ANNUAL CERTIFIED SHAREHOLDER REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7822
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AMERICAN CENTURY INVESTMENT TRUST
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(Exact name of registrant as specified in charter)
4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
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(Address of principal executive offices) (Zip code)
CHARLES A. ETHERINGTON, 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
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Date of fiscal year end: 03-31
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Date of reporting period: 03-31-2008
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ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
PRIME MONEY MARKET FUND
PRESIDENT'S LETTER
JONATHAN THOMAS
[photo of Jonathan Thomas]
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century® Prime
Money Market Fund for the 12 months ended March 31, 2008. We also recommend
our website, americancentury.com, where we provide company news, quarterly
portfolio commentaries, investment views, and other useful information about
portfolio strategy, personal finance, government policy, and the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Fixed-Income Total Returns. . . . . . . . . . . . . . . . . . . 2
PRIME MONEY MARKET FUND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . 4
Yields and Weighted Average Maturity . . . . . . . . . . . . . . . . 4
Portfolio Composition by Maturity. . . . . . . . . . . . . . . . . . 5
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 8
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 13
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 14
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 16
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 20
Report of Independent Registered Public Accounting Firm . . . . . . . 24
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 28
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 29
The opinions expressed in the Market Perspective and the Portfolio Commentary
reflect those of the portfolio management team as of the date of the report,
and do not necessarily represent the opinions of American Century or any other
person in the American Century organization. Any such opinions are subject to
change at any time based upon market or other conditions and American Century
disclaims any responsibility to update such opinions. These opinions may not
be relied upon as investment advice and, because investment decisions made by
American Century funds are based on numerous factors, may not be relied upon
as an indication of trading intent on behalf of any American Century fund.
Security examples are used for representational purposes only and are not
intended as recommendations to purchase or sell securities. Performance
information for comparative indices and securities is provided to American
Century by third party vendors. To the best of American Century's knowledge,
such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of Chief Investment Officer,]
By David MacEwen, Chief Investment Officer, Fixed-Income
VOLATILITY REIGNED
The 12 months ended March 31, 2008, saw widely divergent bond returns as
market volatility surged in the wake of the subprime credit crisis. Credit
woes spread across the financial system, affecting banks, brokers, bond
insurers, hedge funds, and other big, institutional players important for the
functioning of the markets. This led to risk aversion that colored the return
picture for assets ranging from the riskiest high-yield bonds to even some of
the highest-quality money market securities.
The subprime meltdown had direct economic effects as well, weighing on
consumer spending and confidence, leading many economists to suggest that the
economy is already in recession. But even as growth slowed, higher commodity
prices (led by oil) meant rising inflation. The government consumer price
index (CPI) rose 4% during the reporting period.
The Federal Reserve (the Fed) took a series of extraordinary steps, slashing
interest rates and acting as a lender of last resort not only for banks, but
also major brokers. For the year, the federal funds rate target declined from
5.25% to 2.25%.
TREASURY BONDS RULED ROOST
The volatility, credit, and liquidity concerns in the market all favored
Treasury securities over higher-yielding, lower-quality alternatives (see the
accompanying returns table). Inflation-linked bonds--particularly Treasury
inflation-indexed securities--performed best because of their combination of
high quality and inflation protection. Meanwhile, risky corporate high-yield
bonds posted negative returns.
RATES FELL, CURVE STEEPENED
Against this backdrop, Treasury yields declined. The yield on the two-year
Treasury note tumbled from 4.58% to 1.59%, while yields on longer-term notes
and bonds fell less. That's because investors worried about the potential
long-term inflation effects of Fed rate cuts, high energy and commodity
prices, and a weaker dollar. As a result, the yield curve fell and
steepened--the difference in yield between two- and 10-year Treasury
securities increased sharply from seven to 182 basis points (a basis point
equals 0.01%).
U.S. Fixed-Income Total Returns
For the 12 months ended March 31, 2008
TREASURY SECURITIES
3-Month Bill 4.81%
2-Year Note 9.39%
5-Year Note 14.37%
10-Year Note 14.35%
30-Year Bond 13.86%
CITIGROUP U.S. BOND MARKET INDICES
High-Yield Market (corporate) -3.58%
Credit (investment-grade corporate) 4.41%
Mortgage (mortgage-backed) 7.95%
Broad Investment-Grade (multi-sector) 8.41%
Agency 10.37%
Treasury 12.24%
Inflation-Linked Securities 14.64%
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2
PERFORMANCE
Prime Money Market
Total Returns as of March 31, 2008
Average Annual Returns
10 Since Inception
1 year 5 years years Inception Date
INVESTOR CLASS 4.58%(1) 2.87% 3.43% 3.93% 11/17/93
90-DAY U.S. TREASURY BILL
INDEX(2) 3.69% 2.95% 3.43% 3.91%(3) --
LIPPER MONEY MARKET
INSTRUMENT FUNDS AVERAGE
RETURN(2) 4.14% 2.53% 3.14% 3.71%(3) --
Fund's Lipper Ranking among
Money Market Instrument 49 of 40 of 26 of
Funds(2) 55 of 335 290 190 117(3) --
A Class 4.32%(1) 2.62% -- 3.10% 8/28/98
B Class(1)
No sales charge* 3.54% 2.02% -- 1.98%
With sales charge* -0.46% 1.83% -- 1.80% 1/31/03
C Class(1) 3.81% 2.19% -- 1.92% 5/7/02
* Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. The SEC requires that mutual funds provide
performance information net of maximum sales charges in all cases where
charges could be applied.
(1) Class returns would have been lower if American Century had not
voluntarily waived a portion of its management fees or its distribution and
service fees, as applicable.
(2) Data provided by Lipper Inc. - A Reuters Company. © 2008 Reuters. All
rights reserved. Any copying, republication or redistribution of Lipper
content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Lipper. Lipper shall not be
liable for any errors or delays in the content, or for any actions taken in
reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
Lipper Rankings -- Rankings are based only on the universe shown and are
based on average annual total returns. This listing might not represent the
complete universe of funds tracked by Lipper.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
(3) Since 11/30/93, the date nearest the Investor Class's inception for which
data are available.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. To obtain performance data current to the most recent month
end, please call 1-800-345-2021 or visit ammericancentury.com.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the fund.
The 7-day current yield more closely reflects the current earnings of the fund
than the total return.
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3
PORTFOLIO COMMENTARY
Prime Money Market
Lead Portfolio Manager: Denise Latchford
Macro Strategy Team Representative: Steven Permut
PERFORMANCE SUMMARY
Prime Money Market returned 4.58%* for the 12 months ended March 31, 2008,
outperforming the 4.14% average return of the 335 funds in Lipper Inc.'s Money
Market Funds category. The portfolio's 12-month return ranked in the top 17%
of the Lipper category, and its five- and 10-year returns ranked in the top
17% and 21%, respectively, of the Lipper group (see the previous page).
FED POLICY CHANGED TO RAPID RATE REDUCTION
In the first half of the reporting period, a lingering threat of inflation and
strong economic growth kept the Federal Reserve (the Fed) on hold and the fed
funds target rate at 5.25%. Despite increasing threats to economic growth from
the housing market slump, rising mortgage delinquencies, and high energy
prices, the Fed continued to view inflation as a bigger concern than
recession.
In late July 2007, credit and liquidity concerns stemming from a meltdown in
the subprime mortgage market took hold of the financial markets. Originally,
the problems were confined to the taxable bond market, but the contagion
quickly spread to the asset-backed segment of the money market and eventually
to the municipal securities market. The credit crisis sent investors fleeing
to the relative safety of U.S. Treasury securities. At the same time, U.S.
economic growth prospects tumbled, prompting a marked change in Fed strategy.
Reversing a long anti-inflation stance, the Fed indicated the present danger
of recession had surmounted that of inflation -- despite the soaring costs of
oil and other commodities.
Between September 18, 2007, and March 18, 2008, the Fed slashed the fed funds
target by three percentage points, to 2.25%, to help counter the effects of
the housing market downturn and waning consumer and investor confidence.
Portfolio Composition by Credit Rating
% of fund % of fund
investments investments
as of 3/31/08 as of 9/30/07
A-1+ 77% 74%
A-1 23% 26%
Ratings provided by independent research companies. These ratings are listed
in Standard & Poor's format even if they were provided by other sources.
Yields and Weighted Average Maturity
7-DAY CURRENT YIELD* AS OF MARCH 31, 2008
Investor Class 2.93%
A Class 2.68%
B Class 1.94%
C Class 2.19%
7-DAY EFFECTIVE YIELD* AS OF MARCH 31, 2008
Investor Class 2.97%
A Class 2.71%
B Class 1.96%
C Class 2.21%
3/31/08 9/30/07
Weighted Average Maturity 50 days 45 days
* The yields presented reflect the waiver of a portion of the fund's
management fees. Without such waiver, the 7-day yields would have been lower.
* All fund returns, rankings and yields referenced in this commentary are for
Investor Class shares. Class returns would have been lower had management fees
not been waived.
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4
Prime Money Market
In addition, in late 2007 the Fed established a temporary Term Auction
Facility to address the elevated pressures in the short-term funding markets.
Then, following the near-collapse of investment bank Bear Stearns in March
2008, the Fed took extraordinary measures to stabilize the financial markets,
launching two new liquidity-enhancement programs for broker/dealers and
loosening its collateral requirements.
The Fed's easing campaign, combined with a widespread flight to quality by
investors, sparked a strong rally in the Treasury market. The yield on the
three-month Treasury bill plunged 3.7 percentage points during the reporting
period, from 5.03% to 1.33%.
PORTFOLIO STRATEGY
Reflecting the general decline in rates, Prime Money Market's seven-day
current yield fell during the period from 4.86% to 2.93%. In this environment,
we attempted to extend the portfolio's average maturity, which ended the
period at 50 days, compared with 45 days at the end of March 2007.
The portfolio held no securities exposed to the subprime market and no
mortgage-related asset-backed commercial paper. These securities do not meet
our stringent selection criteria. Instead, we maintained our conservative
approach toward credit-related money market securities. Unlike many of our
peers, who simply avoided such securities in the wake of the subprime fallout,
we continued to invest in high-quality, short-term asset-backed securities,
confident our thorough credit research would identify the most attractive
securities. We pursued a similar approach in the hard-hit financials sector,
where we streamlined our exposure to banks and brokers, reduced the number of
names in the portfolio, imposed dollar limits on those we owned, and kept
maturities short. These strategies proved effective and contributed positively
to the fund's performance.
OUTLOOK
The probability of an economic hard landing/recession has increased, as the
fallout from the bursting credit bubble and the ensuing deleveraging process
work their way through the system. The unwinding/deleveraging process is
healthy and necessary, but is rarely orderly. We expect further Fed rate cuts,
assuming the economy and employment continue to weaken in 2008.
Portfolio Composition by Maturity
% of fund
investments % of fund
as of investments
3/31/08 as of 9/30/07
1-30 days 50% 47%
31-90 days 31% 42%
91-180 days 14% 10%
More than 180 days 5% 1%
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5
SHAREHOLDER FEE EXAMPLE (UNAUDITED)
Fund shareholders may incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments and redemption/exchange
fees; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in your fund
and to compare these costs with the ongoing cost of investing in other mutual
funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2007 to March 31, 2008.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or
Institutional Class shares of the American Century Diversified Bond Fund, in
an American Century account (i.e., not a financial intermediary or retirement
plan account), American Century may charge you a $12.50 semiannual account
maintenance fee if the value of those shares is less than $10,000. We will
redeem shares automatically in one of your accounts to pay the $12.50 fee. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. PERSONAL ACCOUNTS
include individual accounts, joint accounts, UGMA/UTMA accounts, personal
trusts, Coverdell Education Savings Accounts and IRAs (including traditional,
Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement
accounts. If you have only business, business retirement, employer-sponsored
or American Century Brokerage accounts, you are currently not subject to this
fee. We will not charge the fee as long as you choose to manage your accounts
exclusively online. If you are subject to the Account Maintenance Fee, your
account value could be reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is
not the actual return of a fund's share class. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
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6
Expenses Paid
Beginning During
Account Ending Period(1) Annualized
Value Account Value 10/1/07 - Expense
10/1/07 3/31/08 3/31/08 Ratio(1)
ACTUAL
Investor Class (after
waiver)(2) $1,000 $1,020.70 $2.88 0.57%
Investor Class (before
waiver) $1,000 $1,020.70(3) $2.98 0.59%
A Class (after
waiver)(2) $1,000 $1,019.50 $4.14 0.82%
A Class (before waiver) $1,000 $1,019.50(3) $4.24 0.84%
B Class (after
waiver)(2) $1,000 $1,015.60 $7.91 1.57%
B Class (before waiver) $1,000 $1,015.60(3) $8.01 1.59%
C Class (after
waiver)(2) $1,000 $1,017.00 $6.66 1.32%
C Class (before waiver) $1,000 $1,017.00(3) $6.76 1.34%
HYPOTHETICAL
Investor Class (after
waiver)(2) $1,000 $1,022.15 $2.88 0.57%
Investor Class (before
waiver) $1,000 $1,022.05 $2.98 0.59%
A Class (after
waiver)(2) $1,000 $1,020.90 $4.14 0.82%
A Class (before waiver) $1,000 $1,020.80 $4.24 0.84%
B Class (after
waiver)(2) $1,000 $1,017.15 $7.92 1.57%
B Class (before waiver) $1,000 $1,017.05 $8.02 1.59%
C Class (after
waiver)(2) $1,000 $1,018.40 $6.66 1.32%
C Class (before waiver) $1,000 $1,018.30 $6.76 1.34%
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
(2) During the six months ended March 31, 2008, the class received a partial
waiver of its management fee.
(3) Ending account value assumes the return earned after waiver. The return
would have been lower had fees not been waived and would have resulted in a
lower ending account value.
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7
SCHEDULE OF INVESTMENTS
Prime Money Market
MARCH 31, 2008
Principal Amount Value
Commercial Paper(1) -- 43.3%
$25,000,000 Allied Irish Banks N.A., 4.65%, 5/2/08 (Acquired
11/6/07, Cost $24,435,503)(2) $24,900,003
10,000,000 Allied Irish Banks N.A., 2.70%, 6/13/08
(Acquired 3/31/08, Cost $9,944,500)(2) 9,945,250
7,600,000 American Honda Finance, 2.77%, 4/28/08 7,584,211
40,000,000 Amsterdam Funding Corp., 3.09%, 4/4/08 (Acquired
2/4/08, Cost $39,794,000)(2) 39,989,700
38,000,000 Amsterdam Funding Corp., 3.18%, 5/2/08 (Acquired
3/4/08, Cost $37,801,957)(2) 37,895,943
45,000,000 Barclays U.S. Funding LLC, 4.62%, 4/2/08 44,994,231
14,000,000 BASF SE, 3.00%, 4/15/08 (Acquired 1/23/08, Cost
$13,903,167)(2) 13,983,667
4,000,000 Cedar Springs Capital Co., 5.00%, 4/11/08
(Acquired 11/1/07, Cost $3,910,000)(2) 3,994,445
9,000,000 Cedar Springs Capital Co., 3.55%, 7/7/08
(Acquired 1/25/08, Cost $8,854,450)(2) 8,913,913
9,000,000 Cedar Springs Capital Co., 3.30%, 8/11/08
(Acquired 2/15/08, Cost $8,853,150)(2) 8,891,100
64,282,000 Chariot Funding LLC, 3.15%, 4/28/08 (Acquired
1/29/08, Cost $63,775,779)(2) 64,130,134
16,000,000 Chariot Funding LLC, 2.55%, 6/23/08 (Acquired
3/20/08, Cost $15,892,333)(2) 15,905,933
28,000,000 Charta LLC, 3.15%, 4/9/08 (Acquired 2/14/08,
Cost $27,865,250)(2) 27,980,400
17,828,000 Charta LLC, 2.69%, 5/2/08 (Acquired
3/20/08-3/27/08, Cost $17,772,776)(2) 17,786,658
12,000,000 Charta LLC, 2.87%, 5/16/08 (Acquired 3/31/08,
Cost $11,955,993)(2) 11,956,950
16,500,000 Charta LLC, 3.10%, 6/3/08 (Acquired 3/3/08, Cost
$16,369,283)(2) 16,410,487
7,000,000 Charta LLC, 2.88%, 6/10/08 (Acquired 3/12/08,
Cost $6,949,600)(2) 6,960,800
18,000,000 CRC Funding LLC, 3.13%, 4/16/08 (Acquired
2/14/08, Cost $17,902,970)(2) 17,976,525
Principal Amount Value
$40,000,000 CRC Funding LLC, 3.16%, 5/29/08 (Acquired
2/25/08, Cost $39,669,956)(2) $39,796,356
25,000,000 CRC Funding LLC, 2.60%, 6/18/08 (Acquired
3/20/08, Cost $24,837,500)(2) 24,859,167
3,900,000 Crown Point Capital Co., 4.98%, 4/18/08
(Acquired 10/19/07, Cost $3,801,811)(2) 3,890,829
13,000,000 Crown Point Capital Co., 3.25%, 6/5/08 (Acquired
3/4/08, Cost $12,890,854)(2) 12,923,715
30,000,000 Crown Point Capital Co., 2.80%, 11/20/08
(Acquired 3/10/08, Cost $29,405,000)(2) 29,456,333
49,000,000 General Electric Capital Services, Inc., 4.52%,
4/28/08 48,833,890
74,000,000 Govco LLC, 3.10%, 4/29/08 (Acquired 1/30/08,
Cost $73,426,500)(2) 73,821,577
45,966,000 Legacy Capital LLC, 4.15%, 7/9/08 (Acquired
1/11/08, Cost $45,012,206)(2) 45,441,413
35,000,000 Legacy Capital LLC, 2.92%, 9/5/08 (Acquired
3/10/08, Cost $34,491,839)(2) 34,554,294
15,000,000 Lexington Parker Capital, 4.97%, 4/7/08
(Acquired 11/6/07, Cost $14,683,163)(2) 14,987,575
23,000,000 Lexington Parker Capital, 4.06%, 4/11/08
(Acquired 11/1/07-1/23/08, Cost $22,683,329)(2) 22,974,069
25,000,000 Lexington Parker Capital, 3.23%, 5/9/08
(Acquired 2/5/08, Cost $24,789,153)(2) 24,914,764
5,000,000 Lexington Parker Capital, 3.10%, 7/15/08
(Acquired 3/12/08, Cost $4,946,181)(2) 4,954,792
13,000,000 Lexington Parker Capital, 3.07%, 8/22/08
(Acquired 2/29/08, Cost $12,805,993)(2) 12,841,469
20,000,000 Ranger Funding Co. LLC, 3.20%, 4/4/08 (Acquired
3/4/08, Cost $19,944,889)(2) 19,994,667
23,000,000 Ranger Funding Co. LLC, 2.60%, 6/9/08 (Acquired
3/19/08, Cost $22,863,789)(2) 22,885,383
27,000,000 Societe Generale N.A., 4.40%, 4/7/08 26,980,200
70,000,000 Swedbank Mortgage AB, 4.58%, 4/4/08 69,973,282
50,000,000 Toronto Dominion Holdings, 4.59%, 5/13/08
(Acquired 11/13/07, Cost $48,839,750)(2) 49,732,250
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8
Prime Money Market
Principal Amount Value
$67,000,000 Tulip Funding Corp., 2.75%, 4/10/08 (Acquired
3/19/08, Cost $66,887,403)(2) $66,953,938
15,000,000 Tulip Funding Corp., 3.13%, 5/7/08 (Acquired
2/6/08, Cost $14,881,321)(2) 14,953,050
15,000,000 UBS Finance LLC, 3.08%, 6/30/08 14,884,688
25,000,000 UBS Finance LLC, 4.12%, 7/8/08 24,719,951
11,000,000 Variable Funding Capital Co. LLC, 3.00%, 4/17/08
(Acquired 3/10/08, Cost $10,965,167)(2) 10,985,333
20,000,000 Windmill Funding Corp., 3.90%, 4/3/08 (Acquired
1/15/08, Cost $19,828,833)(2) 19,995,667
15,700,000 Windmill Funding Corp., 3.27%, 4/7/08 (Acquired
2/22/08, Cost $15,635,826)(2) 15,691,443
4,700,000 Windmill Funding Corp., 4.50%, 4/10/08 (Acquired
1/4/08, Cost $4,643,013)(2) 4,694,713
4,000,000 Windmill Funding Corp., 2.60%, 5/6/08 (Acquired
3/18/08, Cost $3,985,844)(2) 3,989,889
10,000,000 Windmill Funding Corp., 2.72%, 5/8/08 (Acquired
3/20/08, Cost $9,962,978)(2) 9,972,045
25,000,000 Windmill Funding Corp., 2.90%, 5/15/08 (Acquired
3/13/08, Cost $24,873,125)(2) 24,911,389
3,000,000 Windmill Funding Corp., 2.90%, 5/16/08 (Acquired
3/27/08, Cost $2,987,917)(2) 2,989,125
--------------
TOTAL COMMERCIAL PAPER 1,178,757,606
--------------
Corporate Bonds -- 21.4%
5,400,000 AIK Partners LLC, VRN, 2.78%, 4/3/08 (LOC:
Wachovia Bank N.A.) 5,400,000
2,000,000 American Honda Finance Corp., VRN, 3.07%,
6/5/08, resets quarterly off the 3-month LIBOR
plus 0.06% with no caps (Acquired 2/27/08, Cost
$2,000,326)(2) 2,000,275
8,000,000 American Honda Finance Corp., VRN, 2.96%,
6/18/08, resets quarterly off the 3-month LIBOR
plus 0.20% with no caps (Acquired 2/28/08, Cost
$8,012,472)(2) 8,010,655
10,000,000 Bank of Scotland plc (New York), VRN, 4.64%,
4/9/08, resets quarterly off the 3-month LIBOR
plus 0.10% with no caps 10,000,000
Principal Amount Value
$45,000,000 Bank of Scotland plc (New York), VRN, 4.61%,
5/6/08, resets quarterly off the 3-month LIBOR
plus 0.21% with no caps $45,000,000
55,000,000 Bank of the West, VRN, 2.90%, 4/25/08, resets
monthly off the 1-month LIBOR plus 0.30% with no
caps 55,017,500
15,000,000 Barclays Bank plc (New York), VRN, 3.38%,
4/7/08, resets monthly off the 1-month LIBOR
plus 0.29% with no caps 15,000,000
10,000,000 Berkshire Hathaway Finance Corp., 3.375%,
10/15/08 10,051,864
25,000,000 Berkshire Hathaway Finance Corp., VRN, 3.13%,
5/16/08, resets quarterly off the 3-month LIBOR
plus 0.06% with no caps 25,000,427
870,000 Capital Markets Access Co. LLC, VRN, 3.17%,
4/3/08 870,000
1,890,000 Capital Markets Access Co. LLC, VRN, 3.17%,
4/3/08 1,890,000
5,595,000 Capital Markets Access Co. LLC, VRN, 3.17%,
4/3/08 5,595,000
3,550,000 Colorado Natural Gas Inc., VRN, 2.72%, 4/3/08
(LOC: Harris Trust & Savings Bank) 3,550,000
3,275,000 Delos LLC, VRN, 2.73%, 4/3/08 (LOC: Fifth Third
Bank) 3,275,000
8,105,000 Fiore Capital LLC, VRN, 3.30%, 4/3/08 8,105,000
9,000,000 Fleet Financial Group, Inc., 6.375%, 5/15/08 9,017,579
1,870,000 Freehold Young Men's Christian Association
(The), VRN, 3.12%, 4/3/08 (LOC: Wachovia Bank
N.A.) 1,870,000
22,545,000 Great Falls Clinic, LLP, VRN, 4.00%, 4/2/08
(LOC: Bank of America N.A.) 22,545,000
20,950,000 Gwinnett Instructional LLC, VRN, 2.77%, 4/3/08
(LOC: Allied Irish Bank plc) 20,950,000
1,475,000 Herman & Kittle Capital LLC, VRN, 3.15%, 4/3/08
(LOC: FHLB) 1,475,000
19,700,000 KMS Fed Ex L.P., VRN, 3.20%, 4/1/08 (LOC: Union
Bank of California) 19,700,000
3,280,000 Lammert Building L.P., 2.76%, 4/3/08 (Acquired
1/31/08, Cost $3,280,000)(2) 3,280,000
------
9
Prime Money Market
Principal Amount Value
$40,000,000 MBIA Global Funding LLC, VRN, 1.55%, 4/1/08,
resets weekly off the 3-month T-Bill plus 0.33%
with no caps (Acquired 4/11/07, Cost
$40,000,000)(2) $40,000,000
15,000,000 MBIA Global Funding LLC, VRN, 3.16%, 6/4/08,
resets quarterly off the 3-month LIBOR plus
0.10% with no caps (Acquired 8/30/07, Cost
$15,000,000)(2) 15,000,000
12,000,000 MetLife Insurance Co. of Connecticut, VRN,
5.05%, 4/1/08, resets quarterly off the 3-month
LIBOR plus 0.05% with no caps (Acquired 10/1/07,
Cost $12,000,000)(2) 12,000,000
18,000,000 MetLife Insurance Co. of Connecticut, VRN,
3.25%, 5/15/08, resets quarterly off the 3-month
LIBOR plus 0.18% with no caps (Acquired 2/14/08,
Cost $18,000,000)(2) 18,000,000
7,100,000 Mullenix-St Charles Properties LP, VRN, 2.70%,
4/3/08 (LOC: Wachovia Bank N.A.) 7,100,000
4,900,000 Oklahoma Christian University Inc., VRN, 2.73%,
4/3/08 (LOC: FHLB) 4,900,000
5,350,000 Roman Catholic Bishop of San Jose, VRN, 2.68%,
4/3/08 (LOC: Allied Irish Bank plc) 5,350,000
50,000,000 Royal Bank of Canada (New York), VRN, 2.91%,
4/14/08, resets monthly off the 1-month LIBOR
plus 0.05% with no caps 50,000,000
7,500,000 Salvation Army, Series 2003 A, VRN, 2.68%,
4/3/08 (LOC: Bank of New York) 7,500,000
8,000,000 Salvation Army, Series 2004 A, VRN, 2.68%,
4/3/08 (LOC: Bank of New York) 8,000,000
14,500,000 Signal International LLC/Signal International
L.P., VRN, 2.77%, 4/3/08 (LOC: General Electric
Capital Corp.) (Acquired 12/29/05, Cost
$14,500,000)(2) 14,500,000
21,000,000 Toyota Motor Credit Corp., 5.32%, 6/2/08 21,000,000
41,000,000 Travelers Insurance Co. Group, VRN, 3.15%,
5/2/08, resets quarterly off the 3-month LIBOR
plus 0.06% with no caps (Acquired 8/7/03, Cost
$41,000,000)(2) 41,000,000
5,500,000 U.S. Bank N.A., 3.90%, 8/15/08 5,485,107
Principal Amount Value
$14,344,000 U.S. Bank N.A., 4.40%, 8/15/08 $14,364,163
8,675,000 Wachovia Bank N.A., 4.375%, 8/15/08 8,712,428
5,000,000 Wachovia Bank N.A., 5.80%, 12/1/08 5,093,723
5,500,000 Wachovia Corp., 6.40%, 4/1/08 5,500,000
7,300,000 Wachovia Corp., 3.50%, 8/15/08 7,289,542
5,555,000 Wachovia Corp., VRN, 3.30%, 4/30/08, resets
quarterly off the 3-month LIBOR plus 0.05% with
no caps 5,553,913
8,690,000 Woodgrain Millwork, VRN, 3.15%, 4/3/08 (LOC:
General Electric Capital Corp.) 8,690,000
--------------
TOTAL CORPORATE BONDS 582,642,176
--------------
Certificates Of Deposit -- 21.0%
55,000,000 American Express Centurion Bank, 4.90%, 5/30/08 55,000,000
25,000,000 American Express Centurion Bank, 2.73%, 6/30/08 25,000,000
20,000,000 Bank of America N.A., 4.00%, 5/12/08 20,000,000
20,000,000 Bank of the West, 3.25%, 4/24/08 20,000,996
15,000,000 Barclays Bank plc (New York), 5.02%, 4/18/08 15,001,158
50,000,000 Branch Banking & Trust Co., 2.80%, 10/27/08 50,000,000
25,000,000 Canadian Imperial Bank of Commerce (New York),
3.12%, 5/6/08 25,000,000
50,000,000 Canadian Imperial Bank of Commerce (New York),
3.00%, 6/4/08 50,000,000
15,000,000 HBOS Treasury Services plc (New York), 5.33%,
5/30/08 14,997,792
70,000,000 Natixis (New York), 2.35%, 9/17/08 70,000,001
15,000,000 Royal Bank of Canada (New York), 4.63%, 5/7/08 15,000,445
50,000,000 Royal Bank of Scotland plc (New York), 3.10%,
5/6/08 50,000,000
40,000,000 Svenska Handelsbanken (New York), 5.00%, 7/9/08 40,000,000
36,500,000 Toronto Dominion Bank (New York), 2.61%, 10/20/08 36,502,016
35,000,000 UBS AG, 4.80%, 4/22/08 35,000,000
20,000,000 UBS AG, 2.70%, 9/10/08 20,000,000
30,000,000 Union Bank of California N.A., 3.05%, 4/4/08 30,000,000
--------------
TOTAL CERTIFICATES OF DEPOSIT 571,502,408
--------------
------
10
Prime Money Market
Principal Amount Value
Municipal Securities -- 13.5%
$ 4,115,000 Babylon Industrial Development Agency Rev.,
Series 2004 A, (Topiderm Inc.), VRDN, 2.70%,
4/3/08 (LOC: Citibank N.A.) $4,115,000
8,160,000 California Educational Facilities Auth. Rev.,
Series 2005 B, (University La Verne), VRDN,
3.43%, 4/3/08 (LOC: Allied Irish Bank plc) 8,160,000
9,100,000 Catholic Health Initiatives Rev., Series 2007 B,
4.85%, 5/2/08 9,100,000
34,000,000 Catholic Health Initiatives Rev., Series 2007 B,
4.85%, 5/2/08 34,000,000
6,000,000 Catholic Health Initiatives Rev., Series 2008 B,
3.06%, 6/5/08 6,000,000
30,000,000 Catholic Health Initiatives Rev., Series 2008 B,
2.96%, 7/2/08 30,000,000
5,420,000 City of Fairfield Rev., Series 2005 A, VRDN,
2.68%, 4/3/08 (LOC: Landesbank Hessen-Thuringen
Girozentrale) 5,420,000
38,000,000 City of Portland GO, (Taxable Pension), VRDN,
2.65%, 4/2/08 (SBBPA: Landesbank
Hessen-Thuringen Girozentrale) 37,999,646
2,100,000 Concordia College Rev., VRDN, 2.70%, 4/1/08
(LOC: Bank of America N.A.) 2,100,000
50,000,000 Cook County GO, Series 2005 D, (Public
Improvements), VRDN, 2.93%, 4/2/08 (SBBPA: Depfa
Bank plc) 50,000,000
2,540,000 El Monte COP, Series 2003 B, (Community
Improvement), VRDN, 2.73%, 4/3/08 (LOC:
California State Teacher's Retirement System) 2,540,000
6,560,000 Gadsden Airport Auth. Rev., VRDN, 2.78%, 4/3/08
(LOC: Southtrust Bank N.A.) 6,560,000
7,670,000 Georgia Municipal Gas Auth. Rev., (National Gas
Utility Improvements), VRDN, 2.70%, 4/3/08 (LOC:
Wachovia Bank N.A., JPMorgan Chase Bank and
Bayerische Landesbank) 7,670,000
5,750,000 JJB Properties LLC Rev., (Rental Property),
VRDN, 2.70%, 4/3/08 (LOC: Arvest Bank and FHLB) 5,750,000
Principal Amount Value
$10,690,000 Kansas City Financing Commission Tax Increment
Rev., Series 2006 B, (Briarcliff West), VRDN,
2.72%, 4/3/08 (LOC: M&I Marshall & Isley Bank) $10,690,000
7,000,000 Kentucky Housing Corp. Rev., Series 2008 B,
VRDN, 4.01%, 4/3/08 (SBBPA: Lloyds TSB Bank plc) 7,000,000
1,200,000 Las Cruces Industrial Rev., (F&A Dairy
Products), VRDN, 3.13%, 6/1/08 (LOC: Wells Fargo
Bank N.A.) 1,200,000
2,880,000 Long Beach Rev., Series 2004 A, (Towne Center
Site), VRDN, 2.67%, 4/3/08 (LOC: Allied Irish
Bank plc) 2,880,000
21,250,000 Louisiana Agriculture Finance Auth. Rev.,
(Lacassine Syrup Mill), VRDN, 2.93%, 4/3/08
(LOC: AmSouth Bank) 21,250,000
8,200,000 Lower Colorado River Auth. Rev., Series 2008 A,
3.15%, 4/4/08 8,200,000
5,670,000 Minnesota Higher Education Facilities Auth.
Rev., Series 2003 5-P2, (Concordia University,
St. Paul), VRDN, 2.75%, 4/1/08 (LOC: U.S. Bank
N.A.) 5,670,000
6,065,000 Mississippi Business Finance Corp. Rev.,
(Medical Development Properties), VRDN, 2.77%,
4/3/08 (LOC: BancorpSouth Bank and FHLB) 6,065,000
11,000,000 Mississippi Business Finance Corp. Rev.,
(Skyline Steel Pipe), VRDN, 2.77%, 4/3/08 (LOC:
Fortis Bank SA N.V.) 11,000,000
7,500,000 Mississippi Business Finance Corp. Rev., Series
2005, (Future Pipe Industries, Inc.), VRDN,
2.77%, 4/3/08 (LOC: Mashreqbank and Bank of New
York) 7,500,000
5,000,000 Mississippi Business Finance Corp. Rev., Series
2006 R-1, (Brown Bottling Group, Inc.), VRDN,
2.77%, 4/3/08 (LOC: FHLB) 5,000,000
10,000,000 Mississippi Business Finance Corp. Industrial
Development Rev., (VC Regional Assembly), VRDN,
2.75%, 4/2/08 (LOC: JPMorgan Chase Bank) 10,000,000
------
11
Prime Money Market
Principal Amount Value
$ 9,100,000 Pasadena COP, (Los Robles Avenue Parking
Facilities), VRDN, 2.65%, 4/1/08 (LOC: Bank of
New York and California State Teacher's
Retirement System) $9,100,000
20,000,000 Pennsylvania Housing Finance Agency Single
Family Mortgage Rev., Series 2007-97D, VRDN,
2.65%, 4/2/08 (SBBPA: Dexia Credit Local) 20,000,000
945,000 Plymouth Rev., (Carlson Center), VRDN, 3.15%,
4/3/08 (LOC: U.S. Bank N.A.) 945,000
9,990,000 Putnam County Industrial Development Agency
Rev., (Sincerity Facility LLC), VRDN, 2.68%,
4/3/08 (LOC: Bank of New York) 9,990,000
5,000,000 Roman Catholic Diocese of Raleigh Rev., Series
2002 A, VRDN, 2.72%, 4/3/08 (LOC: Bank of
America N.A.) 5,000,000
4,755,000 Santa Rosa Pension Obligation Rev., Series 2003
A, VRDN, 2.68%, 4/3/08 (LOC: Landesbank
Hessen-Thuringen Girozentrale) 4,755,000
6,561,331 Savannah College of Art & Design Inc. Rev.,
Series 2004 BD, VRDN, 2.70%, 4/3/08 (LOC: Bank
of America N.A.) 6,561,331
4,040,000 Sterling Tax Allocation Rev., (Rock River
Redevelopment), VRDN, 3.08%, 4/2/08 (LOC:
Wachovia Bank N.A.) 4,040,000
--------------
TOTAL MUNICIPAL SECURITIES 366,260,977
--------------
U.S. Government Agency Securities -- 0.4%
10,000,000 FHLB, 2.90%, 2/27/09 10,000,000
--------------
TOTAL INVESTMENT SECURITIES -- 99.6% 2,709,163,167
--------------
OTHER ASSETS AND LIABILITIES -- 0.4% 9,998,941
--------------
TOTAL NET ASSETS -- 100.0% $2,719,162,108
==============
Notes to Schedule of Investments
COP = Certificates of Participation
FHLB = Federal Home Loan Bank
GO = General Obligation
LIBOR = London Interbank Offered Rate
LOC = Letter of Credit
MBIA = MBIA Insurance Corporation
resets = The frequency with which a security's coupon changes, based on
current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will
vary significantly from current market rates.
SBBPA = Standby Bond Purchase Agreement
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective March 31, 2008.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) The rate indicated is the yield to maturity at purchase.
(2) Security was purchased under Rule 144A or Section 4(2) of the Securities
Act of 1933 or is a private placement and, unless registered under the Act or
exempted from registration, may only be sold to qualified institutional
investors. The aggregate value of restricted securities at March 31, 2008 was
$1,094,578,083, which represented 40.3% of total net assets. Restricted
securities considered illiquid represent 2.6% of total net assets.
See Notes to Financial Statements.
------
12
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
ASSETS
Investment securities, at value
(amortized cost and cost for federal
income tax purposes) $2,709,163,167
Cash 40,961
Interest receivable 11,268,659
Prepaid portfolio insurance 386,452
---------------
2,720,859,239
---------------
LIABILITIES
Payable for capital shares redeemed 80,010
Accrued management fees 1,257,448
Distribution fees payable 1,535
Service fees (and distribution
fees -- A Class) payable 35,773
Dividends payable 322,365
---------------
1,697,131
---------------
NET ASSETS $2,719,162,108
===============
NET ASSETS CONSIST OF:
Capital paid in $2,719,304,759
Accumulated net realized loss
on investment transactions (142,651)
---------------
$2,719,162,108
===============
INVESTOR CLASS
Net assets $2,539,830,310
Shares outstanding 2,539,965,712
Net asset value per share $1.00
A CLASS
Net assets $176,175,143
Shares outstanding 176,182,399
Net asset value per share $1.00
B CLASS
Net assets $1,193,663
Shares outstanding 1,193,747
Net asset value per share $1.00
C CLASS
Net assets $1,962,992
Shares outstanding 1,963,023
Net asset value per share $1.00
See Notes to Financial Statements.
------
13
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
INVESTMENT INCOME (LOSS)
INCOME:
Interest $129,247,242
------------
EXPENSES:
Management fees 14,630,253
Distribution fees:
A Class 5,569
B Class 7,602
C Class 5,333
Service fees:
A Class 5,569
B Class 2,534
C Class 2,667
Distribution and service fees -- A Class 206,082
Distribution and service fees -- A Class (old) (Note 5) 121,458
Trustees' fees and expenses 100,122
Portfolio insurance and other expenses 438,408
------------
15,525,597
Amount waived (769,296)
------------
14,756,301
------------
NET INVESTMENT INCOME (LOSS) 114,490,941
------------
NET REALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS (100,131)
------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $114,390,810
============
See Notes to Financial Statements.
------
14
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Increase (Decrease) in Net Assets 2008 2007
OPERATIONS
Net investment income (loss) $114,490,941 $105,957,150
Net realized gain (loss) (100,131) (3,528)
-------------- --------------
Net increase (decrease) in net assets resulting
from operations 114,390,810 105,953,622
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class (108,868,604) (101,854,192)
A Class (3,328,348) (153,038)
A Class (old) (Note 5) (2,221,170) (3,877,527)
B Class (34,844) (45,130)
C Class (37,975) (27,263)
-------------- --------------
Decrease in net assets from distributions (114,490,941) (105,957,150)
-------------- --------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets from
capital share transactions 443,914,072 244,090,701
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS 443,813,941 244,087,173
NET ASSETS
Beginning of period 2,275,348,167 2,031,260,994
-------------- --------------
End of period $2,719,162,108 $2,275,348,167
============== ==============
See Notes to Financial Statements.
------
15
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. Prime Money Market Fund (the fund) is one fund
in a series issued by the trust. The fund is diversified under Rule 2a-7 of
the 1940 Act. The fund's investment objective is to earn the highest level of
current income while preserving the value of your investment. The fund invests
most of its assets in high-quality, very short-term debt securities issued by
corporations, banks and governments. The following is a summary of the fund's
significant accounting policies.
MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the A
Class (formerly Advisor Class), the B Class and the C Class. The A Class, B
Class and C Class may be subject to a contingent deferred sales charge. The
share classes differ principally in their respective sales charges and
distribution and shareholder servicing expenses and arrangements. All shares
of the fund represent an equal pro rata interest in the net assets of the
class to which such shares belong, and have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except for
class specific expenses and exclusive rights to vote on matters affecting only
individual classes. Income, non-class specific expenses, and realized and
unrealized capital gains and losses of the fund are allocated to each class of
shares based on their relative net assets.
SECURITY VALUATIONS -- Securities are generally valued at amortized cost,
which approximates current market value. When such valuations do not reflect
market value, securities may be valued as determined by the Board of Trustees
or its designee, in accordance with procedures adopted by the Board of
Trustees.
SECURITY TRANSACTIONS -- For financial reporting purposes, security
transactions are accounted for as of the trade date. Net realized gains and
losses are determined on the identified cost basis, which is also used for
federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a
manner sufficient to enable the fund to obtain those securities in the event
of a default under the repurchase agreement. ACIM monitors, on a daily basis,
the securities transferred to ensure the value, including accrued interest, of
the securities under each repurchase agreement is equal to or greater than
amounts owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM or American
Century Global Investment Management, Inc. (ACGIM), may transfer uninvested
cash balances into a joint trading account. These balances are invested in one
or more repurchase agreements that are collateralized by U.S. Treasury or
Agency obligations.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The fund may engage in securities
transactions on a when-issued or forward commitment basis. Under these
arrangements, the securities' prices and yields are fixed on the date of the
commitment, but payment and delivery are scheduled for a future date. During
this period, securities are subject to market fluctuations. The fund will
segregate cash, cash equivalents or other appropriate liquid securities on its
records in amounts sufficient to meet the purchase price.
INCOME TAX STATUS -- It is the fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. The fund is no longer subject to examination by tax authorities
for years prior to 2005. At this time, management has not identified any
uncertain tax positions for which it is reasonably possible that the total
amounts of unrecognized tax benefits will significantly change in the next
twelve months. Accordingly, no provision has been made for federal or state
income taxes. Interest and penalties associated with any federal or state
income tax obligations, if any, are recorded as interest expense.
