributor may pay fees out of its own resources to such financial
intermediaries for providing these services.
CUSTODIAN BANKS
JPMorgan
Chase Bank, 4 Metro Tech Center,
Brooklyn
,
New
York
,
11245
, serves
as custodian of the fund's cash and securities. Foreign securities, if any, are
held by foreign banks participating in a network coordinated by JPMorgan Chase
Bank. Commerce Bank, N.A., 1000 Walnut,
Kansas
City
,
Missouri
64105
, also
serves as custodian of the fund’s cash to facilitate purchases and redemptions
of fund shares. The custodians take no part in determining the investment
policies of the fund or in deciding which securities are purchased or sold by
the fund. The fund, however, may invest in certain obligations of the custodians
and may purchase or sell certain securities from or to the custodians. JPMorgan
Chase Bank is paid based on the monthly average of assets held in custody plus a
transaction fee.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
PricewaterhouseCoopers
LLP
is the independent registered public
accounting firm of the fund. The address of PricewaterhouseCoopers
LLP
is 1055 Broadway, 10th Floor,
Kansas City
,
Missouri
64105
. As the independent registered public
accounting firm of the fund, PricewaterhouseCoopers
LLP
provides services
including:
|
(1)
|
auditing the annual financial
statements for the fund, and
|
|
(2)
|
assisting and consulting in
connection with SEC filings.
|
BROKERAGE ALLOCATION
The
advisor places orders for equity portfolio transactions with broker-dealers, who
receive commissions for their services. Generally, commissions relating to
securities traded on foreign exchanges will be higher than commissions relating
to securities traded on
U.S.
exchanges.
The
advisor
purchase
s
and
sell
s
fixed-income
securities
through principal transa
c
tions,
meaning the
advisor
normally
purchase
s
securities
on a net basis directly from the issuer or a primary market-maker acting as
principal for the securities. The funds
generally
do
not pay
a
stated
brokerage
commission on these transactions, although the purchase price for debt
securities usually includes an undisclosed compensation. Pu
r
chases of
securities from underwriters typically include a commission or conce
s
sion paid
by the issuer to the underwriter, and purchases from dealers serving as
market-makers typically
include a
dealer’s mark-up (i.e., a spread between the bid and asked
prices).
Under the
management agreement between the funds and the advisor, the advisor has the
responsibility of selecting brokers and dealers to execute portfolio
transa
c
tions.
The funds’ policy is to secure the most favorable prices and execution of
o
r
ders on
its portfolio transactions. The advisor selects broker-dealers on their
perceived ability to obtain “best execution” in effecting transactions in its
clients’ portfolios. In selecting broker-dealers to effect portfolio
transactions relating to equity securities, the advisor considers the full range
and quality of a broker-dealer’s research and brokerage services, including, but
not limited to, the following:
|
•
|
applicable commission rates and
other transaction costs charged by the
broker-dealer
|
|
|
•
|
value of research provided to
the advisor by the broker-dealer (including economic forecasts,
fundamental and technical advice on individual securities, market
analysis, and advice, either directly or through publications or writings,
as to the value of securities, availability of securities or of
purchasers/sellers of securities)
|
|
•
|
timeliness of the
broker-dealer's trade executions
|
|
|
•
|
efficiency and accuracy of the
broker-dealer’s clearance and settlement processes
|
|
|
•
|
broker-dealer’s ability to
provide data on securities executions
|
|
|
•
|
financial condition of the
broker-dealer
|
|
|
•
|
he quality of the overall
brokerage and customer service provided by the
broker-dealer
|
In transactions to buy and sell
fixed-income securities, the selection of the broker-dealer is determined by the
availability of the desired security and its offering price, as well as the
broker-dealer’s general execution and operational and financial capabilities in
the type of transaction involved. The advisor will seek to obtain prompt
execution of orders at the most favorable prices or yields. The advisor does not
consider the receipt of products or services other than brokerage or research
services in selecting broker-dealers.
For International Bond, the advisor
has delegated responsibility for selecting brokers to execute portfolio
transactions to the subadvisor under the terms of the subadvisory
agreement.
On an ongoing basis, the advisor
seeks to determine what levels of commission rates are reasonable in the
marketplace. In evaluating the reasonableness of commission rates, the advisor
considers:
|
•
|
rates quoted by
broker-dealers
|
|
•
|
the size of a particular
transaction, in terms of the number of shares, dollar amount, and number
of clients involved
|
|
•
|
the ability of a broker-dealer
to execute large trades while minimizing market impact the
complexity of a particular transaction
|
|
•
|
the nature and character of the
markets on which a particular trade takes
place
|
|
•
|
the level and type of business
done with a particular firm over a period of
time
|
|
•
|
the ability of a broker-dealer
to provide anonymity while executing trades
|
|
•
|
historical commission
rates
|
|
•
|
rates that other institutional
investors are paying, based on publicly available
information
|
The
brokerage commissions paid by the funds may exceed those that another
br
o
ker-dealer
might have charged for effecting the same transactions, because of the value of
the brokerage and research services provided by the broker-dealer. Research
services fu
r
nished by
broker-dealers through whom the funds effect securities transactions may be used
by the advisor in servicing all of its accounts, and not all such services may
be used by the advisor in managing the portfolios of the
funds.
Pursuant to its internal allocation
procedures, the advisor regularly evaluates the brokerage and research services
provided by each broker-dealer that it uses. On a semi-annual basis, each member
of the advisor’s portfolio management team rates the quality of research and
brokerage services provided by each broker-dealer that provides execution
services and research to the advisor for its clients’ accounts. The resulting
scores are used to rank these broker-dealers on a broker research list. In the
event that the advisor has determined that best execution for a particular
transaction may be obtained by more than one broker-dealer, the advisor may
consider the relative positions of the broker-dealer on this list in determining
the party through which to execute the transaction. Actual business received by
any firm may be more or less than other broker-dealers with a similar rank.
Execution-only brokers are used where deemed
appropriate.
In the fiscal year ended June 30,
2008, the six-month fiscal period ended June 30, 2007, and fiscal years ended
December 31, 2006 and 2005, the brokerage commissions including, as applicable,
futures commissions, of each fund are listed in the following
table.
|
Fund
|
2008
|
2007
(1)
|
2006
|
2005
|
|
International
Bond
|
$452,970
|
$205,782
|
$178,553
|
$0
|
|
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
2007, the fund’s fiscal year end was December
31.
|
Brokerage commissions paid by a fund
may vary significantly from year to year as a result of changing asset levels
throughout the year, portfolio turnover, varying market conditions, and other
factors. The increase in brokerage commissions from 2006 to 2008 is
attributable to the subadvisor increasing its buy and hold period on its cash
bond positions. The subadvisor increased its use of futures over 2007 to
express its strategic views and therefore did not need to raise cash by selling
bond positions.
REGULAR
BROKER-DEALERS
As of the end of its most recently
completed fiscal year, the fund listed below owned securities of its regular
br
o
kers or dealers (as defined by Rule
10b-1 under the Investment Company Act of 1940) or of their parent
comp
a
nies.
|
Fund
|
Broker, Dealer or
Parent
|
Value of Securities
Owned
As of June 30,
2008
|
|
International
Bond
|
Royal Bank of Scotland
Group
|
$28,362,136
|
|
Barclays Bank
plc
|
$14,760,765
|
INFORMATION ABOUT FUND
SHARES
The Declaration of Trust permits the
Board of Trustees to issue an unlimited number of full and fractional shares of
beneficial interest without par value, which may be issued in series (or funds).
The fund is a series of shares issued by the trust, and shares of the fund have
equal voting rights. In addition, each series (or fund) may be divided into
separate classes. See
Multiple Class
Stru
c
ture
which follows. Additional funds and
classes may be added without a shareholder vote.
Voting rights are not cumulative, so
that investors holding more than 50% of the trust’s (all funds’) outstanding
shares may be able to elect a Board of Trustees. The trust undertakes
dollar-based voting, meaning that the number of votes a shareholder is entitled
to is based upon the dollar amount of the shareholder’s investment. The election
of trustees is determined by the votes received from all the trust’s
shareholders without regard to whether a majo
r
ity of shares of any one fund voted in
favor of a particular nominee or all nominees as a group.
Each shareholder has rights to dividends
and distributions declared by the fund he or she owns and to the net
a
s
sets of such fund upon its liquidation
or dissolution proportionate to his or her share ownership interest in the fund.
Shares of the fund have equal voting rights.
The trust shall continue unless
terminated by (1) approval of at least two-thirds of the shares of each fund
entitled to vote or (2) the trustees by written notice to shareholders of each
fund. Any fund may be terminated by (1) approval of at least two-thirds of the
shares of that fund or (2) the trustees by written notice to shareholders of
that fund.
Upon termination of the trust or a fund,
as the case may be, the trust shall pay or otherwise pr
o
vide for all charges, taxes, expenses
and liabilities belonging to the trust or the fund. Thereafter, the trust shall
reduce the remaining assets belonging to each fund (or the particular fund) to
cash, shares of other securities or any combination thereof, and distribute the
proceeds belonging to each fund (or the particular fund) to the shareholders of
that fund ratably according to the number of shares of that fund held by each
shareholder on the termination date.
Shareholders of a
Massachusetts
business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express di
s
claimer of shareholder liability for
acts or obligations of the trust. The Declaration of Trust also provides for
indemnification and reimbursement of e
x
penses of any shareholder held
personally liable for obligations of the trust. The Declaration of Trust
provides that the trust will, upon r
e
quest, assume the defense of any claim
made against any shareholder for any act or obligation of the trust and satisfy
any judgment thereon. The Declaration of Trust further provides that the trust
may maintain appropriate insurance (for example, fidelity, bonding and errors
and omi
s
sions insurance) for the protection of
the trust, its shareholders, trustees, officers, employees and agents to cover
possible tort and other liabilities. Thus, the risk of a shareholder incurring
fina
n
cial loss as a result of shareholder
liability is limited to circumstances in which both inadequate insurance exists
and the trust is unable to meet its obligations.