------
16
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
short-term capital gains, if any, are declared daily and paid monthly. The
fund does not expect to realize any long-term capital gains, and accordingly,
does not expect to pay any capital gains distributions.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the fund. In addition, in the normal course of
business, the fund enters into contracts that provide general
indemnifications. The fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the fund.
The risk of material loss from such claims is considered by management to be
remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America,
which may require management to make certain estimates and assumptions at the
date of the financial statements. Actual results could differ from these
estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
On July 27, 2007, the A Class (formerly Advisor Class, also referred to as "A
Class (new)") shareholders of the fund approved a change in the class's fee
structure. The change was approved by the Board of Trustees on December 8,
2006. Effective September 4, 2007, the fee structure change resulted in an
increase of 0.25% in the unified management fee and a simultaneous decrease of
0.25% in total distribution and service fee, resulting in no change to the
total operating expense ratio of the class.
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
ACIM, under which ACIM provides the fund with investment advisory and
management services in exchange for a single, unified management fee (the fee)
per class. The Agreement provides that all expenses of the fund, except
brokerage commissions, taxes, portfolio insurance, interest, fees and expenses
of those trustees who are not considered "interested persons" as defined in
the 1940 Act (including counsel fees) and extraordinary expenses, will be paid
by ACIM. The fee is computed and accrued daily based on the daily net assets
of the specific class of shares of the fund and paid monthly in arrears. The
fee consists of (1) an Investment Category Fee based on the daily net assets
of the fund and certain other accounts managed by the investment advisor that
are in the same broad investment category as the fund and (2) a Complex Fee
based on the assets of all the funds in the American Century family of funds.
The rates for the Investment Category Fee range from 0.2370% to 0.3500% and
the rates for the Complex Fee (Investor Class, A Class, B Class and C Class)
range from 0.2500% to 0.3100%. Prior to September 4, 2007, the A Class (new)
was 0.2500% less at each point within the Complex Fee range. From August 1,
2006 to July 31, 2007, the investment advisor voluntarily agreed to waive
0.050% of its management fee. Effective August 1, 2007, the investment advisor
voluntarily agreed to waive 0.021% of its management fee. The total amount of
the waiver for each class of the fund for the year ended March 31, 2008, was
$728,961, $18,240, $21,517, $292, and $286 for the Investor Class, A Class
(new), A Class (old), B Class and C Class, respectively. This fee waiver may
be revised or terminated at any time without notice. The effective annual
management fee before waiver for each class of the fund for the year ended
March 31, 2008 was 0.57%. The effective annual management fee after waiver for
each class of the fund for the year ended March 31, 2008 was 0.54%.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a separate
Master Distribution and Individual Shareholder Services Plan for each of the A
Class, B Class and C Class (collectively the plans), pursuant to Rule 12b-1 of
the 1940 Act. The plans provide that the A Class will pay ACIS an annual
distribution and service fee of 0.25%. The plans provide that the B Class will
pay ACIS an annual distribution fee of 0.75% and service fee of 0.25%. The
plans provide that the C Class will pay ACIS an annual distribution fee of
0.50% and service fee of 0.25%. Prior to September 4, 2007, the Board of
Trustees had adopted a Master Distribution and Shareholder Services plan for
the A Class (new), pursuant to Rule 12 b-1 of the 1940 Act, in which the A
Class (new) paid ACIS an annual distribution fee of 0.25% and service fee of
0.25%. The fees are computed and accrued daily based on each class's daily net
assets and paid monthly in arrears. The distribution fee provides compensation
for expenses incurred in connection with distributing shares of the classes
including, but not limited to, payments to brokers, dealers, and financial
institutions that have entered into sales agreements with respect to shares of
the fund. The service fee provides compensation for individual shareholder
services rendered by broker/dealers or other independent financial
intermediaries for A Class (new), A Class (old), B Class and Class. Prior to
September 4, 2007, the service fee provided compensation for shareholder and
administrative services rendered by ACIS, its affiliates or independent third
party providers for A Class (new) shares. Fees incurred under the plans during
the year ended March 31, 2008, are detailed in the Statement of Operations.
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17
MONEY MARKET INSURANCE -- The fund, along with other money market funds
managed by ACIM, has entered into an insurance agreement with Ambac Assurance
Corporation (Ambac). Ambac provides limited coverage for certain loss events
including issuer defaults as to payment of principal or interest and
insolvency of a credit enhancement provider. The fund pays annual premiums to
Ambac, which are amortized daily over one year. For the year ended March 31,
2008, the annualized ratio of money market insurance expense to average net
assets was 0.02%.
RELATED PARTIES -- Certain officers and trustees of the trust are also
officers and/or directors, and, as a group, controlling stockholders of
American Century Companies, Inc. (ACC), the parent of the trust's investment
advisor, ACIM, the distributor of the trust, American Century Investment
Services, Inc., and the trust's transfer agent, American Century Services,
LLC.
JPMorgan Chase Bank is a custodian of the fund and a wholly owned subsidiary
of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows (unlimited number of shares
authorized):
Year ended March 31, 2008 Year ended March 31, 2007
Shares Amount Shares Amount
INVESTOR CLASS
Sold 3,014,610,183 $3,014,610,183 2,293,636,505 $2,293,636,505
Issued in
reinvestment of
distributions 102,724,887 102,724,887 97,522,574 97,522,574
Redeemed (2,733,209,054) (2,733,209,054) (2,217,321,520) (2,217,321,520)
--------------- --------------- --------------- ---------------
384,126,016 384,126,016 173,837,559 173,837,559
--------------- --------------- --------------- ---------------
A CLASS
Sold 159,233,357 159,233,357 3,411,695 3,411,695
Issued in
connection with
reclassification
(Note 5) 109,222,892 109,218,798 -- --
Issued in
reinvestment of
distributions 2,901,684 2,901,684 149,117 149,117
Redeemed (99,360,293) (99,360,293) (2,520,839) (2,520,839)
--------------- --------------- --------------- ---------------
171,997,640 171,993,546 1,039,973 1,039,973
--------------- --------------- --------------- ---------------
A CLASS (OLD)
Sold 64,249,272 64,249,272 198,542,700 198,542,700
Issued in
reinvestment of
distributions 1,551,046 1,551,046 3,203,673 3,203,673
Redeemed in
connection with
reclassification
(Note 5) (109,222,892) (109,218,798) -- --
Redeemed (70,578,778) (70,578,778) (132,900,813) (132,900,813)
--------------- --------------- --------------- ---------------
(114,001,352) (113,997,258) 68,845,560 68,845,560
--------------- --------------- --------------- ---------------
B CLASS
Sold 702,736 702,736 2,159,121 2,159,121
Issued in
reinvestment of
distributions 29,451 29,451 42,105 42,105
Redeemed (376,910) (376,910) (1,497,102) (1,497,102)
--------------- --------------- --------------- ---------------
355,277 355,277 704,124 704,124
--------------- --------------- --------------- ---------------
C CLASS
Sold 2,801,986 2,801,986 821,690 821,690
Issued in
reinvestment of
distributions 33,813 33,813 26,399 26,399
Redeemed (1,399,308) (1,399,308) (1,184,604) (1,184,604)
--------------- --------------- --------------- ---------------
1,436,491 1,436,491 (336,515) (336,515)
--------------- --------------- --------------- ---------------
Net increase
(decrease) 443,914,072 $443,914,072 244,090,701 $244,090,701
=============== =============== =============== ===============
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18
4. FEDERAL TAX INFORMATION
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of certain income items and net realized gains and
losses for financial statement and tax purposes, and may result in
reclassification among certain capital accounts on the financial statements.
As of March 31, 2008, the fund has undistributed ordinary income for federal
income tax purposes of $5,706.
As of March 31, 2008, the fund has accumulated net realized capital loss
carryovers for federal income tax purposes of $(70,864), which may be used to
offset future taxable gains. The capital loss carryovers expire as follows:
2010 2011 2012 2013 2014 2015 2016
$(13,456) $(36) -- $(11,584) $(2,029) $(20,223) $(23,536)
Capital loss deferrals of $(77,493) represent net capital losses incurred in
the five-month period ended March 31, 2008. The fund has elected to treat such
losses as having been incurred in the following fiscal year for federal income
tax purposes.
5. CORPORATE EVENT
Effective September 4, 2007, the A Class (old) shares of the fund were
reclassified as Advisor Class shares. Subsequent to the reclassification, the
Advisor Class was renamed A Class. The change was approved by the Board of
Trustees on December 8, 2006.
6. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is taxable
in a particular jurisdiction), and requires certain expanded tax disclosures.
FIN 48 is effective for fiscal years beginning after December 15, 2006, and is
to be applied to all open tax years as of the date of effectiveness. The
adoption of FIN 48 did not materially impact the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" (FAS 157), in September 2006, which is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands the required
financial statement disclosures about fair value measurements. Management is
currently evaluating the impact that adopting FAS 157 will have on the
financial statement disclosures.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
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19
FINANCIAL HIGHLIGHTS
Prime Money Market
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of
Period $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ----------
Income From
Investment
Operations
Net
Investment
Income (Loss) 0.04 0.05 0.03 0.01 0.01
---------- ---------- ---------- ---------- ----------
Distributions
From Net
Investment
Income (0.04) (0.05) (0.03) (0.01) (0.01)
---------- ---------- ---------- ---------- ----------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
TOTAL RETURN(1) 4.58% 4.83% 3.28% 1.19% 0.58%
RATIOS/SUPPLEMENTAL DATA
Ratio of
Operating
Expenses to
Average Net Assets 0.56%(2) 0.55%(2) 0.57%(2) 0.60% 0.61%
Ratio of
Operating
Expenses to
Average Net
Assets (Before
Expense Waiver) 0.59% 0.59% 0.59% 0.60% 0.61%
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 4.47%(2) 4.73%(2) 3.24%(2) 1.17% 0.58%
Ratio of Net
Investment Income
(Loss) to Average
Net Assets
(Before Expense
Waiver) 4.44% 4.69% 3.22% 1.17% 0.58%
Net Assets, End
of Period (in
thousands) $2,539,830 $2,155,800 $1,981,964 $1,964,135 $2,126,433
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any.
(2) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
See Notes to Financial Statements.
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20
Prime Money Market
A Class(1)
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------- -------
Income From
Investment Operations
Net Investment
Income (Loss) 0.04 0.04 0.03 0.01 --(2)
-------- -------- -------- ------- -------
Distributions
From Net
Investment Income (0.04) (0.04) (0.03) (0.01) --(2)
-------- -------- -------- ------- -------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======= =======
TOTAL RETURN(3) 4.32% 4.58% 3.02% 0.94% 0.33%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 0.81%(4) 0.80%(4) 0.82%(4) 0.85% 0.86%
Ratio of Operating Expenses
to Average
Net Assets (Before
Expense Waiver) 0.84% 0.84% 0.84% 0.85% 0.86%
Ratio of Net Investment
Income (Loss) to
Average Net Assets 4.22%(4) 4.48%(4) 2.99%(4) 0.92% 0.33%
Ratio of Net Investment
Income (Loss) to
Average Net Assets
(Before Expense Waiver) 4.19% 4.44% 2.97% 0.92% 0.33%
Net Assets, End of Period (in
thousands) $176,175 $4,185 $3,145 $2,560 $3,055
(1) Prior to September 4, 2007, the A Class was referred to as the Advisor
Class.
(2) Per-share amount was less than $0.005.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
(4) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
See Notes to Financial Statements.
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21
Prime Money Market
B Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment
Income (Loss) 0.03 0.04 0.02 --(1) --(1)
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.03) (0.04) (0.02) --(1) --(1)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
TOTAL RETURN(2) 3.54% 3.80% 2.26% 0.34% 0.22%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average
Net Assets 1.56%(3) 1.55%(3) 1.57%(3) 1.48%(4) 0.99%(4)
Ratio of Operating Expenses
to Average
Net Assets Before
Expense Waiver) 1.59% 1.59% 1.59% 1.60% 1.61%
Ratio of Net Investment
Income (Loss) to
Average Net Assets 3.47%(3) 3.73%(3) 2.24%(3) 0.29%(4) 0.20%(4)
Ratio of Net Investment
Income (Loss) to
Average Net Assets
(Before Expense Waiver) 3.44% 3.69% 2.22% 0.17% (0.42)%
Net Assets, End of
Period (in thousands) $1,194 $838 $134 $97 $74
(1) Per-share amount was less than $0.005.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
(3) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
(4) The distributor voluntarily waived a portion of its distribution and
service fees.
See Notes to Financial Statements.
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22
Prime Money Market
C Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss) 0.04 0.04 0.02 0.01 --(1)
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.04) (0.04) (0.02) (0.01) --(1)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
TOTAL RETURN(2) 3.81% 4.06% 2.51% 0.57% 0.09%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 1.31%(3) 1.30%(3) 1.32%(3) 1.28%(4) 1.10%(4)
Ratio of Operating Expenses
to Average
Net Assets (Before
Expense Waiver) 1.34% 1.34% 1.34% 1.35% 1.36%
Ratio of Net Investment
Income (Loss) to
Average Net Assets 3.72%(3) 3.98%(3) 2.49%(3) 0.49%(4) 0.09%(4)
Ratio of Net Investment
Income (Loss) to
Average Net Assets
(Before Expense Waiver) 3.69% 3.94% 2.47% 0.42% (0.17)%
Net Assets, End of Period
(in thousands) $1,963 $527 $863 $604 $96
(1) Per-share amount was less than $0.005.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
(3) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
(4) The distributor voluntarily waived a portion of its distribution and
service fees.
See Notes to Financial Statements.
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23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the American Century Investment Trust and
Shareholders of the Prime Money Market Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Prime Money
Market Fund (one of the ten funds comprising the American Century Investment
Trust, hereafter referred to as the "Fund") at March 31, 2008, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for
each of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2008 by
correspondence with the custodians and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 19, 2008
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24
MANAGEMENT
The individuals listed below serve as trustees or officers of the fund. Each
trustee serves until his or her successor is duly elected and qualified or
until he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the
remaining independent trustees. Those listed as interested trustees are
"interested" primarily by virtue of their engagement as directors and/or
officers of, or ownership interest in, American Century Companies, Inc. (ACC)
or its wholly owned, direct or indirect, subsidiaries, including the fund's
investment advisor, American Century Investment Management, Inc. (ACIM or the
advisor); the fund's principal underwriter, American Century Investment
Services, Inc. (ACIS); and the fund's transfer agent, American Century
Services, LLC (ACS).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS, and ACS. The trustees serve
in this capacity for eight registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the fund also serve in similar capacities for
the other 14 investment companies in the American Century Investments family
of funds advised by ACIM, or American Century Global Investment Management,
Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated
for his or her service as an officer of the fund. The listed officers are
interested persons of the fund and are appointed or re-appointed on an annual
basis.
INTERESTED TRUSTEE
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Trustee and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 105
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
INDEPENDENT TRUSTEES
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Trustee (since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
------
25
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of
Law and Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
FREDERICK L.A. GRAUER, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 2008)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Advisor, Barclays Global
Investors (2003 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
PETER F. PERVERE, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Vice President
and Chief Financial Officer, Commerce One, Inc. (software and services
provider)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Intraware, Inc.
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Platinum Grove Asset
Management, L.P., and a Partner, Oak Hill Capital Management (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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2002)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1973 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present)
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee (since 1984)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
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26
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present); and Controller, various American Century Investments funds
(1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the fund's trustees and is available
without charge, upon request, by calling 1-800-345-2021.
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27
ADDITIONAL INFORMATION
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain
403(b), 457 and qualified plans [those not eligible for rollover to an IRA or
to another qualified plan] are subject to federal income tax withholding,
unless you elect not to have withholding apply. Tax will be withheld on the
total amount withdrawn even though you may be receiving amounts that are not
subject to withholding, such as nondeductible contributions. In such case,
excess amounts of withholding could occur. You may adjust your withholding
election so that a greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right
to revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
State tax will be withheld if, at the time of your distribution, your address
is within one of the mandatory withholding states and you have federal income
tax withheld. State taxes will be withheld from your distribution in
accordance with the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment advisor,
is responsible for exercising the voting rights associated with the securities
purchased and/or held by the fund. A description of the policies and
procedures the advisor uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's website at americancentury.com and on the Securities and
Exchange Commission's website at sec.gov. Information regarding how the
investment advisor voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available on the "About Us" page
at americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The fund's Form N-Q is available on the SEC's website at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may
be obtained by calling 1-800-SEC-0330. The fund also makes its complete
schedule of portfolio holdings for the most recent quarter of its fiscal year
available on its website at americancentury.com and, upon request, by calling
1-800-345-2021.
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28
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The 90-DAY U.S. TREASURY BILL INDEX is derived from secondary market interest
rates as published by the Federal Reserve Bank and includes three-month,
six-month, and one-year instruments.
The CITIGROUP AGENCY INDEX is a market-capitalization-weighted index that
includes US government sponsored agencies with a remaining maturity of at
least one year.
The CITIGROUP CREDIT INDEX includes US and non-US corporate securities and
non-US sovereign and provincial securities.
The CITIGROUP MORTGAGE INDEX measures the mortgage component of the US BIG
Bond Index, comprising 15- and 30-year GNMA, FNMA, and FHLMC pass-throughs and
FNMA and FHLMC balloon mortgages.
The CITIGROUP TREASURY INDEX is comprised of US Treasury securities with an
amount outstanding of at least $5 billion and a remaining maturity of at least
one year.
The CITIGROUP US BROAD INVESTMENT-GRADE (BIG) BOND INDEX is a market-
capitalization-weighted index that includes fixed-rate Treasury,
government-sponsored, mortgage, asset-backed, and investment-grade issues with
a maturity of one year or longer.
The CITIGROUP US HIGH-YIELD MARKET INDEX captures the performance of
below-investment-grade debt issued by corporations domiciled in the United
States or Canada. This index includes cash-pay and deferred-interest
securities that are publicly placed, have a fixed coupon, and are
nonconvertible.
The CITIGROUP US INFLATION-LINKED SECURITIES INDEX (ILSI)SM measures the
return of bonds with fixed-rate coupon payments that adjust for inflation as
measured by the Consumer Price Index (CPI).
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29
NOTES
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30
NOTES
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31
NOTES
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32
[american century investments logo and text logo ®]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE . . . . . . . . . . . . 1-800-345-8765
1-800-345-2021 or
INVESTOR SERVICES REPRESENTATIVE . . . . . . . . . 816-531-5575
INVESTORS USING ADVISORS . . . . . . . . . . . . . 1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS. . . . . . . . 1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL PROFESSIONALS, INSURANCE COMPANIES . . . 1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF . . . . . . 1-800-634-4113
AMERICAN CENTURY INVESTMENT TRUST
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
American Century Investments
P.O. Box 419200
Kansas City, MO 64141-6200
PRSRT STD
U.S. POSTAGE PAID
AMERICAN CENTURY
COMPANIES
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60036S
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
DIVERSIFIED BOND FUND
HIGH-YIELD FUND
PRESIDENT'S LETTER
[photo of Jonathan Thomas]
JONATHAN THOMAS
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century®
Diversified Bond and High-Yield funds for the 12 months ended March 31, 2008.
We also recommend our website, americancentury.com, where we provide company
news, quarterly portfolio commentaries, investment views, and other useful
information about portfolio strategy, personal finance, government policy, and
the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
TABLE OF CONTENTS
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Fixed-Income Total Returns. . . . . . . . . . . . . . . . . . . 2
DIVERSIFIED BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 5
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . 5
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . 6
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 7
HIGH-YIELD
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 19
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . 19
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Top Five Industries. . . . . . . . . . . . . . . . . . . . . . . . . 20
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . 20
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 21
Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . . . . 27
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 30
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 32
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 33
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 34
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 42
Report of Independent Registered Public Accounting Firm . . . . . . . 54
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 58
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 59
The opinions expressed in the Market Perspective and each of the Portfolio
Commentaries reflect those of the portfolio management team as of the date of
the report, and do not necessarily represent the opinions of American Century
or any other person in the American Century organization. Any such opinions
are subject to change at any time based upon market or other conditions and
American Century disclaims any responsibility to update such opinions. These
opinions may not be relied upon as investment advice and, because investment
decisions made by American Century funds are based on numerous factors, may
not be relied upon as an indication of trading intent on behalf of any
American Century fund. Security examples are used for representational
purposes only and are not intended as recommendations to purchase or sell
securities. Performance information for comparative indices and securities is
provided to American Century by third party vendors. To the best of American
Century's knowledge, such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of chief investment officer]
By David MacEwen, Chief Investment Officer, Fixed Income
VOLATILITY REIGNED
The 12 months ended March 31, 2008, saw widely divergent bond returns as
market volatility surged in the wake of the subprime credit crisis. Credit
woes spread across the financial system, affecting banks, brokers, bond
insurers, hedge funds, and other big, institutional players important for the
functioning of the markets. This led to risk aversion that colored the return
picture for assets ranging from the riskiest high-yield bonds to even some of
the highest-quality money market securities.
The subprime meltdown had direct economic effects as well, weighing on
consumer spending and confidence, leading many economists to suggest that the
economy is already in recession. But even as growth slowed, higher commodity
prices (led by oil) meant rising inflation. The government consumer price
index (CPI) rose 4% during the reporting period.
The Federal Reserve (the Fed) took a series of extraordinary steps, slashing
interest rates and acting as a lender of last resort not only for banks, but
also major brokers. For the year, the federal funds rate target declined from
5.25% to 2.25%.
TREASURY BONDS RULED ROOST
The volatility, credit, and liquidity concerns in the market all favored
Treasury securities over higher-yielding, lower-quality alternatives (see the
accompanying returns table). Inflation-linked bonds -- particularly Treasury
inflation-indexed securities -- performed best because of their combination of
high quality and inflation protection. Meanwhile, risky corporate high-yield
bonds posted negative returns.
RATES FELL, CURVE STEEPENED
Against this backdrop, Treasury yields declined. The yield on the two-year
Treasury note tumbled from 4.58% to 1.59%, while yields on longer-term notes
and bonds fell less. That's because investors worried about the potential
long-term inflation effects of Fed rate cuts, high energy and commodity
prices, and a weaker dollar. As a result, the yield curve fell and steepened
-- the difference in yield between two- and 10-year Treasury securities
increased sharply from seven to 182 basis points (a basis point equals 0.01%).
U.S. Fixed-Income Total Returns
For the 12 months ended March 31, 2008
TREASURY SECURITIES
3-Month Bill 4.81%
2-Year Note 9.39%
5-Year Note 14.37%
10-Year Note 14.35%
30-Year Bond 13.86%
CITIGROUP U.S. BOND MARKET INDICES
High-Yield Market (corporate) -3.58%
Credit (investment-grade corporate) 4.41%
Mortgage (mortgage-backed) 7.95%
Broad Investment-Grade (multi-sector) 8.41%
Agency 10.37%
Treasury 12.24%
Inflation-Linked Securities 14.64%
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2
PERFORMANCE
Diversified Bond
Total Returns as of March 31, 2008
Average Annual Returns
10 Since Inception
1 year 5 years years Inception Date
INVESTOR CLASS 9.38% 4.54% -- 4.97% 12/3/01
CITIGROUP US BROAD
INVESTMENT-GRADE BOND INDEX 8.41% 4.80% 6.13% 5.49%(1) --
Institutional Class 9.60% 4.75% 5.74% 5.98% 4/1/93
A Class(2)
No sales charge* 9.11% 4.28% -- 4.71%
With sales charge* 4.22% 3.33% -- 3.95% 12/3/01
B Class
No sales charge* 8.30% 3.50% -- 3.63%
With sales charge* 4.30% 3.33% -- 3.46% 1/31/03
C Class 8.30% 3.54% -- 3.67% 1/31/03
R Class 8.84% -- -- 5.18% 7/29/05
* Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 4.50% maximum initial
sales charge for fixed-income funds and may be subject to a maximum CDSC of
1.00%. B Class shares redeemed within six years of purchase are subject to a
CDSC that declines from 5.00% during the first year after purchase to 0.00%
the sixth year after purchase. C Class shares redeemed within 12 months of
purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual
funds provide performance information net of maximum sales charges in all
cases where charges could be applied.
Diversified Bond acquired all of the net assets of the American Century
Intermediate-Term Bond Fund, the American Century Bond Fund, and the American
Century Premium Bond Fund on December 3, 2001, pursuant to a plan of
reorganization approved by the acquired funds' shareholders on November 16,
2001. Financial information prior to December 3, 2001 is that of American
Century Premium Bond Fund and is used in calculating the performance of
Diversified Bond.
(1) Since 11/30/01, the date nearest the Investor Class's inception for which
data are available.
(2) Prior to September 4, 2007, the A Class was referred to as the Advisor
Class. Performance, with sales charge, prior to that date has been adjusted to
reflect the A Class's current sales charge.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
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3
Diversified Bond
Growth of $10,000 Over Life of Class
$10,000 investment made December 3, 2001
One-Year Returns Over Life of Class
Periods ended March 31
2002* 2003 2004 2005 2006 2007 2008
Investor Class -0.99% 9.93% 4.92% 0.63% 1.97% 6.05% 9.38%
Citigroup US Broad
Investment-Grade Bond
Index -0.52% 11.56% 5.52% 1.23% 2.40% 6.60% 8.41%
* From 12/3/01, the Investor Class's inception date. Index data from 11/30/01,
the date nearest the Investor Class's inception for which data are available.
Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
------
4
PORTFOLIO COMMENTARY
Diversified Bond
Lead Portfolio Managers: Jeff Houston, Hando Aguilar, Brian Howell, John
Walsh, Dan Shiffman, Jim Platz, and Seth Plunkett
Macro Strategy Team Representatives: Dave MacEwen and Bob Gahagan
PERFORMANCE SUMMARY
Diversified Bond returned 9.38%* for the 12 months ended March 31, 2008. By
comparison, the fund's benchmark, the Citigroup US Broad Investment-Grade
(BIG) Bond Index, advanced 8.41%. It was the best fiscal-year performance for
the fund and the index since 2003. See page 3 for additional performance
comparisons.
The portfolio's strong return over the last 12 months reflected favorable
conditions for high-quality bonds (see page 2). The fund also outperformed its
benchmark thanks to contributions from our sector, yield curve, and currency
positions.
SECTOR SELECTION HELPED
Our concern over high valuations and low risk premiums for corporate
securities was a key factor in fund positioning for the period, given the
economic fundamentals and market technical factors that included deleveraging
and re-pricing of risk assets. This view led us to hold an underweight
position in the corporate sector relative to the Citigroup BIG Index. This
trade was a leading contributor to performance, as the 12-month period was the
worst on record for corporate bonds relative to Treasuries. It also helped
that we had an underweight position in the hardest-hit financial bonds and
essentially no exposure to subprime debt.
By the end of the reporting period, corporate bond valuations were beginning
to look more attractive, so we added incrementally to our corporate position.
Similarly, we bought some very high-quality mortgage-backed and municipal
bonds because their yields were at such historically attractive levels
compared with Treasuries. Indeed, we were able to add some pre-refunded
municipals (backed by Treasury bonds) offering yields higher than Treasuries.
Our decision to overweight Treasury inflation-indexed securities also added
value.
CURVE, CURRENCY TRADES CONTRIBUTED
The portfolio benefited significantly from a yield-curve steepening bias we
had in place throughout the year using two- and 10-year Treasury futures. We
put this trade on in 2007 when the yield curve was "inverted" (an unusual
situation where yields on short-term notes exceed those of long-term bonds).
During the period, Fed rate cuts and economic and financial concerns drove
short-term yields down dramatically, while long-term yields didn't fall nearly
as much because of inflation concerns.
Portfolio at a Glance
As of As of
3/31/08 3/31/07
Average Duration (effective) 4.6 years 4.6 years
Weighted Average Life 7.4 years 6.9 years
Yields as of March 31, 2008
30-day SEC Yield
Investor Class 4.30%
Institutional Class 4.50%
A Class 3.88%
B Class 3.31%
C Class 3.30%
R Class 3.74%
*All fund returns referenced in this commentary are for Investor Class shares.
------
5
Diversified Bond
Finally, our Japanese yen exposure also contributed to relative performance.
We established this position in early 2007 when the yen reached a 4 1/2-year
low to the U.S. dollar. This positioning added value in the reporting period,
before we closed it out in the first quarter of 2008 as the economic and
valuation fundamentals underpinning the trade became less compelling.
MANAGEMENT CHANGE
In March 2008, Macro Strategy Team Representative Jim Keegan left American
Century Investments to accept an asset management position in his native New
York. We wish him well. Diversified Bond continues to be actively managed by
the investment team shown at the top of page 5, demonstrating a key advantage
of our team approach to managing portfolios.
OUTLOOK
"We think the probability of recession is very high," says Macro Strategy Team
Representative Bob Gahagan. "So we expect the Fed to continue cutting interest
rates as the economy slows and the unemployment rate rises. But inflation
pressures are a growing longer-term concern; as a result, we believe
'stagflation' is a real risk. In that sort of environment, we think it's
reasonable to expect short-term rates to decline from current levels, while
yields on longer-term notes and bonds remain volatile, particularly as
deleveraging continues, risk is re-priced, and inflation fears rise."
"We're likely to overweight short- and intermediate-term bonds," Gahagan
continues. "In terms of our sector allocations, we think mortgages represent
good value, and expect to maintain our overweight position in
inflation-indexed bonds. Finally, we're looking carefully at the relative
values between government and corporate bonds for an entry point into select,
high-quality corporates that we believe represent compelling values."
Types of Investments in Portfolio
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
Mortgage-Backed Securities 24.5% 24.5%
Collateralized Mortgage Obligations 16.4% 13.6%
U.S. Treasury Securities 14.4% 17.3%
Corporate Bonds 14.0% 12.1%
U.S. Government Agency Securities 5.1% 7.3%
Municipal Securities 4.2% 0.2%
Asset-Backed Securities 1.3% 3.8%
Sovereign Governments & Agencies 0.2% 2.2%
Temporary Cash Investments 4.3% 0.3%
Temporary Cash Investments --
Securities Lending Collateral 15.6% 18.7%
Portfolio Composition by Credit Rating
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
AAA 80% 84%
AA 3% 4%
A 10% 5%
BBB 7% 7%
Ratings provided by independent research companies. These ratings are listed
in Standard & Poor's format even if they were provided by other sources.
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6
SCHEDULE OF INVESTMENTS
Diversified Bond
MARCH 31, 2008
Principal Amount Value
U.S. Government Agency Mortgage-Backed Securities(1) -- 28.3%
$ 5,299 FHLMC, 6.50%, 2/1/09 $5,420
1,510,995 FHLMC, 5.00%, 10/1/10(2) 1,553,465
13,253 FHLMC, 6.50%, 12/1/12 13,884
170,937 FHLMC, 6.00%, 1/1/13 176,486
25,445 FHLMC, 7.00%, 11/1/13 26,686
52,156 FHLMC, 7.00%, 6/1/14 54,798
96,925 FHLMC, 6.50%, 6/1/16 101,578
163,165 FHLMC, 6.50%, 6/1/16 170,999
2,231,129 FHLMC, 5.00%, 11/1/17(2) 2,266,189
225,840 FHLMC, 4.50%, 1/1/19 225,614
9,680,471 FHLMC, 5.00%, 1/1/21(2) 9,800,731
3,815,084 FHLMC, 5.00%, 4/1/21(2) 3,862,479
19,092 FHLMC, 7.00%, 9/1/27 20,289
30,865 FHLMC, 6.50%, 1/1/28 32,357
4,647 FHLMC, 7.00%, 2/1/28 4,939
181,574 FHLMC, 6.50%, 3/1/29 190,135
111,666 FHLMC, 6.50%, 6/1/29 117,031
16,955 FHLMC, 7.00%, 8/1/29 18,018
42,170 FHLMC, 7.50%, 8/1/29 45,716
2,819 FHLMC, 6.50%, 5/1/31 2,948
104,968 FHLMC, 6.50%, 5/1/31 109,788
1,672 FHLMC, 6.50%, 6/1/31 1,749
8,999 FHLMC, 6.50%, 6/1/31 9,412
4,005 FHLMC, 6.50%, 6/1/31 4,189
2,755 FHLMC, 6.50%, 6/1/31 2,881
9,693 FHLMC, 6.50%, 6/1/31 10,138
63,558 FHLMC, 6.50%, 6/1/31 66,477
2,308,688 FHLMC, 5.50%, 12/1/33(2) 2,339,332
651,436 FHLMC, 6.50%, 7/1/47 669,681
45,808,623 FNMA, 6.00%, settlement date 4/14/08(3) 46,932,355
13,694,000 FNMA, 6.50%, settlement date 4/14/08(3) 14,183,985
13,508 FNMA, 6.00%, 2/1/09 13,745
11,859 FNMA, 6.00%, 5/1/13 12,278
23,247 FNMA, 6.00%, 5/1/13 24,014
60,058 FNMA, 6.00%, 7/1/13 62,039
96,487 FNMA, 6.00%, 12/1/13 99,670
71,800 FNMA, 6.00%, 1/1/14 74,168
122,626 FNMA, 6.00%, 2/1/14 126,671
131,589 FNMA, 6.00%, 4/1/14 135,930
503,303 FNMA, 5.50%, 12/1/16 516,688
969,961 FNMA, 5.50%, 12/1/16(2) 995,757
3,831,980 FNMA, 4.50%, 5/1/19(2) 3,826,665
101,820 FNMA, 6.50%, 1/1/26 106,599
12,150 FNMA, 7.00%, 12/1/27 12,939
Principal Amount Value
$ 6,309 FNMA, 6.50%, 1/1/28 $6,603
6,081 FNMA, 7.00%, 1/1/28 6,476
26,692 FNMA, 7.50%, 4/1/28 28,900
101,967 FNMA, 7.00%, 5/1/28 108,600
5,526 FNMA, 7.00%, 6/1/28 5,886
24,202 FNMA, 6.50%, 1/1/29 25,314
65,511 FNMA, 6.50%, 4/1/29 68,496
33,710 FNMA, 7.00%, 7/1/29 35,903
39,535 FNMA, 7.00%, 7/1/29 42,108
105,270 FNMA, 7.50%, 7/1/29 113,857
100,194 FNMA, 7.50%, 8/1/30 108,188
46,492 FNMA, 7.50%, 9/1/30 50,201
242,124 FNMA, 7.00%, 9/1/31 257,643
146,322 FNMA, 6.50%, 1/1/32 152,710
1,233,556 FNMA, 7.00%, 6/1/32(2) 1,311,264
542,426 FNMA, 6.50%, 8/1/32 566,109
3,221,285 FNMA, 5.50%, 6/1/33(2) 3,262,868
15,612,035 FNMA, 5.50%, 7/1/33(2) 15,813,572
2,661,793 FNMA, 5.50%, 8/1/33(2) 2,696,154
3,386,045 FNMA, 5.50%, 9/1/33(2) 3,429,755
22,220,351 FNMA, 5.00%, 11/1/33(2) 22,057,744
6,954,061 FNMA, 5.50%, 1/1/34(2) 7,043,831
2,399,640 FNMA, 5.00%, 8/1/35(2) 2,378,924
8,488,408 FNMA, 4.50%, 9/1/35(2) 8,194,557
10,183,952 FNMA, 5.00%, 2/1/36(2) 10,096,034
13,159,979 FNMA, 5.50%, 4/1/36(2) 13,313,398
9,704,990 FNMA, 5.50%, 7/1/36 9,810,348
8,383,841 FNMA, 6.50%, 8/1/37(2) 8,614,950
316,949 FNMA, 6.50%, 6/1/47 324,080
1,129,133 FNMA, 6.50%, 8/1/47(2) 1,156,656
834,710 FNMA, 6.50%, 8/1/47 853,491
1,013,347 FNMA, 6.50%, 9/1/47(2) 1,036,147
1,830,668 FNMA, 6.50%, 9/1/47(2) 1,871,858
1,040,281 FNMA, 6.50%, 9/1/47(2) 1,063,687
138,062 FNMA, 6.50%, 9/1/47 141,169
1,314,392 FNMA, 6.50%, 9/1/47(2) 1,343,965
41,326 GNMA, 7.50%, 8/20/17 44,200
53,197 GNMA, 7.00%, 11/15/22 56,962
53,260 GNMA, 8.75%, 3/15/25 58,388
12,759 GNMA, 7.00%, 4/20/26 13,654
24,375 GNMA, 7.50%, 8/15/26 26,311
11,988 GNMA, 8.00%, 8/15/26 13,153
1,501 GNMA, 7.50%, 4/15/27 1,620
27,123 GNMA, 7.50%, 5/15/27 29,273
20,754 GNMA, 8.00%, 6/15/27 22,766
2,295 GNMA, 7.50%, 11/15/27 2,477
10,444 GNMA, 7.00%, 2/15/28 11,176
------
7
Diversified Bond
Principal Amount Value
$ 16,345 GNMA, 7.50%, 2/15/28 $17,632
15,825 GNMA, 6.50%, 3/15/28 16,556
2,929 GNMA, 7.00%, 4/15/28 3,135
2,212 GNMA, 6.50%, 5/15/28 2,314
13,443 GNMA, 6.50%, 5/15/28 14,064
52,496 GNMA, 6.50%, 5/15/28 54,921
17,355 GNMA, 7.00%, 12/15/28 18,571
1,783 GNMA, 8.00%, 12/15/29 1,956
127,115 GNMA, 7.00%, 5/15/31 135,813
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Cost $203,553,625) 206,963,300
-------------
Collateralized Mortgage Obligations(1) -- 21.3%
5,314,724 Banc of America Alternative Loan Trust, Series
2007-2, Class 2A4, 5.75%, 6/25/37(2) 5,079,287
17,055,750 Banc of America Commercial Mortgage Inc. STRIPS -
COUPON, Series 2004-1, Class XP, VRN, 0.80%,
4/1/08 276,752
6,766,366 Banc of America Commercial Mortgage Inc., Series
2000-2, Class B, 7.38%, 9/15/32(2) 7,048,733
8,250,000 Banc of America Commercial Mortgage Inc., Series
2004-2, Class A3 SEQ, 4.05%, 11/10/38(2) 8,046,860
5,830,000 Banc of America Commercial Mortgage Inc., Series
2006-6, Class A3 SEQ, 5.37%, 12/10/16(2) 5,544,627
5,750,000 Banc of America Commercial Mortgage Inc., Series
2007-4, Class A3 SEQ, 5.81%, 8/10/14(2) 5,573,303
1,041,811 Banc of America Large Loan, Series 2005 MIB1,
Class A1, VRN, 2.97%, 4/15/08, resets monthly off
the 1-month LIBOR plus 0.15% with no caps
(Acquired 11/18/05, Cost $1,041,811)(2)(4) 974,468
27,050,806 Bear Stearns Commercial Mortgage Securities Trust
STRIPS - COUPON, Series 2004 T16, Class X2, VRN,
0.91%, 4/1/08 649,008
3,525,592 Bear Stearns Commercial Mortgage Securities
Trust, Series 2006 BBA7, Class A1, VRN, 2.93%,
4/15/08, resets monthly off the 1-month LIBOR
plus 0.11% with no caps (Acquired 6/5/06, Cost
$3,525,592)(2)(4) 3,355,972
Principal Amount Value
$ 9,164,353 Commercial Mortgage Acceptance Corp. STRIPS -
COUPON, Series 1998 C2, Class X, VRN, 1.09%,
4/1/08 $267,040
129,004 Commercial Mortgage Pass-Through Certificates,
Series 2005 F10A, Class A1, VRN, 2.92%, 4/15/08,
resets monthly off the 1-month LIBOR plus 0.10%
with no caps (Acquired 3/18/05, Cost $129,004)(4) 125,252
82,855 Commercial Mortgage Pass-Through Certificates,
Series 2005 FL11, Class A1, VRN, 2.97%, 4/15/08,
resets monthly off the 1-month LIBOR plus 0.15%
with no caps (Acquired 11/18/05, Cost $82,856)(4) 80,133
1,026,822 Countrywide Home Loan Mortgage Pass-Through
Trust, Series 2003-37, Class 2A2, 4.25%,
9/25/33(2) 1,027,078
11,191,418 Countrywide Home Loan Mortgage Pass-Through
Trust, Series 2007-16, Class A1, 6.50%,
10/25/37(2)(5) 11,048,525
2,500,000 Credit Suisse First Boston Mortgage Securities
Corp., Series 2000 C1, Class B, 7.80%, 4/15/62(2) 2,627,598
2,000,000 Credit Suisse First Boston Mortgage Securities
Corp., Series 2001 CK3, Class A4 SEQ, 6.53%,
6/15/34(2) 2,054,260
5,344,414 Credit Suisse First Boston Mortgage Securities
Corp., Series 2003 AR28, Class 2A1, 4.41%,
12/25/33(2) 5,366,048
3,750,000 Credit Suisse Mortgage Capital Certificates,
Series 2007 TF2A, Class A1, VRN, 3.00%, 4/15/08,
resets monthly off the 1-month LIBOR plus 0.18%
with no caps (Acquired 7/24/07, Cost
$3,750,000)(2)(4) 3,578,021
4,255,534 FHLMC, Series 2567, Class OD, 5.00%, 8/15/15(2) 4,314,346
2,691,118 FHLMC, Series 2900, Class PA, 4.50%, 3/15/14(2) 2,706,379
3,054,000 FHLMC, Series 2926, Class EW SEQ, 5.00%,
1/15/25(2) 3,035,685
1,451,197 FHLMC, Series 2937, Class KA, 4.50%, 12/15/14(2) 1,459,907
10,000,000 FHLMC, Series 3203, Class VN SEQ, 5.00%,
6/15/22(2) 9,646,390
------
8
Diversified Bond
Principal Amount Value
$ 27,581 FNMA, Series 1989-35, Class G SEQ, 9.50%, 7/25/19 $30,451
1,085,000 FNMA, Series 2003-92, Class PD, 4.50%, 3/25/17(2) 1,101,458
6,755,247 GMAC Commercial Mortgage Securities, Inc., Series
2005 C1, Class A2 SEQ, 4.47%, 5/10/43(2) 6,671,341
4,150,000 Greenwich Capital Commercial Funding Corp.,
Series 2005 GG3, Class A2 SEQ, 4.31%, 8/10/42(2) 4,096,448
1,040,891 Greenwich Capital Commercial Funding Corp.,
Series 2006 FL4A, Class A1, VRN, 3.18%, 4/5/08,
resets monthly off the 1-month LIBOR plus 0.09%
with no caps (Acquired 12/14/06, Cost
$1,040,891)(2)(4) 974,584
1,079,044 GS Mortgage Securities Corp. II, Series 2007 EOP,
Class A1 VRN, 3.17%, 4/7/08, resets monthly off
the 1-month LIBOR plus 0.09% with no caps(2) 997,541
3,635,024 J.P. Morgan Mortgage Trust, Series 2005 A8, Class
6A2, 5.13%, 11/25/35(2) 3,544,770
8,200,000 LB-UBS Commercial Mortgage Trust, Series 2003 C3,
Class A3 SEQ, 3.85%, 5/15/27(2) 7,824,834
2,400,000 LB-UBS Commercial Mortgage Trust, Series 2004 C1,
Class A2 SEQ, 3.62%, 1/15/29(2) 2,362,894
5,729,000 LB-UBS Commercial Mortgage Trust, Series 2005 C3,
Class A3 SEQ, 4.65%, 7/30/30(2) 5,565,827
6,570,000 LB-UBS Commercial Mortgage Trust, Series 2006 C1,
Class A4 SEQ, 5.16%, 2/15/31(2) 6,408,542
119,682 Lehman Brothers Commercial Conduit Mortgage
Trust, Series 1998 C1, Class C, 6.68%, 2/18/30 119,369
914,707 Lehman Brothers Floating Rate Commercial Mortgage
Trust, Series 2006 LLFA, Class A1, VRN, 2.90%,
4/15/08, resets monthly off the 1-month LIBOR
plus 0.08% with no caps (Acquired 8/7/06-9/25/06,
Cost $914,656)(4) 860,649
144,794 MASTR Alternative Loans Trust, Series 2003-8,
Class 4A1, 7.00%, 12/25/33 144,304
Principal Amount Value
$ 2,575,124 Merrill Lynch Floating Trust, Series 2006-1,
Class A1, VRN, 2.89%, 4/15/08, resets monthly off
the 1-month LIBOR plus 0.07% with no caps
(Acquired 10/31/06, Cost $2,575,124)(2)(4) $ 2,411,701
3,737,427 Morgan Stanley Capital I, Series 2004 HQ3, Class
A2 SEQ, 4.05%, 1/13/41(2) 3,674,392
2,586,202 Thornburg Mortgage Securities Trust, Series
2006-5, Class A1, VRN, 2.72%, 4/25/08, resets
monthly off the 1-month LIBOR plus 0.12% with no
caps(2) 2,417,059
10,000,000 Wachovia Bank Commercial Mortgage Trust, Series
2006 C23, Class A4, 5.42%, 1/15/45(2) 9,899,640
2,325,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2005 AR4, Class A3, 4.59%,
4/25/35(2) 2,333,335
4,497,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2005 AR4, Class A4B, 4.68%,
4/25/35(2) 4,518,244
5,636,487 Wells Fargo Mortgage Backed Securities Trust,
Series 2007-11, Class A19 SEQ, 6.00%, 8/25/37 5,588,966
-------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $156,931,912) 155,432,021
-------------
U.S. Treasury Securities -- 18.7%
1,500,000 U.S. Treasury Bonds, 10.625%, 8/15/15(2)(5) 2,255,861
11,000,000 U.S. Treasury Bonds, 8.125%, 8/15/19(2)(5) 15,321,801
2,180,000 U.S. Treasury Bonds, 8.125%, 8/15/21(2)(5) 3,095,090
11,817,000 U.S. Treasury Bonds, 7.125%, 2/15/23(2)(5) 15,657,525
7,206,000 U.S. Treasury Bonds, 6.125%, 11/15/27(2)(5) 8,950,645
5,160,000 U.S. Treasury Bonds, 4.75%, 2/15/37(2)(5) 5,553,858
30,579,314 U.S. Treasury Inflation Indexed Bonds, 2.375%,
1/15/27(2)(5) 33,352,980
2,518,500 U.S. Treasury Inflation Indexed Bonds, 1.75%,
1/15/28(2)(5) 2,495,088
12,459,675 U.S. Treasury Inflation Indexed Notes, 3.00%,
7/15/12(2)(5) 13,962,635
------
9
Diversified Bond
Principal Amount Value
$ 7,424,235 U.S. Treasury Inflation Indexed Notes, 2.00%,
1/15/14(2)(5) $ 8,035,576
9,066,600 U.S. Treasury Inflation Indexed Notes, 1.625%,
1/15/18(2)(5) 9,509,313
16,293,000 U.S. Treasury Notes, 4.75%, 8/15/17(2)(5) 18,033,043
-------------
TOTAL U.S. TREASURY SECURITIES
(Cost $129,675,547) 136,223,415
-------------
Corporate Bonds -- 18.2%
AEROSPACE & DEFENSE -- 0.6%
675,000 Honeywell International Inc., 5.30%, 3/15/17(5) 696,082
610,000 Honeywell International Inc., 5.30%, 3/1/18 626,774
853,000 Lockheed Martin Corp., 6.15%, 9/1/36 883,962
1,183,000 United Technologies Corp., 4.375%, 5/1/10(2) 1,213,820
1,027,000 United Technologies Corp., 6.05%, 6/1/36(2) 1,064,507
-------------
4,485,145
-------------
AUTOMOBILES -- 0.2%
710,000 DaimlerChrysler N.A. Holding Corp., 5.875%,
3/15/11 727,045
800,000 DaimlerChrysler N.A. Holding Corp., 6.50%,
11/15/13 844,410
-------------
1,571,455
-------------
BEVERAGES -- 0.8%
1,400,000 Coca-Cola Co. (The), 5.35%, 11/15/17(2) 1,464,702
1,150,000 Diageo Capital plc, 5.75%, 10/23/17(2) 1,180,775
951,000 Miller Brewing Co., 4.25%, 8/15/08 (Acquired
8/6/03, Cost $947,738)(4) 954,922
700,000 PepsiCo, Inc., 4.65%, 2/15/13 725,620
1,490,000 SABMiller plc, 6.20%, 7/1/11 (Acquired 6/27/06,
Cost $1,488,942)(2)(4) 1,586,842
-------------
5,912,861
-------------
CAPITAL MARKETS -- 0.7%
3,180,000 Goldman Sachs Group, Inc. (The), 6.15%, 4/1/18 3,183,498
747,000 Merrill Lynch & Co., Inc., 4.25%, 2/8/10 729,963
1,376,000 Merrill Lynch & Co., Inc., 4.79%, 8/4/10(2) 1,373,190
-------------
5,286,651
-------------
CHEMICALS -- 0.3%
830,000 Air Products and Chemicals, Inc., 4.15%, 2/1/13 832,309
700,000 du Pont (E.I.) de Nemours & Co., 5.00%, 1/15/13(5) 729,959
Principal Amount Value
$ 550,000 Rohm and Haas Co., 5.60%, 3/15/13 $567,822
-------------
2,130,090
-------------
COMMERCIAL BANKS -- 0.9%
1,012,000 PNC Bank N.A., 4.875%, 9/21/17(2) 910,331
730,000 PNC Bank N.A., 6.00%, 12/7/17 704,922
741,000 PNC Funding Corp., 5.125%, 12/14/10 748,909
320,000 SunTrust Bank, 7.25%, 3/15/18 327,949
845,000 Wachovia Bank N.A., 4.80%, 11/1/14 800,619
1,320,000 Wachovia Bank N.A., 4.875%, 2/1/15(2) 1,249,153
1,167,000 Wells Fargo & Co., 4.625%, 8/9/10(5) 1,199,720
880,000 Wells Fargo & Co., 4.375%, 1/31/13 876,814
-------------
6,818,417
-------------
COMMERCIAL SERVICES & SUPPLIES -- 0.1%
540,000 Pitney Bowes, Inc., 5.75%, 9/15/17 550,824
-------------
COMPUTERS & PERIPHERALS -- 0.2%
1,550,000 Hewlett-Packard Co., 4.50%, 3/1/13(2) 1,574,868
-------------
CONSUMER FINANCE -- 0.3%
571,000 American Express Centurion Bank, 4.375%, 7/30/09 572,418
1,700,000 American Express Centurion Bank, 5.55%,
10/17/12(5) 1,717,780
-------------
2,290,198
-------------
DIVERSIFIED FINANCIAL SERVICES -- 1.3%
1,861,000 Bank of America Corp., 4.375%, 12/1/10(2) 1,895,988
949,000 Bank of America N.A., 5.30%, 3/15/17 944,927
825,000 Bank of America N.A., 6.00%, 10/15/36 791,856
834,000 Citigroup Inc., 5.00%, 9/15/14 787,240
773,000 General Electric Capital Corp., 6.125%, 2/22/11 823,013
1,080,000 General Electric Capital Corp., 5.625%, 9/15/17(2) 1,107,944
600,000 John Deere Capital Corp., 4.50%, 4/3/13 599,016
1,205,000 John Deere Capital Corp., 5.50%, 4/13/17(5) 1,239,729
1,000,000 Pricoa Global Funding I, 5.40%, 10/18/12
(Acquired 10/11/07, Cost $998,010)(2)(4) 1,058,002
-------------
9,247,715
-------------
------
10
Diversified Bond
Principal Amount Value
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.3%
$ 1,167,000 AT&T Corp., 7.30%, 11/15/11(5) $ 1,265,425
1,000,000 AT&T Inc., 6.80%, 5/15/36(2) 1,031,051
176,000 BellSouth Corp., 6.875%, 10/15/31(5) 179,490
870,000 British Telecommunications plc, 5.95%, 1/15/18(5) 844,827
494,000 Embarq Corp., 7.08%, 6/1/16 468,536
280,000 Qwest Corp., 7.875%, 9/1/11 280,700
800,000 Qwest Corp., 7.50%, 10/1/14(5) 784,000
1,263,000 Telecom Italia Capital SA, 4.00%, 1/15/10(2) 1,239,761
680,000 Telefonica Emisiones SAU, 7.05%, 6/20/36 713,380
686,000 Verizon Communications Inc., 5.55%, 2/15/16 683,790
580,000 Verizon Communications Inc., 5.50%, 2/15/18 566,172
489,000 Verizon Communications Inc., 6.25%, 4/1/37(5) 468,469
870,000 Verizon Communications Inc., 6.40%, 2/15/38 849,999
-------------
9,375,600
-------------
ELECTRIC UTILITIES -- 0.7%
1,123,000 Carolina Power & Light Co., 5.15%, 4/1/15(2) 1,145,447
545,000 Carolina Power & Light Co., 5.25%, 12/15/15 560,239
908,000 Cleveland Electric Illuminating Co. (The), 5.70%,
4/1/17 883,136
602,000 Florida Power Corp., 4.50%, 6/1/10 618,968
540,000 Florida Power Corp., 6.35%, 9/15/37 563,194
780,000 Southern California Edison Co., 5.625%, 2/1/36 750,163
425,000 Toledo Edison Co., 6.15%, 5/15/37 377,635
-------------
4,898,782
-------------
ELECTRICAL EQUIPMENT -- 0.1%
900,000 Rockwell Automation, Inc., 6.25%, 12/1/37 926,478
-------------
FOOD & STAPLES RETAILING -- 0.9%
820,000 CVS Caremark Corp., 5.75%, 6/1/17 834,825
1,580,000 Kroger Co. (The), 5.00%, 4/15/13(5) 1,591,203
1,170,000 SYSCO Corp., 4.20%, 2/12/13(5) 1,188,719
1,014,000 Wal-Mart Stores, Inc., 4.125%, 7/1/10(5) 1,043,440
Principal Amount Value
$ 1,060,000 Wal-Mart Stores, Inc., 5.875%, 4/5/27(5) $ 1,056,392
850,000 Wal-Mart Stores, Inc., 6.50%, 8/15/37 895,510
-------------
6,610,089
-------------
FOOD PRODUCTS -- 0.9%
1,566,000 Cadbury Schweppes U.S. Finance LLC, 3.875%,
10/1/08 (Acquired 6/14/05-11/28/05, Cost
$1,528,931)(2)(4) 1,562,816
880,000 Cargill Inc., 5.20%, 1/22/13 (Acquired 1/16/08,
Cost $879,270)(4) 889,048
1,460,000 General Mills, Inc., 5.65%, 9/10/12(2) 1,520,537
540,000 Kellogg Co., 6.60%, 4/1/11 582,962
900,000 Kellogg Co., 5.125%, 12/3/12 932,001
830,000 Kraft Foods Inc., 6.00%, 2/11/13 859,365
-------------
6,346,729
-------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.5%
1,531,000 Baxter Finco BV, 4.75%, 10/15/10(2) 1,582,672
1,130,000 Baxter International Inc., 5.90%, 9/1/16(2) 1,195,500
590,000 Baxter International Inc., 6.25%, 12/1/37 605,708
-------------
3,383,880
-------------
HEALTH CARE PROVIDERS & SERVICES -- 0.2%
1,826,000 Laboratory Corp. of America Holdings, 5.625%,
12/15/15(2) 1,809,827
-------------
HOTELS, RESTAURANTS & LEISURE -- 0.6%
1,550,000 McDonald's Corp., 5.35%, 3/1/18(2) 1,573,142
560,000 McDonald's Corp., 6.30%, 10/15/37 577,183
1,390,000 Royal Caribbean Cruises Ltd., 7.00%, 6/15/13(2) 1,307,320
1,120,000 Yum! Brands, Inc., 6.875%, 11/15/37 1,074,839
-------------
4,532,484
-------------
HOUSEHOLD PRODUCTS -- 0.2%
560,000 Kimberly-Clark Corp., 6.125%, 8/1/17 606,680
1,030,000 Procter & Gamble Co. (The), 5.55%, 3/5/37(2) 1,032,165
-------------
1,638,845
-------------
INDUSTRIAL CONGLOMERATES -- 0.5%
2,734,000 General Electric Co., 5.00%, 2/1/13(2) 2,836,178
560,000 General Electric Co., 5.25%, 12/6/17 560,699
-------------
3,396,877
-------------
------
11
Diversified Bond
Principal Amount Value
INSURANCE -- 0.8%
$ 1,280,000 Allstate Financial Global Funding, 4.25%, 9/10/08
(Acquired 9/3/03, Cost $1,277,491)(2)(4) $ 1,286,522
956,000 Hartford Financial Services Group Inc. (The),
5.375%, 3/15/17 928,695
610,000 Hartford Financial Services Group Inc. (The),
6.30%, 3/15/18 612,724
1,120,000 Lincoln National Corp., 6.30%, 10/9/37(2) 1,015,606
900,000 Prudential Financial, Inc., 6.00%, 12/1/17(5) 909,429
600,000 Prudential Financial, Inc., 5.40%, 6/13/35 497,413
570,000 Travelers Companies, Inc. (The), 6.25%, 6/15/37 530,028
-------------
5,780,417
-------------
IT SERVICES -- 0.4%
1,550,000 Computer Sciences Corp., 5.50%, 3/15/13 (Acquired
2/27/08, Cost $1,542,297)(2)(4) 1,557,538
1,100,000 International Business Machines Corp., 5.70%,
9/14/17(2) 1,155,268
-------------
2,712,806
-------------
MACHINERY -- 0.6%
550,000 Atlas Copco AB, 5.60%, 5/22/17 (Acquired 5/15/07,
Cost $549,753)(4) 549,956
560,000 Caterpillar Financial Services Corp., 4.85%,
12/7/12(5) 573,564
3,180,000 Caterpillar Financial Services Corp., 5.45%,
4/15/18(2) 3,243,762
-------------
4,367,282
-------------
MEDIA -- 0.8%
1,104,000 Comcast Corp., 5.90%, 3/15/16(2) 1,097,057
635,000 News America Holdings, 7.75%, 1/20/24 701,651
1,600,000 Rogers Cable Inc., 6.25%, 6/15/13(2) 1,673,092
1,650,000 Time Warner Cable Inc., 5.40%, 7/2/12(2) 1,623,301
445,000 Time Warner Inc., 5.50%, 11/15/11 442,341
176,000 Time Warner Inc., 7.625%, 4/15/31 184,630
-------------
5,722,072
-------------
Principal Amount Value
METALS & MINING -- 0.2%
$ 1,045,000 Xstrata Finance Canada Ltd., 5.50%, 11/16/11
(Acquired 11/8/06-11/17/06, Cost $1,045,503)(4) $ 1,073,413
447,000 Xstrata Finance Canada Ltd., 5.80%, 11/15/16
(Acquired 11/8/06, Cost $445,896)(4) 432,564
-------------
1,505,977
-------------
MULTI-UTILITIES -- 0.8%
560,000 CenterPoint Energy Resources Corp., 6.125%,
11/1/17 573,199
950,000 CenterPoint Energy Resources Corp., 6.25%, 2/1/37 889,216
1,027,000 Consolidated Edison Co. of New York, Inc., Series
2006 C, 5.50%, 9/15/16(2) 1,058,440
584,000 Dominion Resources Inc., 4.75%, 12/15/10 598,244
1,120,000 NSTAR Electric Co., 5.625%, 11/15/17(2) 1,177,225
614,000 Pacific Gas and Electric Co., 6.05%, 3/1/34 604,023
367,000 Pacific Gas and Electric Co., 5.80%, 3/1/37 348,483
610,000 Pacific Gas and Electric Co., 6.35%, 2/15/38 620,144
-------------
5,868,974
-------------
MULTILINE RETAIL -- 0.3%
396,000 Federated Retail Holdings, Inc., 5.35%, 3/15/12 377,790
560,000 Kohl's Corp., 6.875%, 12/15/37 497,006
1,390,000 Macy's Retail Holdings, Inc., 5.875%, 1/15/13(2) 1,338,893
-------------
2,213,689
-------------
OIL, GAS & CONSUMABLE FUELS -- 1.4%
560,000 Canadian Natural Resources Ltd., 5.70%, 5/15/17 567,507
580,000 Canadian Natural Resources Ltd., 6.75%, 2/1/39(5) 593,964
1,240,000 Enbridge Energy Partners, L.P., 6.50%, 4/15/18
(Acquired 3/31/08, Cost $1,233,378)(4) 1,233,378
1,776,000 Enterprise Products Operating L.P., 4.95%,
6/1/10(2) 1,813,769
600,000 Enterprise Products Operating L.P., 6.30%, 9/15/17 604,430
810,000 Nexen Inc., 6.40%, 5/15/37 778,378
1,386,000 Premcor Refining Group Inc. (The), 6.125%,
5/1/11(2) 1,468,334
780,000 Tesoro Corp., 6.25%, 11/1/12 739,050
490,000 Tesoro Corp., 6.50%, 6/1/17 441,000
------
12
Diversified Bond
Principal Amount Value
$ 280,000 TransCanada PipeLines Ltd., 6.20%, 10/15/37 $270,946
773,000 XTO Energy Inc., 5.30%, 6/30/15 783,454
615,000 XTO Energy Inc., 6.10%, 4/1/36(5) 610,508
-------------
9,904,718
-------------
PHARMACEUTICALS -- 0.9%
1,021,000 Abbott Laboratories, 5.875%, 5/15/16(2) 1,090,821
560,000 Abbott Laboratories, 6.15%, 11/30/37 580,630
2,420,000 AstraZeneca plc, 5.40%, 9/15/12(2) 2,556,502
830,000 AstraZeneca plc, 5.90%, 9/15/17 879,275
1,205,000 Wyeth, 5.95%, 4/1/37 1,181,354
-------------
6,288,582
-------------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.1%
1,080,000 ProLogis, 5.625%, 11/15/16(5) 984,357
-------------
ROAD & RAIL -- 0.1%
810,000 Union Pacific Corp., 5.75%, 11/15/17 822,191
-------------
SOFTWARE -- 0.3%
573,000 Intuit Inc., 5.75%, 3/15/17 556,424
1,733,000 Oracle Corp., 5.00%, 1/15/11(2) 1,780,602
-------------
2,337,026
-------------
SPECIALTY RETAIL -- 0.1%
560,000 Lowe's Companies, Inc., 5.60%, 9/15/12(5) 587,434
-------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.1%
708,000 Vodafone Group plc, 5.625%, 2/27/17 689,850
-------------
TOTAL CORPORATE BONDS
(Cost $131,481,868) 132,573,190
-------------
U.S. Government Agency Securities -- 6.5%
14,000,000 FHLMC, 2.875%, 4/30/10(2)(5) 14,169,694
20,000,000 FHLMC, 5.625%, 3/15/11(2)(5) 21,634,540
5,461,000 FNMA, 4.375%, 7/17/13(2)(5) 5,739,036
5,700,000 FNMA, 5.375%, 6/12/17(2)(5) 6,276,190
-------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES
(Cost $46,426,593) 47,819,460
-------------
Municipal Securities -- 5.5%
7,000,000 California Department of Water Resources Power
Supply Rev., Series 2002 A, 5.125%, 5/1/12,
Prerefunded at 101% of Par(2)(6) 7,689,570
Principal Amount Value
$10,200,000 Clark County School District GO, Series 2004 D,
(Building Bonds), 5.00%, 12/15/14, Prerefunded at
100% of Par (MBIA)(2)(6) $ 11,271,102
10,100,000 Clark County School District GO, Series 2005 C,
(Building Bonds), 5.00%, 12/15/15, Prerefunded at
100% of Par (FSA)(2)(6) 11,249,178
1,477,000 Illinois GO, (Taxable Pension), 5.10%, 6/1/33(2) 1,470,250
7,600,000 Massachusetts GO, Series 2005 C, 5.00%, 9/1/15,
Prerefunded at 100% of Par(2)(6) 8,444,664
-------------
TOTAL MUNICIPAL SECURITIES
(Cost $39,264,646) 40,124,764
-------------
Adjustable-Rate U.S. Government Agency Mortgage-Backed Securities(1) -- 3.4%
4,783,303 FHLMC, 6.80%, 8/1/36(2) 4,894,444
6,375,362 FHLMC, 5.99%, 11/1/36(2) 6,512,146
4,092,772 FNMA, 6.49%, 5/1/36(2) 4,228,508
2,739,400 FNMA, 6.42%, 9/1/36(2) 2,819,486
2,926,899 FNMA, 6.45%, 9/1/36(2) 3,030,784
3,399,243 FNMA, 5.97%, 6/1/37(2) 3,477,215
-------------
TOTAL ADJUSTABLE-RATE U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES
(Cost $24,823,439) 24,962,583
-------------
Asset-Backed Securities(1) -- 1.7%
1,082,730 Accredited Mortgage Loan Trust, Series 2006-2,
Class A1, VRN, 2.64%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.04% with no caps(2) 1,063,314
2,400,000 CNH Equipment Trust, Series 2007 C, Class A3A
SEQ, 5.21%, 12/15/11(2) 2,439,360
44,266 Countrywide Asset-Backed Certificates, Series
2006 BC2, Class 2A1, VRN, 2.64%, 4/25/08, resets
monthly off the 1-month LIBOR plus 0.04% with no
caps 44,164
1,164,000 Detroit Edison Securitization Funding LLC, Series
2001-1, Class A4 SEQ, 6.19%, 3/1/13(2) 1,220,114
1,566,101 Long Beach Mortgage Loan Trust, Series 2006-6,
Class 2A1, VRN, 2.64%, 4/25/08, resets monthly
off the 1-month LIBOR plus 0.04% with no caps(2) 1,549,828
------
13
Diversified Bond
Principal Amount Value
$ 24,658 Nomura Home Equity Loan, Inc., Series 2006 HE2,
Class A1, VRN, 2.66%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.06% with no caps $24,382
1,455,941 SLM Student Loan Trust, Series 2006-5, Class A2,
VRN, 3.32%, 4/25/08, resets quarterly off the
3-month LIBOR minus 0.01% with no caps(2) 1,447,412
1,020,752 SLM Student Loan Trust, Series 2006-10, Class A2,
VRN, 3.34%, 4/25/08, resets quarterly off the
3-month LIBOR plus 0.01% with no caps(2) 1,016,776
2,585,673 SLM Student Loan Trust, Series 2007-8, Class A1,
VRN, 3.56%, 4/25/08, resets quarterly off the
3-month LIBOR plus 0.23% with no caps(2) 2,550,637
772,717 Soundview Home Equity Loan Trust, Series 2006-3,
Class A1, VRN, 2.64%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.04% with no caps 767,957
-------------
TOTAL ASSET-BACKED SECURITIES
(Cost $12,116,648) 12,123,944
-------------
Sovereign Governments & Agencies -- 0.2%
246,000 Hydro Quebec, 8.40%, 1/15/22 337,365
1,305,000 Province of Quebec, 5.00%, 7/17/09(2) 1,348,792
-------------
TOTAL SOVEREIGN GOVERNMENTS & AGENCIES
(Cost $1,610,597) 1,686,157
-------------
Temporary Cash Investments -- 5.5%
40,256,000 FNMA Discount Notes, 1.35%, 4/1/08(2)(7)
(Cost $40,256,000) 40,256,000
-------------
Temporary Cash Investments -- Securities Lending Collateral(8) -- 20.3%
6,000,143 Bancaja US Debt, SAu, VRN, 4.55%, 4/10/08, resets
quarterly off the 3-month LIBOR plus 0.05% with
no caps 5,998,356
4,999,768 BASF AG, VRN, 3.89%, 4/21/08, resets quarterly
off the 3-month LIBOR minus 0.01% with no caps 4,996,244
Principal Amount Value
$ 5,997,759 K2 (USA) LLC, VRN, 2.37%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps $ 5,887,428
5,997,755 Links Finance LLC, VRN, 2.37%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps 5,855,760
5,000,000 Merrill Lynch & Co., Inc., VRN, 2.42%, 4/1/08,
resets quarterly off the Federal Reserve Prime
Loan Rate minus 2.83% with no caps 4,893,930
3,003,297 Nationwide Building Society, VRN, 3.00%, 6/9/08,
resets quarterly off the 3-month LIBOR plus 0.13%
with no caps 2,997,697
4,997,744 Tango Finance Corp., VRN, 2.38%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps 4,924,270
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery
value $28,001,789) 28,000,000
Repurchase Agreement, BNP Paribas, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value
$33,672,825) 33,670,674
Repurchase Agreement, Deutsche Bank AG, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.25%, dated 3/31/08, due 4/1/08 (Delivery
value $23,001,438) 23,000,000
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in
a pooled account at the lending agent), 2.15%, dated 3/31/08, due
4/1/08 (Delivery value $28,185,253) 28,183,570
-------------
TOTAL TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL
(Cost $148,850,781) 148,407,929
-------------
TOTAL INVESTMENT SECURITIES -- 129.6%
(Cost $934,991,656) 946,572,763
-------------
OTHER ASSETS AND LIABILITIES -- (29.6)% (216,185,813)
-------------
TOTAL NET ASSETS -- 100.0% $ 730,386,950
=============
------
14
Diversified Bond
Futures Contracts
Expiration Underlying Face Unrealized
Contracts Purchased Date Amount at Value Gain (Loss)
1,198 U.S. Treasury 2-Year Notes June 2008 $257,158,188 $1,889,654
781 U.S. Treasury 5-Year Notes June 2008 89,217,047 788,998
---------------- -------------
$346,375,235 $2,678,652
================ =============
Expiration Underlying Face Unrealized
Contracts Sold Date Amount at Value Gain (Loss)
341 U.S. Long Bond June 2008 $ 40,509,734 $ (346,525)
808 U.S. Treasury 10-Year Notes June 2008 96,114,125 (2,388,879)
---------------- -------------
$136,623,859 $(2,735,404)
================ =============
Swap Agreements
Expiration Unrealized
Notional Amount Description of Agreement Date Gain (Loss)
CREDIT DEFAULT
$21,100,000 Pay quarterly a fixed rate equal to June 2012 $1,021,001
0.35% multiplied by the notional
amount and receive from Barclays
Bank plc upon each default event of
one of the issues of Dow Jones CDX
N.A. Investment Grade 8, par value
of the proportional notional amount.
4,520,000 Pay quarterly a fixed rate equal to September 92,764
0.47% multiplied by the notional 2012
amount and receive from Deutsche
Bank AG upon each default event of
JPMorgan Chase & Co., par value of
the proportional notional amount of
JPMorgan Chase & Co., 4.75%, 3/1/15.
6,000,000 Pay quarterly a fixed rate equal to September 298,556
0.63% multiplied by the notional 2012
amount and receive from Deutsche
Bank AG upon each default event of
Morgan Stanley, par value of the
proportional notional amount of
Morgan Stanley, 6.60%, 4/1/12.
2,750,000 Pay quarterly a fixed rate equal to December 11,065
0.40% multiplied by the notional 2012
amount and receive from Bank of
America N.A. upon each default event
of FHLMC, par value of the
proportional notional amount of
FHLMC, VRN, 5.08%, 2/7/11.
3,000,000 Pay quarterly a fixed rate equal to December 125,906
0.70% multiplied by the notional 2012
amount and receive from Morgan
Stanley Capital Services, Inc. upon
each default event of Citigroup
Inc., par value of the proportional
notional amount of Citigroup Inc.,
6.50%, 1/18/11.
4,000,000 Pay quarterly a fixed rate equal to December 42,427
0.72% multiplied by the notional 2012
amount and receive from Deutsche
Bank AG upon each default event of
Barclays Bank plc, par value of the
proportional notional amount of
Barclays Bank plc, VRN, 4.57%,
10/27/08.
1,370,000 Pay quarterly a fixed rate equal to December 64,934
0.73% multiplied by the notional 2012
amount and receive from Barclays
Bank plc upon each default event of
American International Group, Inc.,
par value of the proportional
notional amount of American
International Group, Inc., 4.25%,
5/15/13.
1,400,000 Pay quarterly a fixed rate equal to December 31,202
2.45% multiplied by the notional 2012
amount and receive from Bank of
America N.A. upon each default event
of Toll Brothers, Inc., par value of
the proportional notional amount of
Toll Brothers Finance Corp., 6.875%,
11/15/12.
------
15
Diversified Bond
Expiration Unrealized
Notional Amount Description of Agreement Date Gain (Loss)
$ 1,400,000 Pay quarterly a fixed rate equal to December $ 9,501
2.85% multiplied by the notional 2012
amount and receive from Barclays
Bank plc upon each default event of
Toll Brothers, Inc., par value of
the proportional notional amount of
Toll Brothers Finance Corp., 6.875%,
11/15/12.
550,000 Pay quarterly a fixed rate equal to March 2013 6,822
0.70% multiplied by the notional
amount and receive from Barclays
Bank plc upon each default event of
Rohm & Haas Company, par value of
the proportional notional amount of
Rohm & Haas Company, 7.85%, 7/15/29.
7,600,000 Pay quarterly a fixed rate equal to March 2017 248,287
0.12% multiplied by the notional
amount and receive from Barclays
Bank plc upon each default event of
Pfizer Inc., par value of the
proportional notional amount of
Pfizer Inc., 4.65%, 3/1/18.
3,010,000 Pay quarterly a fixed rate equal to September 217,709
0.64% multiplied by the notional 2017
amount and receive from Deutsche
Bank AG upon each default event of
JPMorgan Chase & Co., par value of
the proportional notional amount of
JPMorgan Chase & Co., 6.75%, 2/1/11.
-----------
$2,170,174
===========
Notes to Schedule of Investments
CDX = Credit Derivative Indexes
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance, Inc.
GMAC = General Motors Acceptance Corporation
GNMA = Government National Mortgage Association
GO = General Obligation
LB-UBS = Lehman Brothers Inc. -- UBS AG
LIBOR = London Interbank Offered Rate
MASTR = Mortgage Asset Securitization Transactions, Inc.
MBIA = MBIA Insurance Corporation
resets = The frequency with which a security's coupon changes, based on
current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will
vary significantly from current market rates.
SEQ = Sequential Payer
STRIPS = Separate Trading of Registered Interest and Principal of Securities
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) Final maturity indicated, unless otherwise noted.
(2) Security, or a portion thereof, has been segregated for forward
commitments, futures contracts and/or swap agreements.
(3) Forward commitment.
(4) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at March 31, 2008 was $24,545,781,
which represented 3.4% of total net assets.
(5) Security, or a portion thereof, was on loan as of March 31, 2008.
(6) Escrowed to maturity in U.S. government securities or state and local
government securities.
(7) The rate indicated is the yield to maturity at purchase.
(8) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
------
16
PERFORMANCE
High-Yield
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year 5 years 10 years Inception Date
INVESTOR CLASS -1.41%(1) 6.68%(1) 2.81%(1) 3.31% 9/30/97
MERRILL LYNCH US HIGH
YIELD MASTERS II
CONSTRAINED INDEX -3.28% 8.46% 4.95% 5.23% --
LIPPER HIGH CURRENT
YIELD FUNDS AVERAGE
RETURN(2) -4.56% 7.40% 3.32% 3.63% --
Investor Class's Lipper
Ranking(2) 37 of 453 242 of 332 112 of 160 92 of 140 --
Institutional Class(1) -1.21% -- -- 5.01% 8/2/04
A Class(1)(3)
No sales charge* -1.65% 6.43% -- 6.40%
With sales charge* -6.14% 5.45% -- 5.60% 3/8/02
B Class(1)
No sales charge* -2.39% 5.62% -- 6.17%
With sales charge* -6.39% 5.46% -- 6.02% 1/31/03
C Class(1) -2.39% 5.66% -- 5.52% 12/10/01
R Class(1) -1.90% -- -- 3.03% 7/29/05
* Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 4.50% maximum initial
sales charge for fixed-income funds and may be subject to a maximum CDSC of
1.00%. B Class shares redeemed within six years of purchase are subject to a
CDSC that declines from 5.00% during the first year after purchase to 0.00%
the sixth year after purchase. C Class shares redeemed within 12 months of
purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual
funds provide performance information net of maximum sales charges in all
cases where charges could be applied.
(1) Class returns would have been lower if American Century had not
voluntarily waived a portion of its management fees and reimbursed a portion
of its distribution and services fees, as applicable.
(2) Data provided by Lipper Inc. - A Reuters Company. © 2008 Reuters. All
rights reserved. Any copying, republication or redistribution of Lipper
content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Lipper. Lipper shall not be
liable for any errors or delays in the content, or for any actions taken in
reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
Lipper Rankings -- Rankings are based only on the universe shown and are
based on average annual total returns. This listing might not represent the
complete universe of funds tracked by Lipper.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
(3) Prior to September 4, 2007, the A Class was referred to as the Advisor
Class. Performance, with sales charge, prior to that date has been adjusted to
reflect the A Class's current sales charge.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline. In
addition, the lower-rated securities in which the fund invests are subject to
greater credit risk, default risk and liquidity risk.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
------
17
High-Yield
Growth of $10,000 Over 10 Years
$10,000 investment made March 31, 1998
One-Year Returns Over 10 Years
Periods ended March 31
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Investor Class -2.41% 0.90% -8.15% -0.33% 5.90% 15.53% 5.17% 6.29%* 8.54%* -1.41%*
Merrill Lynch
US High Yield
Masters II
Constrained
Index 1.79% -1.09% 1.99% 0.51% 4.62% 22.20% 6.92% 6.96% 11.06% -3.28%
*Returns would have been lower, along with the ending value, if a portion of
the class's management fees had not been waived during the period.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline. In
addition, the lower-rated securities in which the fund invests are subject to
greater credit risk, default risk and liquidity risk.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
------
18
PORTFOLIO COMMENTARY
High-Yield
Lead Portfolio Manager: Mike Difley
Macro Strategy Team Representative: Dave MacEwen
PERFORMANCE SUMMARY
The High-Yield fund returned -1.41%* in the 12 months ended March 31, 2008.
That compares with the -3.28% return of the Merrill Lynch US High Yield Master
II Constrained Index. See page 17 for additional performance comparisons.
It was a year of remarkable volatility and change in the high-yield market,
leading to the first negative fiscal-year return for the fund since 2002.
However, the portfolio held up better than its benchmark because of our bias
toward higher-quality bonds in more defensive sectors, as well as some of our
individual security selection decisions.
TALE OF TWO HIGH-YIELD MARKETS
The fiscal year covered two distinct periods in the high-yield market, marked
by a radical shift in investor attitudes toward risk. Initially, the riskiest,
lowest-rated portion of the market did best by a wide margin and the yield
spread over Treasury bonds touched historic lows. But this began to change in
the summer of 2007, when the extent of the subprime crisis and slowdown in
housing and the broader economy became apparent. The resulting aversion to
risk sent high-yield bond prices lower, and the new issue market came to a
standstill. Add it all up, and higher-quality BB bonds outperformed the
lower-rated segments of the market for the year, and defensive names in less
cyclically sensitive sectors generally held up best.
CREDIT STRUCTURE WAS KEY
A key contribution to the portfolio's relative return came from its credit
allocation -- we held an underweight position in CCC bonds in favor of BB and
B rated securities. We didn't like the risk/reward trade-off for the
lowest-quality bonds in a slowing economy with yield spreads at historic lows.
This bias toward the higher-quality slice of the market limited our relative
results through about June, when the market generally ignored risk and simply
favored the highest-yielding investments regardless of quality. But CCC bonds
-- which suffered from more pronounced spread-widening amid a general
re-pricing of risk -- ultimately underperformed BBs and Bs for the full year.
Portfolio at a Glance
As of As of
3/31/08 3/31/07
Weighted Average Maturity 4.3 years 4.7 years
Average Duration (effective) 3.8 years 3.5 years
Yields as of March 31, 2008(1)
30-day SEC Yield
Investor Class 7.77%
Institutional Class 7.97%
A Class 7.17%
B Class 6.76%
C Class 6.78%
R Class 7.21%
(1) The yields presented reflect the waiver of a portion of the fund's
management fees. Without such waiver, the 30-day yields would have been lower.
*All fund returns referenced in this commentary are for Investor Class shares.
------
19
High-Yield
SECTOR, SECURITY SELECTION HELPED
In terms of our sector allocations, we favored health care and utilities names
because they're in less economically sensitive areas of the economy and should
hold up better given a slowdown in growth. These bonds outperformed,
contributing to relative results. It also helped to be underweight financials.
However, some of the automotive finance bonds we held significantly
underperformed the index, limiting the portfolio's relative return.
Our individual security selection also contributed to relative performance,
behind an overweight position in waste management firm Allied Waste, and an
underweight position in paper and forest products company AbitibiBowater.
MANAGEMENT CHANGE
In March 2008, Macro Strategy Team Representative Jim Keegan left American
Century Investments to accept an asset management position in his native New
York. High-Yield Bond continues to be actively managed by Mike Difley, who has
been a member of the management team since the portfolio's inception and lead
portfolio manager since late 2001. This continuity demonstrates a key
advantage of our team approach to managing portfolios.
OUTLOOK
"While generic high-yield spreads are certainly more attractive than they were
just a few months ago," says Portfolio Manager Mike Difley, "we believe
careful credit selection based upon fundamental research will be increasingly
important. That's because we see an environment where returns are likely to be
driven by individual security selection, rather then a broad, thematic
approach to investing. As always, we will look for what we believe are
attractive investment opportunities with compelling risk/reward profiles."
Top Five Industries* as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Oil, Gas & Consumable Fuels 9.5% 8.5%
Media 8.2% 10.8%
Hotels, Restaurants & Leisure 5.8% 7.1%
Diversified Financial Services 5.7% 6.3%
Diversified Telecommunication Services 5.1% 5.1%
* Excludes securities in the Diversified industry category. These securities
represent investments in diversified pools of underlying securities in multiple
industry categories.
Portfolio Composition by Credit Rating
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
AAA 11% 8%
BBB 1% 1%
BB 38% 31%
B 43% 48%
CCC or lower 7% 12%
Ratings provided by independent research companies. These ratings are listed
in Standard & Poor's format even if they were provided by other sources.