The assets belonging to each series or
class of shares are held separately by the custodian and the shares of each
series or class represent a beneficial interest in the principal, earnings and
profit (or losses) of investments and other assets held for each fund or class.
Within their respective series or class, all shares have equal redemption
rights. Each share, when issued, is fully paid and
non-assessable.
MULTIPLE CLASS
STRUCTURE
The Board of Trustees has adopted a
multiple class plan pursuant to Rule 18f-3 adopted by the SEC. The plan is
described in the fund’s prospectus. Pursuant to such plan, the fund may issue up
to six classes of shares: an Inve
s
tor Class, Institutional Class, A Class,
B Class, C Class and R Class.
The Investor Class is made available to
investors directly from American Century Investments and/or through some
financial intermediaries. Investor Class shares charge a single unified
management fee, without any load or commission payable to American Century
Investments. Additional information regarding elig
i
bility for Investor Class shares may be
found in the fund’s prospectus. The Institutional Class is made available to
institutional shareholders or through financial intermediaries whose clients do
not require the same level of shareholder and administrative services from the
adv
i
sor as Investor Class shareholders. As a
result, the advisor is able to charge this class a lower total management fee.
The A, B and C Classes also are made available through financial intermediaries,
for purchase by individual inve
s
tors who receive advisory and personal
services from the intermediary. The R Class is made available through financial
intermediaries and is generally used in 401(k) and other retir
e
ment plans. The unified management fee
for the A, B, C and R Classes is the same as for Investor Class, but the A, B, C
and R Class shares each are subject to a separate Master Distrib
u
tion and Individual Shareholder Services
Plan (the A Class Plan, B Class Plan, C Class Plan and R Class Plan,
respectively and collectively, the plans) described below. The plans have been
adopted by the fund’s Board of Trustees in accordance with Rule 12b-1 adopted by
the SEC under the Inves
t
ment Company Act.
Rule 12b-1
Rule 12b-1 permits an investment company
to pay expenses associated with the distribution of its shares in accordance
with a plan adopted by its Board of Trustees and approved by its
sharehol
d
ers. Pursuant to such rule, the Board of
Trustees of the fund’s A, B, C, and R Classes have approved and entered into the
A Class Plan, B Class Plan, C Class Plan and R Class Plan, respe
c
tively. The plans are described
below.
In adopting the plans, the Board of
Trustees (including a majority of trustees who are not inte
r
ested persons of the fund [as defined in
the Investment Company Act], hereafter referred to as the ind
e
pendent trustees) determined that there
was a reasonable likelihood that the plans would benefit the fund and the
shareholders of the affected class. Some of the antic
i
pated benefits include improved name
recognition of the fund generally; and growing assets in existing funds, which
helps retain and attract investment management talent, provides a better
environment for improving fund pe
r
formance, and can lower the total
expense ratio for funds with stepped-fee schedules. Pursuant to Rule 12b-1,
information about revenues and expenses under the plans is presented to the
Board of Trustees quarterly for its consideration in continuing the plans.
Contin
u
ance of the plans must be approved by
the Board of Trustees, including a majority of the ind
e
pendent trustees, annually. The plans
may be amended by a vote of the Board of Trustees, including a majority of the
independent trustees, except that the plans may not be amended to materially
increase the amount spent for distribution without majority approval of the
sharehol
d
ers of the affected class. The plans
terminate automatically in the event of an assignment and may be terminated upon
a vote of a majority of the independent trustees or by a majority of the
outstanding shareholder votes of the affected class.
All fees paid under the plans will be
made in accordance with Section 2830 of the Conduct Rules of the Financial
Industry Regulatory Authority (FINRA).
A Class Plan
As described in the prospectus, the A
Class shares of the fund are made available to participants in
employer-sponsored retirement plans and to persons purchasing through
broker-dealers, banks, insurance companies and other financial intermediaries
that provide various administrative, shar
e
holder and distribution services. The
fund’s distributor enters into contracts with various banks, broker-dealers,
insurance companies and other financial intermediaries, with respect to the sale
of the fund’s shares and/or the use of the fund’s shares in various investment
products or in conne
c
tion with various financial
services.
Certain recordkeeping and administrative
services that are provided by the fund’s transfer agent for the Investor Class
shareholders may be performed by a plan sponsor (or its agents) or by a
financial intermediary for A Class investors. In addition to such services, the
financial intermediaries provide various individual shareholder and
di
s
tribution services.
To enable
the fund’s shares to be made available through such plans and financial
intermediaries, and to compe
n
sate them
for such services, the fund’s Board of Trustees has adopted the A Class Plan.
Pursuant to the A Class Plan, the A Class pays the fund’s distributor 0.25%
annually of the average daily net asset value of the A Class shares. The
distributor may use these fees to pay for certain ongoing shareholder and
administrative services (as described below) and for distribution services,
including past distribution services (as described below). This payment is fixed
at 0.25% and is not based on expenses incurred by the distributor. During the
fiscal year ended June 30, 2008, the aggregate amount of fees paid under the A
Class Plan was $219,467
(1)
.
|
1
|
For the period September 4,
2007 to June 30, 2008.
|
The distributor then makes these
payments to the financial intermediaries (including underwriters and
broker-dealers, who may use some of the proceeds to compensate sales personnel)
who offer the A Class shares for the services described below. No portion of
these payments is used by the distributor to pay for advertising, printing costs
or interest expenses.
Payments may be made for a variety of
individual shareholder services, including, but not limited
to:
|
(a)
|
providing individualized and
customized investment advisory services, including the consi
d
eration of shareholder profiles
and specific goals;
|
|
(b)
|
creating investment models and
asset allocation models for use by shar
e
holders in selecting appropriate
funds;
|
|
(c)
|
conducting proprietary research
about investment choices and the market in general;
|
|
(d)
|
periodic rebalancing of
shareholder accounts to ensure compliance with the selected asset
allocation;
|
|
(e)
|
consolidating shareholder accounts
in one place; and
|
|
(f)
|
other individual
services.
|
Individual shareholder services do not
include those activities and expenses that are primarily intended to result in
the sale of additional shares of the fund.
Distribution services include any
activity undertaken or expense incurred that is primarily i
n
tended to result in the sale of A Class
shares, which services may include but are not limited to:
|
(a)
|
paying sales commissions, on-going
commissions and other payments to brokers, dealers, financial institutions
or others who sell A Class shares pursuant to selling agre
e
ments;
|
|
(b)
|
compensating registered
representatives or other employees of the distributor who engage in or
support di
s
tribution of the fund’s A Class
shares;
|
|
(c)
|
compensating and paying expenses
(including overhead and telephone expenses) of the
distributor;
|
|
(d)
|
printing prospectuses, statements
of additional information and reports for other-than-existing
shareholders;
|
|
(e)
|
preparing, printing and
distributing sales literature and advertising materials provided to the
fund’s shar
e
holders and prospective
shareholders;
|
|
(f)
|
receiving and answering
correspondence from prospective shareholders, including distributing
prospectuses, statements of additional information, and shareholder
r
e
ports;
|
|
(g)
|
providing facilities to answer
questions from prospective shareholders about
fund shares;
|
|
(h)
|
complying with federal and state
securities laws pertaining to the sale of fund shares;
|
|
(i)
|
assisting shareholders in
completing application forms and selecting dividend and other
a
c
count options;
|
|
(j)
|
providing other reasonable
assistance in connection with the distribution of fund
shares;
|
|
(k)
|
organizing and conducting sales
seminars and payments in the form of transactional and compensation or
promotional incentives;
|
|
(l)
|
profit on the
foregoing;
|
|
(m)
|
paying service fees for providing
personal, continuing services to investors, as contemplated by the Conduct
Rules of the FINRA; and
|
|
(n)
|
such other distribution and
services activities as the advisor determines may be paid for by the fund
pursuant to the terms of the agreement between the trust and the fund’s
distrib
u
tor and in accordance with Rule
12b-1 of the Investment Company
Act.
|
B Class Plan
As described in the prospectus, the B
Class shares of the fund are made available to participants in
employer-sponsored retirement plans and to persons purchasing through
broker-dealers, banks, insurance companies and other financial intermediaries
that provide various administrative, shar
e
holder and distribution services. The
fund’s distributor enters into contracts with various banks, broker-dealers,
insurance companies and other financial intermediaries, with respect to the sale
of the fund’s shares and/or the use of the fund’s shares in various investment
products or in conne
c
tion with various financial
services.
Certain recordkeeping and administrative
services that are provided by the fund’s transfer agent for the Investor Class
shareholders may be performed by a plan sponsor (or its agents) or by a
financial intermediary for B Class investors. In addition to such services, the
financial intermediaries provide various individual shareholder and
di
s
tribution services.
To enable
the fund’s shares to be made available through such plans and financial
intermediaries, and to compe
n
sate them
for such services, the fund’s Board of Trustees has adopted the B Class Plan.
Pursuant to the B Class Plan, the B Class pays the fund’s distributor 1.00%
annually of the average daily net asset value of the fund’s B Class shares,
0.25% of which is paid for certain o
n
going
individual shareholder and administrative services (as described below) and
0.75% of which is paid for distribution services, including past distribution
services (as d
e
scribed
below). This payment is fixed at 1.00% and is not based on expenses incurred by
the distributor. During the fiscal year ended June 30, 2008, the aggregate
amount of fees paid under the B Class Plan was $1,101
(1)
.
|
1
|
For the period September 28,
2007 to June 30, 2008.
|
The distributor then makes these
payments to the financial intermediaries (including underwriters and
broker-dealers, who may use some of the proceeds to compensate sales
perso
n
nel) who offer the B Class shares for
the services described below. No portion of these payments is used by the
distributor to pay for advertising, printing costs or interest
expenses.