------
20
SCHEDULE OF INVESTMENTS
High-Yield
MARCH 31, 2008
Principal Amount Value
Corporate Bonds -- 86.5%
AEROSPACE & DEFENSE -- 1.1%
$ 400,000 DRS Technologies, Inc., 7.625%, 2/1/18(1) $ 402,007
350,000 L-3 Communications Corp., 6.125%, 7/15/13(1) 343,875
250,000 L-3 Communications Corp., 6.375%, 10/15/15 245,625
------------
991,507
------------
AUTO COMPONENTS -- 0.6%
500,000 Tenneco Inc., 8.125%, 11/15/15 (Acquired 11/1/07,
Cost $500,000)(2) 498,750
------------
AUTOMOBILES -- 1.4%
500,000 Ford Motor Co., 7.45%, 7/16/31(1) 332,500
1,300,000 General Motors Corp., 8.375%, 7/15/33(1)(3) 923,000
------------
1,255,500
------------
CHEMICALS -- 1.4%
550,000 Hexion US Finance Corp./Hexion Nova Scotia
Finance ULC, 9.75%, 11/15/14 592,625
750,000 Ineos Group Holdings plc, 8.50%, 2/15/16
(Acquired 5/14/07, Cost $757,500)(1)(2)(3) 586,875
------------
1,179,500
------------
COMMERCIAL SERVICES & SUPPLIES -- 3.9%
750,000 Allied Waste North America, Inc., 6.375%,
4/15/11(1)(3) 741,563
750,000 Allied Waste North America, Inc., 7.875%,
4/15/13(1)(3) 775,312
750,000 ARAMARK Corp., 8.50%, 2/1/15(1)(3) 755,625
500,000 Cenveo Corp., 7.875%, 12/1/13(1) 407,500
700,000 Corrections Corp. of America, 6.25%, 3/15/13(3) 689,500
------------
3,369,500
------------
COMMUNICATIONS EQUIPMENT -- 0.7%
675,000 Nordic Telephone Co. Holdings ApS, 8.875%, 5/1/16
(Acquired 4/26/06-5/5/06, Cost $693,594)(1)(2)(3) 658,125
------------
CONTAINERS & PACKAGING -- 3.4%
500,000 Ball Corp., 6.875%, 12/15/12(1) 511,250
250,000 Ball Corp., 6.625%, 3/15/18 248,750
250,000 Graham Packaging Co. Inc., 8.50%, 10/15/12(1) 226,250
Principal Amount Value
$ 1,000,000 Graham Packaging Co. Inc., 9.875%, 10/15/14(1) $ 845,000
750,000 Rock-Tenn Co., 9.25%, 3/15/16 (Acquired
2/28/08-3/14/08, Cost $758,250)(2)(3) 780,000
400,000 Smurfit-Stone Container Enterprises, Inc., 8.00%,
3/15/17(1) 338,000
------------
2,949,250
------------
DIVERSIFIED -- 4.4%
1,980,000 Dow Jones CDX N.A. High Yield Secured Note,
Series 8-T1, 7.625%, 6/29/12 (Acquired 4/11/07,
Cost $1,947,825)(2) 1,881,000
2,000,000 Dow Jones CDX N.A. High Yield Secured Note,
Series 8-T2, 6.75%, 6/29/12 (Acquired 4/11/07,
Cost $1,980,000)(2) 1,942,500
------------
3,823,500
------------
DIVERSIFIED FINANCIAL SERVICES -- 5.7%
400,000 Ford Motor Credit Co., 6.625%, 6/16/08 395,500
1,600,000 Ford Motor Credit Co., 7.375%, 10/28/09(3) 1,459,262
1,100,000 Ford Motor Credit Co., 7.25%, 10/25/11(3) 904,965
1,000,000 General Motors Acceptance Corp., 6.875%,
9/15/11(3) 766,583
750,000 General Motors Acceptance Corp., 6.75%, 12/1/14(3) 531,597
1,000,000 KAR Holdings, Inc., 8.75%, 5/1/14(3) 895,000
------------
4,952,907
------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.1%
325,000 Citizens Communications Co., 6.25%, 1/15/13 295,750
500,000 Embarq Corp., 7.08%, 6/1/16 474,227
200,000 Intelsat Bermuda Ltd., 9.25%, 6/15/16 202,500
250,000 Intelsat Subsidiary Holding Co. Ltd., 8.25%,
1/15/13 253,125
500,000 Intelsat Subsidiary Holding Co. Ltd., 8.625%,
1/15/15 506,250
1,000,000 MetroPCS Wireless, Inc., 9.25%, 11/1/14(1)(3) 925,000
550,000 Qwest Communications International Inc., 7.50%,
2/15/14 519,750
550,000 Qwest Corp., 7.875%, 9/1/11 551,375
750,000 Qwest Corp., 7.50%, 10/1/14(3) 735,000
------------
4,462,977
------------
------
21
High-Yield
Principal Amount Value
ELECTRIC UTILITIES -- 1.3%
$ 500,000 Edison Mission Energy, 7.00%, 5/15/17 $ 500,000
600,000 Energy Future Holdings Corp., 10.875%, 11/1/17
(Acquired 10/24/07, Cost $607,500)(2) 609,000
------------
1,109,000
------------
ELECTRICAL EQUIPMENT -- 0.6%
500,000 Baldor Electric Co., 8.625%, 2/15/17(1) 497,500
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.6%
1,000,000 Celestica Inc., 7.625%, 7/1/13(1)(3) 950,000
500,000 Flextronics International Ltd., 6.50%, 5/15/13 480,000
------------
1,430,000
------------
FOOD & STAPLES RETAILING -- 2.3%
500,000 Ingles Markets, Inc., 8.875%, 12/1/11 507,500
750,000 Rite Aid Corp., 7.50%, 3/1/17(3) 678,750
550,000 SUPERVALU INC., 7.50%, 11/15/14 558,250
250,000 Susser Holdings LLC, 10.625%, 12/15/13 (Acquired
10/30/07, Cost $256,250)(2) 258,125
------------
2,002,625
------------
FOOD PRODUCTS -- 0.7%
750,000 Smithfield Foods, Inc., 7.75%, 7/1/17(1)(3) 735,000
------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 1.5%
650,000 Bausch & Lomb Inc., 9.875%, 11/1/15 (Acquired
10/16/07, Cost $659,375)(1)(2) 663,000
600,000 LVB Acquisition Merger Sub, Inc., 10.00%,
10/15/17 (Acquired 10/5/07, Cost
$616,500)(1)(2)(3) 631,500
------------
1,294,500
------------
HEALTH CARE PROVIDERS & SERVICES -- 4.9%
1,400,000 Community Health Systems Inc., 8.875%, 7/15/15(3) 1,412,250
750,000 HCA Inc., 6.50%, 2/15/16(3) 635,625
1,250,000 HCA Inc., 9.25%, 11/15/16(3) 1,300,000
250,000 Omnicare Inc., 6.875%, 12/15/15 218,750
750,000 Sun Healthcare Group, Inc., 9.125%, 4/15/15 727,500
------------
4,294,125
------------
Principal Amount Value
HOTELS, RESTAURANTS & LEISURE -- 5.8%
$ 600,000 Majestic Star Casino LLC/Majestic Star Casino
Capital Corp., 9.50%, 10/15/10(1)(3) $ 532,500
34,000 Mandalay Resort Group, 9.375%, 2/15/10 35,190
1,000,000 MGM Mirage, 8.50%, 9/15/10(3) 1,037,501
300,000 MGM Mirage, 6.75%, 9/1/12 279,750
750,000 Pinnacle Entertainment Inc., 7.50%, 6/15/15
(Acquired 6/5/07, Cost $738,938)(2)(3) 594,375
300,000 Royal Caribbean Cruises Ltd., 7.00%, 6/15/13 282,155
300,000 Royal Caribbean Cruises Ltd., 6.875%, 12/1/13 281,325
250,000 Six Flags Inc., 8.875%, 2/1/10(1) 171,250
500,000 Six Flags Inc., 9.75%, 4/15/13(1) 290,000
500,000 Station Casinos Inc., 6.875%, 3/1/16(1) 293,750
750,000 Station Casinos Inc., 7.75%, 8/15/16(1) 607,500
400,000 Tropicana Entertainment, LLC/Tropicana Finance
Corp., 9.625%, 12/15/14(1) 209,500
500,000 Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp.,
6.625%, 12/1/14(1) 483,750
------------
5,098,546
------------
HOUSEHOLD DURABLES -- 1.3%
500,000 KB Home, 6.375%, 8/15/11 472,500
750,000 Sealy Mattress Co., 8.25%, 6/15/14(3) 630,000
------------
1,102,500
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 3.2%
500,000 AES Corp. (The), 8.75%, 5/15/13 (Acquired 5/1/03,
Cost $500,000)(2) 522,500
750,000 AES Corp. (The), 8.00%, 10/15/17(3) 763,125
750,000 NRG Energy Inc., 7.375%, 2/1/16(3) 736,875
750,000 Reliant Energy, Inc., 7.625%, 6/15/14(3) 748,125
------------
2,770,625
------------
INSURANCE -- 0.7%
675,000 Fairfax Financial Holdings Ltd., 7.75%,
6/15/17(1)(3) 654,750
------------
------
22
High-Yield
Principal Amount Value
IT SERVICES -- 0.9%
$ 450,000 SunGard Data Systems Inc., 9.125%, 8/15/13(3) $ 456,750
350,000 SunGard Data Systems Inc., 10.25%, 8/15/15(1) 353,500
------------
810,250
------------
MACHINERY -- 1.3%
600,000 Rental Service Corp., 9.50%, 12/1/14(1)(3) 504,000
650,000 SPX Corp., 7.625%, 12/15/14 (Acquired 12/10/07,
Cost $650,000)(2)(3) 670,313
------------
1,174,313
------------
MEDIA -- 8.2%
700,000 Cablevision Systems Corp., 8.00%, 4/15/12(3) 684,250
350,000 Cadmus Communications Corp., 8.375%, 6/15/14 280,000
798,000 CCH I, LLC/CCH I Capital Corp., 11.00%, 10/1/15(1) 558,600
1,000,000 Cinemark Inc., VRN, 0.00%, 3/15/09(1)(3)(4) 904,999
500,000 CSC Holdings, Inc., 8.125%, 8/15/09 506,250
250,000 CSC Holdings, Inc., 6.75%, 4/15/12 242,500
500,000 Dex Media Inc., 8.00%, 11/15/13 367,500
500,000 DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.,
8.375%, 3/15/13 509,375
500,000 EchoStar DBS Corp., 6.375%, 10/1/11 481,250
750,000 Harland Clarke Holdings Corp., 9.50%, 5/15/15(3) 555,000
250,000 Harland Clarke Holdings Corp., VRN, 7.82%,
5/15/08, resets quarterly off the 3-month LIBOR
plus 4.75% with no caps(1) 156,250
700,000 Idearc Inc., 8.00%, 11/15/16(3) 456,750
500,000 Mediacom LLC/Mediacom Capital Corp., 9.50%,
1/15/13 462,500
850,000 R.H. Donnelley Corp., 8.875%, 1/15/16(3) 541,875
500,000 Valassis Communications Inc., 8.25%, 3/1/15(1) 413,750
------------
7,120,849
------------
Principal Amount Value
METALS & MINING -- 2.3%
$ 300,000 Freeport-McMoRan Copper & Gold, Inc., 8.25%,
4/1/15 $317,250
950,000 Freeport-McMoRan Copper & Gold, Inc., 8.375%,
4/1/17(3) 1,010,563
775,000 Tube City IMS Corp., 9.75%, 2/1/15 685,875
------------
2,013,688
------------
MULTI-UTILITIES -- 0.6%
500,000 CMS Energy Corp., 7.75%, 8/1/10 525,643
------------
MULTILINE RETAIL -- 0.4%
500,000 Bon-Ton Stores, Inc. (The), 10.25%, 3/15/14(1) 336,250
------------
OIL, GAS & CONSUMABLE FUELS -- 9.5%
500,000 Chesapeake Energy Corp., 7.625%, 7/15/13 515,000
600,000 Chesapeake Energy Corp., 7.50%, 6/15/14(3) 618,000
750,000 Cimarex Energy Co., 7.125%, 5/1/17(3) 748,125
650,000 Forest Oil Corp., 7.75%, 5/1/14(1)(3) 671,125
400,000 Massey Energy Co., 6.625%, 11/15/10(1) 398,500
750,000 Massey Energy Co., 6.875%, 12/15/13 729,375
800,000 OPTI Canada Inc., 7.875%, 12/15/14(3) 785,999
520,000 Pacific Energy Partners L.P./Pacific Energy
Finance Corp., 7.125%, 6/15/14 550,804
500,000 Peabody Energy Corp., 7.375%, 11/1/16(1) 520,000
500,000 Range Resources Corp., 7.375%, 7/15/13 510,000
750,000 Sabine Pass LNG, L.P., 7.50%, 11/30/16(3) 727,500
700,000 Southwestern Energy Co., 7.50%, 2/1/18 (Acquired
1/11/08, Cost $700,000)(2)(3) 728,000
250,000 Tesoro Corp., 6.25%, 11/1/12 236,875
500,000 Williams Companies, Inc. (The), 8.125%, 3/15/12 548,750
------------
8,288,053
------------
PAPER & FOREST PRODUCTS -- 2.4%
300,000 Boise Cascade LLC, 7.125%, 10/15/14 281,250
500,000 Georgia-Pacific Corp., 7.70%, 6/15/15(1) 472,500
------
23
High-Yield
Principal Amount Value
$ 150,000 Georgia-Pacific Corp., 7.125%, 1/15/17 (Acquired
12/13/06, Cost $150,000)(2) $139,500
21,000 Jefferson Smurfit Corp., 8.25%, 10/1/12(1) 19,031
650,000 NewPage Corp., 10.00%, 5/1/12 (Acquired
12/7/07-12/19/07, Cost $655,000)(2)(3) 663,000
500,000 Verso Paper Holdings LLC/Verso Paper Inc.,
9.125%, 8/1/14 485,000
------------
2,060,281
------------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.7%
400,000 Host Marriott L.P., 7.00%, 8/15/12(1) 393,000
250,000 Host Marriott L.P., 6.75%, 6/1/16 235,000
------------
628,000
------------
ROAD & RAIL -- 1.1%
550,000 Hertz Corp., 8.875%, 1/1/14 523,875
500,000 Hertz Corp., 10.50%, 1/1/16(1) 470,625
------------
994,500
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.6%
500,000 Amkor Technology Inc., 9.25%, 6/1/16(1) 483,750
------------
SPECIALTY RETAIL -- 3.3%
250,000 Asbury Automotive Group Inc., 8.00%, 3/15/14(1) 218,750
650,000 Asbury Automotive Group Inc., 7.625%, 3/15/17(3) 516,750
350,000 Claire's Stores Inc., 9.25%, 6/1/15(1) 221,375
600,000 Couche-Tard U.S. L.P./Couche-Tard Financing
Corp., 7.50%, 12/15/13(3) 601,500
650,000 GSC Holdings Corp., 8.00%, 10/1/12(3) 690,625
425,000 Michaels Stores, Inc., 10.00%, 11/1/14(1) 374,000
350,000 Toys "R" Us, Inc., 7.375%, 10/15/18(1) 244,125
------------
2,867,125
------------
TEXTILES, APPAREL & LUXURY GOODS -- 1.6%
850,000 Hanesbrands Inc., VRN, 8.20%, 6/16/08, resets
semiannually off the 6-month LIBOR plus 3.375%
with no caps(3) 758,625
625,000 Perry Ellis International, Inc., 8.875%,
9/15/13(3) 600,000
------------
1,358,625
------------
Principal Amount Value
TRADING COMPANIES & DISTRIBUTORS -- 1.3%
$ 675,000 Ashtead Capital Inc., 9.00%, 8/15/16 (Acquired
8/1/06-10/5/06, Cost $690,500)(1)(2)(3) $ 550,125
400,000 United Rentals North America, Inc., 6.50%, 2/15/12 364,000
271,000 United Rentals North America, Inc., 7.75%,
11/15/13(1) 220,865
------------
1,134,990
------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.7%
300,000 Rural Cellular Corp., 9.875%, 2/1/10 309,750
300,000 Syniverse Technologies Inc., 7.75%, 8/15/13 284,250
------------
594,000
------------
TOTAL CORPORATE BONDS
(Cost $81,341,529) 75,521,004
------------
Temporary Cash Investments -- 11.5%
10,014,000 FNMA Discount Notes, 1.35%, 4/1/08(3)(5)
(Cost $10,014,000) 10,014,000
------------
Temporary Cash Investments -- Securities Lending Collateral(6) -- 26.5%
1,000,024 Bancaja US Debt, SAu, VRN, 4.55%, 4/10/08, resets
quarterly off the 3-month LIBOR plus 0.05% with
no caps 999,726
999,954 BASF AG, VRN, 3.89%, 4/21/08, resets quarterly
off the 3-month LIBOR minus 0.01% with no caps 999,249
999,627 K2 (USA) LLC, VRN, 2.37%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps 981,238
999,626 Links Finance LLC, VRN, 2.37%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps 975,960
1,000,000 Merrill Lynch & Co., Inc., VRN, 2.42%, 4/1/08,
resets quarterly off the Federal Reserve Prime
Loan Rate minus 2.83% with no caps 978,786
1,001,099 Nationwide Building Society, VRN, 3.00%, 6/9/08,
resets quarterly off the 3-month LIBOR plus 0.13%
with no caps 999,232
------
24
High-Yield
Principal Amount Value
$ 999,549 Tango Finance Corp., VRN, 2.38%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps $ 984,854
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery
value $4,948,809) 4,948,493
Repurchase Agreement, BNP Paribas, (collateralized by various U.S.
Government Agency obligations in a pooled account at the lending
agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value
$3,239,332) 3,239,125
Repurchase Agreement, Deutsche Bank AG, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.25%, dated 3/31/08, due 4/1/08 (Delivery value
$4,000,250) 4,000,000
Principal Amount Value
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in a
pooled account at the lending agent), 2.15%, dated 3/31/08, due
4/1/08 (Delivery value $4,000,239) $ 4,000,000
------------
TOTAL TEMPORARY CASH INVESTMENTS -- SECURITIES LENDING COLLATERAL
(Cost $23,187,534) 23,106,663
------------
TOTAL INVESTMENT SECURITIES -- 124.5%
(Cost $114,543,063) 108,641,667
------------
OTHER ASSETS AND LIABILITIES -- (24.5)% (21,372,282)
------------
TOTAL NET ASSETS -- 100.0% $ 87,269,385
============
Futures Contracts
Expiration Underlying Face Unrealized
Contracts Purchased Date Amount at Value Gain (Loss)
140 U.S. Treasury 2-Year Notes June 2008 $30,051,875 $ 220,828
=============== ===========
Expiration Underlying Face Unrealized
Contracts Sold Date Amount at Value Gain (Loss)
14 U.S. Long Bond June 2008 $ 1,663,156 $ (15,997)
45 U.S. Treasury 10-Year Notes June 2008 5,352,891 (133,044)
--------------- -----------
$ 7,016,047 $(149,041)
=============== ===========
Swap Agreements
Notional Expiration Unrealized
Amount Description of Agreement Date Gain (Loss)
CREDIT DEFAULT
$5,100,000 Pay semiannually a fixed rate equal to June 2012 $178,126
1.25% multiplied by the notional
amount and receive from Barclays Bank
plc upon each default event of one of
the issues of Dow Jones CDX Emerging
Markets 7, par value of the
proportional notional amount.
750,000 Pay quarterly a fixed rate equal to December 7,955
0.72% multiplied by the notional 2012
amount and receive from Deutsche Bank
AG upon each default event of Barclays
Bank plc, par value of the
proportional notional amount of
Barclays Bank plc, VRN, 4.57%,
10/27/08.
250,000 Pay quarterly a fixed rate equal to December 5,572
2.45% multiplied by the notional 2012
amount and receive from Bank of
America N.A. upon each default event
of Toll Brothers, Inc., par value of
the proportional notional amount of
Toll Brothers Finance Corp., 6.875%,
11/15/12.
500,000 Pay quarterly a fixed rate equal to December 3,393
2.85% multiplied by the notional 2012
amount and receive from Barclays Bank
plc upon each default event of Toll
Brothers, Inc., par value of the
proportional notional amount of Toll
Brothers Finance Corp., 6.875%,
11/15/12.
----------
$195,046
==========
------
25
High-Yield
Notes to Schedule of Investments
CDX = Credit Derivative Indexes
FNMA = Federal National Mortgage Association
LIBOR = London Interbank Offered Rate
resets = The frequency with which a security's coupon changes, based on
current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will
vary significantly from current market rates.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) Security, or a portion thereof, was on loan as of March 31, 2008.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at March 31, 2008 was $12,376,688,
which represented 14.2% of total net assets. None of the restricted securities
were considered illiquid.
(3) Security, or a portion thereof, has been segregated for futures contracts
and/or swap agreements.
(4) Step-coupon security. These securities are issued with a zero-coupon and
become interest bearing at a predetermined rate and date and are issued at a
substantial discount from their value at maturity. Rate shown is effective
March 31, 2008.
(5) The rate indicated is the yield to maturity at purchase.
(6) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
------
26
SHAREHOLDER FEE EXAMPLES (UNAUDITED)
Fund shareholders may incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments and redemption/exchange
fees; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in your fund
and to compare these costs with the ongoing cost of investing in other mutual
funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2007 to March 31, 2008.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or
Institutional Class shares of the American Century Diversified Bond Fund, in
an American Century account (i.e., not a financial intermediary or retirement
plan account), American Century may charge you a $12.50 semiannual account
maintenance fee if the value of those shares is less than $10,000. We will
redeem shares automatically in one of your accounts to pay the $12.50 fee. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. PERSONAL ACCOUNTS
include individual accounts, joint accounts, UGMA/UTMA accounts, personal
trusts, Coverdell Education Savings Accounts and IRAs (including traditional,
Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement
accounts. If you have only business, business retirement, employer-sponsored
or American Century Brokerage accounts, you are currently not subject to this
fee. We will not charge the fee as long as you choose to manage your accounts
exclusively online. If you are subject to the Account Maintenance Fee, your
account value could be reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is
not the actual return of a fund's share class. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
------
27
Expenses Paid
Beginning Ending During
Account Account Period(1) Annualized
Value Value 10/1/07 - Expense
10/1/07 3/31/08 3/31/08 Ratio(1)
Diversified Bond
ACTUAL
Investor Class $1,000 $1,068.10 $3.21 0.62%
Institutional Class $1,000 $1,069.10 $2.17 0.42%
A Class $1,000 $1,066.80 $4.50 0.87%
B Class $1,000 $1,062.80 $8.35 1.62%
C Class $1,000 $1,062.80 $8.35 1.62%
R Class $1,000 $1,065.40 $5.78 1.12%
HYPOTHETICAL
Investor Class $1,000 $1,021.90 $3.13 0.62%
Institutional Class $1,000 $1,022.90 $2.12 0.42%
A Class $1,000 $1,020.65 $4.39 0.87%
B Class $1,000 $1,016.90 $8.17 1.62%
C Class $1,000 $1,016.90 $8.17 1.62%
R Class $1,000 $1,019.40 $5.65 1.12%
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
------
28
Beginning Ending Expenses Paid
Account Account During Annualized
Value Value Period(1) Expense
10/1/07 3/31/08 10/1/07 - 3/31/08 Ratio(1)
High-Yield
ACTUAL
Investor Class
(after waiver)(2) $1,000 $977.90 $3.96 0.80%
Investor Class
(before waiver) $1,000 $977.90(3) $4.30 0.87%
Institutional Class
(after waiver)(2) $1,000 $978.90 $2.97 0.60%
Institutional Class
(before waiver) $1,000 $978.90(3) $3.31 0.67%
A Class
(after waiver)(2) $1,000 $976.70 $5.19 1.05%
A Class
(before waiver) $1,000 $976.70(3) $5.53 1.12%
B Class
(after waiver)(2) $1,000 $973.00 $8.88 1.80%
B Class
(before waiver) $1,000 $973.00(3) $9.22 1.87%
C Class
(after waiver)(2) $1,000 $973.00 $8.88 1.80%
C Class
(before waiver) $1,000 $973.00(3) $9.22 1.87%
R Class
(after waiver)(2) $1,000 $975.50 $6.42 1.30%
R Class
(before waiver) $1,000 $975.50(3) $6.77 1.37%
HYPOTHETICAL
Investor Class
(after waiver)(2) $1,000 $1,021.00 $4.04 0.80%
Investor Class
(before waiver) $1,000 $1,020.65 $4.39 0.87%
Institutional Class
(after waiver)(2) $1,000 $1,022.00 $3.03 0.60%
Institutional Class
(before waiver) $1,000 $1,021.65 $3.39 0.67%
A Class
(after waiver)(2) $1,000 $1,019.75 $5.30 1.05%
A Class
(before waiver) $1,000 $1,019.40 $5.65 1.12%
B Class
(after waiver)(2) $1,000 $1,016.00 $9.07 1.80%
B Class
(before waiver) $1,000 $1,015.65 $9.42 1.87%
C Class
(after waiver)(2) $1,000 $1,016.00 $9.07 1.80%
C Class
(before waiver) $1,000 $1,015.65 $9.42 1.87%
R Class
(after waiver)(2) $1,000 $1,018.50 $6.56 1.30%
R Class
(before waiver) $1,000 $1,018.15 $6.91 1.37%
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
(2) During the six months ended March 31, 2008, the class received a partial
waiver of its management fee.
(3) Ending account value assumes the return earned after waiver. The return
would have been lower had fees not been waived and may have resulted in a
lower ending account value.
------
29
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
Diversified
Bond High-Yield
ASSETS
Investment securities, at value (cost of
$786,140,875 and $91,355,529, respectively) --
including $174,181,885 and $22,751,790 of securities
on loan, respectively $798,164,834 $85,535,004
Investments made with cash collateral received for
securities on loan, at value (cost of $148,850,781
and $23,187,534, respectively) 148,407,929 23,106,663
------------ -----------
Total investment securities, at value (cost of
$934,991,656 and $114,543,063, respectively) 946,572,763 108,641,667
Cash 844,126 --
Receivable for investments sold 1,586,402 --
Receivable for capital shares sold 55,304 73,000
Receivable for variation margin on futures contracts 11,983 61,139
Unrealized appreciation on swap agreements 2,170,174 195,046
Interest receivable 4,993,028 1,884,689
------------ -----------
956,233,780 110,855,541
------------ -----------
LIABILITIES
Disbursements in excess of demand deposit cash -- 7,638
Payable for collateral received for securities on
loan 148,850,781 23,187,534
Payable for investments purchased 75,273,168 --
Payable for capital shares redeemed 27,390 --
Accrued management fees 342,379 53,670
Distribution fees payable 3,832 1,761
Service fees (and distribution fees -- A Class and R
Class) payable 5,869 2,334
Dividends payable 1,343,411 333,219
------------ -----------
225,846,830 23,586,156
------------ -----------
NET ASSETS $730,386,950 $87,269,385
============ ===========
See Notes to Financial Statements.
------
30
MARCH 31, 2008
Diversified
Bond High-Yield
NET ASSETS CONSIST OF:
Capital paid in $707,546,121 $105,473,602
Undistributed net investment income 3,472,405 614,385
Accumulated undistributed net realized gain (loss)
on investment transactions 5,670,215 (13,220,806)
Net unrealized appreciation (depreciation) on
investments 13,698,209 (5,597,796)
------------ ------------
$730,386,950 $ 87,269,385
============ ============
INVESTOR CLASS
Net assets $515,184,026 $51,375,063
Shares outstanding 49,166,570 8,604,414
Net asset value per share $10.48 $5.97
INSTITUTIONAL CLASS
Net assets $186,031,139 $24,795,162
Shares outstanding 17,753,885 4,152,750
Net asset value per share $10.48 $5.97
A CLASS
Net assets $23,020,126 $8,274,764
Shares outstanding 2,196,927 1,385,877
Net asset value per share $10.48 $5.97
Maximum offering price (net asset value divided by
0.955) $10.97 $6.25
B CLASS
Net assets $1,104,625 $1,118,841
Shares outstanding 105,420 187,386
Net asset value per share $10.48 $5.97
C CLASS
Net assets $5,015,953 $1,678,175
Shares outstanding 478,697 281,065
Net asset value per share $10.48 $5.97
R CLASS
Net assets $31,081 $27,380
Shares outstanding 2,966 4,586
Net asset value per share $10.48 $5.97
See Notes to Financial Statements.
------
31
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
Diversified
Bond High-Yield
INVESTMENT INCOME (LOSS)
INCOME:
Interest $33,070,238 $ 6,649,551
Securities lending, net 634,284 55,374
----------- ------------
33,704,522 6,704,925
----------- ------------
EXPENSES:
Management fees 3,660,074 713,350
Distribution fees:
A Class 3,329 957
B Class 6,204 9,437
C Class 25,763 13,878
Service fees:
A Class 3,329 957
B Class 2,068 3,146
C Class 8,588 4,626
Distribution and service fees:
A Class 21,494 13,747
A Class (old) (Note 9) 8,396 10,929
R Class 140 139
Trustees' fees and expenses 26,198 3,503
Other expenses 5,691 125
----------- ------------
3,771,274 774,794
Amount waived -- (61,633)
----------- ------------
3,771,274 713,161
----------- ------------
NET INVESTMENT INCOME (LOSS) 29,933,248 5,991,764
----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
Investment transactions 10,029,512 (115,092)
Futures and swaps transactions 6,786,789 328,371
----------- ------------
16,816,301 213,279
----------- ------------
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION)
ON:
Investments 10,976,074 (7,814,128)
Futures and swaps 1,170,024 244,028
----------- ------------
12,146,098 (7,570,100)
----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 28,962,399 (7,356,821)
----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $58,895,647 $(1,365,057)
=========== ============
See Notes to Financial Statements.
------
32
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Diversified Bond High-Yield
Increase (Decrease) in Net
Assets 2008 2007 2008 2007
OPERATIONS
Net investment income (loss) $ 29,933,248 $ 33,433,873 $ 5,991,764 $ 4,961,267
Net realized gain (loss) 16,816,301 (3,020,837) 213,279 17,724
Change in net unrealized
appreciation (depreciation) 12,146,098 12,151,171 (7,570,100) 1,154,960
------------ ------------ ----------- -----------
Net increase (decrease) in
net assets resulting from
operations 58,895,647 42,564,207 (1,365,057) 6,133,951
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income:
Investor Class (20,392,198) (13,796,392) (3,545,634) (3,048,546)
Institutional Class (8,622,452) (18,990,587) (1,529,504) (947,906)
A Class (417,664) (202,222) (388,007) (38,759)
A Class (old) (Note 9) (144,687) (313,123) (277,389) (717,605)
B Class (28,897) (29,896) (72,559) (69,352)
C Class (119,364) (85,835) (106,684) (111,418)
R Class (1,117) (1,039) (1,746) (1,617)
------------ ------------ ----------- -----------
Decrease in net assets from
distributions (29,726,379) (33,419,094) (5,921,523) (4,935,203)
------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in
net assets from capital
share transactions (97,521,587) 109,144,189 9,462,625 17,128,138
------------ ------------ ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS (68,352,319) 118,289,302 2,176,045 18,326,886
NET ASSETS
Beginning of period 798,739,269 680,449,967 85,093,340 66,766,454
------------ ------------ ----------- -----------
End of period $730,386,950 $798,739,269 $87,269,385 $85,093,340
============ ============ =========== ===========
Accumulated undistributed
net investment income (loss) $3,472,405 $(163,172) $614,385 $(1,359)
============ ============ =========== ===========
See Notes to Financial Statements.
------
33
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. Diversified Bond Fund (Diversified Bond) and
High-Yield Fund (High-Yield) (the funds) are two funds in a series issued by
the trust. The funds are diversified under the 1940 Act. Diversified Bond's
investment objective is to seek a high level of income by investing in
non-money market debt securities. High-Yield's investment objective is to seek
high current income by investing in high-yield corporate bonds and other debt
securities. High-Yield invests primarily in lower-rated debt securities, which
are subject to greater credit risk and consequently offer higher yields. The
following is a summary of the funds' significant accounting policies.
MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the
Institutional Class, the A Class (formerly Advisor Class), the B Class, the C
Class and the R Class. The A Class may incur an initial sales charge. The A
Class, B Class and C Class may be subject to a contingent deferred sales
charge. The share classes differ principally in their respective sales charges
and distribution and shareholder servicing expenses and arrangements. All
shares of the funds represent an equal pro rata interest in the net assets of
the class to which such shares belong, and have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except for
class specific expenses and exclusive rights to vote on matters affecting only
individual classes. Income, non-class specific expenses, and realized and
unrealized capital gains and losses of the funds are allocated to each class
of shares based on their relative net assets.
SECURITY VALUATIONS -- Debt securities maturing in greater than 60 days are
valued at current market value as provided by a commercial pricing service or
at the mean of the most recent bid and asked prices. Debt securities maturing
within 60 days may be valued at cost, plus or minus any amortized discount or
premium. Discount notes may be valued through a commercial pricing service or
at amortized cost, which approximates fair value. Securities traded on foreign
securities exchanges and over-the-counter markets are normally completed
before the close of business on days that the New York Stock Exchange (the
Exchange) is open and may also take place on days when the Exchange is not
open. If an event occurs after the value of a security was established but
before the net asset value per share was determined that was likely to
materially change the net asset value, that security would be valued as
determined in accordance with procedures adopted by the Board of Trustees. If
the funds determine that the market price of a portfolio security is not
readily available, or that the valuation methods mentioned above do not
reflect the security's fair value, such security is valued as determined by
the Board of Trustees or its designee, in accordance with procedures adopted
by the Board of Trustees, if such determination would materially impact a
fund's net asset value. Certain other circumstances may cause the funds to use
alternative procedures to value a security such as: a security has been
declared in default; trading in a security has been halted during the trading
day; or there is a foreign market holiday and no trading will commence.
SECURITY TRANSACTIONS -- For financial reporting purposes, security
transactions are accounted for as of the trade date. Net realized gains and
losses are determined on the identified cost basis, which is also used for
federal income tax purposes.
INVESTMENT INCOME -- Interest income less foreign taxes withheld, if any, is
recorded on the accrual basis and includes paydown gain (loss) and accretion
of discounts and amortization of premiums.
SECURITIES ON LOAN -- The funds may lend portfolio securities through their
lending agent to certain approved borrowers in order to earn additional
income. The income earned, net of any rebates or fees, is included in the
Statement of Operations. The funds continue to recognize any gain or loss in
the market price of the securities loaned and record any interest earned or
dividends declared.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially
expressed in foreign currencies are translated into U.S. dollars at prevailing
exchange rates at period end. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are translated at the rates
of exchange prevailing on the respective dates of such transactions. For
assets and liabilities, other than investments in securities, net realized and
unrealized gains and losses from foreign currency translations arise from
changes in currency exchange rates.
------
34
Net realized and unrealized foreign currency exchange gains or losses
occurring during the holding period of investment securities are a component
of realized gain (loss) on investment transactions and unrealized appreciation
(depreciation) on investments, respectively. Certain countries may impose
taxes on the contract amount of purchases and sales of foreign currency
contracts in their currency. The funds record the foreign tax expense, if any,
as a reduction to the net realized gain (loss) on foreign currency
transactions.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The funds may engage in securities
transactions on a when-issued or forward commitment basis. In these
transactions, the securities' prices and yields are fixed on the date of the
commitment. In a when-issued transaction, the payment and delivery are
scheduled for a future date and during this period, securities are subject to
market fluctuations. In a forward commitment transaction, the funds may sell a
security and at the same time make a commitment to purchase the same security
at a future date at a specified price. Conversely, the funds may purchase a
security and at the same time make a commitment to sell the same security at a
future date at a specified price. These types of transactions are executed
simultaneously in what are known as "roll" transactions. The funds will
segregate cash, cash equivalents or other appropriate liquid securities on
their records in amounts sufficient to meet the purchase price. The funds
account for "roll" transactions as purchases and sales; as such these
transactions may increase portfolio turnover.
FUTURES CONTRACTS -- The funds may enter into futures contracts in order to
manage the funds' exposure to changes in market conditions. One of the risks
of entering into futures contracts is the possibility that the change in value
of the contract may not correlate with the changes in value of the underlying
securities. Upon entering into a futures contract, the funds are required to
deposit either cash or securities in an amount equal to a certain percentage
of the contract value (initial margin). Subsequent payments (variation margin)
are made or received daily, in cash, by the funds. The variation margin is
equal to the daily change in the contract value and is recorded as unrealized
gains and losses. The funds recognize a realized gain or loss when the
contract is closed or expires. Net realized and unrealized gains or losses
occurring during the holding period of futures contracts are a component of
realized gain (loss) on futures and swaps transactions and unrealized
appreciation (depreciation) on futures and swaps, respectively.
SWAP AGREEMENTS -- The funds may enter into swap agreements in order to
attempt to obtain or preserve a particular return or spread at a lower cost
than obtaining a return or spread through purchases and/or sales of
instruments in other markets; protect against currency fluctuations; attempt
to manage duration to protect against any increase in the price of securities
the funds anticipate purchasing at a later date; or gain exposure to certain
markets in the most economical way possible. A basic swap agreement is a
contract in which two parties agree to exchange the returns earned or realized
on predetermined investments or instruments. Credit default swaps enable an
investor to buy/sell protection against a credit event of a specific issuer.
The seller of credit protection against a security or basket of securities
receives an up-front or periodic payment to compensate against potential
default events. The funds may enhance returns by selling protection or attempt
to mitigate credit risk by buying protection. The funds will segregate cash,
cash equivalents or other appropriate liquid securities on their records in
amounts sufficient to meet requirements. Unrealized gains are reported as an
asset and unrealized losses are reported as a liability on the Statement of
Assets and Liabilities. Swap agreements are valued daily and changes in value,
including the periodic amounts of interest to be paid or received on swaps,
are recorded as unrealized appreciation (depreciation) on futures and swaps.
Realized gain or loss is recorded upon receipt or payment of a periodic
settlement or termination of swap agreements. The risks of entering into swap
agreements include the possible lack of liquidity, failure of the counterparty
to meet its obligations, and that there may be unfavorable changes in the
underlying investments and instruments.
CREDIT-LINKED TRUST CERTIFICATES -- Credit-linked trust certificates are
investments in a limited purpose trust formed under state law which invests in
a basket of derivative instruments, such as credit default swaps.
Credit-linked trust certificates represent the right to receive periodic
income payments and payment of principal at the end of the term of the
certificate. The risks of investing in credit-linked trust certificates
include the payments are conditioned on the trust's receipt of payments from,
and the trust's potential obligations to, the counterparties to the derivative
instruments and other securities in which the trust invests.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at
cost. Each fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a
manner sufficient to enable each fund to obtain those securities in the event
of a default under the repurchase agreement. ACIM monitors, on
------
35
a daily basis, the securities transferred to ensure the value, including
accrued interest, of the securities under each repurchase agreement is equal
to or greater than amounts owed to each fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, each fund, along with other registered
investment companies having management agreements with ACIM or American
Century Global Investment Management, Inc. (ACGIM), may transfer uninvested
cash balances into a joint trading account. These balances are invested in one
or more repurchase agreements that are collateralized by U.S. Treasury or
Agency obligations.
INCOME TAX STATUS -- It is each fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. The funds are no longer subject to examination by tax
authorities for years prior to 2005. At this time, management has not
identified any uncertain tax positions for which it is reasonably possible
that the total amounts of unrecognized tax benefits will significantly change
in the next twelve months. Accordingly, no provision has been made for federal
or state income taxes. Interest and penalties associated with any federal or
state income tax obligations, if any, are recorded as interest expense.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income for
the funds are declared daily and paid monthly. Distributions from net realized
gains for the funds, if any, are generally declared and paid annually.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the funds. In addition, in the normal course of
business, the funds enter into contracts that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the
funds. The risk of material loss from such claims is considered by management
to be remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America,
which may require management to make certain estimates and assumptions at the
date of the financial statements. Actual results could differ from these
estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
On July 27, 2007, the A Class (formerly Advisor Class, also referred to as "A
Class (new)") shareholders of Diversified Bond and High-Yield approved a
change in the class's fee structure. The change was approved by the Board of
Trustees on December 8, 2006. Effective September 4, 2007, the fee structure
change resulted in an increase of 0.25% in the unified management fee and a
simultaneous decrease of 0.25% in the total distribution and service fee,
resulting in no change to the total operating expense ratio of the class.
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
ACIM, under which ACIM provides the funds with investment advisory and
management services in exchange for a single, unified management fee (the fee)
per class. The Agreement provides that all expenses of the funds, except
brokerage commissions, taxes, interest, fees and expenses of those trustees
who are not considered "interested persons" as defined in the 1940 Act
(including counsel fees) and extraordinary expenses, will be paid by ACIM. The
fee is computed and accrued daily based on the daily net assets of each
specific class of shares of each fund and paid monthly in arrears. The fee
consists of (1) an Investment Category Fee based on the daily net assets of
the funds and certain other accounts managed by the investment advisor that
are in the same broad investment category as each fund and (2) a Complex Fee
based on the assets of all the funds in the American Century family of funds.
The rates for the Investment Category Fee range from 0.2925% to 0.4100% for
Diversified Bond and from 0.5425% to 0.6600% for High-Yield. The rates for the
Complex Fee (Investor Class, A Class, B Class, C Class and R Class) range from
0.2500% to 0.3100%. The Institutional Class is 0.2000% less at each point
within the Complex Fee range. Prior to September 4, 2007, the A Class (new)
was 0.2500% less at each point within the Complex Fee range. From August 1,
2006 to July 31, 2007, the investment advisor voluntarily agreed to waive
0.071% of its management fee for High-Yield. Effective August 1, 2007, the
investment voluntarily agreed to waive 0.070% of its management fee for
High-Yield. The total amount of the waiver for the year ended March 31, 2008,
was $36,839, $15,377, $4,117, $3,094, $885, $1,302 and $19 for the Investor
Class, Institutional Class, A Class, A Class (old), B Class, C Class and R
Class, respectively. The fee waiver may be revised or terminated at any time
without notice.
------
36
The effective annual management fee for each class of each fund for the year
ended March 31, 2008, was as follows:
Investor, B, C & R Institutional A
Diversified Bond 0.62% 0.42% 0.59%
High-Yield (before waiver) 0.87% 0.67% 0.86%
High-Yield (after waiver) 0.80% 0.60% 0.79%
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a separate
Master Distribution and Individual Shareholder Services Plan for each of the A
Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule
12b-1 of the 1940 Act. The plans provide that the A Class will pay American
Century Investment Services, Inc. (ACIS) an annual distribution and service
fee of 0.25%. The plans provide that the B Class and the C Class will each pay
ACIS an annual distribution fee of 0.75% and service fee of 0.25%. The plans
provide that the R Class will pay ACIS an annual distribution and service fee
of 0.50%. Prior to September 4, 2007, the Board of Trustees had adopted a
Master Distribution and Shareholder Services Plan for the A Class (new),
pursuant to Rule 12b-1 of the 1940 Act, in which the A Class (new) paid ACIS
an annual distribution fee of 0.25% and service fee of 0.25%. The fees are
computed and accrued daily based on each class's daily net assets and paid
monthly in arrears. The distribution fee provides compensation for expenses
incurred in connection with distributing shares of the classes including, but
not limited to, payments to brokers, dealers, and financial institutions that
have entered into sales agreements with respect to shares of the funds. The
service fee provides compensation for individual shareholder services rendered
by broker/dealers or other independent financial intermediaries. Prior to
September 4, 2007, the service fee provided compensation for shareholder and
administrative services rendered by ACIS, its affiliates or independent third
party providers for A Class (new) shares. Fees incurred under the plans during
the year ended March 31, 2008, are detailed in the Statement of Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also
officers and/or directors, and, as a group, controlling stockholders of
American Century Companies, Inc. (ACC), the parent of the trust's investment
advisor, ACIM, the distributor of the trust, ACIS, and the trust's transfer
agent, American Century Services, LLC. American Century Asset Allocation
Portfolios, Inc. (ACAAP) owns 52% and 61% of the shares of Diversified Bond
and High-Yield, respectively. ACAAP does not invest in the funds for the
purpose of exercising management or control.
The funds have a securities lending agreement with JPMorgan Chase Bank
(JPMCB). Prior to December 12, 2007, the funds had a bank line of credit
agreement with JPMCB. JPMCB is a custodian of the funds and a wholly owned
subsidiary of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
March 31, 2008, were as follows:
Diversified
Bond High-Yield
PURCHASES
U.S. Treasury & Government Agency Obligations $1,380,833,347 --
Investment securities other than U.S. Treasury &
Government Agency Obligations $192,439,536 $41,031,542
PROCEEDS FROM SALES
U.S. Treasury & Government Agency Obligations $1,596,478,174 --
Investment securities other than U.S. Treasury &
Government Agency Obligations $140,592,169 $31,268,113
------
37
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows (unlimited number of
shares authorized):
Year ended March 31, 2008 Year ended March 31, 2007
Shares Amount Shares Amount
Diversified Bond
INVESTOR CLASS
Sold 18,106,408 $183,275,887 19,083,598 $189,679,584
Issued in
reinvestment of
distributions 510,470 5,172,682 551,974 5,481,168
Redeemed (8,793,263) (89,411,203) (3,072,427) (30,463,768)
------------ ------------- ------------ -------------
9,823,615 99,037,366 16,563,145 164,696,984
------------ ------------- ------------ -------------
INSTITUTIONAL CLASS
Sold 22,983,628 230,672,072 12,690,857 125,229,593
Issued in
reinvestment of
distributions 729,783 7,399,365 785,190 7,795,930
Redeemed (44,851,813) (448,429,707) (19,152,457) (188,236,458)
------------ ------------- ------------ -------------
(21,138,402) (210,358,270) (5,676,410) (55,210,935)
------------ ------------- ------------ -------------
A CLASS
Sold 1,307,233 13,563,416 121,547 1,207,066
Issued in
connection with
reclassification
(Note 9) 847,474 8,460,890 -- --
Issued in
reinvestment of
distributions 36,554 375,150 18,205 180,700
Redeemed (334,066) (3,405,819) (370,803) (3,680,623)
------------ ------------- ------------ -------------
1,857,195 18,993,637 (231,051) (2,292,857)
------------ ------------- ------------ -------------
A CLASS (OLD)
Sold 178,372 1,764,421 359,978 3,569,345
Issued in
reinvestment of
distributions 10,124 100,181 27,435 272,444
Redeemed in
connection with
reclassification
(Note 9) (847,474) (8,460,890) -- --
Redeemed (100,169) (991,431) (329,552) (3,266,681)
------------ ------------- ------------ -------------
(759,147) (7,587,719) 57,861 575,108
------------ ------------- ------------ -------------
B CLASS
Sold 38,315 396,821 30,434 301,436
Issued in
reinvestment of
distributions 2,170 22,010 2,190 21,749
Redeemed (15,462) (156,358) (28,058) (279,528)
------------ ------------- ------------ -------------
25,023 262,473 4,566 43,657
------------ ------------- ------------ -------------
C CLASS
Sold 273,481 2,788,572 209,537 2,057,287
Issued in
reinvestment of
distributions 8,373 85,075 6,593 65,583
Redeemed (74,300) (746,217) (79,977) (791,675)
------------ ------------- ------------ -------------
207,554 2,127,430 136,153 1,331,195
------------ ------------- ------------ -------------
R CLASS
Sold 713 7,424 -- --
Issued in
reinvestment of
distributions 108 1,096 104 1,037
Redeemed (479) (5,024) -- --
------------ ------------- ------------ -------------
342 3,496 104 1,037
------------ ------------- ------------ -------------
Net increase
(decrease) (9,983,820) $(97,521,587) 10,854,368 $109,144,189
============ ============= ============ =============
------
38
Year ended March 31, 2008 Year ended March 31, 2007
Shares Amount Shares Amount
High-Yield
INVESTOR CLASS
Sold 3,322,689 $20,785,681 3,955,742 $ 25,227,656
Issued in reinvestment
of distributions 192,227 1,195,047 219,459 1,396,011
Redeemed (2,893,149) (17,926,486) (2,877,431) (18,220,571)
----------- ------------ ----------- ------------
621,767 4,054,242 1,297,770 8,403,096
----------- ------------ ----------- ------------
INSTITUTIONAL CLASS
Sold 1,883,900 11,736,790 1,774,286 11,314,912
Issued in reinvestment
of distributions 17,900 111,143 8,236 53,017
Redeemed (554,708) (3,426,895) (448,137) (2,872,655)
----------- ------------ ----------- ------------
1,347,092 8,421,038 1,334,385 8,495,274
----------- ------------ ----------- ------------
A CLASS
Sold 199,562 1,240,943 93,171 593,364
Issued in connection
with reclassification
(Note 9) 1,531,917 9,523,342 -- --
Issued in reinvestment
of distributions 55,413 340,937 4,098 26,222
Redeemed (539,964) (3,321,710) (22,040) (141,034)
----------- ------------ ----------- ------------
1,246,928 7,783,512 75,229 478,552
----------- ------------ ----------- ------------
A CLASS (OLD)
Sold 128,872 822,538 613,956 3,907,488
Issued in reinvestment
of distributions 31,139 198,358 99,327 632,705
Redeemed in connection
with reclassification
(Note 9) (1,531,917) (9,523,342) -- --
Redeemed (312,246) (1,982,035) (799,098) (5,095,378)
----------- ------------ ----------- ------------
(1,684,152) (10,484,481) (85,815) (555,185)
----------- ------------ ----------- ------------
B CLASS
Sold 36,829 230,313 32,561 207,334
Issued in reinvestment
of distributions 7,180 44,606 6,257 39,884
Redeemed (66,192) (415,106) (14,471) (92,149)
----------- ------------ ----------- ------------
(22,183) (140,187) 24,347 155,069
----------- ------------ ----------- ------------
C CLASS
Sold 62,746 387,238 130,824 831,650
Issued in reinvestment
of distributions 7,007 43,479 5,694 36,239
Redeemed (97,624) (603,749) (113,320) (718,696)
----------- ------------ ----------- ------------
(27,871) (173,032) 23,198 149,193
----------- ------------ ----------- ------------
R CLASS
Sold 461 2,777 82 527
Issued in reinvestment
of distributions 278 1,726 253 1,612
Redeemed (495) (2,970) -- --
----------- ------------ ----------- ------------
244 1,533 335 2,139
----------- ------------ ----------- ------------
Net increase (decrease) 1,481,825 $ 9,462,625 2,669,449 $ 17,128,138
=========== ============ =========== ============
------
39
5. SECURITIES LENDING
As of March 31, 2008, securities in Diversified Bond and High-Yield valued at
$174,181,885 and $22,751,790, respectively, were on loan through the lending
agent, JPMCB, to certain approved borrowers. JPMCB receives and maintains
collateral in the form of cash and/or acceptable securities as approved by
ACIM. Cash collateral is invested in authorized investments by the lending
agent in a pooled account. The value of cash collateral received at period end
is disclosed in the Statement of Assets and Liabilities and investments made
with the cash by the lending agent are listed in the Schedule of Investments.
Any deficiencies or excess of collateral must be delivered or transferred by
the member firms no later than the close of business on the next business day.
The total market value of all collateral received, at this date, was
$177,096,475 and $23,106,663, respectively. The funds' risks in securities
lending are that the borrower may not provide additional collateral when
required or return the securities when due. If the borrower defaults, receipt
of the collateral by the funds may be delayed or limited.
6. BANK LINE OF CREDIT
Effective December 12, 2007, the funds, along with certain other funds managed
by ACIM or ACGIM, have a $500,000,000 unsecured bank line of credit agreement
with Bank of America, N.A. Prior to December 12, 2007, the funds, along with
certain other funds managed by ACIM or ACGIM, had a $500,000,000 unsecured
bank line of credit agreement with JPMCB. The funds may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement, which is subject to annual renewal, bear interest at the
Federal Funds rate plus 0.40%. The funds
did not borrow from the line during the year ended March 31, 2008.
7. RISK FACTORS
High-Yield invests primarily in lower-rated debt securities, which are subject
to substantial risks including price volatility, liquidity risk, and default
risk.
8. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2008
and March 31, 2007 were as follows:
Diversified Bond High-Yield
2008 2007 2008 2007
DISTRIBUTIONS PAID FROM
Ordinary income $29,726,379 $33,419,094 $5,921,523 $4,935,203
Long-term capital gains -- -- -- --
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of paydown losses, certain income items and net
realized gains and losses for financial statement and tax purposes, and may
result in reclassification among certain capital accounts on the financial
statements. The reclassifications, which reflect character differences
primarily related to federal income tax treatment of paydown losses and
income, expense and gain (loss) settlements on swap agreements, were as
follows:
Diversified
Bond High-Yield
Undistributed net investment income $3,428,708 $545,503
Accumulated undistributed net realized gain (loss) $(3,514,617) $(563,303)
Unrealized appreciation (depreciation) $85,909 $17,800
------
40
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
Diversified
Bond High-Yield
Federal tax cost of investments $935,041,291 $114,543,063
============ =============
Gross tax appreciation of investments $16,204,115 $ 504,772
Gross tax depreciation of investments (4,672,643) (6,406,168)
------------ -------------
Net tax appreciation (depreciation) of investments $11,531,472 $(5,901,396)
============ =============
Net tax appreciation (depreciation) on derivatives
and translation of assets and liabilities in
foreign currencies $ 2,173,854 $ 231,813
------------ -------------
Net tax appreciation (depreciation) $13,705,326 $(5,669,583)
============ =============
Undistributed ordinary income $7,499,510 $614,385
Accumulated long-term gains $1,635,993 --
Accumulated capital losses -- $(12,803,330)
Capital loss deferrals -- $(345,689)
The difference between book-basis and tax-basis cost and unrealized
appreciation (depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the realization for tax purposes of unrealized gains
for certain futures contracts.
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for
federal income tax purposes. Future capital loss carryover utilization in any
given year may be limited due to large shareholder redemptions. The capital
loss carryovers expire as follows:
2009 2010 2011 2012 2013 2014
High-Yield $(2,497,586) $(10,290,680) -- -- -- $(15,064)
The capital loss deferrals listed above represent net capital losses incurred
in the five-month period ended March 31, 2008. The funds have elected to treat
such losses as having been incurred in the following fiscal year for federal
income tax purposes.
9. CORPORATE EVENT
Effective September 4, 2007, the A Class (old) shares of Diversified Bond and
High-Yield were reclassified as Advisor Class shares of the same fund.
Subsequent to the reclassification, the Advisor Class was renamed A Class. The
changes were approved by the Board of Trustees on December 8, 2006.
10. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is taxable
in a particular jurisdiction), and requires certain expanded tax disclosures.
FIN 48 is effective for fiscal years beginning after December 15, 2006, and is
to be applied to all open tax years as of the date of effectiveness. The
adoption of FIN 48 did not materially impact the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" (FAS 157), in September 2006, which is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands the required
financial statement disclosures about fair value measurements. Management is
currently evaluating the impact that adopting FAS 157 will have on the
financial statement disclosures.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
------
41
FINANCIAL HIGHLIGHTS
Diversified Bond
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $10.02 $9.89 $10.10 $10.49 $10.47
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.46 0.45 0.41 0.33 0.36
Net Realized and
Unrealized Gain (Loss) 0.45 0.13 (0.21) (0.27) 0.14
-------- -------- -------- -------- --------
Total From
Investment Operations 0.91 0.58 0.20 0.06 0.50
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.45) (0.45) (0.41) (0.34) (0.37)
From Net Realized Gains -- -- -- (0.11) (0.11)
-------- -------- -------- -------- --------
Total Distributions (0.45) (0.45) (0.41) (0.45) (0.48)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $10.48 $10.02 $9.89 $10.10 $10.49
======== ======== ======== ======== ========
TOTAL RETURN(2) 9.38% 6.05% 1.97% 0.63% 4.92%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 0.62% 0.62% 0.62% 0.63% 0.64%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 4.53% 4.58% 4.04% 3.25% 3.38%
Portfolio Turnover Rate 250% 323% 341% 386% 324%
Net Assets, End of
Period (in thousands) $515,184 $394,346 $225,187 $180,346 $177,791
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
------
42
Diversified Bond
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $10.02 $9.89 $10.10 $10.49 $10.47
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment
Income (Loss)(1) 0.48 0.47 0.43 0.35 0.38
Net Realized and
Unrealized Gain (Loss) 0.45 0.13 (0.21) (0.27) 0.14
-------- -------- -------- -------- --------
Total From
Investment Operations 0.93 0.60 0.22 0.08 0.52
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.47) (0.47) (0.43) (0.36) (0.39)
From Net Realized Gains -- -- -- (0.11) (0.11)
-------- -------- -------- -------- --------
Total Distributions (0.47) (0.47) (0.43) (0.47) (0.50)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $10.48 $10.02 $9.89 $10.10 $10.49
======== ======== ======== ======== ========
TOTAL RETURN(2) 9.60% 6.26% 2.17% 0.83% 5.13%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 0.42% 0.42% 0.42% 0.43% 0.44%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 4.73% 4.78% 4.24% 3.45% 3.58%
Portfolio Turnover Rate 250% 323% 341% 386% 324%
Net Assets, End of
Period (in thousands) $186,031 $389,829 $440,579 $336,207 $309,579
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
------
43
Diversified Bond
A Class(1)
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $10.02 $9.89 $10.10 $10.49 $10.47
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss)(2) 0.44 0.43 0.38 0.31 0.33
Net Realized and
Unrealized Gain (Loss) 0.45 0.13 (0.21) (0.28) 0.14
-------- -------- -------- -------- --------
Total From
Investment Operations 0.89 0.56 0.17 0.03 0.47
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.43) (0.43) (0.38) (0.31) (0.34)
From Net
Realized Gains -- -- -- (0.11) (0.11)
-------- -------- -------- -------- --------
Total Distributions (0.43) (0.43) (0.38) (0.42) (0.45)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $10.48 $10.02 $9.89 $10.10 $10.49
======== ======== ======== ======== ========
TOTAL RETURN(3) 9.11% 5.77% 1.72% 0.38% 4.66%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses
to Average Net Assets 0.87% 0.87% 0.87% 0.88% 0.89%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 4.28% 4.33% 3.79% 3.00% 3.13%
Portfolio Turnover Rate 250% 323% 341% 386% 324%
Net Assets, End of Period
(in thousands) $23,020 $3,405 $5,642 $5,421 $7,107
(1) Prior to September 4, 2007, the A Class was referred to as the Advisor
Class.
(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.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
------
44
Diversified Bond
B Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $10.02 $9.89 $10.10 $10.49 $10.47
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss)(1) 0.36 0.35 0.31 0.23 0.26
Net Realized and
Unrealized Gain (Loss) 0.45 0.13 (0.21) (0.27) 0.14
-------- -------- -------- -------- --------
Total From
Investment Operations 0.81 0.48 0.10 (0.04) 0.40
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.35) (0.35) (0.31) (0.24) (0.27)
From Net
Realized Gains -- -- -- (0.11) (0.11)
-------- -------- -------- -------- --------
Total Distributions (0.35) (0.35) (0.31) (0.35) (0.38)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $10.48 $10.02 $9.89 $10.10 $10.49
======== ======== ======== ======== ========
TOTAL RETURN(2) 8.30% 5.00% 0.96% (0.37)% 3.87%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.62% 1.62% 1.62% 1.63% 1.64%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 3.53% 3.58% 3.04% 2.25% 2.38%
Portfolio Turnover Rate 250% 323% 341% 386% 324%
Net Assets, End of Period
(in thousands) $1,105 $806 $750 $753 $615
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
------
45
Diversified Bond
C Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $10.02 $9.89 $10.10 $10.49 $10.47
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss)(1) 0.36 0.35 0.31 0.23 0.28
Net Realized and
Unrealized Gain (Loss) 0.45 0.13 (0.21) (0.27) 0.14
-------- -------- -------- -------- --------
Total From
Investment Operations 0.81 0.48 0.10 (0.04) 0.42
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.35) (0.35) (0.31) (0.24) (0.29)
From Net
Realized Gains -- -- -- (0.11) (0.11)
-------- -------- -------- -------- --------
Total Distributions (0.35) (0.35) (0.31) (0.35) (0.40)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $10.48 $10.02 $9.89 $10.10 $10.49
======== ======== ======== ======== ========
TOTAL RETURN(2) 8.30% 4.99% 0.96% (0.37)% 4.07%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.62% 1.62% 1.62% 1.63% 1.47%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 3.53% 3.58% 3.04% 2.25% 2.55%
Portfolio Turnover Rate 250% 323% 341% 386% 324%
Net Assets, End of Period
(in thousands) $5,016 $2,718 $1,334 $1,418 $1,347
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
------
46
Diversified Bond
R Class
For a Share Outstanding Throughout the Years Ended March 31
(except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.02 $9.89 $10.17
-------- -------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.41 0.40 0.25
Net Realized and Unrealized Gain (Loss) 0.45 0.13 (0.28)
-------- -------- --------
Total From Investment Operations 0.86 0.53 (0.03)
-------- -------- --------
Distributions
From Net Investment Income (0.40) (0.40) (0.25)
-------- -------- --------
Net Asset Value, End of Period $10.48 $10.02 $9.89
======== ======== ========
TOTAL RETURN(3) 8.84% 5.52% (0.33)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.12% 1.12% 1.12%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets 4.03% 4.08% 3.68%(4)
Portfolio Turnover Rate 250% 323% 341%(5)
Net Assets, End of Period (in thousands) $31 $26 $25
(1) July 29, 2005 (commencement of sale) through March 31, 2006.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2006.
See Notes to Financial Statements.
------
47
High-Yield
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $6.48 $6.38 $6.42 $6.55 $6.13
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss) 0.42 0.42 0.43 0.46 0.50
Net Realized and
Unrealized Gain (Loss) (0.51) 0.10 (0.04) (0.13) 0.42
-------- -------- -------- -------- --------
Total From
Investment Operations (0.09) 0.52 0.39 0.33 0.92
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.42) (0.42) (0.43) (0.46) (0.50)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $5.97 $6.48 $6.38 $6.42 $6.55
======== ======== ======== ======== ========
TOTAL RETURN(1) (1.41)% 8.54% 6.29% 5.17% 15.53%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 0.80%(2) 0.79%(2) 0.81%(2) 0.88% 0.89%
Ratio of Operating
Expenses to Average
Net Assets (Before
Expense Waiver) 0.87% 0.87% 0.87% 0.88% 0.89%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 6.87%(2) 6.69%(2) 6.74%(2) 7.04% 7.82%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before
Expense Waiver) 6.80% 6.61% 6.68% 7.04% 7.82%
Portfolio Turnover Rate 40% 45% 40% 64% 80%
Net Assets, End of Period
(in thousands) $51,375 $51,717 $42,650 $40,746 $54,074
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(2) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
See Notes to Financial Statements.
------
48
High-Yield
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006 2005(1)
PER-SHARE DATA
Net Asset Value,
Beginning of Period $6.48 $6.38 $6.42 $6.43
-------- -------- -------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.44 0.44 0.44 0.30
Net Realized and Unrealized
Gain (Loss) (0.51) 0.10 (0.04) (0.01)
-------- -------- -------- --------
Total From Investment Operations (0.07) 0.54 0.40 0.29
-------- -------- -------- --------
Distributions
From Net Investment Income (0.44) (0.44) (0.44) (0.30)
-------- -------- -------- --------
Net Asset Value, End of Period $5.97 $6.48 $6.38 $6.42
======== ======== ======== ========
TOTAL RETURN(2) (1.21)% 8.76% 6.50% 4.53%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 0.60%(3) 0.59%(3) 0.61%(3) 0.68%(4)
Ratio of Operating Expenses to
Average Net Assets (Before
Expense Waiver) 0.67% 0.67% 0.67% 0.68%(4)
Ratio of Net Investment Income
(Loss) to Average Net Assets 7.07%(3) 6.89%(3) 6.94%(3) 4.37%(4)
Ratio of Net Investment Income
(Loss) to Average Net Assets
(Before Expense Waiver) 7.00% 6.81% 6.88% 4.37%(4)
Portfolio Turnover Rate 40% 45% 40% 64%(5)
Net Assets, End of Period
(in thousands) $24,795 $18,177 $9,387 $3,021
(1) August 2, 2004 (commencement of sale) through March 31, 2005.
(2) 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.
(3) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2005.
See Notes to Financial Statements.
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49
High-Yield
A Class(1)
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $6.48 $6.38 $6.42 $6.55 $6.13
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss) 0.41 0.41 0.42 0.44 0.49
Net Realized and
Unrealized Gain (Loss) (0.51) 0.10 (0.04) (0.13) 0.42
-------- -------- -------- -------- --------
Total From
Investment Operations (0.10) 0.51 0.38 0.31 0.91
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.41) (0.41) (0.42) (0.44) (0.49)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $5.97 $6.48 $6.38 $6.42 $6.55
======== ======== ======== ======== ========
TOTAL RETURN(2) (1.65)% 8.27% 6.02% 4.91% 15.35%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 1.05%(3) 1.04%(3) 1.06%(3) 1.13% 1.12%(4)
Ratio of Operating
Expenses to Average
Net Assets (Before
Expense Waiver) 1.12% 1.12% 1.12% 1.13% 1.14%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 6.62%(3) 6.44%(3) 6.49%(3) 6.79% 7.59%(4)
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before
Expense Waiver) 6.55% 6.36% 6.43% 6.79% 7.57%
Portfolio Turnover Rate 40% 45% 40% 64% 80%
Net Assets, End of Period
(in thousands) $8,275 $900 $407 $385 $242
(1) Prior to September 4, 2007, the A Class was referred to as the Advisor
Class.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
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.
(3) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
(4) During the year ended March 31, 2004, the distributor voluntarily waived a
portion of its distribution and service fees.
See Notes to Financial Statements.
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50
High-Yield
B Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $6.48 $6.38 $6.42 $6.55 $6.13
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss) 0.36 0.36 0.37 0.39 0.44
Net Realized and
Unrealized Gain (Loss) (0.51) 0.10 (0.04) (0.13) 0.42
-------- -------- -------- -------- --------
Total From
Investment Operations (0.15) 0.46 0.33 0.26 0.86
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.36) (0.36) (0.37) (0.39) (0.44)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $5.97 $6.48 $6.38 $6.42 $6.55
======== ======== ======== ======== ========
TOTAL RETURN(1) (2.39)% 7.47% 5.23% 4.13% 14.38%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 1.80%(2) 1.79%(2) 1.81%(2) 1.88% 1.89%
Ratio of Operating
Expenses to Average
Net Assets (Before
Expense Waiver) 1.87% 1.87% 1.87% 1.88% 1.89%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 5.87%(2) 5.69%(2) 5.74%(2) 6.04% 6.82%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before
Expense Waiver) 5.80% 5.61% 5.68% 6.04% 6.82%
Portfolio Turnover Rate 40% 45% 40% 64% 80%
Net Assets, End of Period
(in thousands) $1,119 $1,358 $1,182 $1,105 $855
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
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.
(2) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
See Notes to Financial Statements.
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51
High-Yield
C Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $6.48 $6.38 $6.42 $6.55 $6.13
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss) 0.36 0.36 0.37 0.39 0.45
Net Realized and
Unrealized Gain (Loss) (0.51) 0.10 (0.04) (0.13) 0.42
-------- -------- -------- -------- --------
Total From
Investment Operations (0.15) 0.46 0.33 0.26 0.87
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.36) (0.36) (0.37) (0.39) (0.45)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $5.97 $6.48 $6.38 $6.42 $6.55
======== ======== ======== ======== ========
TOTAL RETURN(1) (2.39)% 7.46% 5.23% 4.13% 14.60%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 1.80%(2) 1.79%(2) 1.81%(2) 1.88% 1.72%
Ratio of Operating
Expenses to Average
Net Assets (Before
Expense Waiver) 1.87% 1.87% 1.87% 1.88% 1.72%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 5.87%(2) 5.69%(2) 5.74%(2) 6.04% 6.99%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before
Expense Waiver) 5.80% 5.61% 5.68% 6.04% 6.99%
Portfolio Turnover Rate 40% 45% 40% 64% 80%
Net Assets, End of Period
(in thousands) $1,678 $2,002 $1,823 $3,351 $3,590
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
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.
(2) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
See Notes to Financial Statements.
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52
High-Yield
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $6.48 $6.38 $6.51
-------- -------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.39 0.39 0.27
Net Realized and Unrealized Gain (Loss) (0.51) 0.10 (0.13)
-------- -------- --------
Total From Investment Operations (0.12) 0.49 0.14
-------- -------- --------
Distributions
From Net Investment Income (0.39) (0.39) (0.27)
-------- -------- --------
Net Asset Value, End of Period $5.97 $6.48 $6.38
======== ======== ========
TOTAL RETURN(2) (1.90)% 8.00% 2.23%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3) 1.30% 1.29% 1.27%(4)
Ratio of Operating Expenses to Average
Net Assets (Before Expense Waiver) 1.37% 1.37% 1.37%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets(3) 6.37% 6.19% 6.39%(4)
Ratio of Net Investment Income (Loss) to
Average Net Assets (Before Expense Waiver) 6.30% 6.11% 6.29%(4)
Portfolio Turnover Rate 40% 45% 40%(5)
Net Assets, End of Period (in thousands) $27 $28 $26
(1) July 29, 2005 (commencement of sale) through March 31, 2006.
(2) 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.
(3) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2006.
See Notes to Financial Statements.
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53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the American Century Investment Trust and Shareholders
of the Diversified Bond Fund and the High-Yield Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Diversified
Bond Fund and High-Yield Fund (two of the ten funds comprising the American
Century Investment Trust, hereafter referred to as the "Funds") at March 31,
2008, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at March 31, 2008 by correspondence with the custodians and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 19, 2008
------
54
MANAGEMENT
The individuals listed below serve as trustees or officers of the funds. Each
trustee serves until his or her successor is duly elected and qualified or
until he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the
remaining independent trustees. Those listed as interested trustees are
"interested" primarily by virtue of their engagement as directors and/or
officers of, or ownership interest in, American Century Companies, Inc. (ACC)
or its wholly owned, direct or indirect, subsidiaries, including the funds'
investment advisor, American Century Investment Management, Inc. (ACIM or the
advisor); the funds' principal underwriter, American Century Investment
Services, Inc. (ACIS); and the funds' transfer agent, American Century
Services, LLC (ACS).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS, and ACS. The trustees serve
in this capacity for eight registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the funds also serve in similar capacities
for the other 14 investment companies in the American Century Investments
family of funds advised by ACIM, or American Century Global Investment
Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise
noted. Only officers with policy-making functions are listed. No officer is
compensated for his or her service as an officer of the funds. The listed
officers are interested persons of the funds 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 FUNDS: 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, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 105
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
------
55
INDEPENDENT TRUSTEES
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUNDS: Trustee (since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUNDS: Trustee (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of
Law and Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
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 FUNDS: Trustee (since 2008)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Advisor, Barclays Global
Investors (2003 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
PETER F. PERVERE, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUNDS: Trustee (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Vice President
and Chief Financial Officer, Commerce One, Inc. (software and services
provider)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Intraware, Inc.
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUNDS: Trustee (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Platinum Grove Asset
Management, L.P., and a Partner, Oak Hill Capital Management (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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUNDS: 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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present)
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Trustee (since 1984)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
------
56
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUNDS: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUNDS: 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 FUNDS: Tax Officer (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the funds' trustees and is available
without charge, upon request, by calling 1-800-345-2021.
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57
ADDITIONAL INFORMATION
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain
403(b), 457 and qualified plans [those not eligible for rollover to an IRA or
to another qualified plan] are subject to federal income tax withholding,
unless you elect not to have withholding apply. Tax will be withheld on the
total amount withdrawn even though you may be receiving amounts that are not
subject to withholding, such as nondeductible contributions. In such case,
excess amounts of withholding could occur. You may adjust your withholding
election so that a greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right
to revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
State tax will be withheld if, at the time of your distribution, your address
is within one of the mandatory withholding states and you have federal income
tax withheld. State taxes will be withheld from your distribution in
accordance with the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' investment advisor,
is responsible for exercising the voting rights associated with the securities
purchased and/or held by the funds. A description of the policies and
procedures the advisor uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's website at americancentury.com and on the Securities and
Exchange Commission's website at sec.gov. Information regarding how the
investment advisor voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available on the "About Us" page
at americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The funds file their complete schedule of portfolio holdings with the
Securities and Exchange Commission (SEC) for the first and third quarters of
each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's
website at sec.gov, and may be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330. The funds also make
their complete schedule of portfolio holdings for the most recent quarter of
their fiscal year available on their website at americancentury.com and, upon
request, by calling 1-800-345-2021.
------
58
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The CITIGROUP AGENCY INDEX is a market-capitalization-weighted index that
includes US government sponsored agencies with a remaining maturity of at
least one year.
The CITIGROUP CREDIT INDEX includes US and non-US corporate securities and
non-US sovereign and provincial securities.
The CITIGROUP MORTGAGE INDEX measures the mortgage component of the US BIG
Bond Index, comprising 30- and 15-year GNMA, FNMA, and FHLMC pass-throughs and
FNMA and FHLMC balloon mortgages.
The CITIGROUP TREASURY INDEX is comprised of US Treasury securities with an
amount outstanding of at least $5 billion and a remaining maturity of at least
one year.
The CITIGROUP US BROAD INVESTMENT-GRADE (BIG) BOND INDEX is a market-
capitalization-weighted index that includes fixed-rate Treasury, government-
sponsored, mortgage, asset-backed, and investment-grade issues with a maturity
of one year or longer.
The CITIGROUP US HIGH-YIELD MARKET INDEX captures the performance of
below-investment-grade debt issued by corporations domiciled in the United
States or Canada. This index includes cash-pay and deferred-interest
securities that are publicly placed, have a fixed coupon, and are
nonconvertible.
The CITIGROUP US INFLATION-LINKED SECURITIES INDEX (ILSI)(SM) measures the
return of bonds with fixed-rate coupon payments that adjust for inflation as
measured by the Consumer Price Index (CPI).
The MERRILL LYNCH US HIGH YIELD MASTER II CONSTRAINED INDEX tracks the
performance of below investment-grade U.S. dollar-denominated corporate bonds
publicly issued in the U.S. domestic markets and limits any single issuer to
no more than 2% of the index.
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59
NOTES
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60
[back cover]
[american century investments logo and text logo ®]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE . . . . . . . . . . . . . . 1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE . . . . . . . . . . . 1-800-345-2021 or
816-531-5575
INVESTORS USING ADVISORS . . . . . . . . . . . . . . . 1-800-378-9878
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . 1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL PROFESSIONALS, INSURANCE COMPANIES . . . . . 1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF . . . . . . . . 1-800-634-4113
AMERICAN CENTURY INVESTMENT TRUST
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for distribution
to prospective investors unless preceded or accompanied by an effective
prospectus.
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60038N
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo®]
AMERICAN CENTURY INVESTMENTS
PREMIUM MONEY MARKET FUND
PRESIDENT'S LETTER
JONATHAN THOMAS
[photo of Jonathan Thomas]
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century®
Premium Money Market Fund for the 12 months ended March 31, 2008. We also
recommend our website, americancentury.com, where we provide company news,
quarterly portfolio commentaries, investment views, and other useful
information about portfolio strategy, personal finance, government policy, and
the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
TABLE OF CONTENTS
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Fixed-Income Total Returns. . . . . . . . . . . . . . . . . . . 2
PREMIUM MONEY MARKET
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . 4
Portfolio Composition by Maturity. . . . . . . . . . . . . . . . . . 4
Yields and Weighted Average Maturity . . . . . . . . . . . . . . . . 5
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 8
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 14
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 15
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 17
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 20
Report of Independent Registered Public Accounting Firm . . . . . . . 21
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 25
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 26
The opinions expressed in the Market Perspective and the Portfolio Commentary
reflect those of the portfolio management team as of the date of the report,
and do not necessarily represent the opinions of American Century or any other
person in the American Century organization. Any such opinions are subject to
change at any time based upon market or other conditions and American Century
disclaims any responsibility to update such opinions. These opinions may not
be relied upon as investment advice and, because investment decisions made by
American Century funds are based on numerous factors, may not be relied upon
as an indication of trading intent on behalf of any American Century fund.
Security examples are used for representational purposes only and are not
intended as recommendations to purchase or sell securities. Performance
information for comparative indices and securities is provided to American
Century by third party vendors. To the best of American Century's knowledge,
such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of Chief Investment Officer]
By David MacEwen, Chief Investment Officer, Fixed-Income
VOLATILITY REIGNED
The 12 months ended March 31, 2008, saw widely divergent bond returns as
market volatility surged in the wake of the subprime credit crisis. Credit
woes spread across the financial system, affecting banks, brokers, bond
insurers, hedge funds, and other big, institutional players important for the
functioning of the markets. This led to risk aversion that colored the return
picture for assets ranging from the riskiest high-yield bonds to even some of
the highest-quality money market securities.
The subprime meltdown had direct economic effects as well, weighing on
consumer spending and confidence, leading many economists to suggest that the
economy is already in recession. But even as growth slowed, higher commodity
prices (led by oil) meant rising inflation. The government consumer price
index (CPI) rose 4% during the reporting period.
The Federal Reserve (the Fed) took a series of extraordinary steps, slashing
interest rates and acting as a lender of last resort not only for banks, but
also major brokers. For the year, the federal funds rate target declined from
5.25% to 2.25%.
TREASURY BONDS RULED ROOST
The volatility, credit, and liquidity concerns in the market all favored
Treasury securities over higher-yielding, lower-quality alternatives (see the
returns table). Inflation-linked bonds -- particularly Treasury
inflation-indexed securities -- performed best because of their combination of
high quality and inflation protection. Meanwhile, risky corporate high-yield
bonds posted negative returns.
RATES FELL, CURVE STEEPENED
Against this backdrop, Treasury yields declined. The yield on the two-year
Treasury note tumbled from 4.58% to 1.59%, while yields on longer-term notes
and bonds fell less. That's because investors worried about the potential
long-term inflation effects of Fed rate cuts, high energy and commodity
prices, and a weaker dollar. As a result, the yield curve fell and steepened
-- the difference in yield between two- and 10-year Treasury securities
increased sharply from seven to 182 basis points (a basis point equals 0.01%).
U.S. Fixed-Income Total Returns
For the 12 months ended March 31, 2008
TREASURY SECURITIES
3-Month Bill 4.81%
2-Year Note 9.39%
5-Year Note 14.37%
10-Year Note 14.35%
30-Year Bond 13.86%
CITIGROUP U.S. BOND MARKET INDICES
High-Yield Market (corporate) -3.58%
Credit (investment-grade corporate) 4.41%
Mortgage (mortgage-backed) 7.95%
Broad Investment-Grade (multi-sector) 8.41%
Agency 10.37%
Treasury 12.24%
Inflation-Linked Securities 14.64%
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2
PERFORMANCE
Premium Money Market
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year 5 years 10 years Inception Date
INVESTOR CLASS 4.70%(1) 3.01% 3.58% 3.95% 4/1/93
90-DAY U.S. TREASURY
BILL INDEX(2) 3.69% 2.95% 3.43% 3.88% --
LIPPER MONEY MARKET
INSTRUMENT FUNDS
AVERAGE RETURN(2) 4.14% 2.53% 3.14% -- --
Fund's Lipper
Ranking among Money
Market Instrument
Funds(2) 27 of 335 21 of 290 18 of 190 -- --
Premium Money Market acquired all of the net assets of American Century
Premium Capital Reserve Fund and the American Century Premium Government
Reserve Fund on December 3, 2001, pursuant to a plan approved by the acquired
funds' shareholders on November 16, 2001. Performance information prior to
December 3, 2001 is that of the American Century Premium Capital Reserve Fund.
(1) Class returns would have been lower if American Century had not
voluntarily waived a portion of its management fees.
(2) Data provided by Lipper Inc. - A Reuters Company. © 2008 Reuters. All
rights reserved. Any copying, republication or redistribution of Lipper
content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Lipper. Lipper shall not be
liable for any errors or delays in the content, or for any actions taken in
reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
Lipper Rankings -- Rankings are based only on the universe shown and are
based on average annual total returns. This listing might not represent the
complete universe of funds tracked by Lipper.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. To obtain performance data current to the most recent month
end, please call 1-800-345-2021 or visit americancentury.com.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the fund.
The 7-day current yield more closely reflects the current earnings of the fund
than the total return.
------
3
PORTFOLIO COMMENTARY
Premium Money Market
Lead Portfolio Manager: Lynn Paschen
Macro Strategy Team Representative: Steven Permut
PERFORMANCE SUMMARY
Premium Money Market returned 4.70%* for the 12 months ended March 31, 2008,
outperforming the 4.14% average return of the 335 funds in Lipper Inc.'s Money
Market Funds category. The portfolio's 12-month return ranked in the top 9% of
the Lipper category, and its five- and 10-year returns ranked in the top 8%
and 10%, respectively, of the Lipper group (see the previous page).
FED POLICY CHANGED TO RAPID RATE REDUCTION
In the first half of the reporting period, a lingering threat of inflation and
strong economic growth kept the Federal Reserve (the Fed) on hold and the fed
funds target rate at 5.25%. Despite increasing threats to economic growth from
the housing market slump, rising mortgage delinquencies, and high energy
prices, the Fed continued to view inflation as a bigger concern than
recession.
In late July 2007, credit and liquidity concerns stemming from a meltdown in
the subprime mortgage market took hold of the financial markets. Originally,
the problems were confined to the taxable bond market, but the contagion
quickly spread to the asset-backed segment of the money market and eventually
to the municipal securities market. The credit crisis sent investors fleeing
to the relative safety of U.S. Treasury securities. At the same time, U.S.
economic growth prospects tumbled, prompting a marked change in Fed strategy.
Reversing a long anti-inflation stance, the Fed indicated the present danger
of recession had surmounted that of inflation -- despite the soaring costs of
oil and other commodities.
Between September 18, 2007, and March 18, 2008, the Fed slashed the fed funds
target by three percentage points, to 2.25%, to help counter the effects of
the housing market downturn and waning consumer and investor confidence. In
addition, in late 2007 the Fed established a temporary Term Auction Facility
to address the elevated pressures in the short-term funding markets. Then,
following the near-collapse of investment bank Bear Stearns in March 2008, the
Fed took extraordinary measures to stabilize the financial markets, launching
two new liquidity-enhancement programs for broker/dealers and loosening its
collateral requirements.
Portfolio Composition by Credit Rating
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
A-1+ 77% 67%
A-1 23% 33%
Ratings provided by independent research companies. These ratings are listed
in Standard & Poor's format even if they were provided by other sources.
Portfolio Composition by Maturity
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
1 - 30 days 61% 56%
31 - 90 days 23% 35%
91 - 180 days 10% 7%
More than 180 days 6% 2%
*Class returns would have been lower had management fees not been waived.
------
4
Premium Money Market
The Fed's easing campaign, combined with a widespread flight to quality by
investors, sparked a strong rally in the Treasury market. The yield on the
three-month Treasury bill plunged 3.7 percentage points during the reporting
period, from 5.03% to 1.33%.
PORTFOLIO STRATEGY
Premium Money Market's seven-day current yield declined during the reporting
period, from 4.99% to 3.06%, reflecting the general decline in rates. In this
environment, we attempted to lock in higher yields by extending the
portfolio's average maturity, which ended the period at 44 days, compared with
39 days at the end of March 2007.
The portfolio held no securities exposed to the subprime market and no
mortgage-related asset-backed commercial paper. These securities do not meet
our stringent selection criteria. Instead, we maintained our conservative
approach toward credit-related money market securities. Unlike many of our
peers, who simply avoided such securities in the wake of the subprime fallout,
we continued to invest in high-quality, short-term asset-backed securities,
confident our thorough credit research would identify the most attractive
securities. We pursued a similar approach in the hard-hit financials sector,
where we streamlined our exposure to banks and brokers, reduced the number of
names in the portfolio, imposed dollar limits on those we owned and kept
maturities short. These strategies proved effective and contributed positively
to the fund's performance.
OUTLOOK
The probability of an economic hard landing/recession has increased, as the
fallout from the bursting credit bubble and the ensuing deleveraging process
work their way through the system. The unwinding/deleveraging process is
healthy and necessary, but is rarely orderly. We expect further Fed rate cuts,
assuming the economy and employment continue to weaken in 2008.
Yields and Weighted Average Maturity
3/31/08
7-Day Current Yield(1) 3.06%
7-Day Effective Yield(1) 3.10%
3/31/08 9/30/07
Weighted Average Maturity 44 days 39 days
(1) The yields presented reflect the waiver of a portion of the fund's
management fees. Without such waiver, the 7-day yields would have been lower.
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5
SHAREHOLDER FEE EXAMPLE (UNAUDITED)
Fund shareholders may incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments and redemption/exchange
fees; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in your fund
and to compare these costs with the ongoing cost of investing in other mutual
funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2007 to March 31, 2008.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or
Institutional Class shares of the American Century Diversified Bond Fund, in
an American Century account (i.e., not a financial intermediary or retirement
plan account), American Century may charge you a $12.50 semiannual account
maintenance fee if the value of those shares is less than $10,000. We will
redeem shares automatically in one of your accounts to pay the $12.50 fee. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. PERSONAL ACCOUNTS
include individual accounts, joint accounts, UGMA/UTMA accounts, personal
trusts, Coverdell Education Savings Accounts and IRAs (including traditional,
Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement
accounts. If you have only business, business retirement, employer-sponsored
or American Century Brokerage accounts, you are currently not subject to this
fee. We will not charge the fee as long as you choose to manage your accounts
exclusively online. If you are subject to the Account Maintenance Fee, your
account value could be reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is
not the actual return of a fund's share class. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
------
6
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
Beginning
Account Ending Expenses Paid Annualized
Value Account During Period(1) Expense
10/1/07 Value 3/31/08 10/1/07 - 3/31/08 Ratio(1)
Actual
(after waiver)(2) $1,000 $1,021.20 $2.27 0.45%
Actual
(before waiver) $1,000 $1,021.20(3) $2.37 0.47%
Hypothetical (after
waiver)(2) $1,000 $1,022.75 $2.28 0.45%
Hypothetical (before
waiver) $1,000 $1,022.65 $2.38 0.47%
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
(2) During the six months ended March 31, 2008, the fund received a partial
waiver of its management fee.
(3) Ending account value assumes the return earned after waiver. The return
would have been lower had fees not been waived and would have resulted in a
lower ending account value.