Payments may be made for a variety of
individual shareholder services, including, but not limited
to:
|
(a)
|
providing individualized and
customized investment advisory services, including the consideration of
shar
e
holder profiles and specific
goals;
|
|
(b)
|
creating investment models and
asset allocation models for use by shareholders in selecting appropriate
funds;
|
|
(c)
|
conducting proprietary research
about investment choices and the market in general;
|
|
(d)
|
periodic rebalancing of
shareholder accounts to ensure compliance with the selected asset
allocation;
|
|
(e)
|
consolidating shareholder accounts
in one place; and
|
|
(f)
|
other individual
services.
|
Individual shareholder services do not
include those activities and expenses that are primarily intended to result in
the sale of additional shares of the fund.
Distribution services include any
activity undertaken or expense incurred that is primarily i
n
tended to result in the sale of B Class
shares, which services may include but are not limited to:
|
(a)
|
paying sales commissions, on-going
commissions and other payments to brokers, dealers, financial institutions
or others who sell B Class shares pursuant to selling agre
e
ments;
|
|
(b)
|
compensating registered
representatives or other employees of the distributor who engage in or
support di
s
tribution of the fund’s B Class
shares;
|
|
(c)
|
compensating and paying expenses
(including overhead and telephone expenses)
of the di
s
tributor;
|
|
(d)
|
printing prospectuses, statements
of additional information and reports for other-than-existing
shareholders;
|
|
(e)
|
preparing, printing and
distributing sales literature and advertising materials provided to the
fund’s shar
e
holders and prospective
shareholders;
|
|
(f)
|
receiving and answering
correspondence from prospective shareholders, including distributing
prospectuses, statements of additional information, and shareholder
r
e
ports;
|
|
(g)
|
providing facilities to answer
questions from prospective shareholders about
fund shares;
|
|
(h)
|
complying with federal and state
securities laws pertaining to the sale of fund shares;
|
|
(i)
|
assisting shareholders in
completing application forms and selecting dividend and other
a
c
count options;
|
|
(j)
|
providing other reasonable
assistance in connection with the distribution of fund
shares;
|
|
(k)
|
organizing and conducting sales
seminars and payments in the form of transactional and compensation or
promotional incentives;
|
|
(l)
|
profit on the
foregoing;
|
|
(m)
|
paying service fees for providing
personal, continuing services to investors, as contemplated by the Conduct
Rules of the FINRA; and
|
|
(n)
|
such other distribution and
services activities as the advisor determines may be paid for by the fund
pursuant to the terms of the agreement between the trust and the fund’s
distrib
u
tor and in accordance with Rule
12b-1 of the Investment Company
Act.
|
C Class Plan
As described in the prospectus, the C
Class shares of the fund are made available to participants in
employer-sponsored retirement plans and to persons purchasing through
broker-dealers, banks, insurance companies and other financial intermediaries
that provide various administrative, shar
e
holder and distribution services. The
fund’s distributor enters into contracts with various banks, broker-dealers,
insurance companies and other financial intermediaries, with respect to the sale
of the fund’s shares and/or the use of the fund’s shares in various investment
products or in conne
c
tion with various financial
services.
Certain recordkeeping and administrative
services that are provided by the fund’s transfer agent for the Investor Class
shareholders may be performed by a plan sponsor (or its agents) or by a
financial intermediary for C Class investors. In addition to such services, the
financial intermediaries provide various individual shareholder and
di
s
tribution services.
To enable
the fund’s shares to be made available through such plans and financial
intermediaries, and to compe
n
sate them
for such services, the fund’s Board of Trustees has adopted the C Class Plan.
Pursuant to the C Class Plan, the C Class pays the fund’s distributor 1.00%
annually of the average daily net asset value of the C Class shares, 0.25% of
which is paid for certain ongoing individual shareholder and administrative
services (as d
e
scribed
below) and 0.75% of which is paid for distribution services, including past
distribution services (as described below). This pa
y
ment is
fixed at 1.00% and is not based on expenses incurred by the distributor. During
the fiscal year ended June 30, 2008, the aggregate amount of fees paid under the
C Class Plan was $6,020
(1)
.
|
1
|
For the period September 28,
2007 to June 30, 2008.
|
The distributor then makes these
payments to the financial intermediaries (including underwriters and
broker-dealers, who may use some of the proceeds to compensate sales
perso
n
nel) who offer the C Class shares for
the services described below. No portion of these payments is used by the
distributor to pay for advertising, printing costs or interest
expenses.
Payments may be made for a variety of
individual shareholder services, including, but not limited
to:
|
(a)
|
providing individualized and
customized investment advisory services, including the consideration of
shar
e
holder profiles and specific
goals;
|
|
(b)
|
creating investment models and
asset allocation models for use by shareholders in selecting appropriate
funds;
|
|
(c)
|
conducting proprietary research
about investment choices and the market in general;
|
|
(d)
|
periodic rebalancing of
shareholder accounts to ensure compliance with the selected asset
allocation;
|
|
(e)
|
consolidating shareholder accounts
in one place; and
|
|
(f)
|
other individual
services.
|
Individual shareholder services do not
include those activities and expenses that are primarily intended to result in
the sale of additional shares of the fund.
Distribution services include any
activity undertaken or expense incurred that is primarily i
n
tended to result in the sale of C Class
shares, which services may include but are not limited to:
|
(a)
|
paying sales commissions, on-going
commissions and other payments to brokers, dealers, financial institutions
or others who sell C Class shares pursuant to selling agre
e
ments;
|
|
(b)
|
compensating registered
representatives or other employees of the distributor who engage in or
support di
s
tribution of the fund’s C Class
shares;
|
|
(c)
|
compensating and paying expenses
(including overhead and telephone expenses) of the di
s
tributor;
|
|
(d)
|
printing prospectuses, statements
of additional information and reports for other-than-existing
shareholders;
|
|
(e)
|
preparing, printing and
distributing sales literature and advertising materials provided to the
fund’s shar
e
holders and prospective
shareholders;
|
|
(f)
|
receiving and answering
correspondence from prospective shareholders, including distributing
prospectuses, statements of additional information, and shareholder
r
e
ports;
|
|
(g)
|
providing facilities to answer
questions from prospective shareholders about
fund shares;
|
|
(h)
|
complying with federal and state
securities laws pertaining to the sale of fund shares;
|
|
(i)
|
assisting shareholders in
completing application forms and selecting dividend and other
a
c
count options;
|
|
(j)
|
providing other reasonable
assistance in connection with the distribution of fund
shares;
|
|
(k)
|
organizing and conducting sales
seminars and payments in the form of transactional and compensation or
promotional incentives;
|
|
(l)
|
profit on the
foregoing;
|
|
(m)
|
paying service fees for providing
personal, continuing services to investors, as contemplated by the Conduct
Rules of the FINRA; and
|
|
(n)
|
such other distribution and
services activities as the advisor determines may be paid for by the fund
pursuant to the terms of the agreement between the trust and the fund’s
distrib
u
tor and in accordance with Rule
12b-1 of the Investment Company
Act.
|
R Class Plan
As described in the prospectus, the R
Class shares of the fund are made available to participants in
employer-sponsored retirement plans and to persons purchasing through
broker-dealers, banks, insurance companies and other financial intermediaries
that provide various administrative, shar
e
holder and distribution services. The
fund’s distributor enters into contracts with various banks, broker-dealers,
insurance companies and other financial intermediaries, with respect to the sale
of the fund’s shares and/or the use of the fund’s shares in various investment
products or in conne
c
tion with various financial
services.
Certain recordkeeping and administrative
services that are provided by the fund’s transfer agent for the Investor Class
shareholders may be performed by a plan sponsor (or its agents) or by a
financial intermediary for R Class investors. In addition to such services, the
financial intermedia
r
ies provide various individual
shareholder and distribution services.
To enable
the fund’s shares to be made available through such plans and financial
intermediaries, and to compe
n
sate them
for such services, the fund’s Board of Trustees has adopted the R Class Plan.
Pursuant to the R Class Plan, the R Class pays the fund’s distributor 0.50%
annually of the average daily net asset value of the R Class shares. The
distributor may use these fees to pay for certain ongoing shareholder and
administrative services (as described below) and for distribution services,
including past distribution services (as described below). This payment is fixed
at 0.50% and is not based on expenses incurred by the distributor. During the
fiscal year ended June 30, 2008, the aggregate amount of fees paid under the R
Class Plan was $102
(1)
.
|
1
|
For the period September 28,
2007 to June 30, 2008.
|
The distributor then makes these
payments to the financial intermediaries (including underwriters and
broker-dealers, who may use some of the proceeds to compensate sales
perso
n
nel) who offer the R Class shares for
the services described below. No portion of these payments is used by the
distributor to pay for advertising, printing costs or interest
expenses.
Payments may be made for a variety of
individual shareholder services, including, but not limited
to:
|
(a)
|
providing individualized and
customized investment advisory services, including the consideration of
shar
e
holder profiles and specific
goals;
|
|
(b)
|
creating investment models and
asset allocation models for use by shareholders in selecting appropriate
funds;
|
|
(c)
|
conducting proprietary research
about investment choices and the market in general;
|
|
(d)
|
periodic rebalancing of
shareholder accounts to ensure compliance with the selected asset
allocation;
|
|
(e)
|
consolidating shareholder accounts
in one place; and
|
|
(f)
|
other individual
services.
|
Individual shareholder services do not
include those activities and expenses that are primarily intended to result in
the sale of additional shares of the fund.
Distribution services include any
activity undertaken or expense incurred that is primarily i
n
tended to result in the sale of R Class
shares, which services may include but are not limited to:
|
(a)
|
paying sales commissions, on-going
commissions and other payments to brokers, dealers, financial institutions
or others who sell R Class shares pursuant to
selling agre
e
ments;
|
|
(b)
|
compensating registered
representatives or other employees of the distributor who engage in or
support di
s
tribution of the fund’s R Class
shares;
|
|
(c)
|
compensating and paying expenses
(including overhead and telephone expenses)
of the di
s
tributor;
|
|
(d)
|
printing prospectuses, statements
of additional information and reports for other-than-existing
shareholders;
|
|
(e)
|
preparing, printing and
distributing sales literature and advertising materials provided to the
fund’s shar
e
holders and prospective
shareholders;
|
|
(f)
|
receiving and answering
correspondence from prospective shareholders, including distributing
prospectuses, statements of additional information, and shareholder
r
e
ports;
|
|
(g)
|
providing facilities to answer
questions from prospective shareholders about fund
shares;
|
|
(h)
|
complying with federal and state
securities laws pertaining to the sale of fund shares;
|
|
(i)
|
assisting shareholders in
completing application forms and selecting dividend and other
a
c
count options;
|
|
(j)
|
providing other reasonable
assistance in connection with the distribution of fund
shares;
|
|
(k)
|
organizing and conducting of sales
seminars and payments in the form of transactional and compensation or
promotional incentives;
|
|
(l)
|
profit on the
foregoing;
|
|
(m)
|
paying service fees for providing
personal, continuing services to shareholders, as contemplated by the
Co
n
duct Rules of the FINRA;
and
|
|
(n)
|
such other distribution and
services activities as the advisor determines may be paid for by the fund
pursuant to the terms of the agreement between the trust and the fund’s
distributor and in accordance with Rule 12b-1 of the Investment Company
Act.
|
Advisor Class Plan
(1)
The
fund’s Advisor Class shares were made available to participants in e
m
ployer-sponsored
retirement or savings plans and to persons purchasing through broker-dealers,
banks, insurance companies and other financial intermediaries that provide
various admini
s
trative,
shareholder and distribution services. The fund’s distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries, with respect to the sale of the fund’s shares and/or
the use of the fund’s shares in various inves
t
ment
products or in connection with various financial
services.
Certain recordkeeping and
administrative services that are provided by the fund’s transfer agent for the
Investor Class shareholders may have been performed by a plan sponsor (or its
agents) or by a financial intermediary for Advisor Class investors. In addition
to such services, the financial intermediaries provided various distribution
services.
|
1
|
As of September 4, 2007, the
Advisor Class of the fund was renamed A Class and became subject to the A
Class Plan.
|
To make
the fund’s shares available through such plans and financial
intermedia
r
ies, and
to compensate them for such services, the fund’s advisor reduced its
manag
e
ment fee
by 0.25% per annum with respect to the Advisor Class shares and the fund’s Board
of Trustees adopted a Master Distribution and Shareholder Services Plan (the
Advisor Class Plan). Pursuant to the Advisor Class Plan, the Advisor Class paid
the fund’s distrib
u
tor a fee
of 0.50% annually of the aggregate average daily asset value of the fund’s
Advisor Class shares, 0.25% of which was paid for ongoing shareholder and
administrative services (as described below) and 0.25% of which was paid for
distribution services, including past distribution services (described below).
This payment was fixed at 0.50% and was not based on expenses incurred by the
distributor. The distributor then made these payments to the financial
intermediaries (including underwriters and broker-dealers, who may have used
some of the proceeds to compe
n
sate
sales personnel) who offered the Advisor Class shares for the services described
below. No portion of these payments was used by the distributor to pay for
adverti
s
ing,
printing costs or interest expenses. For the period from July 1, 2007 to
September 3, 2007, the aggregate amount of fees paid under the plan was
$64,606
.
Payments may have been made for a
variety of shareholder services, including, but not limited
to:
|
(a)
|
receiving, aggregating and
processing purchase, exchange and redemption requests from beneficial
owners of shares (including contract owners of insurance products that
utilize the fund as underlying investment media) and placing purchase,
exchange and redemption orders with the fund’s
distributors;
|
|
(b)
|
providing shareholders with a
service that invests the assets of their accounts in shares
purs
u
ant to specific or pre-authorized
instructions;
|
|
(c)
|
processing dividend payments from
the fund on behalf of shareholders and assisting shar
e
holders in changing dividend
options, account designations and addresses;
|
|
(d)
|
providing and maintaining elective
services such as check writing and wire
transfer
services;
|
|
(e)
|
acting as shareholder of record
and nominee for beneficial owners;
|
|
(f)
|
maintaining account records for
shareholders and/or other beneficial owners;
|
|
(g)
|
issuing confirmations of
transactions;
|
|
(h)
|
providing subaccounting with
respect to shares beneficially owned by customers of third pa
r
ties or providing the information
to the fund as necessary for such subaccounting;
|
|
(i)
|
preparing and forwarding investor
communications from the fund (such as proxies, shareholder reports, annual
and semi-annual financial statements and dividend, distribution and tax
notices) to shareholders and/or other beneficial owners;
and
|
|
(j)
|
providing other similar
administrative and sub-transfer agency
services.
|
Shareholder
services do not include those activities and expenses that are primarily
intended to result in the sale of additional shares of the fund. For the period
from July 1, 2007 to September 3, 2007, the amount of fees paid under the
Adv
i
sor Class
Plan for shareholder services was $32,303.
Distribution
services include any activity undertaken or expense incurred that was primarily
intended to result in the sale of Advisor Class shares, which services may have
included, but were not li
m
ited
to:
|
(a)
|
paying sales commissions, on-going
commissions and other payments to brokers, dealers, financial
instit
u
tions or others who sell Advisor
Class shares pursuant to Selling Agreements;
|
|
(b)
|
compensating registered
representatives or other employees of the distributor who engage in or
support di
s
tribution of the fund’s Advisor
Class shares;
|
|
(c)
|
compensating and paying expenses
(including overhead and telephone expenses) of the di
s
tributor;
|
|
(d)
|
printing prospectuses, statements
of additional information and reports for other-than-existing
shareholders;
|
|
(e)
|
preparing, printing and
distributing sales literature and advertising materials provided to the
fund’s shar
e
holders and prospective
shareholders;
|
|
(f)
|
receiving and answering
correspondence from prospective shareholders, including distributing
prospectuses, statements of additional information, and shareholder
r
e
ports;
|
|
(g)
|
providing facilities to answer
questions from prospective investors about fund
shares;
|
|
(h)
|
complying with federal and state
securities laws pertaining to the sale of fund shares;
|
|
(i)
|
assisting shareholders in
completing application forms and selecting dividend and other
a
c
count options;
|
|
(j)
|
providing other reasonable
assistance in connection with the distribution of
fund shares;
|
|
(k)
|
organizing and conducting sales
seminars and payments in the form of transactional and compensation or
promotional incentives;
|
|
(l)
|
profit on the
foregoing;
|
|
(m)
|
paying service fees for providing
personal, continuing services to shareholders, as contemplated by the
Co
n
duct Rules of the FINRA;
and
|
|
(n)
|
such other distribution and
services activities as the advisor determines may be paid for by the fund
pursuant to the terms of the agreement between the trust and the fund’s
distrib
u
tor and in accordance with Rule
12b-1 of the Investment Company
Act.
|
For the period from July 1, 2007 to
September 3, 2007, the amount of fees paid under the Advisor Class Plan for
distribution services was $32,303.
Sales Charges
The sales charges applicable to the A, B
and C Classes of the fund are described in the prospectus for those classes in
the section titled
Investing Through a
Financial Intermediary
.
Shares of the A Class are subject to an initial sales charge, which declines as
the amount of the purchase increases pursuant to the schedule set forth in the
pr
o
spectus. This charge may be waived in
the following situations:
|
•
|
Employer-sponsored retirement plan
purchases
|
|
•
|
Certain individual retirement
account rollovers
|
|
•
|
Purchases by registered
representatives and other employees of certain financial
interm
e
diaries (and their immediate
family members) having sales agreements with the advisor or the
distrib
u
tor
|
|
•
|
Wrap accounts maintained for
clients of certain financial intermediaries who have entered into
agreements with American Century
Investments
|
|
•
|
Purchases by current and retired
employees of American Century
Investments
and their immed
i
ate family members (spouses and
children under age 21) and trusts or employer-sponsored retirement plans
established by those persons
|
|
•
|
Purchases by certain other
investors that American Century
Investments
deems appropr
i
ate, including but not limited to
current or retired directors, trustees and officers of funds managed by
the advisor and trusts and employer-sponsored retirement plans established
by those persons
|
There are several ways to reduce the
sales charges applicable to a purchase of A Class shares. These methods are
described in the relevant prospectus. You or your financial advisor must
ind
i
cate at the time of purchase that you
intend to take advantage of one of these reductions.
Shares of the A, B and C Classes are
subject to a contingent deferred sales charge (CDSC) upon redemption of the
shares in certain circumstances. The specific charges and when they apply are
described in the relevant prospectus. The CDSC may be waived for certain
redemptions by some shareholders, as described in the
prospectus.
An investor may terminate his
relationship with an intermediary at any time. If the investor does not
establish a relationship with a new intermediary and transfer any accounts to
that new intermediary, such accounts may be exchanged to the Investor Class of
the fund, if such class is available. The investor will be the shareholder of
record of such accounts. In this situation, any applicable CDSCs will be charged
when the exchange is made.