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7
SCHEDULE OF INVESTMENTS
Premium Money Market
MARCH 31, 2008
Principal Amount Value
Commercial Paper(1) -- 41.4%
$ 1,500,000 Allied Irish Banks N.A., 2.67%, 9/8/08 (Acquired
3/12/08, Cost $1,479,975)(2) $ 1,482,200
15,000,000 American Honda Finance, 2.77%, 4/28/08 14,968,838
7,500,000 Amsterdam Funding Corp., 3.10%, 4/1/08 (Acquired
3/31/08, Cost $7,499,354)(2) 7,500,000
15,000,000 Amsterdam Funding Corp., 3.05%, 4/4/08 (Acquired
2/1/08, Cost $14,919,938)(2) 14,996,187
7,400,000 Amsterdam Funding Corp., 4.50%, 4/10/08
(Acquired 1/4/08, Cost $7,310,275)(2) 7,391,675
20,000,000 Barclays U.S. Funding LLC, 2.87%, 8/7/08 19,796,267
20,000,000 Canadian Imperial Holdings, 3.07%, 4/3/08 19,996,589
10,000,000 Cedar Springs Capital Co., 4.10%, 7/14/08
(Acquired 1/16/08, Cost $9,795,000)(2) 9,881,556
11,000,000 Chariot Funding LLC, 4.55%, 4/7/08 (Acquired
1/3/08, Cost $10,873,485)(2) 10,991,659
6,000,000 Chariot Funding LLC, 3.25%, 4/24/08 (Acquired
1/25/08, Cost $5,951,250)(2) 5,987,542
14,700,000 Charta LLC, 3.15%, 4/2/08 (Acquired 2/8/08, Cost
$14,630,543)(2) 14,698,714
20,000,000 Charta LLC, 3.23%, 4/9/08 (Acquired 2/25/08,
Cost $19,921,044)(2) 19,985,644
4,700,000 CRC Funding LLC, 2.64%, 5/20/08 (Acquired
3/19/08, Cost $4,678,631)(2) 4,683,111
10,800,000 Crown Point Capital Co., 3.30%, 5/6/08 (Acquired
3/10/08, Cost $10,743,570)(2) 10,765,350
11,000,000 Crown Point Capital Co., 3.25%, 5/23/08
(Acquired 2/27/08, Cost $10,914,597)(2) 10,948,361
10,000,000 Crown Point Capital Co., 2.92%, 9/12/08
(Acquired 3/14/08, Cost $9,852,378)(2) 9,866,978
10,000,000 Depfa Bank plc, 4.30%, 4/7/08 (Acquired 1/9/08,
Cost $9,893,694)(2) 9,992,833
15,000,000 Depfa Bank plc, 3.91%, 4/14/08 (Acquired
1/14/08, Cost $14,851,746)(2) 14,978,821
15,000,000 Fortis Funding LLC, 2.67%, 9/30/08 (Acquired
3/27/08, Cost $14,796,794)(2) 14,797,904
Principal Amount Value
$20,000,000 Govco LLC, 2.75%, 6/9/08 (Acquired 3/12/08, Cost
$19,864,028)(2) $ 19,894,583
14,000,000 Govco LLC, 2.95%, 6/26/08 (Acquired 2/12/08,
Cost $13,845,125)(2) 13,901,339
2,300,000 ING (U.S.) Funding LLC, 2.75%, 6/10/08 2,287,701
5,000,000 ING (U.S.) Funding LLC, 3.67%, 6/16/08 4,961,261
3,700,000 Legacy Capital LLC, 3.40%, 4/2/08 (Acquired
3/3/08, Cost $3,689,517)(2) 3,699,650
5,000,000 Legacy Capital LLC, 3.25%, 6/6/08 (Acquired
3/13/08, Cost $4,961,632)(2) 4,970,208
10,000,000 Legacy Capital LLC, 3.82%, 7/11/08 (Acquired
1/18/08, Cost $9,814,306)(2) 9,892,828
12,000,000 Legacy Capital LLC, 3.15%, 8/1/08 (Acquired
2/4/08, Cost $11,812,050)(2) 11,871,900
22,000,000 Lexington Parker Capital, 4.00%, 4/22/08
(Acquired 1/18/08, Cost $21,767,778)(2) 21,948,666
12,500,000 Lexington Parker Capital, 3.25%, 6/6/08
(Acquired 3/7/08, Cost $12,397,309)(2) 12,425,521
10,000,000 Marshall & Ilsley Corp., 2.76%, 6/4/08 9,950,933
4,839,000 Ranger Funding Co. LLC, 4.10%, 4/18/08 (Acquired
1/11/08, Cost $4,784,991)(2) 4,829,631
11,200,000 Societe Generale, 4.60%, 4/2/08 11,198,569
15,000,000 Societe Generale, 4.75%, 4/4/08 14,994,063
7,000,000 Stadshypotek Delaware, Inc., 3.15%, 4/22/08
(Acquired 1/23/08, Cost $6,944,875)(2) 6,987,138
5,600,000 Toronto Dominion Holdings, 3.55%, 7/17/08
(Acquired 1/17/08, Cost $5,499,496)(2) 5,540,912
16,300,000 Tulip Funding Corp., 3.13%, 5/7/08 (Acquired
2/6/08, Cost $16,171,035)(2) 16,248,981
15,000,000 UBS Finance LLC, 4.70%, 4/24/08 14,955,006
15,000,000 UBS Finance LLC, 3.95%, 5/12/08 14,932,521
5,000,000 Variable Funding Capital Co. LLC, 3.20%, 4/25/08
(Acquired 1/28/08, Cost $4,960,889)(2) 4,989,333
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8
Premium Money Market
Principal Amount Value
$ 7,700,000 Westpac Banking Corp., 4.52%, 4/2/08 (Acquired
1/3/08, Cost $7,612,990)(2) $ 7,699,033
15,300,000 Westpac Securities NZ Ltd., 3.59%, 4/7/08
(Acquired 1/8/08-1/23/08, Cost $15,175,383)(2) 15,290,850
2,700,000 Windmill Funding Corp., 3.27%, 4/7/08 (Acquired
2/22/08, Cost $2,688,964)(2) 2,698,529
19,200,000 Windmill Funding Corp., 3.27%, 4/9/08 (Acquired
2/26/08, Cost $19,125,008)(2) 19,186,048
13,500,000 Windmill Funding Corp., 2.93%, 5/7/08 (Acquired
3/14/08, Cost $13,440,668)(2) 13,460,445
--------------
TOTAL COMMERCIAL PAPER 492,525,878
--------------
Corporate Bonds -- 28.1%
12,700,000 American Honda Finance Corp., VRN, 3.09%,
5/6/08, resets quarterly off the 3-month LIBOR
minus 0.01% with no caps (Acquired 2/7/08, Cost
$12,696,698)(2) 12,697,623
3,500,000 Astin Redevelopment L.P., VRN, 2.77%, 4/3/08 3,500,000
10,000,000 Bank of Scotland plc, 3.75%, 9/30/08 (Acquired
11/2/07, Cost $9,922,400)(2) 9,957,481
5,000,000 Bank of Scotland plc (New York), VRN, 4.64%,
4/9/08, resets quarterly off the 3-month LIBOR
plus 0.10% with no caps 5,000,000
15,000,000 Bank of Scotland plc (New York), VRN, 4.61%,
5/6/08, resets quarterly off the 3-month LIBOR
plus 0.21% with no caps 15,000,000
20,000,000 Bank of the West, VRN, 2.90%, 4/25/08, resets
monthly off the 1-month LIBOR plus 0.30% with no
caps 20,006,358
25,000,000 Barclays Bank plc (New York), VRN, 3.38%,
4/7/08, resets monthly off the 1-month LIBOR
plus 0.29% with no caps 25,000,000
5,000,000 Berkshire Hathaway Finance Corp., 3.375%,
10/15/08 5,025,932
10,000,000 Berkshire Hathaway Finance Corp., VRN, 3.13%,
5/16/08, resets quarterly off the 3-month LIBOR
plus 0.06% with no caps 10,000,171
Principal Amount Value
$11,500,000 BNP Paribas, VRN, 3.13%, 5/7/08, resets
quarterly off the 3-month LIBOR minus 0.03% with
no caps $ 11,495,805
3,000,000 Castleton United Methodist Church Inc., VRN,
2.73%, 4/2/08 (LOC: U.S. Bank N.A.) 3,000,000
3,485,000 Christopher Place Inc., VRN, 2.78%, 4/3/08 (LOC:
Fifth Third Bank) 3,485,000
4,465,000 Crosspoint Community Church, VRN, 2.93%, 4/3/08,
resets monthly off the 1-month LIBOR plus 0.10%
with no caps (LOC: AmSouth Bank) 4,465,000
6,650,000 Cunat Capital Corp., VRN, 2.73%, 4/3/08 6,650,000
16,750,000 Cunat Sheffield Heights LLC, VRN, 2.73%, 4/3/08 16,750,000
6,135,000 Delos LLC, VRN, 2.73%, 4/3/08 (LOC: Fifth Third
Bank) 6,135,000
13,100,000 Dexia Credit Local, VRN, 2.65%, 4/28/08, resets
monthly off the 1-month T-Bill minus 0.05% with
no caps 13,084,425
4,000,000 First Baptist Church of Opelika, VRN, 2.77%,
4/3/08 (LOC: FHLB) 4,000,000
4,000,000 Fleet Financial Group, Inc., 6.375%, 5/15/08 4,007,813
1,655,000 Gastroenterology Associates LLC, VRN, 2.78%,
4/3/08 (Acquired 7/16/07, Cost $1,655,000)(2) 1,655,000
2,070,000 Grace Community Church of Amarillo, VRN, 2.77%,
4/3/08 (LOC: Wells Fargo Bank N.A.) 2,070,000
1,215,000 Indiana Finance Auth. Rev., Series 2007 B,
(Golden Years Homestead and Great Lakes
Christian Homes), VRDN, 2.76%, 4/3/08 (LOC:
Keybank N.A.) 1,215,000
375,000 Lakeshore Crossing Apartments, Ltd., VRN, 2.92%,
4/3/08 (LOC: Wachovia Bank N.A.) 375,000
5,600,000 Lee Group Inc./County Materials Inc./Lees
Aggregate & Trucking Inc., VRN, 2.79%, 4/3/08
(LOC: FHLB) 5,600,000
10,000,000 MBIA Global Funding LLC, VRN, 1.55%, 4/1/08,
resets weekly off the 3-month T-Bill plus 0.33%
with no caps (Acquired 4/11/07, Cost
$10,000,000)(2) 10,000,000
------
9
Premium Money Market
Principal Amount Value
$10,000,000 MBIA Global Funding LLC, VRN, 3.16%, 6/4/08,
resets quarterly off the 3-month LIBOR plus
0.10% with no caps (Acquired 8/30/07, Cost
$10,000,000)(2) $ 10,000,000
13,000,000 MetLife Insurance Co. of Connecticut, VRN,
5.05%, 4/1/08, resets quarterly off the 3-month
LIBOR plus 0.05% with no caps (Acquired 10/1/07,
Cost $13,000,000)(2) 13,000,000
7,000,000 MetLife Insurance Co. of Connecticut, VRN,
3.25%, 5/15/08, resets quarterly off the 3-month
LIBOR plus 0.18% with no caps (Acquired 2/14/08,
Cost $7,000,000)(2) 7,000,000
2,400,000 Multimetco Inc., VRN, 2.93%, 4/3/08, resets
monthly off the 1-month LIBOR plus 0.10% with no
caps (LOC: AmSouth Bank) 2,400,000
4,400,000 Pfizer Inc., 3.30%, 3/2/09 4,432,740
10,000,000 Royal Bank of Canada (New York), VRN, 2.91%,
4/14/08, resets monthly off the 1-month T-Bill
plus 0.05% with no caps 10,000,000
1,300,000 Royal Bank of Canada (New York), VRN, 2.65%,
4/30/08, resets monthly off the 1-month T-Bill
minus 0.06% with no caps 1,299,758
10,000,000 Royal Bank of Scotland plc, VRN, 3.94%, 4/22/08,
resets quarterly off the 3-month T-Bill plus
0.05% with no caps (Acquired 2/8/08, Cost
$10,014,580)(2) 10,010,178
6,000,000 Rupert E. Phillips, VRN, 2.77%, 4/3/08 (LOC:
FHLB) 6,000,000
7,500,000 Salvation Army, Series 2003 A, VRN, 2.68%,
4/3/08 (LOC: Bank of New York) 7,500,000
2,000,000 Salvation Army, Series 2004 A, VRN, 2.68%,
4/3/08 (LOC: Bank of New York) 2,000,000
6,300,000 St. James United Methodist Church, VRN, 2.78%,
4/3/08 (LOC: Regions Bank) 6,300,000
1,705,000 St. Mary's Congregation, VRN, 2.83%, 4/3/08
(LOC: M&I Marshall & Isley Bank) 1,705,000
9,000,000 Toyota Motor Credit Corp., 5.32%, 6/2/08 9,000,000
Principal Amount Value
$ 9,000,000 Travelers Insurance Co. Group, VRN, 3.15%,
5/2/08, resets quarterly off the 3-month LIBOR
plus 0.06% with no caps (Acquired 8/7/03, Cost
$9,000,000)(2) $ 9,000,000
1,220,000 U.S. Bank N.A., 6.30%, 7/15/08 1,225,762
4,675,000 Wachovia Bank N.A., 4.375%, 8/15/08 4,699,841
19,750,000 Wachovia Bank N.A., VRN, 4.67%, 4/3/08, resets
quarterly off the 3-month T-Bill minus 0.03%
with no caps 19,756,940
2,324,000 Wachovia Corp., 6.25%, 8/4/08 2,347,223
5,000,000 Wachovia Corp., 3.50%, 8/15/08 4,999,292
2,300,000 Wachovia Corp., VRN, 3.30%, 4/30/08, resets
quarterly off the 3-month T-Bill plus 0.05% with
no caps 2,299,383
--------------
TOTAL CORPORATE BONDS 335,151,725
--------------
Municipal Securities -- 18.4%
1,680,000 Alameda County Industrial Development Auth.
Rev., Series 2005 B, (Ettore Products Co.),
VRDN, 2.67%, 4/3/08 (LOC: Comerica Bank) 1,680,000
5,100,000 Albany-Dougherty Inner City Auth. Economic
Development Rev., (Albany Hilton Garden Inn and
Conference Center), VRDN, 2.77%, 4/3/08 (LOC:
SunTrust Bank) 5,100,000
430,000 Board of Trustees of Morgan County Memorial
Hospital Rev., (Johnson County), VRDN, 2.85%,
4/3/08 (LOC: Fifth Third Bank) 430,000
1,160,000 California Infrastructure & Economic Development
Bank Rev., Series 2000 B, (Metrotile
Manufacturing), VRDN, 2.78%, 4/3/08 (LOC:
Comerica Bank) 1,160,000
1,050,000 California Infrastructure & Economic Development
Bank Rev., Series 2007 B, (Tobinworld), VRDN,
2.78%, 4/3/08 (LOC: Comerica Bank) 1,050,000
16,000,000 Catholic Health Initiatives Rev., Series 2007 B,
4.85%, 5/2/08 16,000,000
17,000,000 Catholic Health Initiatives Rev., Series 2008 B,
2.96%, 7/2/08 17,000,000
------
10
Premium Money Market
Principal Amount Value
$ 1,840,000 City of Houston Higher Education Finance Corp.
Housing Rev., Series 2003 C, (Tierwester Oaks &
Richfield Manor), VRDN, 3.21%, 4/1/08 (LOC: Bank
of New York) $ 1,840,000
1,570,000 City of Salinas Economic Development Rev.,
Series 2007 B, (Monterey County Public
Building), VRDN, 2.77%, 4/3/08 (LOC: Bank of New
York) 1,570,000
350,000 Colorado Housing & Finance Auth. Economic
Development Rev., Series 2004 B, (Corey
Building), VRDN, 2.78%, 4/3/08 (LOC: Wells Fargo
Bank N.A.) 350,000
520,000 Colorado Housing & Finance Auth. Economic
Development Rev., Series 2004 B, (Taxable POPIEL
Properties), VRDN, 2.76%, 4/3/08 (LOC: Guaranty
Bank & Trust and Wells Fargo Bank N.A.) 520,000
1,080,000 Colorado Housing & Finance Auth. Economic
Development Rev., Series 2005 B, (Closet
Factory), VRDN, 2.78%, 4/3/08 (LOC: Colorado
Business Bank and Bank of New York) 1,080,000
1,040,000 Colorado Housing & Finance Auth. Economic
Development Rev., Series 2007 B, (Monaco LLC),
VRDN, 2.78%, 4/2/08 (LOC: JPMorgan Chase Bank) 1,040,000
8,500,000 Cook County GO, Series 2005 D, (Public
Improvements), VRDN, 2.93%, 4/2/08 (SBBPA: Depfa
Bank plc) 8,500,000
5,105,000 Cook County Industrial Development Rev., Series
1999 B, (Devorahco LLC), VRDN, 2.70%, 4/3/08
(LOC: LaSalle Bank N.A.) 5,105,000
630,000 Crawford Education Facilities Corp. Rev., Series
2004 B, (Refunding Taxable University Package),
VRDN, 2.77%, 4/3/08 (LOC: BNP Paribas) 630,000
2,800,000 Fairfield Rev., Series 2005 A2, VRDN, 2.68%,
4/3/08 (LOC: Landesbank Hessen-Thuringen
Girozentrale) 2,800,000
Principal Amount Value
$12,500,000 Florida Housing Finance Corp. Multifamily
Mortgage Rev., Series 2007 G2, (Northbridge
Apartments), VRDN, 3.75%, 4/2/08 (LOC: Keybank
N.A.) $ 12,500,000
400,000 Greenville Memorial Auditorium District COP,
Series 1996 C, (BI-LO Center), VRDN, 3.03%,
4/2/08 (LOC: Bank of America N.A.) 400,000
10,000,000 Kansas City Financing Commission Tax Increment
Rev., Series 2006 B, (Briarcliff West), VRDN,
2.72%, 4/3/08 (LOC: M&I Marshall & Isley Bank) 10,000,000
3,000,000 Kentucky Housing Corp. Rev., Series 2008 B,
VRDN, 4.01%, 4/3/08 (SBBPA: Lloyds TSB Bank plc) 3,000,000
8,100,000 Lower Colorado River Auth. Rev., Series 2008 A,
3.15%, 4/4/08 8,100,000
12,500,000 Mississippi Business Finance Corp. Rev., (Aurora
Flight Sciences Corp.), VRDN, 2.77%, 4/3/08
(LOC: Branch Banking & Trust) 12,500,000
7,500,000 Mississippi Business Finance Corp. Rev., Series
2005, (Future Pipe Industries, Inc.), VRDN,
2.77%, 4/3/08 (LOC: Mashreqbank and Bank of New
York) 7,500,000
10,000,000 Mississippi Business Finance Corp. Rev., Series
2006 R-1, (Brown Bottling Group, Inc.), VRDN,
2.77%, 4/3/08 (LOC: FHLB) 10,000,000
2,120,000 Mississippi Business Finance Corp. Rev., Series
2007 B, (Drury Inns, Inc.), VRDN, 2.80%, 4/2/08
(LOC: Regions Bank) 2,120,000
2,845,000 Mobile Airport Auth. Rev., VRDN, 2.78%, 4/3/08
(LOC: Regions Bank) 2,845,000
7,345,000 Montebello COP, VRDN, 2.73%, 4/2/08 (LOC: Union
Bank of California and California State
Teacher's Retirement System) 7,345,000
13,800,000 Morgan Hill Redevelopment Agency Tax Allocation
Rev., Series 2008 B, (Ojo de Agua Redevelopment
Area), VRDN, 2.68%, 4/3/08 (LOC: Scotiabank) 13,800,000
------
11
Premium Money Market
Principal Amount Value
$ 280,000 Nebraska Investment Finance Auth. Multifamily
Rev., Series 2001 B, (Riverbend Apartments),
VRDN, 2.70%, 4/3/08 (LOC: LaSalle Bank N.A.) $280,000
1,350,000 New Jersey Economic Development Auth. Rev.,
Series 2006 B, (Accurate Box Co., Inc.), VRDN,
2.77%, 6/2/08 (LOC: Sun Bank N.A. and Wells
Fargo Bank N.A.) 1,350,000
8,800,000 New York Housing Finance Agency Rev., Series
2005 B, (55 West 25th Street Housing), VRDN,
2.65%, 4/3/08 (LOC: FNMA) 8,800,000
1,765,000 North Carolina Medical Care Commission Health
Care Facilities Rev., Series 2007 B, VRDN,
3.43%, 4/3/08 (LOC: RBS Citizens Bank N.A.) 1,765,000
10,000,000 North Texas Higher Education Auth., Inc. Student
Loan Rev., Series 2007 B, VRDN, 2.65%, 4/2/08
(Guaranteed Student Loans) (LOC: Bank of America
N.A. and Lloyds TSB Bank plc) 10,000,000
2,900,000 Ogden City Redevelopment Ageny Rev., Series 2005
C1, VRDN, 2.66%, 4/1/08 (LOC: Bank of New York) 2,900,000
1,200,000 Ontario County Industrial Development Agency
Rev., Series 2005 B, (Friends of the Finger
Lakes Performing Arts Center, Inc. Civic
Facility), VRDN, 3.60%, 4/1/08 (LOC: RBS
Citizens Bank N.A.) 1,200,000
315,000 Ontario County Industrial Development Agency
Rev., Series 2006 B, (CHF - Finger Lakes, LLC
Civic Facility), VRDN, 3.15%, 4/3/08 (LOC: RBS
Citizens Bank N.A.) 315,000
1,300,000 Oregon Facilities Auth. Rev., Series 2002-1,
(Hazelden Springbrook), VRDN, 3.24%, 4/3/08
(LOC: Allied Irish Bank plc) 1,300,000
1,900,000 Osceola County Housing Finance Auth. Rev.,
Series 2002 B, (Regatta Bay Apartments), VRDN,
3.18%, 4/2/08 (LOC: FNMA) 1,900,000
Principal Amount Value
$ 400,000 Pasadena COP, (Los Robles Avenue Parking
Facilities), VRDN, 2.65%, 4/1/08 (LOC: Bank of
New York and California State Teacher's
Retirement System) $400,000
10,000,000 Pennsylvania Housing Finance Agency Single
Family Mortgage Rev., Series 2007-97D, VRDN,
2.65%, 4/2/08 (SBBPA: Dexia Credit Local) 10,000,000
3,330,000 Putnam Hospital Center Rev., VRDN, 2.88%, 4/2/08
(LOC: JPMorgan Chase Bank) 3,330,000
2,500,000 Southeast Industrial Development Agency Rev.,
(Powers Fasteners, Inc.), VRDN, 2.78%, 4/3/08
(LOC: Bank of New York) 2,500,000
2,395,000 Southeast Industrial Development Agency Rev.,
(Powers Fasteners, Inc.), VRDN, 2.78%, 4/3/08
(LOC: JPMorgan Chase) 2,395,000
345,000 St. Louis County Industrial Development Auth.
Rev., Series 2005 B, (C.R. Metal Products),
VRDN, 2.88%, 4/3/08 (LOC: M&I Marshall & Ilsley
Bank) 345,000
1,840,000 Washington Economic Development Finance Auth.
Rev., Series 2006 G, (Wesmar Company, Inc.),
VRDN, 2.76%, 4/2/08 (LOC: U.S. Bank N.A.) 1,840,000
7,665,000 Washington Economic Development Finance Auth.
Rev., Series 2007 B, (Delta Marine Industries,
Inc.), VRDN, 2.78%, 4/3/08 (LOC: Keybank, N.A.) 7,665,000
3,005,000 Washington Economic Development Finance Auth.
Rev., Series 2007 K, (Ocean Gold Seafoods,
Inc.), VRDN, 2.75%, 4/3/08 (LOC: Wells Fargo
Bank N.A.) 3,005,000
2,500,000 West Covina Public Financing Auth. Tax
Allocation Rev., Series 1999, (Redevelopment
Agency & Sub-Lien), VRDN, 2.76%, 4/3/08 (LOC:
Allied Irish Bank plc) 2,500,000
--------------
TOTAL MUNICIPAL SECURITIES 219,755,000
--------------
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12
Premium Money Market
Principal Amount Value
Certificates of Deposit -- 8.2%
$10,000,000 American Express Centurion Bank, 4.43%, 4/8/08 $ 10,002,546
10,000,000 Branch Banking & Trust Co., 5.35%, 4/23/08 10,000,000
30,000,000 Calyon New York, 4.57%, 4/7/08 30,000,000
2,000,000 Natixis (New York), 5.24%, 5/2/08 1,999,648
11,000,000 Natixis (New York), 5.23%, 5/6/08 11,000,925
10,000,000 Royal Bank of Canada (New York), 4.63%, 5/7/08 10,000,297
15,000,000 Royal Bank of Scotland plc (New York), 3.75%,
7/18/08 15,000,000
10,000,000 Svenska Handelsbanken (New York), 5.00%, 7/9/08 10,000,000
--------------
TOTAL CERTIFICATES OF DEPOSIT 98,003,416
--------------
Principal Amount Value
U.S. Government Agency Securities -- 3.4%
$25,000,000 FHLB, 4.55%, 11/28/08 $ 25,000,000
15,000,000 FHLB, 2.75%, 2/20/09 15,000,000
--------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES 40,000,000
--------------
TOTAL INVESTMENT SECURITIES -- 99.5% 1,185,436,019
--------------
OTHER ASSETS AND LIABILITIES -- 0.5% 6,310,128
--------------
TOTAL NET ASSETS -- 100.0% $1,191,746,147
==============
Notes to Schedule of Investments
COP = Certificates of Participation
FHLB = Federal Home Loan Bank
FNMA = Federal National Mortgage Association
GO = General Obligation
LIBOR = London Interbank Offered Rate
LOC = Letter of Credit
MBIA = MBIA Insurance Corporation
resets = The frequency with which a security's coupon changes, based on
current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will
vary significantly from current market rates.
SBBPA = Standby Bond Purchase Agreement
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective March 31, 2008.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) The rate indicated is the yield to maturity at purchase.
(2) Security was purchased under Rule 144A or Section 4(2) of the Securities
Act of 1933 or is a private placement and, unless registered under the Act or
exempted from registration, may only be sold to qualified institutional
investors. The aggregate value of restricted securities at March 31, 2008 was
$447,804,412, which represented 37.6% of total net assets. Restricted
securities considered illiquid represent 2.4% of total net assets.
See Notes to Financial Statements.
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13
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
ASSETS
Investment securities, at value (amortized cost
and cost for federal income tax purposes) $1,185,436,019
Cash 1,789,003
Interest receivable 5,385,122
Prepaid portfolio insurance 175,342
--------------
1,192,785,486
--------------
LIABILITIES
Accrued management fees 430,585
Dividends payable 608,754
--------------
1,039,339
--------------
NET ASSETS $1,191,746,147
==============
INVESTOR CLASS CAPITAL SHARES
Outstanding (unlimited number of shares authorized) 1,191,795,326
==============
NET ASSET VALUE PER SHARE $1.00
==============
NET ASSETS CONSIST OF:
Capital paid in $1,191,790,518
Accumulated net realized loss on investment transactions (44,371)
--------------
$1,191,746,147
==============
See Notes to Financial Statements.
------
14
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
INVESTMENT INCOME (LOSS)
INCOME:
Interest $54,267,118
--------------
EXPENSES:
Management fees 4,866,558
Trustees' fees and expenses 41,842
Portfolio insurance and other expenses 171,332
--------------
5,079,732
--------------
Amount waived (386,057)
--------------
4,693,675
--------------
NET INVESTMENT INCOME (LOSS) 49,573,443
--------------
NET REALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS (39,565)
--------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $49,533,878
==============
See Notes to Financial Statements.
------
15
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Increase (Decrease) in Net Assets 2008 2007
OPERATIONS
Net investment income (loss) $ 49,573,443 $ 39,550,030
Net realized gain (loss) (39,565) 164
-------------- --------------
Net increase (decrease) in net assets
resulting from operations 49,533,878 39,550,194
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (49,573,443) (39,550,030)
-------------- --------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 1,198,681,958 913,300,007
Proceeds from reinvestment of distributions 38,354,931 31,468,928
Payments for shares redeemed (963,029,587) (668,240,175)
-------------- --------------
Net increase (decrease) in net assets from
capital share transactions 274,007,302 276,528,760
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS 273,967,737 276,528,924
NET ASSETS
Beginning of period 917,778,410 641,249,486
-------------- --------------
End of period $1,191,746,147 $ 917,778,410
============== ==============
TRANSACTIONS IN SHARES OF THE FUND
Sold 1,198,681,958 913,300,007
Issued in reinvestment of distributions 38,354,931 31,468,928
Redeemed (963,029,587) (668,240,175)
-------------- --------------
Net increase (decrease) in
shares of the fund 274,007,302 276,528,760
============== ==============
See Notes to Financial Statements.
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16
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. Premium Money Market Fund (the fund) is one
fund in a series issued by the trust. The fund is diversified under Rule 2a-7
of the 1940 Act. The fund's investment objective is to earn the highest level
of current income while preserving the value of your investment. The fund
invests most of its assets in high-quality, very short-term debt securities
issued by corporations, banks and governments. The following is a summary of
the fund's significant accounting policies.
SECURITY VALUATIONS -- Securities are generally valued at amortized cost,
which approximates current market value. When such valuations do not reflect
market value, securities may be valued as determined by the Board of Trustees
or its designee, in accordance with procedures adopted by the Board of
Trustees.
SECURITY TRANSACTIONS -- For financial reporting purposes, security
transactions are accounted for as of the trade date. Net realized gains and
losses are determined on the identified cost basis, which is also used for
federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a
manner sufficient to enable the fund to obtain those securities in the event
of a default under the repurchase agreement. ACIM monitors, on a daily basis,
the securities transferred to ensure the value, including accrued interest, of
the securities under each repurchase agreement is equal to or greater than
amounts owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM or American
Century Global Investment Management, Inc. (ACGIM), may transfer uninvested
cash balances into a joint trading account. These balances are invested in one
or more repurchase agreements that are collateralized by U.S. Treasury or
Agency obligations.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The fund may engage in securities
transactions on a when-issued or forward commitment basis. Under these
arrangements, the securities' prices and yields are fixed on the date of the
commitment, but payment and delivery are scheduled for a future date. During
this period, securities are subject to market fluctuations. The fund will
segregate cash, cash equivalents or other appropriate liquid securities on its
records in amounts sufficient to meet the purchase price.
INCOME TAX STATUS -- It is the fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. The fund is no longer subject to examination by tax authorities
for years prior to 2005. At this time, management has not identified any
uncertain tax positions for which it is reasonably possible that the total
amounts of unrecognized tax benefits will significantly change in the next
twelve months. Accordingly, no provision has been made for federal or state
income taxes. Interest and penalties associated with any federal or state
income tax obligations, if any, are recorded as interest expense.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
short-term capital gains, if any, are declared daily and paid monthly. The
fund does not expect to realize any long-term capital gains, and accordingly,
does not expect to pay any capital gains distributions.
------
17
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the fund. In addition, in the normal course of
business, the fund enters into contracts that provide general
indemnifications. The fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the fund.
The risk of material loss from such claims is considered by management to be
remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America,
which may require management to make certain estimates and assumptions at the
date of the financial statements. Actual results could differ from these
estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
ACIM, under which ACIM provides the fund with investment advisory and
management services in exchange for a single, unified management fee (the
fee). The Agreement provides that all expenses of the fund, except brokerage
commissions, taxes, portfolio insurance, interest, fees and expenses of those
trustees who are not considered "interested persons" as defined in the 1940
Act (including counsel fees) and extraordinary expenses, will be paid by ACIM.
The fee is computed and accrued daily based on the daily net assets of the
specific class of shares of the fund and paid monthly in arrears. The fee
consists of (1) an Investment Category Fee based on the daily net assets of
the fund and certain other accounts managed by the investment manager that are
in the same broad investment category as the fund and (2) a Complex Fee based
on the assets of all the funds in the American Century family of funds. The
rates for the Investment Category Fee range from 0.1170% to 0.2300% and the
rates for the Complex Fee range from 0.2500% to 0.3100%. From August 1, 2006
to July 31, 2007, the investment advisor voluntarily agreed to waive 0.071% of
its management fee. Effective August 1, 2007, the investment advisor
voluntarily agreed to waive 0.020% of its management fee. This fee waiver may
be revised or terminated any time without notice. The effective annual
management fee before waiver for the fund for the year ended March 31, 2008,
was 0.45%. The effective annual management fee after waiver for the fund for
the year ended March 31, 2008, was 0.41%.
MONEY MARKET INSURANCE -- The fund, along with other money market funds
managed by ACIM, has entered into an insurance agreement with Ambac Assurance
Corporation (Ambac). Ambac provides limited coverage for certain loss events
including issuer defaults as to payment of principal or interest and
insolvency of a credit enhancement provider. The fund pays annual premiums to
Ambac, which are amortized daily over one year. For the year ended March 31,
2008, the annualized ratio of money market insurance expense to average net
assets was 0.02%.
RELATED PARTIES -- Certain officers and trustees of the trust are also
officers and/or directors, and, as a group, controlling stockholders of
American Century Companies, Inc. (ACC), the parent of the trust's investment
advisor, ACIM, the distributor of the trust, American Century Investment
Services, Inc., and the trust's transfer agent, American Century Services,
LLC.
JPMorgan Chase Bank is a custodian of the fund and a wholly owned subsidiary
of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. FEDERAL TAX INFORMATION
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of certain income items and net realized gains and
losses for financial statement and tax purposes, and may result in
reclassification among certain capital accounts on the financial statements.
As of March 31, 2008, the fund has accumulated net realized capital loss
carryovers for federal income tax purposes of $(14,922), which may be used to
offset future taxable realized gains. Capital loss carryovers of $(446),
$(885), ($3,164) and $(10,427) expire in 2013, 2014, 2015 and 2016,
respectively.
Capital loss deferrals of $(29,449) represent net capital losses incurred in
the five-month period ended March 31, 2008. The fund has elected to treat such
losses as having been incurred in the following fiscal year for federal income
tax purposes.
------
18
4. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is taxable
in a particular jurisdiction), and requires certain expanded tax disclosures.
FIN 48 is effective for fiscal years beginning after December 15, 2006, and is
to be applied to all open tax years as of the date of effectiveness. The
adoption of FIN 48 did not materially impact the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" (FAS 157), in September 2006, which is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands the required
financial statement disclosures about fair value measurements. Management is
currently evaluating the impact that adopting FAS 157 will have on the
financial statement disclosures.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities - an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
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19
FINANCIAL HIGHLIGHTS
Premium Money Market
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss) 0.05 0.05 0.03 0.01 0.01
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.05) (0.05) (0.03) (0.01) (0.01)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
TOTAL RETURN(1) 4.70% 4.98% 3.41% 1.33% 0.74%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average Net
Assets 0.43%(2) 0.41%(2) 0.45%(2) 0.48% 0.47%
Ratio of Operating
Expenses to Average Net
Assets (Before Expense
Waiver) 0.47% 0.47% 0.47% 0.48% 0.47%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 4.58%(2) 4.89%(2) 3.41%(2) 1.31% 0.73%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before
Expense Waiver) 4.54% 4.83% 3.39% 1.31% 0.73%
Net Assets, End of Period
(in thousands) $1,191,746 $917,778 $641,249 $472,954 $479,341
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any.
(2) Effective July 29, 2005, the investment advisor voluntarily agreed to
waive a portion of its management fee.
See Notes to Financial Statements.
------
20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the American Century Investment Trust and Shareholders of
the Premium Money Market Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of the Premium Money Market Fund
(one of the ten funds comprising the American Century Investment Trust,
hereafter referred to as the "Fund") at March 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2008 by
correspondence with the custodians and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 19, 2008
------
21
MANAGEMENT
The individuals listed below serve as trustees or officers of the fund. Each
trustee serves until his or her successor is duly elected and qualified or
until he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the
remaining independent trustees. Those listed as interested trustees are
"interested" primarily by virtue of their engagement as directors and/or
officers of, or ownership interest in, American Century Companies, Inc. (ACC)
or its wholly owned, direct or indirect, subsidiaries, including the fund's
investment advisor, American Century Investment Management, Inc. (ACIM or the
advisor); the fund's principal underwriter, American Century Investment
Services, Inc. (ACIS); and the fund's transfer agent, American Century
Services, LLC (ACS).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS, and ACS. The trustees serve
in this capacity for eight registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the fund also serve in similar capacities for
the other 14 investment companies in the American Century Investments family
of funds advised by ACIM, or American Century Global Investment Management,
Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated
for his or her service as an officer of the fund. The listed officers are
interested persons of the fund and are appointed or re-appointed on an annual
basis.
INTERESTED TRUSTEE
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Trustee and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 105
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
------
22
INDEPENDENT TRUSTEES
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Trustee (since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
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 Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
FREDERICK L.A. GRAUER, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 2008)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Advisor, Barclays Global
Investors (2003 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
PETER F. PERVERE, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Vice President
and Chief Financial Officer, Commerce One, Inc. (software and services
provider)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Intraware, Inc.
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Platinum Grove Asset
Management, L.P., and a Partner, Oak Hill Capital Management (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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2002)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1973 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present)
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee (since 1984)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
------
23
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present); and Controller, various American Century Investments funds
(1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the fund's trustees and is available
without charge, upon request, by calling 1-800-345-2021.
------
24
ADDITIONAL INFORMATION
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain
403(b), 457 and qualified plans [those not eligible for rollover to an IRA or
to another qualified plan] are subject to federal income tax withholding,
unless you elect not to have withholding apply. Tax will be withheld on the
total amount withdrawn even though you may be receiving amounts that are not
subject to withholding, such as nondeductible contributions. In such case,
excess amounts of withholding could occur. You may adjust your withholding
election so that a greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right
to revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
State tax will be withheld if, at the time of your distribution, your address
is within one of the mandatory withholding states and you have federal income
tax withheld. State taxes will be withheld from your distribution in
accordance with the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment advisor,
is responsible for exercising the voting rights associated with the securities
purchased and/or held by the fund. A description of the policies and
procedures the advisor uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's website at americancentury.com and on the Securities and
Exchange Commission's website at sec.gov. Information regarding how the
investment advisor voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available on the "About Us" page
at americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The fund's Form N-Q is available on the SEC's website at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may
be obtained by calling 1-800-SEC-0330. The fund also makes its complete
schedule of portfolio holdings for the most recent quarter of its fiscal year
available on its website at americancentury.com and, upon request, by calling
1-800-345-2021.
------
25
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The 90-DAY U.S. TREASURY BILL INDEX is derived from secondary market interest
rates as published by the Federal Reserve Bank and includes three-month,
six-month, and one-year instruments.
The CITIGROUP AGENCY INDEX is a market-capitalization-weighted index that
includes US government sponsored agencies with a remaining maturity of at
least one year.
The CITIGROUP CREDIT INDEX includes US and non-US corporate securities and
non-US sovereign and provincial securities.
The CITIGROUP MORTGAGE INDEX measures the mortgage component of the US BIG
Bond Index, comprising 15- and 30-year GNMA, FNMA, and FHLMC pass-throughs and
FNMA and FHLMC balloon mortgages.
The CITIGROUP TREASURY INDEX is comprised of US Treasury securities with an
amount outstanding of at least $5 billion and a remaining maturity of at least
one year.
The CITIGROUP US BROAD INVESTMENT-GRADE (BIG) BOND INDEX is a market-
capitalization-weighted index that includes fixed-rate Treasury, government-
sponsored, mortgage, asset-backed, and investment-grade issues with a maturity
of one year or longer.
The CITIGROUP US HIGH-YIELD MARKET INDEX captures the performance of
below-investment-grade debt issued by corporations domiciled in the United
States or Canada. This index includes cash-pay and deferred-interest
securities that are publicly placed, have a fixed coupon, and are
nonconvertible.
The CITIGROUP US INFLATION-LINKED SECURITIES INDEX (ILSI)(SM) measures the
return of bonds with fixed-rate coupon payments that adjust for inflation as
measured by the Consumer Price Index (CPI).
------
26
NOTES
------
27
NOTES
------
28
[back cover]
[american century investments logo and text logo®]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE . . . . . . . . . . . . . . . 1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE . . . . . . . . . . . . 1-800-345-2021 or
816-531-5575
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . 1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL PROFESSIONALS, INSURANCE COMPANIES . . . . . . 1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF . . . . . . . . . 1-800-634-4113
AMERICAN CENTURY INVESTMENT TRUST
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60037N
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
INFLATION PROTECTION BOND FUND
PRESIDENT'S LETTER
JONATHAN THOMAS
[photo of Jonathan Thomas]
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century®
Inflation Protection Bond Fund for the 12 months ended March 31, 2008. We also
recommend our website, americancentury.com, where we provide company news,
quarterly portfolio commentaries, investment views, and other useful
information about portfolio strategy, personal finance, government policy, and
the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
TABLE OF CONTENTS
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Fixed-Income Total Returns. . . . . . . . . . . . . . . . . . . 2
INFLATION PROTECTION BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 5
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . 5
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Portfolio Composition by Effective Maturity. . . . . . . . . . . . . 6
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . 7
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 9
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 12
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 14
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 16
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 22
Report of Independent Registered Public Accounting Firm . . . . . . . 28
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 32
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 33
The opinions expressed in the Market Perspective and the Portfolio Commentary
reflect those of the portfolio management team as of the date of the report,
and do not necessarily represent the opinions of American Century or any other
person in the American Century organization. Any such opinions are subject to
change at any time based upon market or other conditions and American Century
disclaims any responsibility to update such opinions. These opinions may not
be relied upon as investment advice and, because investment decisions made by
American Century funds are based on numerous factors, may not be relied upon
as an indication of trading intent on behalf of any American Century fund.
Security examples are used for representational purposes only and are not
intended as recommendations to purchase or sell securities. Performance
information for comparative indices and securities is provided to American
Century by third party vendors. To the best of American Century's knowledge,
such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of Chief Investment Officer]
By David MacEwen, Chief Investment Officer, Fixed Income
VOLATILITY REIGNED
The 12 months ended March 31, 2008, saw widely divergent bond returns as
market volatility surged in the wake of the subprime credit crisis. Credit
woes spread across the financial system, affecting banks, brokers, bond
insurers, hedge funds, and other big, institutional players important for the
functioning of the markets. This led to risk aversion that colored the return
picture for assets ranging from the riskiest high-yield bonds to even some of
the highest-quality money market securities.
The subprime meltdown had direct economic effects as well, weighing on
consumer spending and confidence, leading many economists to suggest that the
economy is already in recession. But even as growth slowed, higher commodity
prices (led by oil) meant rising inflation. The government consumer price
index (CPI) rose 4% during the reporting period.
The Federal Reserve (the Fed) took a series of extraordinary steps, slashing
interest rates and acting as a lender of last resort not only for banks, but
also major brokers. For the year, the federal funds rate target declined from
5.25% to 2.25%.