No
contingent deferred sales charges were paid to the distributor for A Class
shares in the fiscal year ended June 30, 2008. The aggregate CDSCs paid to the
distributor from the B and C Class ince
p
tion date
of September 28, 2007, to the fiscal year ended June 30, 2008,
were:
B
Class:
$1,250
C
Class
$441
Payments to Dealers
The fund’s distributor expects to pay
sales commissions to the financial intermediaries who sell A, B and/or C Class
shares of the fund at the time of such sales. Payments for A Class shares will
be as follows:
No concession will be paid on purchases
by employer-sponsored retirement plans. Payments will equal 4.00% of the
purchase price of B Class shares and 1.00% of the purchase price of the Class
shares sold by the intermediary. The distributor will retain the 12b-1 fee paid
by the C Class of funds for the first 12 months after the shares are purchased.
This fee is intended in part to permit the distributor to recoup a portion of
on-going sales commissions to dealers plus financing costs, if any. Beginning
with the first day of the 13th month, the distributor will make the C Class
distribution and individual shareholder services fee payments described above to
the financial intermed
i
aries involved on a quarterly basis. In
addition, B and C Class pu
r
chases, and A Class purchases greater
than $1,000,000, are subject to a CDSC as described in the
prospectus.
From time to time, the distributor may
provide additional payments to dealers, including but not limited to payment
assistance for conferences and seminars, provision of sales or training
pr
o
grams for dealer employees and/or the
public (including, in some cases, payment for travel expenses for registered
representatives and other dealer employees who participate), advertising and
sales campaigns about a fund or funds, and assistance in financing
dealer-sponsored events. Other payments may be offered as well, and all such
payments will be consistent with applicable law, including the then-current
rules of the Financial Industry Regulatory Authority. Such payments will not
change the price paid by investors for shares of the fund.
BUYING AND SELLING FUND
SHARES
Information about buying, selling,
exchanging and, if applicable, converting fund shares is co
n
tained in the fund’s
prospectus
.
The prospectus is available to
investors without charge and may be obtained by calling us.
Examples of employer-sponsored
retirement plans include the following:
|
•
|
401(a)
plans
|
|
•
|
pension
plans
|
|
•
|
profit sharing
plans
|
|
•
|
401(k)
plans
|
|
•
|
money purchase
plans
|
|
•
|
target benefit
plans
|
|
•
|
Taft-Hartley multi-employer
pension plans
|
|
•
|
SERP and “Top Hat”
plans
|
|
•
|
ERISA
trusts
|
|
•
|
employee benefit
plans and
trusts
|
|
•
|
employer-sponsored
health
plans
|
|
•
|
457
plans
|
|
•
|
KEOGH
or
HR(10)
plans
|
|
•
|
employer-sponsored 403(b) plans
(including self-directed)
|
|
•
|
nonqualified deferred compensation
plans
|
|
•
|
nonqualified excess benefit
plans
|
|
•
|
nonqualified retirement
plans
|
|
•
|
SIMPLE
IRAs
|
|
•
|
SEP IRAs
|
|
•
|
SARSEP
|
Traditional and Roth IRAs are not
considered employer-sponsored retirement plans. The follo
w
ing table indicates the types of shares
that may be purchased through employer-sponsored retir
e
ment plans, Traditional IRAs and Roth
IRAs.
|
1
|
Refer to the prospectus regarding
sales charges and CDSC
waivers.
|
|
2
|
Refer to the prospectus for
maximum purchase
requirements.
|
VALUATION OF THE FUND’S
SECURITIES
All classes of the fund except the A
Class are offered at their net asset value, as described below. The A Class of
the fund is offered at its public offering price, which is the net asset value
plus the appropriate sales charge. This calculation may be expressed as a
formula:
Offering Price = Net Asset Value/(1 –
Sales Charge as a % of Offering Price)
For example, if the net asset value of a
fund’s A Class shares is $5.00, the public offering price would be
$5.00/(1-5.75%) = $5.31.
The fund’s net asset value per share
(NAV) is calculated as of the close of business of the New York Stock
E
x
change (the NYSE), each day the NYSE is
open for business. The NYSE usually closes at 4 p.m. Eastern time. The NYSE
typically observes the following holidays: New Year’s Day, Martin Luther King
Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Although the fund expects the same
hol
i
days to be observed in the future, the
NYSE may modify its holiday sche
d
ule at any time.
The fund’s NAV is calculated by adding
the value of all portfolio securities and other assets, deducting liabilities
and dividing the result by the number of shares outstanding. Expenses and
inte
r
est earned on portfolio securities are
accrued daily.
Debt securities not traded on a
principal securities exchange are valued through valuations obtained from a
co
m
mercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Tru
s
tees.
The subadvisor typically completes its
trading on behalf of the fund in various markets before the NYSE closes for the
day. Foreign currency exchange rates also are determined prior to the close of
the NYSE. If an event were to occur 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, then that security would be
valued as determined in accordance with procedures adopted by the Board of
Trustees.
Securities maturing within 60 days of
the valuation date may be valued at cost, plus or minus an amortized
di
s
count or premium, unless the trustees
determine that this would not result in fair valuation of a given security.
Other assets and securities for which quotations are not readily available are
valued in good faith using methods approved by the Board of
Trustees.
The value of an exchange-traded foreign
security is determined in its national currency as of the close of trading on
the foreign exchange on which it is traded or as of the close of business on the
NYSE, if that is earlier. That value is then translated to dollars at the
prevailing foreign exchange rate.
Trading in securities on European and
Far Eastern securities exchanges and over-the-counter
markets is normally co
m
pleted at various times before the close
of business on each day that the NYSE is open. If an event were to occur 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,
then that security would be valued as determined in accordance with procedures
adopted by the Board of Trustees.
Trading of these securities in foreign
markets may not take place on every day that the NYSE is open. In addition,
trading may take place in various foreign markets and on some electronic
tra
d
ing networks on Saturdays or on other
days when the NYSE is not open and on which the fund’s net asset values are not
calculated. Therefore, such calculations do not take place
contemporan
e
ously with the determination of the
prices of many of the portfolio securities used in such calcul
a
tion, and the value of the fund’s
portfolios may be affected on days when shares of the fund may not be purchased
or redeemed.
TA
XES
FEDERAL INCOME TAX
The fund intends to qualify annually as
a regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended (the Code). By so qualifying, the fund should be exempt from
federal income taxes to the extent that it distributes substantially all of its
net inves
t
ment income and net realized capital
gains (if any) to investors. If the fund fails to qualify as a regulated
investment company, it will be liable for taxes, signif
i
cantly reducing its distributions to
investors and eliminating investors’ ability to treat distributions from the
fund in the same manner in which they were realized by the
fund.
If fund
shares are purchased through taxable accounts, distributions either of cash or
additional shares of net inves
t
ment
income and net short-term capital gains are taxable to you as ordinary income,
unless they are designated as qualified dividend income and you meet a minimum
required holding period with respect to your shares of a fund, in which case
such distributions are taxed at the long-term capital gains tax rates. Unless
extended, all dividends will be taxed at ordinary income tax rates beginning in
2011. Qualified dividend income is a dividend received by a fund from the stock
of a domestic or qualifying foreign corporation, provided that the fund has held
the stock for a required holding period. The r
e
quired
holding period for qualified dividend income is met if the underlying shares are
held more than 60 days in the 121-day period beginning 60 days prior to the
ex-dividend date. Dividends received by the fund on shares of stock of domestic
corporations may qualify for the 70% div
i
dends
received deduction available to corporate shareholders to the extent that the
fund held those shares for more than 45 days.
Distributions from gains on assets held
by the fund longer than 12 months are taxable as long-term gains
regar
d
less of the length of time you have held
your shares in the fund. If you purchase shares in the fund and sell them at a
loss within six months, your loss on the sale of those shares will be treated as
a long-term capital loss to the e
x
tent of any long-term capital gains
dividends you received on those shares.
Dividends and interest received by the
fund on foreign securities may give rise to withhol
d
ing and other taxes imposed by foreign
countries. However, tax conventions between certain countries and the
United States
may reduce or eliminate such taxes.
Foreign countries generally do not impose taxes on capital gains with respect to
investments by non-resident inve
s
tors. Any foreign taxes paid by the fund
will reduce its dividends distributions to investors.
If more than 50% of the value of the
fund’s total assets at the end of its fiscal year consists of s
e
curities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that fund shareholders may be able to claim a
foreign tax credit in lieu of a deduction for foreign income taxes paid by the
fund. If such an ele
c
tion is made, the foreign taxes paid by
the fund will be treated as income received by you. In order for you to utilize
the foreign tax credit, you must have held your shares for 16 days or more
during the 31-day period, beginning 15 days prior to the ex-dividend date for
the mutual fund shares. The mutual fund must meet a similar holding period
requirement with respect to foreign securities to which a div
i
dend is attributable. Any portion of the
foreign tax credit that is ineligible as a result of the fund not meeting the
holding period requirement will be deducted in computing net inves
t
ment income.
If you have not complied with certain
provisions of the Internal Revenue Code and Regulations, either American Century
Investments or your financial intermediary is required by federal
law to withhold and remit to the IRS the
applicable federal withholding rate of reportable
payments (which may include dividends,
capital gains distributions and redemption proceeds). Those regulations require
you to certify that the Social Security number or tax identification number you
provide is correct and that you are not subject to withholding for previous
under-reporting to the IRS. You will be asked to make the
appropriate certification on your
account application. Payments reported by us to the IRS that omit your Social
Security number or tax identification number will subject us to a non-refundable
penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed.
A redemption of shares of the fund
(including a redemption made in an exchange transaction) will be a taxable
transaction for federal income tax purposes and you generally will recognize
gain or loss in an amount equal to the difference between the basis of the
shares and the amount received. If a loss is realized on the redemption of fund
shares, the rei
n
vestment in additional fund shares
within 30 days before or after the redemption may be subject to the “wash sale”
rules of the Code, resulting in a postponement of the recognition of such loss
for federal income tax purposes.
The fund’s transactions in foreign
currencies, forward contracts, options and futures contracts (including options
and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the fund (i.e., may affect whether gains or losses
are ordinary or capital), accelerate recognition of income to the fund, defer
fund losses, and affect the determin
a
tion of whether capital gains and losses
are characterized as long-term or short-term capital gains or losses. These
rules could ther
e
fore affect the character, amount and
timing of distributions to shareholders. These provisions also may require the
fund to mark-to-market certain types of the positions in its portfolio (i.e.,
treat them as if they were sold), which may cause the fund to recognize income
without receiving cash with which to make distrib
u
tions in amounts necessary to satisfy
the 90% and 98% distribution requirements for relief from income and excise
taxes, respectively. The fund will monitor its transactions and may make such
tax elections as fund management deems appropriate with respect to foreign
currency, options, futures contracts or forward contracts. The fund’s status as
a reg
u
lated investment company may limit its
transactions involving foreign currency, futures, options and forward
contracts.
Under the Code, gains or losses
attributable to fluctuations in exchange rates that occur between the time the
fund accrues income or other receivables or accrues expenses or other
liabilities d
e
nominated in a foreign currency and the
time the fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or loss. Sim
i
larly, in disposing of debt securities
denominated in foreign currencies, certain forward currency contracts, or other
instr
u
ments, gains or losses attributable to
fluctuations in the value of a foreign currency between the date the security,
contract, or other instrument is acquired and the date it is disposed of are
also usually treated as ordinary income or loss. Under Section 988 of the Code,
these gains or losses may increase or decrease the amount of the fund’s
investment company taxable income distri
b
uted to shareholders as ordinary
income.
STATE AND LOCAL
TAXES
Distributions by the fund also may be
subject to state and local taxes, even if all or a substantial part of such
distributions are derived from interest on
U.S.
government obligations which, if you
received such interest directly, would be exempt from state income tax. However,
most but not all states allow this tax exemption to pass through to fund
shareholders when a fund pays distrib
u
tions to its shareholders. You should
consult your tax advisor about the tax status of such distrib
u
tions in your state.
FINANCIAL STATEMENTS
The
financial statements of the fund have been audited by PricewaterhouseCoopers
LLP
,
ind
e
pendent
registered public accounting firm. Their Report of Independent Registered Public
Accoun
t
ing Firm
and the financial statements included in the fund’s annual report for the fiscal
p
e
riod
ended June 30, 2008, are incorporated herein by
reference.
EXPLANATIO
N OF
FIXED-INCOME
SECURITIES RATINGS
As described in the prospectus, the fund
may invest in fixed-income securities. Those investments, however, are subject
to certain credit quality restrictions, as noted in the prospectus. The
following is a summary of the rating categories referenced in the
prospectus.
|
Ratings of Corporate Debt
Securities
|
|
|
Standard &
Poor’s
|
|
|
AAA
|
This is the highest rating
assigned by S&P to a debt obligation. It indicates an extremely strong
capacity to pay interest and repay principal.
|
|
AA
|
Debt rated in this category is
considered to have a very strong capacity to pay interest and repay
principal. It differs from the highest-rated obligations only in small
degree.
|
|
A
|
Debt rated A has a strong capacity
to pay interest and repay principal, although it is somewhat more
susceptible to the adverse effects of changes in circu
m
stances and economic conditions
than debt in higher-rated categories.
|
|
BBB
|
Debt rated in this category is
regarded as having an adequate capacity to pay interest and repay
principal. While it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories. Debt rated below BBB is
regarded as having significant speculative chara
c
teristics.
|
|
BB
|
Debt rated in this category has
less near-term vulnerability to default than other spec
u
lative issues. However, it faces
major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions that could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating also is used for debt
subo
r
dinated to senior debt that is
assigned an actual or implied BBB rating.
|
|
B
|
Debt rated in this category is
more vulnerable to nonpayment than obligations rated BB, but currently has
the capacity to pay interest and repay principal. Adverse business,
financial, or economic conditions will likely impair the obligor’s
capacity or willingness to pay interest and repay
principal.
|
|
CCC
|
Debt rated in this category is
currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions to meet timely payment of
interest and repayment of principal. In the event of adverse business,
financial, or ec
o
nomic conditions, it is not likely
to have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is
a
s
signed an actual or implied B or
B- rating.
|
|
CC
|
Debt rated in this category is
currently highly vulnerable to nonpayment. This rating category is also
applied to debt subordinated to senior debt that is assigned an actual or
implied CCC rating.
|
|
C
|
The rating C typically is applied
to debt subordinated to senior debt, and is currently highly vulnerable to
nonpayment of interest and principal. This rating may be used to cover a
situation where a bankruptcy petition has been filed or similar action
taken, but debt service payments are being
continued.
|
|
D
|
Debt rated in this category is in
default. This rating is used when interest payments or principal
repayments are not made on the date due even if the applic
a
ble grace period has not expired,
unless S&P believes that such payments will be made during such grace
period. It also will be used upon the filing of a bankruptcy petition or
the taking of a similar action if debt service payments are
jeopardized.
|
|
Moody’s Investors Service,
Inc.
|
|
|
Aaa
|
This is the highest rating
assigned by Moody’s to a debt obligation. It indicates an extremely strong
capacity to pay interest and repay princ
i
pal.
|
|
Aa
|
Debt rated in this category is
considered to have a very strong capacity to pay interest and repay
principal and differs from Aaa issues only in a small degree. Together
with Aaa debt, it comprises what are generally known as high-grade
bonds.
|
|
A
|
Debt rated in this category
possesses many favorable investment attributes and is to be considered as
upper-medium-grade debt. A
l
though capacity to pay interest
and repay principal are considered adequate, it is somewhat more
susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher-rated
categories.
|
|
Baa
|
Debt rated in this category is
considered as medium-grade debt having an adequate capacity to pay
interest and repay principal. While it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories. Debt rated below Baa is regarded as having
significant speculative characteristics.
|
|
Ba
|
Debt rated Ba has less near-term
vulnerability to default than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse business, financial or
economic conditions that could lead to inadequate capacity to meet timely
interest and principal payments. Often the protection of interest and
principal payments may be very moderate.
|
|
B
|
Debt rated B has a greater
vulnerability to default, but currently has the capacity to meet financial
commitments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small. The B rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied Ba or Ba3
rating.
|
|
Caa
|
Debt rated Caa is of poor
standing, has a currently identifiable vulne
r
ability to default, and is
dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repa
y
ment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. Such issues may be
in default or there may be present el
e
ments of danger with respect to
principal or interest. The Caa rating is also used for debt subordinated
to senior debt that is assigned an actual or implied B or B3
rating.
|
|
Ca
|
Debt rated in this category
represent obligations that are speculative in a high degree. Such debt is
often in default or has other marked shor
t
comings.
|
|
C
|
This is the lowest rating assigned
by Moody’s, and debt rated C can be regarded as having extremely poor
prospects of attaining investment
standing.
|
|
Fitch Investors Service,
Inc.
|
|
|
AAA
|
Debt rated in this category has
the lowest expectation of credit risk. Capacity for timely payment of
financial commitments is exceptionally strong and highly unlikely to be
adversely affected by foreseeable events.
|
|
AA
|
Debt rated in this category has a
very low expectation of credit risk. Capacity for timely payment of
financial commitments is very strong and not signif
i
cantly vulnerable to foreseeable
events.
|
|
A
|
Debt rated in this category has a
low expectation of credit risk. Capacity for timely payment of financial
commitments is strong, but may be more vulne
r
able to changes in circumstances
or in economic conditions than debt rated in
higher
categories.
|
To provide more detailed indications of
credit quality, the Standard & Poor’s ratings from AA to CCC may be modified
by the addition of a plus or minus sign to show relative standing within these
major rating categories. Similarly, Moody’s adds numerical modifiers (1, 2, 3)
to designate relative standing within its major bond rating categories. Fitch
also rates bonds and uses a ratings system that is substantially similar to that
used by Standard & Poor’s.
|
Commercial Paper
Ratings
|
||
|
S&P
|
Moody’s
|
Description
|
|
A-1
|
Prime-1
(P-1)
|
This indicates that the degree of
safety regarding timely payment is strong. Standard & Poor’s rates
those issues determined to possess extremely strong safety characteristics
as A-1+.
|
|
A-2
|
Prime-2
(P-2)
|
Capacity for timely payment on
commercial paper is satisfa
c
tory, but the relative degree of
safety is not as high as for issues de
s
ignated A-1. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropr
i
ated, may be more affected by
external cond
i
tions. Ample alternate liquidity
is maintained.
|
|
A-3
|
Prime-3
(P-3)
|
Satisfactory capacity for timely
repayment. Issues that carry this rating are somewhat more vulnerable to
the adverse changes in circumstances than obligations carrying the higher
design
a
tions.
|
|
Note
Ratings
|
||
|
S&P
|
Moody’s
|
Description
|
|
SP-1
|
MIG-1;
VMIG-1
|
Notes are of the highest quality
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.
|
|
SP-2
|
MIG-2;
VMIG-2
|
Notes are of high quality with
margins of protection ample, a
l
though not so large as in the
preceding group.
|
|
SP-3
|
MIG-3;
VMIG-3
|
Notes are of favorable quality
with all security elements accounted for, but lacking the undeniable
strength of the preceding grades. Market access for refinancing, in
particular, is likely to be less well
established.
|
|
SP-4
|
MIG-4;
VMIG-4
|
Notes are of adequate quality
carrying specific risk but having protection and not distinctly or
predominantly speculative.
|
Notes
Where to Find More
Information
Annual and Semiannual
Reports
The annual and semiannual reports
contain more information about the fund's investments and the market conditions
and investment strategies that significantly affected the fund's performance
during the most r
e
cent fiscal period.