TREASURY BONDS RULED ROOST
The volatility, credit, and liquidity concerns in the market all favored
Treasury securities over higher-yielding, lower-quality alternatives (see the
accompanying returns table). Inflation-linked bonds--particularly Treasury
inflation-indexed securities--performed best because of their combination of
high quality and inflation protection. Meanwhile, risky corporate high-yield
bonds posted negative returns.
RATES FELL, CURVE STEEPENED
Against this backdrop, Treasury yields declined. The yield on the two-year
Treasury note tumbled from 4.58% to 1.59%, while yields on longer-term notes
and bonds fell less. That's because investors worried about the potential
long-term inflation effects of Fed rate cuts, high energy and commodity
prices, and a weaker dollar. As a result, the yield curve fell and
steepened--the difference in yield between two- and 10-year Treasury
securities increased sharply from seven to 182 basis points (a basis point
equals 0.01%).
U.S. Fixed-Income Total Returns
For the 12 months ended March 31, 2008
TREASURY SECURITIES
3-Month Bill 4.81%
2-Year Note 9.39%
5-Year Note 14.37%
10-Year Note 14.35%
30-Year Bond 13.86%
CITIGROUP U.S. BOND MARKET INDICES
High-Yield Market (corporate) -3.58%
Credit (investment-grade corporate) 4.41%
Mortgage (mortgage-backed) 7.95%
Broad Investment-Grade (multi-sector) 8.41%
Agency 10.37%
Treasury 12.24%
Inflation-Linked Securities 14.64%
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2
PERFORMANCE
Inflation Protection Bond
Total Returns as of March 31, 2008
Average Annual
Returns
Since Inception
1 year Inception Date
INVESTOR CLASS 14.87% 5.85% 5/31/05
CITIGROUP US INFLATION-LINKED SECURITIES
INDEX(1) 14.64% 6.19% --
Institutional Class 15.43% 6.20% 5/31/05
A Class
No sales charge* 14.66% 5.61%
With sales charge* 9.48% 3.91% 5/31/05
B Class
No sales charge* 13.86% 4.85%
With sales charge* 9.86% 3.87% 5/31/05
C Class 13.98% 4.90% 5/31/05
R Class 14.47% 5.42% 5/31/05
* Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 4.50% maximum initial
sales charge for fixed-income funds and may be subject to a maximum CDSC of
1.00%. B Class shares redeemed within six years of purchase are subject to a
CDSC that declines from 5.00% during the first year after purchase to 0.00%
the sixth year after purchase. C Class shares redeemed within 12 months of
purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual
funds provide performance information net of maximum sales charges in all
cases where charges could be applied.
(1) The Citigroup US Inflation-Linked Securities Index is not subject to the
tax code diversification and other regulatory requirements limiting the type
and amount of securities that the fund may own.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
------
3
Inflation Protection Bond
Growth of $10,000 Over Life of Class
$10,000 investment made May 31, 2005
One-Year Returns Over Life of Class
Periods ended March 31
2006* 2007 2008
Investor Class -2.09% 4.46% 14.87%
Citigroup US Inflation-Linked Securities Index -1.76% 5.27% 14.64%
*From 5/31/05 (fund inception) to 3/31/06. Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
------
4
PORTFOLIO COMMENTARY
Inflation Protection Bond
Lead Portfolio Managers: Brian Howell, Jim Platz, Seth Plunkett,
and Bob Gahagan
Macro Strategy Team Representatives: Brian Howell and Bob Gahagan
PERFORMANCE SUMMARY
Inflation Protection Bond returned 14.87%* for the 12 months ended March 31,
2008. By comparison, the fund's benchmark, the Citigroup US Inflation-Linked
Securities Index, returned 14.64%. Portfolio returns reflect operating
expenses, while the index returns do not.
The portfolio's return reflected the strong performance of high-quality
securities in general--and inflation-protected securities in
particular--during the 12-month period. In an environment characterized by a
flight to quality and mounting inflationary pressures, Treasury
Inflation-Protected Securities (TIPS) offered dual benefits. In addition, the
sensitivity of TIPS to interest rate changes (their longer duration) aided
performance as yields declined.
The portfolio's 12-month return (Investor Class shares) also represents the
best fiscal year for the fund since its inception in May 2005 -- and more than
double the average annual total return since that inception date. Although we
believe the economic and investing climates continue to favor TIPS, we realize
such strong, double-digit performance is unusual for a one-year period -- and
unlikely to persist.
ECONOMIC DOWNTURN DIDN'T THWART INFLATION THREATS
In the first half of the reporting period, a lingering threat of inflation and
strong economic growth kept the Federal Reserve (the Fed) on hold. Despite
increasing threats to economic growth from the housing market slump, rising
mortgage delinquencies, and high energy prices, the Fed continued to view
inflation as a bigger concern than recession.
As the year progressed, U.S. economic growth prospects tumbled, prompting a
marked change in Fed strategy. Reversing a long anti-inflation stance, the Fed
indicated the present danger of recession had surmounted that of inflation,
and it cut the federal funds target rate by three percentage points between
September 2007 and March 2008.
Food and commodity prices continued to soar, and the U.S. dollar continued to
tumble. More alarming than the potential for inflation, stagflation (stalled
economic growth coupled with rising inflation), a worst-case scenario not
experienced since the 1970s, seemed increasingly likely.
Portfolio at a Glance
As of As of
3/31/08 3/31/07
Weighted Average Maturity 9.2 years 11.2 years
Average Duration (effective) 6.1 years 6.5 years
*All fund returns referenced in this commentary are for Investor Class shares.
------
5
Inflation Protection Bond
TIPS ALLOCATION, YEN TRADE HELPED RESULTS
Due to the growing risk of higher inflation, approximately 93% of the
portfolio was invested in TIPS, as of March 31, 2008. This strategy served the
portfolio well during the 12 months. In addition, our foreign currency trades,
notably in the Japanese yen, helped performance in the prevailing
weaker-dollar environment.
We also took advantage of a municipal-market anomaly late in the reporting
period. To cover outflows and meet margin calls, hedge funds and other
highly-leveraged investors had to sell billions of dollars in municipal
securities. The resulting supply/demand imbalance caused municipal
yield-to-Treasury-yield ratios to rise to historic levels. We added a small
weighting to municipals (0.7% of total net assets as of March 31, 2008) to
take advantage of the unusually attractive pricing/yield environment.
The portfolio held small allocations to some attractively valued agency and
high-quality collateralized mortgage-backed securities, which trailed Treasury
bonds in the fiscal year's flight-to-quality environment. Over time, though,
we expect these higher-yielding securities to outpace Treasury bonds.
CURVE POSITIONING WAS A POSITIVE FACTOR
For the entire period, we maintained a yield-curve steepening bias through the
use of TIPS and two- and 10-year Treasury futures. This strategy helped
relative results as the slopes of the nominal and TIPS yield curves steepened
during the 12-month period.
OUTLOOK
As of March 31, 2008, the Consumer Price Index (CPI) showed an annual increase
of 4.0%. At the same time, the so-called breakeven yield on 10-year TIPS (the
difference between the 10-year TIPS yield and the 10-year nominal Treasury
yield, representing the market's projection of the 10-year inflation rate) was
approximately 2.35%, representing good value for investors. Core inflation
remains at the high end of the Fed's 1%-2% "comfort range." Plus, with the Fed
favoring anti-recessionary insurance over inflation vigilance, and with food
and other commodity prices continuing to increase, inflation expectations
remain on the rise. This scenario continues to bode well for
inflation-protected securities, though their returns are not likely to be as
high as they were during the last reporting period.
Yields as of March 31, 2008
30-Day SEC Yield
Investor Class 5.32%
Institutional Class 5.58%
A Class 4.83%
B Class 4.31%
C Class 4.32%
R Class 4.81%
Portfolio Composition by Effective Maturity
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
0 - 5-Year Notes 27.2% 38.7%
5 - 10-Year Notes 49.0% 31.5%
10 - 30-Year Bonds 23.8% 29.8%
------
6
SHAREHOLDER FEE EXAMPLE (UNAUDITED)
Fund shareholders may incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments and redemption/exchange
fees; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in your fund
and to compare these costs with the ongoing cost of investing in other mutual
funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2007 to March 31, 2008.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or
Institutional Class shares of the American Century Diversified Bond Fund, in
an American Century account (i.e., not a financial intermediary or retirement
plan account), American Century may charge you a $12.50 semiannual account
maintenance fee if the value of those shares is less than $10,000. We will
redeem shares automatically in one of your accounts to pay the $12.50 fee. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. PERSONAL ACCOUNTS
include individual accounts, joint accounts, UGMA/UTMA accounts, personal
trusts, Coverdell Education Savings Accounts and IRAs (including traditional,
Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement
accounts. If you have only business, business retirement, employer-sponsored
or American Century Brokerage accounts, you are currently not subject to this
fee. We will not charge the fee as long as you choose to manage your accounts
exclusively online. If you are subject to the Account Maintenance Fee, your
account value could be reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is
not the actual return of a fund's share class. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
------
7
Expenses Paid
Beginning Ending During Period*
Account Value Account 10/1/07 - Annualized
10/1/07 Value 3/31/08 3/31/08 Expense Ratio*
ACTUAL
Investor
Class $1,000 $1,110.50 $3.11 0.59%
Institutional
Class $1,000 $1,113.60 $2.06 0.39%
A Class $1,000 $1,109.80 $4.43 0.84%
B Class $1,000 $1,106.20 $8.37 1.59%
C Class $1,000 $1,107.30 $8.38 1.59%
R Class $1,000 $1,109.20 $5.75 1.09%
HYPOTHETICAL
Investor
Class $1,000 $1,022.05 $2.98 0.59%
Institutional
Class $1,000 $1,023.05 $1.97 0.39%
A Class $1,000 $1,020.80 $4.24 0.84%
B Class $1,000 $1,017.05 $8.02 1.59%
C Class $1,000 $1,017.05 $8.02 1.59%
R Class $1,000 $1,019.55 $5.50 1.09%
*Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
------
8
SCHEDULE OF INVESTMENTS
Inflation Protection Bond
MARCH 31, 2008
Principal Amount Value
U.S. Treasury Securities -- 93.3%
$5,402,215 U.S. Treasury Inflation Indexed Bonds, 2.375%,
1/15/25(1) $ 5,879,554
6,167,314 U.S. Treasury Inflation Indexed Bonds, 2.00%,
1/15/26(1) 6,360,049
4,672,712 U.S. Treasury Inflation Indexed Bonds, 2.375%,
1/15/27 5,102,022
3,551,085 U.S. Treasury Inflation Indexed Bonds, 1.75%,
1/15/28 3,521,401
1,552,772 U.S. Treasury Inflation Indexed Bonds, 3.625%,
4/15/28 2,013,994
2,066,902 U.S. Treasury Inflation Indexed Bonds, 3.875%,
4/15/29 2,794,679
1,087,926 U.S. Treasury Inflation Indexed Bonds, 3.375%,
4/15/32 1,428,923
1,154,048 U.S. Treasury Inflation Indexed Notes, 4.25%,
1/15/10 1,252,503
3,592,715 U.S. Treasury Inflation Indexed Notes, 0.875%,
4/15/10(1) 3,677,761
1,091,340 U.S. Treasury Inflation Indexed Notes, 3.50%,
1/15/11 1,207,210
2,126,560 U.S. Treasury Inflation Indexed Notes, 2.375%,
4/15/11 2,285,389
1,426,272 U.S. Treasury Inflation Indexed Notes, 3.375%,
1/15/12 1,606,005
7,280,280 U.S. Treasury Inflation Indexed Notes, 2.00%,
4/15/12(1) 7,840,527
7,641,308 U.S. Treasury Inflation Indexed Notes, 3.00%,
7/15/12(1) 8,566,624
3,418,543 U.S. Treasury Inflation Indexed Notes, 1.875%,
7/15/13 3,688,290
6,282,045 U.S. Treasury Inflation Indexed Notes, 2.00%,
1/15/14 6,806,206
4,254,594 U.S. Treasury Inflation Indexed Notes, 2.00%,
7/15/14 4,621,889
3,647,391 U.S. Treasury Inflation Indexed Notes, 1.625%,
1/15/15 3,869,940
5,045,343 U.S. Treasury Inflation Indexed Notes, 1.875%,
7/15/15 5,447,790
5,103,984 U.S. Treasury Inflation Indexed Notes, 2.00%,
1/15/16 5,535,832
3,627,299 U.S. Treasury Inflation Indexed Notes, 2.50%,
7/15/16 4,087,230
2,642,463 U.S. Treasury Inflation Indexed Notes, 2.375%,
1/15/17 2,950,064
8,986,409 U.S. Treasury Inflation Indexed Notes, 2.625%,
7/15/17(1) 10,243,106
9,645,855 U.S. Treasury Inflation Indexed Notes, 1.625%,
1/15/18(1) 10,131,919
------------
TOTAL U.S. TREASURY SECURITIES
(Cost $107,113,260) 110,918,907
------------
Principal Amount Value
Collateralized Mortgage Obligations(2) -- 0.8%
$500,000 Credit Suisse Mortgage Capital Certificates, Series
2007 TF2A, Class A1, VRN, 3.00%, 4/15/08, resets
monthly off the 1-month LIBOR plus 0.18% with no
caps $ 477,070
453,640 Lehman Brothers Floating Rate Commercial Mortgage
Trust, Series 2007 LLFA, Class A1, VRN, 3.12%,
4/15/08, resets monthly off the 1-month LIBOR plus
0.30% with no caps 431,054
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $953,640) 908,124
------------
Municipal Securities -- 0.7%
800,000 California Department of Water Resources Power
Supply Rev., Series 2002 A, 5.125%, 5/1/19,
Prerefunded at 101% of Par(3)
(Cost $870,213) 878,656
------------
U.S. Government Agency Securities -- 0.5%
500,000 PEFCO, 6.67%, 9/15/09
(Cost $509,731) 532,135
------------
Asset-Backed Securities(2) -- 0.3%
350,000 Public Service New Hampshire Funding LLC, Series
2001-1, Class A3 SEQ, 6.48%, 5/1/15
(Cost $364,322) 375,992
------------
Commercial Paper -- 3.4%
4,095,000 Chariot Funding LLC, 3.10%, 4/1/08 (Acquired
3/31/08, Cost $4,095,000)(4)(5)
(Cost $4,095,000) 4,095,000
------------
TOTAL INVESTMENT SECURITIES -- 99.0%
(Cost $113,906,166) 117,708,814
------------
OTHER ASSETS AND LIABILITIES -- 1.0% 1,219,944
------------
TOTAL NET ASSETS -- 100.0% $118,928,758
============
------
9
Inflation Protection Bond
Futures Contracts
Expiration Underlying Face Unrealized
Contracts Purchased Date Amount at Value Gain (Loss)
128 U.S. Treasury
2-Year Notes June 2008 $27,476,000 $201,900
91 U.S. Treasury
5-Year Notes June 2008 10,395,328 138,492
--------------- ------------
$37,871,328 $340,392
=============== ============
Expiration Underlying Face Unrealized Gain
Contracts Sold Date Amount at Value (Loss)
76 U.S. Treasury
10-Year Notes June 2008 $9,040,438 $(224,697)
=============== ============
Swap Agreements
Notional Expiration Unrealized
Amount Description of Agreement Date Gain (Loss)
CREDIT DEFAULT
$160,000 Pay quarterly a fixed rate equal to December $ (686)
0.40% multiplied by the notional 2012
amount and receive from Bank of
America N.A. upon each default event
of FHLMC, par value of the
proportional notional amount of FHLMC,
VRN, 5.08%, 2/7/11.
300,000 Pay quarterly a fixed rate equal to December (12,731)
0.70% multiplied by the notional 2012
amount and receive from Morgan Stanley
Capital Services, Inc. upon each
default event of Citigroup Inc., par
value of the proportional notional
amount of Citigroup Inc., 6.50%,
1/18/11.
60,000 Pay quarterly a fixed rate equal to December (2,873)
0.73% multiplied by the notional 2012
amount and receive from Barclays Bank
plc upon each default event of
American International Group, Inc.,
par value of the proportional notional
amount of American International
Group, Inc., 4.25%, 5/15/13.
250,000 Pay quarterly a fixed rate equal to December (5,980)
2.45% multiplied by the notional 2012
amount and receive from Bank of
America N.A. upon each default event
of Toll Brothers, Inc., par value of
the proportional notional amount of
Toll Brothers Finance Corp., 6.875%,
11/15/12.
400,000 Pay quarterly a fixed rate equal to September (27,640)
0.69% multiplied by the notional 2017
amount and receive from Barclays Bank
plc upon each default event of
JPMorgan Chase & Co., par value of the
proportional notional amount of
JPMorgan Chase & Co., 6.75%, 2/1/11.
TOTAL RETURN
800,000 Pay a fixed rate equal to 1.13% and January 16,454
receive the return of the U.S. CPI 2012
Urban Consumers NSA Index upon the
termination date with Barclays Bank
plc.
1,000,000 Pay a fixed rate equal to 1.31% and April 3,266
receive the return of the U.S. CPI 2017
Urban Consumers NSA Index upon the
termination date with Barclays Bank
plc.
1,900,000 Pay a fixed rate equal to 2.895% and December (40,446)
receive the return of the U.S. CPI 2027
Urban Consumers NSA Index upon the
termination date with Barclays Bank
plc.
-----------
$(70,636)
===========
------
10
Inflation Protection Bond
Notes to Schedule of Investments
CPI = Consumer Price Index
FHLMC = Federal Home Loan Mortgage Corporation
LIBOR = London Interbank Offered Rate
NSA = Not Seasonally Adjusted
PEFCO = Private Export Funding Corporation
resets = The frequency with which a security's coupon changes, based on
current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will
vary significantly from current market rates.
SEQ = Sequential Payer
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) Security, or a portion thereof, has been segregated for futures contracts
and/or swap agreements.
(2) Final maturity indicated, unless otherwise noted.
(3) Escrowed to maturity in U. S. government securities or state and local
government securities.
(4) The rate indicated is the yield to maturity at purchase.
(5) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at March 31, 2008, was $4,095,000,
which represented 3.4% of total net assets.
See Notes to Financial Statements.
------
11
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
ASSETS
Investment securities, at value
(cost of $113,906,166) $117,708,814
Cash 83,295
Foreign currency holdings, at value (cost $901) 1,098
Unrealized appreciation on swap agreements 19,720
Receivable for capital shares sold 866,274
Receivable for variation margin on futures contracts 16,328
Interest receivable 602,116
------------
119,297,645
------------
LIABILITIES
Payable for capital shares redeemed 192,558
Unrealized depreciation on swap agreements 90,356
Accrued management fees 53,868
Distribution fees payable 13,358
Service fees (and distribution fees --
A Class and R Class) payable 18,747
------------
368,887
------------
NET ASSETS $118,928,758
============
See Notes to Financial Statements.
------
12
MARCH 31, 2008
NET ASSETS CONSIST OF:
Capital paid in $114,901,798
Undistributed net investment income 288,478
Accumulated net realized loss on investment
and foreign currency transactions (109,825)
Net unrealized appreciation on investments
and translation of assets and liabilities
in foreign currencies 3,848,307
------------
$118,928,758
============
INVESTOR CLASS
Net assets $21,968,329
Shares outstanding 2,096,681
Net asset value per share $10.48
INSTITUTIONAL CLASS
Net assets $459,649
Shares outstanding 43,752
Net asset value per share $10.51
A CLASS
Net assets $72,396,998
Shares outstanding 6,938,232
Net asset value per share $10.43
Maximum offering price (net asset value divided by 0.955) $10.92
B CLASS
Net assets $2,826,147
Shares outstanding 271,512
Net asset value per share $10.41
C CLASS
Net assets $20,978,200
Shares outstanding 2,015,049
Net asset value per share $10.41
R CLASS
Net assets $299,435
Shares outstanding 28,040
Net asset value per share $10.68
See Notes to Financial Statements.
------
13
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
INVESTMENT INCOME (LOSS)
INCOME:
Interest $2,298,353
----------
EXPENSES:
Management fees 242,316
Distribution fees:
B Class 10,303
C Class 66,176
Service fees:
B Class 3,434
C Class 22,059
Distribution and service fees:
A Class 55,071
R Class 887
Trustees' fees and expenses 1,354
----------
401,600
----------
NET INVESTMENT INCOME (LOSS) 1,896,753
----------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
Investment and foreign currency transactions (67,893)
Futures and swaps transactions 378,081
----------
310,188
----------
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments and translation of assets and
liabilities in foreign currencies 3,772,154
Futures and swaps 29,837
----------
3,801,991
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) 4,112,179
----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $6,008,932
==========
See Notes to Financial Statements.
------
14
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Increase (Decrease) in Net Assets 2008 2007
OPERATIONS
Net investment income (loss) $ 1,896,753 $ 524,244
Net realized gain (loss) 310,188 (311,252)
Change in net unrealized
appreciation (depreciation) 3,801,991 529,124
------------ -----------
Net increase (decrease) in net assets
resulting from operations 6,008,932 742,116
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class (376,585) (19,831)
Institutional Class (5,386) (1,427)
A Class (891,234) (336,894)
B Class (48,556) (22,154)
C Class (316,517) (142,850)
R Class (6,635) (1,088)
From return of capital:
Investor Class -- (83)
A Class -- (20,050)
B Class -- (3,328)
C Class -- (30,712)
------------ -----------
Decrease in net assets from distributions (1,644,913) (578,417)
------------ -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets from capital
share transactions 93,585,715 6,167,036
------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS 97,949,734 6,330,735
NET ASSETS
Beginning of period 20,979,024 14,648,289
------------ -----------
End of period $118,928,758 $20,979,024
============ ===========
Undistributed net investment income $288,478 $1,584
============ ===========
See Notes to Financial Statements.
------
15
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. Inflation Protection Bond Fund (the fund) is
one fund in a series issued by the trust. The fund is nondiversified under the
1940 Act. The fund's investment objective is to seek total return and
protection against U.S. inflation. The fund invests primarily in
inflation-linked debt securities. These securities include inflation-linked
securities issued by the U.S. Treasury, by U.S. government agencies and
instrumentalities, and by entities other than the U.S. Treasury or U.S.
government agencies and instrumentalities. The following is a summary of the
fund's significant accounting policies.
MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the
Institutional Class, the A Class, the B Class, the C Class, and the R Class.
The A Class may incur an initial sales charge. The A Class, B Class, and C
Class may be subject to a contingent deferred sales charge. The share classes
differ principally in their respective sales charges and distribution and
shareholder servicing expenses and arrangements. All shares of the funds
represent an equal pro rata interest in the net assets of the class to which
such shares belong, and have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except for class specific expenses
and exclusive rights to vote on matters affecting only individual classes.
Income, non-class specific expenses, and realized and unrealized capital gains
and losses of the funds are allocated to each class of shares based on their
relative net assets.
SECURITY VALUATIONS -- Debt securities maturing in greater than 60 days are
valued at current market value as provided by a commercial pricing service or
at the mean of the most recent bid and asked prices. Debt securities maturing
within 60 days may be valued at cost, plus or minus any amortized discount or
premium. Securities traded on foreign securities exchanges and
over-the-counter markets are normally completed before the close of business
on days that the New York Stock Exchange (the Exchange) is open and may also
take place on days when the Exchange is not open. If an event occurs after the
value of a security was established but before the net asset value per share
was determined that was likely to materially change the net asset value, that
security would be valued as determined in accordance with procedures adopted
by the Board of Trustees. If the fund determines that the market price of a
portfolio security is not readily available, or that the valuation methods
mentioned above do not reflect the security's fair value, such security is
valued as determined by the Board of Trustees or its designee, in accordance
with procedures adopted by the Board of Trustees, if such determination would
materially impact a fund's net asset value. Certain other circumstances may
cause the fund to use alternative procedures to value a security such as: a
security has been declared in default; trading in a security has been halted
during the trading day; or there is a foreign market holiday and no trading
will commence.
SECURITY TRANSACTIONS -- For financial reporting purposes, security
transactions are accounted for as of the trade date. Net realized gains and
losses are determined on the identified cost basis, which is also used for
federal income tax purposes.
INVESTMENT INCOME-- Interest income less foreign taxes withheld, if any, is
recorded on the accrual basis and includes accretion of discounts and
amortization of premiums. Inflation adjustments related to inflation-linked
debt securities are reflected as interest income.
FUTURES CONTRACTS -- The fund may enter into futures contracts in order to
manage the fund's exposure to changes in market conditions. One of the risks
of entering into futures contracts is the possibility that the change in value
of the contract may not correlate with the changes in value of the underlying
securities. Upon entering into a futures contract, the fund is required to
deposit either cash or securities in an amount equal to a certain percentage
of the contract value (initial margin). Subsequent payments (variation margin)
are made or received daily, in cash, by the fund. The variation margin is
equal to the daily change in the contract value and is recorded as unrealized
gains and losses. The fund recognizes a realized gain or loss when the
contract is closed or expires. Net realized and unrealized gains or losses
occurring during the holding period of futures contracts are a component of
realized gain (loss) on futures and swaps transactions and unrealized
appreciation (depreciation) on futures and swaps, respectively.
------
16
SWAP AGREEMENTS -- The fund may enter into swap agreements in order to attempt
to obtain or preserve a particular return or spread at a lower cost than
obtaining a return or spread through purchases and/or sales of instruments in
other markets; protect against currency fluctuations; attempt to manage
duration to protect against any increase in the price of securities the fund
anticipates purchasing at a later date; or gain exposure to certain markets in
the most economical way possible. A basic swap agreement is a contract in
which two parties agree to exchange the returns earned or realized on
predetermined investments or instruments. Credit default swaps enable an
investor to buy/sell protection against a credit event of a specific issuer.
The seller of credit protection against a security or basket of securities
receives an up-front or periodic payment to compensate against potential
default events. The fund may enhance returns by selling protection or attempt
to mitigate credit risk by buying protection. The fund will segregate cash,
cash equivalents or other appropriate liquid securities on its records in
amounts sufficient to meet requirements. Unrealized gains are reported as an
asset and unrealized losses are reported as a liability on the Statement of
Assets and Liabilities. Swap agreements are valued daily and changes in value,
including the periodic amounts of interest to be paid or received on swaps,
are recorded as unrealized appreciation (depreciation) on futures and swaps.
Realized gain or loss is recorded upon receipt or payment of a periodic
settlement or termination of swap agreements. The risks of entering into swap
agreements include the possible lack of liquidity, failure of the counterparty
to meet its obligations, and that there may be unfavorable changes in the
underlying investments and instruments.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially
expressed in foreign currencies are translated into U.S. dollars at prevailing
exchange rates at period end. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are translated at the rates
of exchange prevailing on the respective dates of such transactions. For
assets and liabilities, other than investments in securities, net realized and
unrealized gains and losses from foreign currency translations arise from
changes in currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses
occurring during the holding period of investment securities are a component
of realized gain (loss) on investment transactions and unrealized appreciation
(depreciation) on investments, respectively. Certain countries may impose
taxes on the contract amount of purchases and sales of foreign currency
contracts in their currency. The fund records the foreign tax expense, if any,
as a reduction to the net realized gain (loss) on foreign currency
transactions.
INCOME TAX STATUS -- It is the fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. At this time, management has not identified any uncertain tax
positions for which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next twelve months.
Accordingly, no provision has been made for federal or state income taxes.
Interest and penalties associated with any federal or state income tax
obligations, if any, are recorded as interest expense.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income are declared
and paid quarterly. Prior to October 1, 2007, distributions from net
investment income were declared daily and paid monthly. Distributions from net
realized gains, if any, are generally declared and paid annually.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the fund. In addition, in the normal course of
business, the fund enters into contracts that provide general
indemnifications. The fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the fund.
The risk of material loss from such claims is considered by management to be
remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America,
which may require management to make certain estimates and assumptions at the
date of the financial statements. Actual results could differ from these
estimates.
------
17
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
American Century Investment Management, Inc. (ACIM) (the investment advisor),
under which ACIM provides the fund with investment advisory and management
services in exchange for a single, unified management fee (the fee) per class.
The Agreement provides that all expenses of the fund, except brokerage
commissions, taxes, interest, fees and expenses of those trustees who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee is computed
and accrued daily based on the daily net assets of the specific class of
shares of the fund and paid monthly in arrears. The fee consists of (1) an
Investment Category Fee based on the daily net assets of the fund and certain
other accounts managed by the investment advisor that are in the same broad
investment category as the fund and (2) a Complex Fee based on the assets of
all the funds in the American Century family of funds. The rates for the
Investment Category Fee range from 0.2625% to 0.3800% and the rates for the
Complex Fee (except for Institutional Class) range from 0.2500% to 0.3100%.
The Institutional Class is 0.2000% less at each point within the Complex Fee
range. The effective annual management fee for the fund for the year ended
March 31, 2008 was 0.59% for all classes except Institutional Class, which was
0.39%.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a separate
Master Distribution and Individual Shareholder Services Plan for each of the A
Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule
12b-1 of the 1940 Act. The plans provide that the A Class and the R Class will
pay American Century Investment Services, Inc. (ACIS) an annual distribution
and service fee of 0.25% for the A Class and 0.50% for the R Class. The plans
provide that the B Class and C Class will each pay ACIS an annual distribution
fee and service fee of 0.75% and 0.25%, respectively. The fees are computed
and accrued daily based on each class's daily net assets and paid monthly in
arrears. The distribution fee provides compensation for expenses incurred in
connection with distributing shares of the classes including, but not limited
to, payments to brokers, dealers, and financial institutions that have entered
into sales agreements with respect to shares of the fund. The service fee
provides compensation for individual shareholder services rendered by
broker/dealers or other independent financial intermediaries. Fees incurred
under the plans during the year ended March 31, 2008, are detailed in the
Statement of Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also
officers and/or directors, and, as a group, controlling stockholders of
American Century Companies, Inc. (ACC), the parent of the trust's investment
advisor, ACIM, the distributor of the trust, ACIS, and the trust's transfer
agent, American Century Services, LLC.
Prior to December 12, 2007, the fund had a bank line of credit agreement with
JPMorgan Chase Bank (JPMCB). JPMCB is a wholly owned subsidiary of JPMorgan
Chase & Co. (JPM). JPM is an equity investor in ACC.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the year ended March 31, 2008, were $100,700,580 and
$12,928,936, respectively.
------
18
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows (unlimited number of shares
authorized):
Year ended Year ended
March 31, 2008 March 31, 2007
Shares Amount Shares Amount
INVESTOR CLASS
Sold 2,262,755 $22,684,296 76,590 $ 722,622
Issued in reinvestment
of distributions 9,000 92,112 521 4,911
Redeemed (237,385) (2,422,401) (54,375) (512,192)
--------- ----------- --------- -----------
2,034,370 20,354,007 22,736 215,341
--------- ----------- --------- -----------
INSTITUTIONAL CLASS
Sold 46,449 478,321 343 3,231
Issued in reinvestment
of distributions 539 5,386 152 1,427
Redeemed (7,760) (81,946) -- --
--------- ----------- --------- -----------
39,228 401,761 495 4,658
--------- ----------- --------- -----------
A CLASS
Sold 6,138,544 62,548,402 947,874 8,907,190
Issued in reinvestment
of distributions 84,307 828,630 35,366 332,299
Redeemed (587,143) (5,721,573) (544,625) (5,108,120)
--------- ----------- --------- -----------
5,635,708 57,655,459 438,615 4,131,369
--------- ----------- --------- -----------
B CLASS
Sold 164,154 1,670,920 52,410 493,406
Issued in reinvestment
of distributions 3,435 32,780 1,858 17,462
Redeemed (15,257) (146,908) (22,981) (214,939)
--------- ----------- --------- -----------
152,332 1,556,792 31,287 295,929
--------- ----------- --------- -----------
C CLASS
Sold 1,482,312 15,107,504 356,677 3,342,230
Issued in reinvestment
of distributions 15,171 145,969 7,955 74,632
Redeemed (186,762) (1,793,393) (212,538) (1,992,934)
--------- ----------- --------- -----------
1,310,721 13,460,080 152,094 1,423,928
--------- ----------- --------- -----------
R CLASS
Sold 19,429 199,126 9,843 94,816
Issued in reinvestment
of distributions 678 6,635 113 1,088
Redeemed (4,722) (48,145) (10) (93)
--------- ----------- --------- -----------
15,385 157,616 9,946 95,811
--------- ----------- --------- -----------
Net increase (decrease) 9,187,744 $93,585,715 655,173 $6,167,036
========= =========== ========= ===========
5. BANK LINE OF CREDIT
Effective December 12, 2007, the fund, along with certain other funds managed
by ACIM or American Century Global Investment Management, Inc. (ACGIM), has a
$500,000,000 unsecured bank line of credit agreement with Bank of America,
N.A. Prior to December 12, 2007, the fund, along with certain other funds
managed by ACIM or ACGIM, had a $500,000,000 unsecured bank line of credit
agreement with JPMCB. The fund may borrow money for temporary or emergency
purposes to fund shareholder redemptions. Borrowings under the agreement,
which is subject to annual renewal, bear interest at the Federal Funds rate
plus 0.40%. The fund did not borrow from the line during the year ended March
31, 2008.
------
19
6. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2008
and March 31, 2007 were as follows:
2008 2007
DISTRIBUTIONS PAID FROM
Ordinary income $1,644,913 $524,244
Long-term capital gains -- --
Return of capital -- $54,173
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of certain income items and net realized gains and
losses for financial statement and tax purposes, and may result in
reclassification among certain capital accounts on the financial statements.
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
Federal tax cost of investments $114,098,058
=============
Gross tax appreciation of investments $3,656,272
Gross tax depreciation of investments (45,516)
-------------
Net tax appreciation (depreciation) of investments $3,610,756
=============
Net tax appreciation (depreciation) on
derivatives and translation of assets and
liabilities in foreign currencies $(70,036)
-------------
Net tax appreciation (depreciation) $3,540,720
=============
Undistributed ordinary income $371,020
Accumulated long-term gains $115,220
The difference between book-basis and tax-basis cost and unrealized
appreciation (depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the realization for tax purposes of unrealized gains
on certain futures contracts.
------
20
7. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is taxable
in a particular jurisdiction), and requires certain expanded tax disclosures.
FIN 48 is effective for fiscal years beginning after December 15, 2006, and is
to be applied to all open tax years as of the date of effectiveness. The
adoption of FIN 48 did not materially impact the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" (FAS 157), in September 2006, which is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands the required
financial statement disclosures about fair value measurements. Management is
currently evaluating the impact that adopting FAS 157 will have on the
financial statement disclosures.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
------
21
FINANCIAL HIGHLIGHTS
Inflation Protection Bond
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.57 $9.47 $10.00
------- ------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.49(2) 0.33(2) 0.33
Net Realized and Unrealized Gain (Loss) 0.88 0.08 (0.53)
------- ------- --------
Total From Investment Operations 1.37 0.41 (0.20)
------- ------- --------
Distributions
From Net Investment Income (0.46) (0.31) (0.33)
From Return of Capital -- --(3) --
------- ------- --------
Total Distributions (0.46) (0.31) (0.33)
------- ------- --------
Net Asset Value, End of Period $10.48 $9.57 $9.47
======= ======= ========
TOTAL RETURN(4) 14.87% 4.46% (2.09)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.59% 0.59% 0.59%(5)
Ratio of Net Investment
Income (Loss) to Average Net Assets 4.95% 3.26% 3.97%(5)
Portfolio Turnover Rate 31% 52% 51%
Net Assets, End of Period (in thousands) $21,968 $596 $375
(1) May 31, 2005 (fund inception) through March 31, 2006.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
------
22
Inflation Protection Bond
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.57 $9.47 $10.00
------- ------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.49(2) 0.35(2) 0.34
Net Realized and Unrealized Gain (Loss) 0.93 0.11 (0.53)
------- ------- --------
Total From Investment Operations 1.42 0.46 (0.19)
------- ------- --------
Distributions
From Net Investment Income (0.48) (0.36) (0.34)
------- ------- --------
Net Asset Value, End of Period $10.51 $9.57 $9.47
======= ======= ========
TOTAL RETURN(3) 15.43% 4.81% (1.97)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.39% 0.39% 0.39%(4)
Ratio of Net Investment
Income (Loss) to Average Net Assets 5.15% 3.46% 4.17%(4)
Portfolio Turnover Rate 31% 52% 51%
Net Assets, End of Period (in thousands) $460 $43 $38
(1) May 31, 2005 (fund inception) through March 31, 2006.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
23
Inflation Protection Bond
A Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.52 $9.45 $10.00
------- ------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.46(2) 0.28(2) 0.33
Net Realized and Unrealized Gain (Loss) 0.89 0.11 (0.55)
------- ------- --------
Total From Investment Operations 1.35 0.39 (0.22)
------- ------- --------
Distributions
From Net Investment Income (0.44) (0.30) (0.33)
From Return of Capital -- (0.02) --
------- ------- --------
Total Distributions (0.44) (0.32) (0.33)
------- ------- --------
Net Asset Value, End of Period $10.43 $9.52 $9.45
======= ======= ========
TOTAL RETURN(3) 14.66% 4.25% (2.35)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.84% 0.84% 0.84%(4)
Ratio of Net Investment
Income (Loss) to Average Net Assets 4.70% 3.01% 3.72%(4)
Portfolio Turnover Rate 31% 52% 51%
Net Assets, End of Period (in thousands) $72,397 $12,402 $8,164
(1) May 31, 2005 (fund inception) through March 31, 2006.
(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 values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
24
Inflation Protection Bond
B Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.50 $9.45 $10.00
------- ------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.41(2) 0.21(2) 0.27
Net Realized and Unrealized Gain (Loss) 0.86 0.11 (0.55)
------- ------- --------
Total From Investment Operations 1.27 0.32 (0.28)
------- ------- --------
Distributions
From Net Investment Income (0.36) (0.23) (0.27)
From Return of Capital -- (0.04) --
------- ------- --------
Total Distributions (0.36) (0.27) (0.27)
------- ------- --------
Net Asset Value, End of Period $10.41 $9.50 $9.45
======= ======= ========
TOTAL RETURN(3) 13.86% 3.41% (2.87)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.59% 1.59% 1.59%(4)
Ratio of Net Investment
Income (Loss) to Average Net Assets 3.95% 2.26% 2.97%(4)
Portfolio Turnover Rate 31% 52% 51%
Net Assets, End of Period (in thousands) $2,826 $1,132 $830
(1) May 31, 2005 (fund inception) through March 31, 2006.
(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 values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
25
Inflation Protection Bond
C Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.49 $9.44 $10.00
------- ------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.41(2) 0.21(2) 0.27
Net Realized and Unrealized Gain (Loss) 0.87 0.12 (0.56)
------- ------- --------
Total From Investment Operations 1.28 0.33 (0.29)
------- ------- --------
Distributions
From Net Investment Income (0.36) (0.23) (0.27)
From Return of Capital -- (0.05) --
------- ------- --------
Total Distributions (0.36) (0.28) (0.27)
------- ------- --------
Net Asset Value, End of Period $10.41 $9.49 $9.44
======= ======= ========
TOTAL RETURN(3) 13.98% 3.54% (2.95)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.59% 1.59% 1.59%(4)
Ratio of Net Investment
Income (Loss) to Average Net Assets 3.95% 2.26% 2.97%(4)
Portfolio Turnover Rate 31% 52% 51%
Net Assets, End of Period (in thousands) $20,978 $6,682 $5,215
(1) May 31, 2005 (fund inception) through March 31, 2006.
(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 values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
26
Inflation Protection Bond
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.74 $9.46 $10.00
------- ------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.46(2) 0.15(2) 0.30
Net Realized and Unrealized Gain (Loss) 0.90 0.23 (0.54)
------- ------- --------
Total From Investment Operations 1.36 0.38 (0.24)
------- ------- --------
Distributions
From Net Investment Income (0.42) (0.10) (0.30)
------- ------- --------
Net Asset Value, End of Period $10.68 $9.74 $9.46
======= ======= ========
TOTAL RETURN(3) 14.47% 4.03% (2.48)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.09% 1.09% 1.09%(4)
Ratio of Net Investment
Income (Loss) to Average Net Assets 4.45% 2.76% 3.47%(4)
Portfolio Turnover Rate 31% 52% 51%
Net Assets, End of Period (in thousands) $299 $123 $26
(1) May 31, 2005 (fund inception) through March 31, 2006.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the American Century Investment Trust and
Shareholders of the Inflation Protection Bond:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Inflation
Protection Bond Fund (one of the ten funds comprising the American Century
Investment Trust, hereafter referred to as the "Fund") at March 31, 2008, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 19, 2008
------
28
MANAGEMENT
The individuals listed below serve as trustees or officers of the fund. Each
trustee serves until his or her successor is duly elected and qualified or
until he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the
remaining independent trustees. Those listed as interested trustees are
"interested" primarily by virtue of their engagement as directors and/or
officers of, or ownership interest in, American Century Companies, Inc. (ACC)
or its wholly owned, direct or indirect, subsidiaries, including the fund's
investment advisor, American Century Investment Management, Inc. (ACIM or the
advisor); the fund's principal underwriter, American Century Investment
Services, Inc. (ACIS); and the fund's transfer agent, American Century
Services, LLC (ACS).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS, and ACS. The trustees serve
in this capacity for eight registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the fund also serve in similar capacities for
the other 14 investment companies in the American Century Investments family
of funds advised by ACIM, or American Century Global Investment Management,
Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated
for his or her service as an officer of the fund. The listed officers are
interested persons of the fund and are appointed or re-appointed on an annual
basis.
INTERESTED TRUSTEE
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Trustee and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 105
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
INDEPENDENT TRUSTEES
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Trustee (since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
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29
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of
Law and Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
FREDERICK L.A. GRAUER, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 2008)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Advisor, Barclays Global
Investors (2003 to present).
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
PETER F. PERVERE, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Vice President
and Chief Financial Officer, Commerce One, Inc. (software and services
provider)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Intraware, Inc.
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Platinum Grove Asset
Management, L.P., and a Partner, Oak Hill Capital Management (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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2002)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1973 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present)
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee (since 1984)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
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30
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present); and Controller, various American Century Investments funds
(1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the fund's trustees and is available
without charge, upon request, by calling 1-800-345-2021.