You can receive a free copy of the
annual and semiannual reports, and ask any questions about the fund, online at
americancentury.com, by contacting American Century Inves
t
ments at the addresses or telephone
numbers listed below or by contacting your financial
intermediary.
If you own or are considering purchasing
fund shares through
|
•
|
an employer-sponsored retirement
plan
|
|
•
|
a bank
|
|
•
|
a
broker-dealer
|
|
•
|
an insurance
company
|
|
•
|
another financial
intermediary
|
you can receive the annual and
semiannual reports directly from them.
From the SEC
You also can get information about the
fund from the Securities and Exchange Commission (SEC). The SEC charges a
duplicating fee to provide copies of this information.
|
In person
|
SEC Public Reference
Room
Washington
, D.C.
Call 202-942-8090 for location and
hours.
|
|
On the
Internet
|
• EDGAR database at
sec.gov
• By email request at
publicinfo@sec.gov
|
|
By mail
|
SEC Public Reference
Section
Washington
,
D.C.
20549-6009
|
Investment Company Act File No.
811-5447
|
American Century
Investments
americancentury.com
|
|
|
Self-Directed Retail
Investors
P.O. Box
419200
Kansas City
,
Missouri
64141-6200
1-800-345-2021 or
816-531-5575
|
Banks and Trust Companies,
Broker-Dealers,
Financial Professionals, Insurance
Comp
a
nies
P.O. Box
419786
Kansas City
,
Missouri
64141-6786
1-800-345-6488
|
CL-SAI-61634 0811
AMERICAN
CENTURY INTERNATIONAL BOND FUNDS
PART
C OTHER
INFORMATION
Item
23. Exhibits
(a) (1) Amended
and Restated Agreement and Declaration of Trust, dated March 26, 2004 (filed
electronically as Exhibit a to Post-Effective Amendment No. 19 to the
Registration Statement of the Registrant on April 29, 2004, File No. 33-43321,
and incorporated herein by reference).
(2) Amendment
No. 1 to the Amended and Restated Agreement and Declaration of Trust, dated June
14, 2004 (filed electronically as Exhibit a2 to Post-Effective Amendment No. 21
to the Registration Statement of the Registrant on July 29, 2004, File No.
33-43321, and incorporated herein by reference).
(3) Amendment
No. 2 to the Amended and Restated Agreement and Declaration of Trust, dated
March 8, 2007 (filed electronically as Exhibit a3 to Post-Effective Amendment
No. 25 to the Registration Statement of the Registrant on April 30, 2007, File
No. 33-43321, and incorporated herein by reference).
(4) Amendment
No. 3 to the Amended and Restated Agreement and Declaration of Trust, dated
August 31, 2007 (filed electronically as Exhibit a4 to Post-Effective Amendment
No. 26 to the Registration Statement of the Registrant on September 27, 2007,
File No. 33-43321, and incorporated herein by reference).
(b) Amended
and Restated Bylaws, dated December 7, 2007, are included herein.
(c) Registrant
hereby incorporates by reference, as though set forth fully herein, Article III,
IV, V, VI and Article VIII of Registrant's Amended and Restated Agreement and
Declaration of Trust, appearing as Exhibit (a) herein and Article II, Article
VII, and Article IX of Registrant's Amended and Restated Bylaws, appearing as
Exhibit (b) herein.
(d) (1) Investment
Sub-Advisory Agreement with J.P. Morgan Investment Management, Inc., dated
August 1, 1997 (filed electronically as Exhibit 5c to Post-Effective Amendment
No. 10 to the Registration Statement of the Registrant on September 30, 1997,
File No. 33-43321, and incorporated herein by reference).
(2) Amended
and Restated Management Agreement with American Century Investment Management,
Inc., dated August 1, 2008, is included herein.
(e) (1) Amended
and Restated Distribution Agreement between American Century International Bond
Funds and American Century Investment Services, Inc., dated September 4, 2007
(filed electronically as Exhibit e1 to Post-Effective Amendment No. 26 to the
Registration Statement of the Registrant on September 27, 2007, File No.
33-43321, and incorporated herein by reference).
(2) Form
of Dealer/Agency Agreement (filed electronically as Exhibit e2 to Post-Effective
Amendment No. 25 to the Registration Statement of the Registrant on April 30,
2007, File No. 333-43321 and incorporated herein by reference).
(f) Not
applicable.
(g) (1) Master
Agreement with Commerce Bank, N.A., dated January 22, 1997 (filed electronically
as Exhibit b8e to Post-Effective Amendment No. 76 to the Registration Statement
of American Century Mutual Funds, Inc. on February 28, 1997, File No. 2-14213,
and incorporated herein by reference).
(2) Global
Custody Agreement with The Chase Manhattan Bank, dated August 9, 1996 (filed
electronically as Exhibit b8 to Post-Effective Amendment No. 31 to the
Registration Statement of American Century Government Income Trust on February
7, 1997, File No. 2-99222, and incorporated herein by reference).
(3) Amendment
to the Global Custody Agreement with The Chase Manhattan Bank, dated December 9,
2000 (filed electronically as Exhibit g2 to Pre-Effective Amendment No. 2 to the
Registration Statement of American Century Variable Portfolios II, Inc. on
January 9, 2001, File No. 333-46922, and incorporated herein by
reference).
(4) Amendment
No. 2 to the Global Custody Agreement between American Century Investments and
the JPMorgan Chase Bank, dated May 1, 2004 (filed electronically as Exhibit g4
to Post-Effective Amendment No. 35 to the Registration Statement of American
Century Quantitative Equity Funds, Inc. on April 29, 2004, File No. 33-19589,
and incorporated herein by reference).
(5) Amendment
No. 3 to the Global Custody Agreement between American Century Investments and
the JPMorgan Chase Bank, dated as of May 31, 2006 (filed electronically as
Exhibit g6 to Pre-Effective Amendment No. 1 to the Registration Statement of
American Century Growth Funds, Inc. on May 30, 2006, File No. 333-132114, and
incorporated herein by reference).
(6) Amendment
No. 4 to the Global Custody Agreement with JPMorgan Chase Bank, dated as of July
2, 2008 (filed electronically as Exhibit g6 to Post-Effective Amendment No. 56
to the Registration Statement of American Century Government Income Trust on
July 29, 2008, File No. 2-99222, and incorporated herein by
reference).
(h) (1) Amended
and Restated Transfer Agency Agreement with American Century Services
Corporation, dated as of August 1, 2007 (filed electronically as Exhibit h1 to
Post-Effective Amendment No. 26 to the Registration Statement of the Registrant
on September 27, 2007, File No. 33-43321, and incorporated herein by
reference).
(2) American
Century Funds Credit Agreement dated December 12, 2007 with Bank of America,
N.A., as Administrative Agent (filed electronically as Exhibit h2 to
Post-Effective Amendment No. 43 to the Registration Statement of American
Century California Tax-Free and Municipal Funds on December 28, 2007, File No.
2-82734, and incorporated herein by reference).
(3) Fund
Services Agreement between American Century Investment Management, Inc. and J.P.
Morgan Investor Services Co., dated July 2, 2008 (filed electronically as
Exhibit h3 to Post-Effective Amendment No. 53 to the Registration Statement of
American Century Municipal Trust on September 26, 2008, File No. 2-91229, and
incorporated herein by reference).
(i) Opinion
and Consent of Counsel, dated September 27, 2007 (filed electronically as
Exhibit i to Post-Effective Amendment No. 26 to the Registration Statement of
the Registrant on September 27, 2007, File No. 33-43321, and incorporated herein
by reference).
(j) Consent
of PricewaterhouseCoopers LLP, independent registered public accounting firm,
dated October 22, 2008, is included herein.
(k) Not
applicable.
(l) Not
applicable.
(m) (1) Master
Distribution and Individual Shareholder Services Plan (A Class), dated January
1, 2008, is included herein.
(2) Master
Distribution and Individual Shareholder Services Plan (B Class), dated January
1, 2008, is included herein.
(3) Master
Distribution and Individual Shareholder Services Plan (C Class), dated January
1, 2008, is included herein.
(4) Master
Distribution and Individual Shareholder Services Plan (R Class), dated January
1, 2008, is included herein.
(n) Amended
and Restated Multiple Class Plan, dated January 1, 2008, is included
herein.
(o) Reserved.
(p) (1) American
Century Investments Code of Ethics (filed electronically as Exhibit p1 to
Post-Effective Amendment No. 41 to the Registration Statement of American
Century California Tax-Free and Municipal Funds on December 28, 2006, File No.
2-82734, and incorporated herein by reference).
(2) J.P.
Morgan Investment Management, Inc. Code of Ethics, is included
herein.
(3) Independent
Directors’ Code of Ethics amended February 28, 2000 (filed electronically as
Exhibit p2 to Post-Effective Amendment No. 40 to the Registration Statement of
American Century Target Maturities Trust on November 30, 2004, File No. 2-94608,
and incorporated herein by reference).
(q) (1) Power
of Attorney, dated March 12, 2008 (filed electronically as Exhibit q1 to
Post-Effective Amendment No. 12 to the Registration Statement of American
Century Variable Portfolios II, Inc. on April 11, 2008, File No. 333-46922, and
incorporated herein by reference).
(2) Secretary's
Certificate, dated March 13, 2008 (filed electronically as Exhibit q2 to
Post-Effective Amendment No. 12 to the Registration Statement of American
Century Variable Portfolios II, Inc. on April 11, 2008, File No. 333-46922, and
incorporated herein by reference).
Item 24.
Persons Controlled by or Under Common Control with Registrant
The persons who serve as the trustees or
directors of the Registrant also serve, in substantially identical capacities,
the following investment companies:
American Century
California
Tax-Free and Municipal
Funds
American Century Government Income
Trust
American Century International Bond
Funds
American Century Investment
Trust
American Century Municipal
Trust
American Century Quantitative Equity
Funds, Inc.
American Century Target Maturities
Trust
American Century Variable Portfolios II,
Inc.
Because the boards of each of the
above-named investment companies are identical, these companies may be deemed to
be under common control.
Item
25. Indemnification
As stated in Article VII, Section 3 of
the Amended and Restated Declaration of Trust, incorporated herein by reference
to Exhibit (a1)to the Registration Statement, "The Trustees shall be entitled
and empowered to the fullest extent permitted by law to purchase insurance for
and to provide by resolution or in the Bylaws for indemnification out of Trust
assets for liability and for all expenses reasonably incurred or paid or
expected to be paid by a Trustee or officer in connection with any claim,
action, suit, or proceeding in which he becomes involved by virtue of his
capacity or former capacity with the Trust. The provisions, including
any exceptions and limitations concerning indemnification, may be set forth in
detail in the Bylaws or in a resolution of the Trustees."
Registrant hereby incorporates by
reference, as though set forth fully herein, Article VI of the Registrant's
Amended and Restated Bylaws, appearing as Exhibit (b) herein.
The Registrant has purchased an
insurance policy insuring its officers and directors against certain liabilities
which such officers and directors may incur while acting in such capacities and
providing reimbursement to the Registrant for sums which it may be permitted or
required to pay to its officers and directors by way of indemnification against
such liabilities, subject in either case to clauses respecting deductibility and
participation.
Item
26. Business
and other Connections of Investment Advisor
In addition to serving as the
Registrant’s investment advisor, American Century Investment Management, Inc.
provides portfolio management services for other investment companies as well as
for other business and institutional clients. Business backgrounds of
the directors and principal executive officers of the advisor that also hold
positions with the Registrant are included under “Management” in the Statement
of Additional Information included in this registration
statement. The remaining principal executive officers and directors
of the advisor and their principal occupations during the past 2 fiscal years
are as follows:
James E. Stowers, Jr.
(Director). Founder, Co-Chairman, Director and Controlling
Shareholder, American Century Companies, Inc. (ACC); Co-Vice Chairman, ACC
(January 2005-February 2007), Chairman, ACC (January 1995 to December 2004);
Director, American Century Global Investment Management, Inc. (ACGIM), American
Century Services, LLC (ACS), American Century Investment Services, Inc. (ACIS)
and other ACC subsidiaries, as well as a number of American Century-advised
investment companies.
Enrique Chang (President, Chief
Executive Officer and Chief Investment Officer of ACIM and
ACGIM). Served as President and Chief Executive Officer, Munder
Capital Management, 2002 to 2006.
The principal address for all American
Century entities other than ACGIM is
4500 Main Street
,
Kansas City
,
MO
64111
. The principal address for
ACGIM is
666 Third
Avenue
, 23rd Floor,
New York
,
NY
10017
.
The subadvisor for International Bond is
J.P. Morgan Investment Management, Inc. (JPMIM). Additional
information about the business and other connections of JPMIM is available in
Part I of JPMIM's Form ADV and the schedules thereto (SEC file number
801-21011).
Item 27.
Principal Underwriters
I. (a) American
Century Investment Services, Inc. (ACIS) acts as principal underwriter for the
following investment companies:
American
Century Asset Allocation Portfolios, Inc.
American
Century California Tax-Free and Municipal Funds
American
Century Capital Portfolios, Inc.
American
Century Government Income Trust
American
Century Growth Funds, Inc.
American
Century International Bond Funds
American
Century Investment Trust
American
Century Municipal Trust
American
Century Mutual Funds, Inc.
American
Century Quantitative Equity Funds, Inc.
American
Century Strategic Asset Allocations, Inc.
American
Century Target Maturities Trust
American
Century Variable Portfolios, Inc.
American
Century Variable Portfolios II, Inc.
American
Century World Mutual Funds, Inc.
ACIS is registered with the Securities
and Exchange Commission as a broker-dealer and is a member of the Financial
Industry Regulatory Authority. ACIS is located at 4500 Main Street, Kansas City,
Missouri 64111. ACIS is a wholly-owned subsidiary of American Century Companies,
Inc.
(b) The
following is a list of the directors, executive officers and partners of
ACIS:
|
Name
and Principal
Business
Address*
___________________
|
Positions
and Offices
With
Underwriter
__________________
|
Positions
and Offices
With
Registrant
__________________
|
|
James
E. Stowers, Jr.
|
Director
|
none
|
|
Jonathan
S. Thomas
|
Director
|
President
and Trustee
|
|
Barry
Fink
|
Director
|
Executive
Vice President
|
|
Brian
Jeter
|
President
and Chief
Executive
Officer
|
none
|
|
Jon
W. Zindel
|
Senior
Vice President and
Chief
Accounting Officer
|
Tax
Officer
|
|
David
K. Anderson
|
Chief
Financial Officer
|
none
|
|
Mark
Killen
|
Senior
Vice President
|
none
|
|
David
Larrabee
|
Senior
Vice President
|
none
|
|
Barry
Mayhew
|
Senior
Vice President
|
none
|
|
Martha
G. Miller
|
Senior
Vice President
|
none
|
|
Joseph
S. Reece
|
Chief
Compliance Officer
|
none
|
* All
addresses are 4500 Main Street, Kansas City, Missouri 64111
(c) Not
applicable.
Item
28. Location
of Accounts and Records
All accounts, books and other documents
required to be maintained by Section 31(a) of the 1940 Act, and the rules
promulgated thereunder, are in the possession of American Century Investment
Management, Inc., 4500 Main Street, Kansas City, MO 64111 and 1665 Charleston
Road, Mountain View, CA 94043; American Century Services, LLC, 4500 Main Street,
Kansas City, MO 64111; JPMorgan Chase Bank, 4 Metro Tech Center, Brooklyn, NY
11245; and Commerce Bank, N.A., 1000 Walnut, Kansas City, MO 64105. Certain
records relating to the day-to-day portfolio management of International Bond
are kept in the offices of the subadvisor, J.P. Morgan Investment Management,
Inc., 20 Finsbury Street, London EC2Y 9AQ United Kingdom.
Item
29. Management
Services – Not Applicable.
Item
30. Undertakings
– Not Applicable.
SIGNATURES
Pursuant
to the requirements of the Securities Act and the Investment Company Act of
1940, the Registrant certifies that it meets all of the requirements for
effectiveness of this Registration Statement amendment pursuant to Rule 485(b)
promulgated under the Securities Act of 1933, as amended, and has duly caused
this amendment to be signed on its behalf by the undersigned, duly authorized,
in the City of Kansas City, State of Missouri on the 28th day of October,
2008.
|
American
Century International Bond Funds
|
|
|
(Registrant)
|
|
|
By:
*
___________________________________
Jonathan S. Thomas
President
|
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
amendment has been signed by the following persons in the capacities and on the
dates indicated.
|
SIGNATURES
|
TITLE
|
DATE
|
|
|
*
_________________________________
Jonathan
S. Thomas
|
President
and Trustee
|
October
28, 2008
|
|
|
*
_________________________________
Robert
J. Leach
|
Vice
President, Treasurer and Chief Financial Officer
|
October
28, 2008
|
|
|
*
_________________________________
John
Freidenrich
|
Trustee
|
October
28, 2008
|
|
|
*
_________________________________
Ronald
J. Gilson
|
Chairman
of the Board and Trustee
|
October
28, 2008
|
|
|
*
_________________________________
Frederick
L.A. Grauer
|
Trustee
|
October
28, 2008
|
|
|
*
_________________________________
Peter
F. Pervere
|
Trustee
|
October
28, 2008
|
|
|
*
_________________________________
Myron
S. Scholes
|
Trustee
|
October
28, 2008
|
|
|
*
_________________________________
John
B. Shoven
|
Trustee
|
October
28, 2008
|
|
|
*
_________________________________
Jeanne
D. Wohlers
|
Trustee
|
October
28, 2008
|
|
|
*By:
/s/ Christine J.
Crossley
Christine J. Crossley
Attorney in Fact
(pursuant to Power of
Attorney
dated March 12,
2008)
|
EXHIBIT
INDEX
EXHIBIT
NUMBE
R
DESCRIPTION OF DOCUMENT
|
EXHIBIT
(b)
|
Amended
and Restated Bylaws, dated December 7,
2007.
|
|
EXHIBIT
(d)(2)
|
Amended
and Restated Management Agreement with American Century Investment
Management, Inc., dated August 1,
2008.
|
|
EXHIBIT
(j)
|
Consent
of PricewaterhouseCoopers LLP, independent registered public accounting
firm, dated October 22, 2008.
|
|
EXHIBIT
(m)(1)
|
Master
Distribution and Individual Shareholder Services Plan (A Class), dated
January 1, 2008.
|
|
EXHIBIT
(m)(2)
|
Master
Distribution and Individual Shareholder Services Plan (B Class), dated
January 1, 2008.
|
|
EXHIBIT
(m)(3)
|
Master
Distribution and Individual Shareholder Services Plan (C Class), dated
January 1, 2008.
|
|
EXHIBIT
(m)(4)
|
Master
Distribution and Individual Shareholder Services Plan (R Class), dated
January 1, 2008.
|
|
EXHIBIT
(n)
|
Amended
and Restated Multiple Class Plan, dated January 1,
2008.
|
|
EXHIBIT
(p)(2)
|
J.P.
Morgan Investment Management, Inc. Code of
Ethics.
|