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31
ADDITIONAL INFORMATION
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain
403(b), 457 and qualified plans [those not eligible for rollover to an IRA or
to another qualified plan] are subject to federal income tax withholding,
unless you elect not to have withholding apply. Tax will be withheld on the
total amount withdrawn even though you may be receiving amounts that are not
subject to withholding, such as nondeductible contributions. In such case,
excess amounts of withholding could occur. You may adjust your withholding
election so that a greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right
to revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
State tax will be withheld if, at the time of your distribution, your address
is within one of the mandatory withholding states and you have federal income
tax withheld. State taxes will be withheld from your distribution in
accordance with the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment advisor,
is responsible for exercising the voting rights associated with the securities
purchased and/or held by the fund. A description of the policies and
procedures the advisor uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's website at americancentury.com and on the Securities and
Exchange Commission's website at sec.gov. Information regarding how the
investment advisor voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available on the "About Us" page
at americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The fund's Form N-Q is available on the SEC's website at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may
be obtained by calling 1-800-SEC-0330. The fund also makes its complete
schedule of portfolio holdings for the most recent quarter of its fiscal year
available on its website at americancentury.com and, upon request, by calling
1-800-345-2021.
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32
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The CITIGROUP AGENCY INDEX is a market-capitalization-weighted index that
includes US government sponsored agencies with a remaining maturity of at
least one year.
The CITIGROUP CREDIT INDEX includes US and non-US corporate securities and
non-US sovereign and provincial securities.
The CITIGROUP MORTGAGE INDEX measures the mortgage component of the US BIG
Bond Index, comprising 15- and 30-year GNMA, FNMA, and FHLMC pass-throughs and
FNMA and FHLMC balloon mortgages.
The CITIGROUP TREASURY INDEX is comprised of US Treasury securities with an
amount outstanding of at least $5 billion and a remaining maturity of at least
one year.
The CITIGROUP US BROAD INVESTMENT-GRADE (BIG) BOND INDEX is a market-
capitalization-weighted index that includes fixed-rate Treasury, government-
sponsored, mortgage, asset-backed, and investment-grade issues with a maturity
of one year or longer.
The CITIGROUP US HIGH-YIELD MARKET INDEX captures the performance of
below-investment-grade debt issued by corporations domiciled in the United
States or Canada. This index includes cash-pay and deferred-interest
securities that are publicly placed, have a fixed coupon, and are
nonconvertible.
The CITIGROUP US INFLATION-LINKED SECURITIES INDEX (ILSI)SM measures the
return of bonds with fixed-rate coupon payments that adjust for inflation as
measured by the Consumer Price Index (CPI).
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33
NOTES
------
34
NOTES
------
35
NOTES
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36
[american century investments logo and text logo ®]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE . . . . . . . . . . . . 1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE . . . . . . . . . 1-800-345-2021 or
816-531-5575
INVESTORS USING ADVISORS . . . . . . . . . . . . . 1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS. . . . . . . . 1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL PROFESSIONALS, INSURANCE COMPANIES . . . 1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF . . . . . . 1-800-634-4113
AMERICAN CENTURY INVESTMENT TRUST
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60039N
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY-MASON STREET SELECT BOND FUND
AMERICAN CENTURY-MASON STREET HIGH-YIELD BOND FUND
PRESIDENT'S LETTER
JONATHAN THOMAS
[photo of Jonathan Thomas]
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century®-Mason
Street Select Bond and High-Yield Bond funds for the 12 months ended March 31,
2008. We also recommend our website, americancentury.com, where we provide
company news, quarterly portfolio commentaries, investment views, and other
useful information about portfolio strategy, personal finance, government
policy, and the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
TABLE OF CONTENTS
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Fixed-Income Total Returns. . . . . . . . . . . . . . . . . . . 2
SELECT BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 5
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . 5
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . 6
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 7
HIGH-YIELD BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 19
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . 19
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Top Five Industries. . . . . . . . . . . . . . . . . . . . . . . . . 20
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . 20
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 21
Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . . . . 28
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 31
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 33
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 34
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 35
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 42
Report of Independent Registered Public Accounting Firm . . . . . . . 54
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 58
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 59
The opinions expressed in the Market Perspective and each of the Portfolio
Commentaries reflect those of the portfolio management team as of the date of
the report, and do not necessarily represent the opinions of American Century
or any other person in the American Century organization. Any such opinions
are subject to change at any time based upon market or other conditions and
American Century disclaims any responsibility to update such opinions. These
opinions may not be relied upon as investment advice and, because investment
decisions made by American Century funds are based on numerous factors, may
not be relied upon as an indication of trading intent on behalf of any
American Century fund. Security examples are used for representational
purposes only and are not intended as recommendations to purchase or sell
securities. Performance information for comparative indices and securities is
provided to American Century by third party vendors. To the best of American
Century's knowledge, such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of Chief Investment Officer]
By David MacEwen, Chief Investment Officer, Fixed Income
VOLATILITY REIGNED
The 12 months ended March 31, 2008, saw widely divergent bond returns as
market volatility surged in the wake of the subprime credit crisis. Credit
woes spread across the financial system, affecting banks, brokers, bond
insurers, hedge funds, and other big, institutional players important for the
functioning of the markets. This led to risk aversion that colored the return
picture for assets ranging from the riskiest high-yield bonds to even some of
the highest-quality money market securities.
The subprime meltdown had direct economic effects as well, weighing on
consumer spending and confidence, leading many economists to suggest that the
economy is already in recession. But even as growth slowed, higher commodity
prices (led by oil) meant rising inflation. The government consumer price
index (CPI) rose 4% during the reporting period.
The Federal Reserve took a series of extraordinary steps, slashing interest
rates and acting as a lender of last resort not only for banks, but also major
brokers. For the year, the federal funds rate target declined from 5.25% to
2.25%.
TREASURY BONDS RULED ROOST
The volatility, credit, and liquidity concerns in the market all favored
Treasury securities over higher-yielding, lower-quality alternatives (see the
accompanying returns table). Inflation-linked bonds--particularly Treasury
inflation-indexed securities--performed best because of their combination of
high quality and inflation protection. Meanwhile, risky corporate high-yield
bonds posted negative returns.
RATES FELL, CURVE STEEPENED
Against this backdrop, Treasury yields declined. The yield on the two-year
Treasury note tumbled from 4.58% to 1.59%, while yields on longer-term notes
and bonds fell less. That's because investors worried about the potential
long-term inflation effects of Fed rate cuts, high energy and commodity
prices, and a weaker dollar. As a result, the yield curve fell and
steepened--the difference in yield between two- and 10-year Treasury
securities increased sharply from seven to 182 basis points (a basis point
equals 0.01%).
U.S. Fixed-Income Total Returns
For the 12 months ended March 31, 2008
TREASURY SECURITIES
3-Month Bill 4.81%
2-Year Note 9.39%
5-Year Note 14.37%
10-Year Note 14.35%
30-Year Bond 13.86%
CITIGROUP U.S. BOND MARKET INDICES
High-Yield Market (corporate) -3.58%
Credit (investment-grade corporate) 4.41%
Mortgage (mortgage-backed) 7.95%
Broad Investment-Grade (multi-sector) 8.41%
Agency 10.37%
Treasury 12.24%
Inflation-Linked Securities 14.64%
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2
PERFORMANCE
Select Bond
Total Returns as of March 31, 2008
Average Annual Returns
10 Since Inception
1 year 5 years years Inception Date
A CLASS(1)
No sales charge* 6.06% 3.88% 5.78% 6.34%
With sales charge* 1.24% 2.93% 5.30% 5.90% 3/31/97
CITIGROUP US BROAD
INVESTMENT-GRADE BOND INDEX 8.41% 4.80% 6.13% 6.65% --
Investor Class 6.30% -- -- 6.20% 4/3/06
Institutional Class 6.51% -- -- 6.41% 4/3/06
B Class(1)
No sales charge* 5.37% 3.21% 5.10% 5.65%
With sales charge* 1.37% 3.03% 5.10% 5.65% 3/31/97
C Class 5.25% -- -- 5.15% 4/3/06
R Class 5.77% -- -- 5.67% 4/3/06
* Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 4.50% maximum initial
sales charge for fixed-income funds and may be subject to a maximum CDSC of
1.00%. B Class shares redeemed within six years of purchase are subject to a
CDSC that declines from 5.00% during the first year after purchase to 0.00%
the sixth year after purchase. C Class shares redeemed within 12 months of
purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual
funds provide performance information net of maximum sales charges in all
cases where charges could be applied.
Select Bond acquired all of the net assets of the Mason Street Select Bond
Fund on March 31, 2006, pursuant to a plan of reorganization approved by the
acquired fund's shareholders on March 23, 2006. Performance information prior
to April 1, 2006 is that of the Mason Street Select Bond Fund.
(1) Class returns would have been lower if fees had not been waived.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects A Class shares; performance
for other share classes will vary due to differences in fee structure. For
information about other share classes available, please consult the
prospectus. Data assumes reinvestment of dividends and capital gains, and none
of the charts reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares. Returns for the index are
provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
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3
Select Bond
Growth of $10,000 Over 10 Years
$10,000 investment made March 31, 1998*
One-Year Returns Over 10 Years
Periods ended March 31
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
A Class** (no
sales charge) 4.60% 2.26% 13.32% 5.76% 13.19% 6.50% -0.27% 1.47% 5.86% 6.06%
Citigroup US
Broad
Investment-Grade
Bond Index 6.50% 1.81% 12.57% 5.34% 11.56% 5.52% 1.23% 2.40% 6.60% 8.41%
* Select Bond A Class's initial investment is $9,550 to reflect the maximum
4.50% initial sales charge.
** Class returns would have been lower, along with the ending value, if fees
had not been waived.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects A Class shares; performance
for other share classes will vary due to differences in fee structure. For
information about other share classes available, please consult the
prospectus. Data assumes reinvestment of dividends and capital gains, and none
of the charts reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares. Returns for the index are
provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
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4
PORTFOLIO COMMENTARY
Select Bond
Lead Portfolio Manager: David Ells
PERFORMANCE SUMMARY
Select Bond returned 6.06%* for the 12 months ended March 31, 2008. By
comparison, the Citigroup US Broad Investment-Grade Index (BIG) Bond Index
advanced 8.41%. See page 3 for additional performance comparisons. Portfolio
returns reflect operating expenses, while Citigroup index returns do not.
The portfolio's absolute return over the last 12 months reflected the
performance of the broader market, as high-quality securities performed well
while risk assets lagged amid worries about the health of the economy and
financial system (see page 2). Select Bond underperformed its benchmark
because of its focus on higher-yielding corporate and mortgage-backed
securities (MBS) at a time when Treasury bonds significantly outperformed.
However, the fund's relative return benefited from some of our yield curve and
currency trades.
CORPORATES, MBS UNDERPERFORMED
The key factor explaining the portfolio's performance relative to the
benchmark for the year was our overweight position in "spread products"
(securities such as corporates and MBS that trade at a spread over Treasuries)
and underweight position in Treasuries. Despite underperformance during the
fiscal year, we maintained this positioning because other things being equal,
higher-yielding spread products should outperform Treasury bonds over time.
It's probably also worth pointing out that we had essentially zero subprime
exposure in our mortgage positions. And within corporates, we avoided the
troubled financials sector and had no high-yield exposure. Instead we
preferred shorter-term, less price-sensitive bonds in more defensive sectors
of the economy.
TIIS OUTPERFORMED
We helped performance within our Treasury allocation by carrying a sizable
position in Treasury inflation-indexed securities (TIIS), which were the
best-performing bonds for the year, beating out even plain-vanilla Treasury
bonds. TIIS saw heavy demand for two main reasons. First, they offered the
highest possible credit quality at a time when investors were shunning risk
assets. Second, their inflation protection was desirable in an environment
where the Federal Reserve (the Fed) was thought by many to be focused on
promoting economic growth even at the expense of inflation prevention.
Portfolio at a Glance
As of As of
3/31/08 3/31/07
Weighted Average Maturity 6.1 years 6.8 years
Average Duration (effective) 4.1 years 4.6 years
Yields as of March 31, 2008
30-day SEC Yield
Investor Class 4.45%
Institutional Class 4.64%
A Class(1) 4.02%
B Class(1) 3.56%
C Class 3.44%
R Class 3.94%
(1) The yields presented reflect the waiver of a portion of the class's
distribution and service fees. Without such waiver, the 30-day yields would
have been lower.
* All fund returns referenced in this commentary are for A Class shares and
are not reduced by sales charges. A Class shares are subject to a maximum
sales charge of 4.50%. Had the sales charge been applied or if distribution
and service fees had not been waived, returns would be lower than those shown.
------
5
Select Bond
CURVE, CURRENCY TRADES HELPED
In addition, we aided performance by using a yield curve steepening trade.
Looking at the 12 months, the curve steepened sharply as Fed rate cuts and
economic and financial concerns drove two-year yields down more than any other
area on the curve. Meanwhile, market concern about the Fed's apparent lack of
focus on inflation meant yields on longer-term notes and bonds did not fall as
much. As a result, the difference in yield between two- and 10-year notes went
from just seven basis points (the curve was essentially flat) to 182 basis
points (a more normal, upward slope).
Finally, our Japanese yen exposure contributed to relative performance. We put
this trade on in the second half of the fiscal year because of attractive
relative values, as well as positive technical and fundamental factors. We
closed out this trade and took our profits in March.
OUTLOOK
"In terms of the economy, we believe we are already in recession," says Lead
Portfolio Manager David Ells. "Add to that the crisis in the financial system
and you get a very active Federal Reserve, pulling out all the stops to boost
the economy and markets. But that gives us some very real inflation concerns,
because inflation's already running at an elevated level. As a result, we're
likely to maintain a relatively short duration (price sensitivity to interest
rate changes) and favor inflation-protected bonds."
Ells continues: "At the same time, the massive re-pricing of risk that's gone
on in the marketplace means we're finding select opportunities that we believe
offer potential reward far in excess of their downside risk. That has us
looking to add some high-quality MBS, corporate, and agency securities where
we think we can find compelling relative values."
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Corporate Bonds 34.0% 35.3%
Mortgage-Backed Securities 32.1% 36.3%
Collateralized Mortgage Obligations 15.2% 13.3%
U.S. Treasury Securities 8.0% 8.4%
Commercial Paper 4.4% --
Asset-Backed Securities 3.4% 5.4%
U.S. Government Agency Securities 1.3% 1.2%
Sovereign Governments & Agencies 0.8% 0.8%
Temporary Cash Investments -- 0.5%
Other Assets and Liabilities 0.8% (1.2)%
Portfolio Composition by Credit Rating
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
AAA 66% 64%
AA 3% 4%
A 10% 10%
BBB 18% 19%
BB 3% 3%
------
6
SCHEDULE OF INVESTMENTS
Select Bond
MARCH 31, 2008
Principal Amount Value
Corporate Bonds -- 34.0%
AEROSPACE & DEFENSE -- 2.1%
$ 315,000 BAE Systems Holdings Inc., 4.75%, 8/15/10 (Acquired
3/21/06, Cost $305,566)(1) $ 326,858
313,000 Boeing Capital Corp., 4.75%, 8/25/08 316,083
316,000 General Dynamics Corp., 3.00%, 5/15/08 315,924
124,000 General Dynamics Corp., 4.25%, 5/15/13 125,784
370,000 L-3 Communications Corp., 6.375%, 10/15/15 363,525
75,000 Lockheed Martin Corp., 6.15%, 9/1/36 77,722
462,000 Raytheon Company, 5.50%, 11/15/12 493,738
50,000 United Technologies Corp., 6.35%, 3/1/11 54,118
-----------
2,073,752
-----------
AIR FREIGHT & LOGISTICS(2)
30,000 United Parcel Service, Inc., 6.20%, 1/15/38 32,203
-----------
AUTO COMPONENTS -- 0.2%
104,000 Johnson Controls, Inc., 5.50%, 1/15/16 106,222
63,000 Johnson Controls, Inc., 6.00%, 1/15/36 60,092
-----------
166,314
-----------
AUTOMOBILES -- 0.4%
315,000 DaimlerChrysler N.A. Holding Corp., 5.75%, 5/18/09 318,070
25,000 DaimlerChrysler N.A. Holding Corp., 8.50%, 1/18/31 28,655
-----------
346,725
-----------
BEVERAGES -- 0.9%
15,000 Anheuser-Busch Companies, Inc., 5.95%, 1/15/33 15,086
25,000 Anheuser-Busch Companies, Inc., 5.75%, 4/1/36 24,472
50,000 Bottling Group, LLC, 4.625%, 11/15/12 52,193
125,000 Coca-Cola Co. (The), 5.35%, 11/15/17 130,777
160,000 Constellation Brands Inc., 7.25%, 9/1/16 156,400
98,000 Fortune Brands Inc., 5.375%, 1/15/16 92,815
Principal Amount Value
$ 45,000 PepsiCo, Inc., 4.65%, 2/15/13 $ 46,647
285,000 SABMiller plc, 6.20%, 7/1/11 (Acquired 6/27/06, Cost
$284,798)(1) 303,523
-----------
821,913
-----------
CAPITAL MARKETS -- 1.5%
115,000 Bank of New York Mellon Corp. (The), 4.95%, 11/1/12 117,994
45,000 Bear Stearns Companies Inc. (The), 7.25%, 2/1/18 46,617
20,000 Credit Suisse, 5.75%, 2/15/18 20,004
15,000 Credit Suisse, 5.86%, 12/29/49 12,733
10,000 Eaton Vance Corp., 6.50%, 10/2/17 10,690
387,000 Goldman Sachs Group, Inc. (The), 5.15%, 1/15/14 381,853
25,000 Lehman Brothers Holdings Inc., 4.80%, 3/13/14 21,753
35,000 Lehman Brothers Holdings Inc., 6.50%, 7/19/17 33,317
110,000 Lehman Brothers Holdings Inc., 5.875%, 11/15/17 101,578
75,000 Lehman Brothers Holdings Inc., 7.00%, 9/27/27 69,501
220,000 Merrill Lynch & Co., Inc., 6.40%, 8/28/17 217,628
20,000 Merrill Lynch & Co., Inc., 6.22%, 9/15/26 16,842
110,000 Morgan Stanley, 6.25%, 8/9/26 97,636
80,000 Northern Trust Corp., 5.30%, 8/29/11 85,203
250,000 State Street Bank & Trust Co., 5.30%, 1/15/16 248,848
-----------
1,482,197
-----------
COMMERCIAL BANKS -- 1.8%
422,000 Bank One Corp., 5.25%, 1/30/13 431,279
17,000 BB&T Corp., 4.90%, 6/30/17 15,422
20,000 BNP Paribas, 5.19%, 6/29/49 (Acquired 9/21/07, Cost
$18,063)(1) 16,803
114,000 Deutsche Bank Capital Funding Trust VII, 5.63%,
1/19/16 (Acquired 5/9/06-9/21/07, Cost $107,331)(1) 98,839
45,000 Fifth Third Bancorp, 8.25%, 3/1/38 45,982
250,000 M&I Marshall & Ilsley Bank, 5.15%, 2/22/12 247,894
60,000 PNC Funding Corp., 5.625%, 2/1/17 57,303
------
7
Select Bond
Principal Amount Value
$ 25,000 SunTrust Bank, 7.25%, 3/15/18 $ 25,621
75,000 U.S. Bank N.A., 4.80%, 4/15/15 75,976
93,000 UnionBanCal Corp., 5.25%, 12/16/13 92,442
380,000 Wachovia Corp., 5.35%, 3/15/11 390,180
279,000 Zions Bancorporation, 5.50%, 11/16/15 250,215
-----------
1,747,956
-----------
COMPUTERS & PERIPHERALS -- 0.1%
70,000 Seagate Technology HDD Holdings, 6.80%, 10/1/16 67,025
-----------
CONSTRUCTION MATERIALS -- 0.1%
75,000 CRH America Inc., 6.00%, 9/30/16 71,525
-----------
CONSUMER FINANCE -- 0.3%
285,000 SLM Corp., 5.45%, 4/25/11 229,364
10,000 SLM Corp., 5.375%, 1/15/13 7,674
50,000 SLM Corp., 5.375%, 5/15/14 37,579
-----------
274,617
-----------
DIVERSIFIED FINANCIAL SERVICES -- 1.3%
30,000 Bank of America Corp., 5.625%, 10/14/16 30,664
30,000 Bank of America Corp., 8.00%, 1/30/18 30,097
20,000 Capmark Financial Group Inc., 6.30%, 5/10/17
(Acquired 5/3/07, Cost $19,968)(1) 12,017
10,000 Citigroup Capital XXI, 8.30%, 12/21/57 9,883
140,000 Citigroup Inc., 5.125%, 5/5/14 137,001
10,000 Citigroup Inc., 6.875%, 3/5/38 10,025
30,000 General Electric Capital Corp., 5.875%, 1/14/38 29,015
195,000 GMAC LLC, 6.00%, 12/15/11 145,971
425,000 HSBC Finance Corp., 4.125%, 11/16/09 418,877
276,000 International Lease Finance Corp., 4.75%, 1/13/12 267,556
197,000 John Deere Capital Corp., 4.50%, 8/25/08 197,981
-----------
1,289,087
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.7%
224,000 AT&T Corp., 8.00%, 5/15/08 262,557
159,000 AT&T Corp., 7.30%, 11/15/11 172,410
45,000 British Telecommunications plc, 9.125%, 12/15/30 56,052
85,000 Deutsche Telekom International Finance BV, 5.75%,
3/23/16 84,197
Principal Amount Value
$ 105,000 Embarq Corp., 6.74%, 6/1/13 $ 101,687
80,000 Embarq Corp., 7.08%, 6/1/16 75,876
15,000 Embarq Corp., 8.00%, 3/1/36 13,738
125,000 France Telecom SA, 8.50%, 3/1/31 155,334
210,000 Sprint Capital Corp., 8.375%, 3/15/12 194,408
40,000 Sprint Capital Corp., 6.90%, 5/1/19 31,556
62,000 Sprint Capital Corp., 8.75%, 3/15/32 52,507
146,000 Telecom Italia Capital SA, 4.00%, 1/15/10 143,314
175,000 Telecom Italia Capital SA, 6.20%, 7/18/11 173,787
175,000 Verizon Global Funding Corp., 5.85%, 9/15/35 159,975
-----------
1,677,398
-----------
ELECTRIC UTILITIES -- 5.0%
45,000 Bruce Mansfield Plant Units 1 & 2, 6.85%, 6/1/34 47,115
60,000 Carolina Power & Light Co., 6.50%, 7/15/12 64,712
35,000 Carolina Power & Light Co., 5.15%, 4/1/15 35,700
10,000 Commonwealth Edison Co., 6.45%, 1/15/38 9,670
634,000 DTE Energy Co., 7.05%, 6/1/11 678,718
148,000 Duquesne Light Holdings, Inc., 5.50%, 8/15/15 144,493
153,000 Entergy Mississippi Inc., 6.25%, 4/1/34 147,587
45,000 Exelon Generation Co. LLC, 6.20%, 10/1/17 44,682
100,000 Florida Power & Light Co., 5.625%, 4/1/34 96,418
469,000 Florida Power Corp., 4.50%, 6/1/10 482,218
339,000 Indiana Michigan Power Co., 5.05%, 11/15/14 324,274
145,545 Kiowa Power Partners LLC, 4.81%, 12/30/13 (Acquired
11/19/04, Cost $142,096)(1) 147,143
123,000 Kiowa Power Partners LLC, 5.74%, 3/30/21 (Acquired
11/19/04, Cost $123,000)(1) 121,555
30,000 MidAmerican Energy Holdings Co., 5.95%, 5/15/37 28,202
80,000 Monongahela Power Co., 5.70%, 3/15/17 (Acquired
9/13/06, Cost $79,708)(1) 81,968
292,000 Nevada Power Co., 5.875%, 1/15/15 287,843
10,000 Nevada Power Co., 5.95%, 3/15/16 9,879
------
8
Select Bond
Principal Amount Value
$ 90,000 Nevada Power Co., 6.50%, 5/18/18 $ 92,279
160,000 Oncor Electric Delivery Co., 6.375%, 1/15/15 160,198
110,000 Oncor Electric Delivery Co., 7.00%, 9/1/22 105,605
371,000 PacifiCorp, 5.45%, 9/15/13 392,022
75,000 PacifiCorp, 5.75%, 4/1/37 71,003
20,000 Potomac Electric Power Co., 6.50%, 11/15/37 19,597
373,000 PPL Electric Utilities Corp., 4.30%, 6/1/13 359,046
45,000 PPL Energy Supply, LLC, 6.50%, 5/1/18 44,833
40,000 PPL Energy Supply, LLC, 6.00%, 12/15/36 32,738
45,000 Sierra Pacific Power Co., 6.75%, 7/1/37 43,390
25,000 South Carolina Electric & Gas Co., 6.05%, 1/15/38 25,218
235,000 Southern California Edison Co., 5.00%, 1/15/16 238,006
15,000 Southern California Edison Co., 5.55%, 1/15/37 14,264
25,000 Tampa Electric Co., 6.15%, 5/15/37 23,380
115,000 Toledo Edison Co. (The), 6.15%, 5/15/37 102,183
335,000 Virginia Electric and Power Co., 5.25%, 12/15/15 337,081
-----------
4,813,020
-----------
ENERGY EQUIPMENT & SERVICES -- 0.4%
268,000 Consolidated Natural Gas Co., 5.00%, 12/1/14 260,590
65,000 Pride International Inc., 7.375%, 7/15/14 67,925
10,000 Southern Natural Gas Co., 5.90%, 4/1/17 (Acquired
3/14/07, Cost $9,983)(1) 9,829
-----------
338,344
-----------
FOOD & STAPLES RETAILING -- 0.3%
20,000 Costco Wholesale Corp., 5.30%, 3/15/12 21,096
113,000 CVS Caremark Corp., 4.875%, 9/15/14 112,100
80,000 CVS Caremark Corp., 6.125%, 8/15/16 83,611
20,000 Delhaize Group, 6.50%, 6/15/17 20,704
35,000 Kroger Co. (The), 7.00%, 5/1/18 38,183
Principal Amount Value
$ 10,000 Kroger Co. (The), 6.80%, 12/15/18 $ 10,792
15,000 Kroger Co. (The), 6.15%, 1/15/20 15,449
-----------
301,935
-----------
FOOD PRODUCTS -- 0.9%
85,000 General Mills, Inc., 5.70%, 2/15/17 85,907
473,000 Kellogg Co., 6.60%, 4/1/11 510,632
68,000 Kraft Foods Inc., 6.25%, 6/1/12 70,906
40,000 Kraft Foods Inc., 6.50%, 8/11/17 41,138
35,000 Kraft Foods Inc., 6.875%, 2/1/38 34,551
85,000 Smithfield Foods, Inc., 7.75%, 5/15/13 84,575
-----------
827,709
-----------
HOTELS, RESTAURANTS & LEISURE -- 0.5%
10,000 Darden Restaurants, Inc., 6.20%, 10/15/17 9,758
60,000 Darden Restaurants, Inc., 6.80%, 10/15/37 55,001
40,000 Harrah's Operating Co. Inc., 5.75%, 10/1/17 22,400
170,000 Royal Caribbean Cruises Ltd., 7.00%, 6/15/13 159,888
215,000 Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp.,
6.625%, 12/1/14 (Acquired 11/1/07, Cost $209,519)(1) 208,012
75,000 Yum! Brands, Inc., 6.875%, 11/15/37 71,976
-----------
527,035
-----------
HOUSEHOLD DURABLES -- 0.5%
45,000 Centex Corp., 7.875%, 2/1/11 42,551
95,000 Centex Corp., 5.45%, 8/15/12 80,350
15,000 D.R. Horton, Inc., 7.875%, 8/15/11 14,606
65,000 D.R. Horton, Inc., 5.375%, 6/15/12 57,200
145,000 KB Home, 7.75%, 2/1/10 139,381
130,000 Lennar Corp., 5.95%, 10/17/11 110,500
-----------
444,588
-----------
HOUSEHOLD PRODUCTS -- 1.2%
399,000 Clorox Co., 4.20%, 1/15/10 400,781
745,000 Gillette Co. (The), 2.50%, 6/1/08 744,631
55,000 Procter & Gamble Co. (The), 5.55%, 3/5/37 55,116
-----------
1,200,528
-----------
------
9
Select Bond
Principal Amount Value
INDUSTRIAL CONGLOMERATES -- 0.1%
$ 110,000 Siemens Financieringsmaatschappij N.V., 5.75%,
10/17/16 (Acquired 8/9/06, Cost $109,721)(1) $ 112,830
-----------
INSURANCE -- 0.9%
745,000 Berkley (W.R.) Corp., 9.875%, 5/15/08 749,880
25,000 Progressive Corp. (The), 6.70%, 6/15/37 22,310
40,000 Prudential Financial, Inc., 5.70%, 12/14/36 34,186
20,000 Travelers Companies, Inc. (The), 6.25%, 6/15/37 18,597
-----------
824,973
-----------
IT SERVICES -- 0.2%
95,000 Fiserv, Inc., 6.125%, 11/20/12 98,036
95,000 Fiserv, Inc., 6.80%, 11/20/17 98,416
-----------
196,452
-----------
MACHINERY -- 0.2%
160,000 Case Corp., 7.25%, 1/15/16 156,000
-----------
MEDIA -- 1.8%
130,000 Comcast Corp., 5.90%, 3/15/16 129,182
40,000 Comcast Corp., 5.875%, 2/15/18 39,048
5,000 Comcast Corp., 7.05%, 3/15/33 5,115
15,000 Comcast Corp., 6.95%, 8/15/37 15,081
65,000 News America Inc., 6.40%, 12/15/35 63,284
5,000 News America Inc., 6.15%, 3/1/37 4,739
45,000 News America Inc., 6.65%, 11/15/37 45,529
20,000 Rogers Cable Inc., 6.25%, 6/15/13 20,914
345,000 Rogers Cable Inc., 5.50%, 3/15/14 326,073
125,000 TCI Communications, Inc., 8.75%, 8/1/15 141,671
600,000 Time Warner Entertainment Co. L.P., 7.25%, 9/1/08 607,011
105,000 Time Warner Entertainment Co. L.P., 8.375%, 3/15/23 116,627
15,000 Time Warner Inc., 6.875%, 6/15/18 15,080
50,000 Time Warner Inc., 6.625%, 5/15/29 47,022
Principal Amount Value
$ 90,000 Viacom Inc., 5.75%, 4/30/11 $ 91,048
55,000 Viacom Inc., 6.625%, 5/15/11 56,200
-----------
1,723,624
-----------
METALS & MINING -- 0.2%
100,000 Alcoa Inc., 5.72%, 2/23/19 98,129
85,000 Alcoa Inc., 5.90%, 2/1/27 76,810
-----------
174,939
-----------
MULTI-UTILITIES -- 2.8%
15,000 AmerenUE, 6.40%, 6/15/17 15,797
25,000 CenterPoint Energy Houston Electric LLC, 5.70%,
3/15/13 26,167
30,000 CenterPoint Energy Houston Electric LLC, 6.95%,
3/15/33 31,824
10,000 CenterPoint Energy Resources Corp., 6.125%, 11/1/17 10,236
313,000 CenterPoint Energy Transition Bond Co. II, LLC,
5.17%, 8/1/19 314,443
110,000 CMS Energy Corp., 6.875%, 12/15/15 109,888
25,000 Consolidated Edison Co. of New York, Inc., Series
2005 C, 5.375%, 12/15/15 25,591
55,000 Consolidated Edison Co. of New York, Inc., Series
2006 C, 5.50%, 9/15/16 56,684
30,000 Consolidated Edison Co. of New York, Inc., Series
2007 A, 6.30%, 8/15/37 29,973
834,000 Consumers Energy Co., 4.80%, 2/17/09 839,704
80,000 NiSource Finance Corp., 5.40%, 7/15/14 79,211
22,000 NiSource Finance Corp., 5.25%, 9/15/17 20,081
15,000 NiSource Finance Corp., 6.40%, 3/15/18 15,060
25,000 Northern States Power Co., 5.25%, 10/1/18 25,403
45,000 Pacific Gas and Electric Co., 6.05%, 3/1/34 44,269
20,000 Pacific Gas and Electric Co., 5.80%, 3/1/37 18,991
115,000 Public Service Co. of Colorado, 5.50%, 4/1/14 120,063
224,000 Public Service Electric & Gas Co., 5.00%, 1/1/13 230,331
145,000 Public Service Electric & Gas Co., 5.70%, 12/1/36 138,954
313,000 Puget Sound Energy, Inc., 3.36%, 6/1/08 312,716
50,000 Puget Sound Energy, Inc., 6.27%, 3/15/37 47,559
------
10
Select Bond
Principal Amount Value
$ 20,000 San Diego Gas & Electric Co., 5.30%, 11/15/15 $ 20,605
15,000 San Diego Gas & Electric Co., 6.125%, 9/15/37 15,371
25,000 SCANA Corp., 6.25%, 4/1/20 25,422
65,000 Tampa Electric Co., 6.55%, 5/15/36 64,531
85,000 Xcel Energy Inc., 6.50%, 7/1/36 83,842
-----------
2,722,716
-----------
MULTILINE RETAIL -- 1.3%
302,000 Federated Department Stores, Inc., 6.30%, 4/1/09 302,111
15,000 Federated Department Stores, Inc., 7.00%, 2/15/28 12,915
55,000 Federated Retail Holdings, Inc., 5.35%, 3/15/12 52,471
63,000 J.C. Penney Corp., Inc., 6.875%, 10/15/15 64,348
30,000 J.C. Penney Corp., Inc., 7.95%, 4/1/17 31,992
10,000 J.C. Penney Corp., Inc., 5.75%, 2/15/18 9,257
20,000 J.C. Penney Corp., Inc., 6.375%, 10/15/36 17,047
30,000 Kohl's Corp., 6.25%, 12/15/17 28,638
20,000 Kohl's Corp., 6.875%, 12/15/37 17,750
5,000 May Department Stores Co. (The), 6.65%, 7/15/24 4,260
25,000 Nordstrom, Inc., 7.00%, 1/15/38 24,822
644,000 Target Corp., 5.40%, 10/1/08 650,657
50,000 Target Corp., 5.375%, 5/1/17 49,750
45,000 Target Corp., 6.50%, 10/15/37 43,650
-----------
1,309,668
-----------
OIL, GAS & CONSUMABLE FUELS -- 2.2%
35,000 Amerada Hess Corp., 7.125%, 3/15/33 39,154
115,000 Anadarko Finance Co., 7.50%, 5/1/31 129,761
35,000 Canadian Natural Resources Ltd., 5.70%, 5/15/17 35,469
30,000 Canadian Natural Resources Ltd., 6.45%, 6/30/33 29,937
5,000 Canadian Natural Resources Ltd., 5.85%, 2/1/35 4,610
35,000 Canadian Natural Resources Ltd., 6.25%, 3/15/38 33,690
20,000 Canadian Natural Resources Ltd., 6.75%, 2/1/39 20,482
25,000 Devon Energy Corp., 7.95%, 4/15/32 30,921
40,000 El Paso Corp., 7.00%, 6/15/17 41,354
Principal Amount Value
$ 5,000 EnCana Corp., 6.625%, 8/15/37 $ 5,084
35,000 EnCana Corp., 6.50%, 2/1/38 34,877
105,000 EnCana Holdings Finance Corp., 5.80%, 5/1/14 111,097
125,000 Kinder Morgan Energy Partners L.P., 7.30%, 8/15/33 127,980
300,000 Kinder Morgan Finance Co., ULC, 5.35%, 1/5/11 299,249
25,000 Marathon Oil Corp., 5.90%, 3/15/18 25,196
10,000 Marathon Oil Corp., 6.60%, 10/1/37 9,968
138,000 Nexen Inc., 5.875%, 3/10/35 126,018
20,000 Pemex Project Funding Master Trust, 6.625%, 6/15/35
(Acquired 10/17/07, Cost $20,739)(1) 20,803
100,000 Petro-Canada, 5.95%, 5/15/35 90,603
210,000 Pioneer Natural Resources Co., 6.875%, 5/1/18 200,093
35,000 Suncor Energy Inc., 6.50%, 6/15/38 34,648
75,000 Sunoco Inc., 5.75%, 1/15/17 74,255
107,000 Talisman Energy Inc., 5.85%, 2/1/37 94,141
220,000 Tesoro Corp., 6.25%, 11/1/12 208,450
200,000 Tesoro Corp., 6.50%, 6/1/17 180,000
20,000 Valero Energy Corp., 6.125%, 6/15/17 20,247
105,000 Valero Energy Corp., 6.625%, 6/15/37 100,680
30,000 XTO Energy Inc., 5.30%, 6/30/15 30,406
-----------
2,159,173
-----------
PAPER & FOREST PRODUCTS(2)
20,000 Weyerhaeuser Co., 6.875%, 12/15/33 18,795
-----------
PHARMACEUTICALS -- 0.2%
5,000 Bristol-Myers Squibb Co., 5.875%, 11/15/36 4,852
90,000 Wyeth, 5.50%, 2/1/14 93,345
60,000 Wyeth, 5.95%, 4/1/37 58,823
-----------
157,020
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 1.5%
50,000 AvalonBay Communities Inc., 5.50%, 1/15/12 49,592
35,000 BRE Properties, Inc., 5.50%, 3/15/17 29,548
231,000 Developers Diversified Realty Corp., 5.375%, 10/15/12 216,022
80,000 Duke Realty L.P., 5.95%, 2/15/17 69,536
------
11
Select Bond
Principal Amount Value
$ 15,000 HCP, Inc., 6.70%, 1/30/18 $ 12,894
35,000 Health Care Property Investors, Inc., 6.00%, 1/30/17 28,640
242,000 iStar Financial Inc., 5.15%, 3/1/12 179,228
241,000 ProLogis, 5.50%, 3/1/13 234,117
150,000 ProLogis, 5.75%, 4/1/16 138,018
255,000 Simon Property Group L.P., 5.375%, 6/1/11 253,548
85,000 Simon Property Group L.P., 5.60%, 9/1/11 85,187
190,000 Simon Property Group L.P., 6.10%, 5/1/16 183,825
-----------
1,480,155
-----------
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.5%
35,000 Colonial Realty L.P., 6.05%, 9/1/16 28,749
91,000 ERP Operating L.P., 5.25%, 9/15/14 84,568
40,000 ERP Operating L.P., 5.75%, 6/15/17 36,514
440,000 Rouse Co. L.P./TRC Co-Issuer Inc., 6.75%, 5/1/13
(Acquired 5/2/06, Cost $438,627)(1) 381,754
-----------
531,585
-----------
ROAD & RAIL -- 1.6%
471,000 Burlington Northern Santa Fe Corp., 6.125%, 3/15/09 480,201
35,000 Burlington Northern Santa Fe Corp., 6.15%, 5/1/37 33,693
15,000 Canadian National Railway Co., 5.85%, 11/15/17 15,672
25,000 Canadian Pacific Railway Co., 5.95%, 5/15/37 20,802
30,000 CSX Corp., 5.60%, 5/1/17 28,573
55,000 CSX Corp., 6.25%, 3/15/18 54,417
98,000 Union Pacific Corp., 3.875%, 2/15/09 98,438
671,000 Union Pacific Corp., 7.375%, 9/15/09 705,129
55,000 Union Pacific Corp., 5.65%, 5/1/17 55,017
35,000 Union Pacific Corp., 5.75%, 11/15/17 35,527
-----------
1,527,469
-----------
SPECIALTY RETAIL -- 0.3%
365,000 Home Depot, Inc. (The), 5.875%, 12/16/36 298,893
-----------
Principal Amount Value
THRIFTS & MORTGAGE FINANCE -- 0.2%
$ 55,000 Countrywide Financial Corp., 5.80%, 6/7/12 $ 49,892
20,000 Countrywide Home Loans Inc., 4.125%, 9/15/09 18,037
90,000 Countrywide Home Loans Inc., 4.00%, 3/22/11 80,406
90,000 Residential Capital Corp., 8.00%, 2/22/11 44,550
-----------
192,885
-----------
TOBACCO -- 0.2%
190,000 Reynolds American Inc., 7.625%, 6/1/16 200,922
20,000 Reynolds American Inc., 6.75%, 6/15/17 20,336
20,000 Reynolds American Inc., 7.25%, 6/15/37 19,903
-----------
241,161
-----------
WIRELESS TELECOMMUNICATION SERVICES -- 0.6%
160,000 Cingular Wireless LLC, 7.125%, 12/15/31 168,863
65,000 Rogers Wireless Inc., 6.375%, 3/1/14 64,539
350,000 Vodafone Group plc, 5.50%, 6/15/11 356,299
-----------
589,701
-----------
TOTAL CORPORATE BONDS
(Cost $33,584,775) 32,921,910
-----------
U.S. Government Agency Mortgage-Backed Securities(3) -- 32.1%
635,803 FHLMC, 4.50%, 5/1/19 634,363
288,631 FHLMC, 5.00%, 10/1/19 292,578
829,306 FHLMC, 5.00%, 11/1/19 840,647
90,698 FHLMC, 5.50%, 11/1/19 92,866
87,009 FHLMC, 5.50%, 11/1/19 89,089
113,550 FHLMC, 5.50%, 11/1/19 116,264
80,198 FHLMC, 5.50%, 11/1/19 82,115
61,068 FHLMC, 5.50%, 11/1/19 62,528
76,953 FHLMC, 5.50%, 12/1/19 78,792
55,208 FHLMC, 5.00%, 2/1/20 55,894
25,637 FHLMC, 5.00%, 2/1/20 25,955
150,262 FHLMC, 5.50%, 3/1/20 153,680
321,774 FHLMC, 5.50%, 3/1/20 329,093
113,538 FHLMC, 5.50%, 3/1/20 116,120
88,357 FHLMC, 5.00%, 5/1/20 89,454
27,490 FHLMC, 5.00%, 5/1/20 27,832
168,889 FHLMC, 5.00%, 5/1/20 170,987
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12
Select Bond
Principal Amount Value
$ 131,686 FHLMC, 4.00%, 10/1/20 $ 128,509
498,544 FHLMC, 5.50%, 6/1/35 504,454
1,937,829 FHLMC, 5.00%, 11/1/35 1,922,120
309,582 FNMA, 5.32%, 4/1/14 322,838
474,270 FNMA, 5.17%, 1/1/16 487,360
1,114,637 FNMA, 5.29%, 4/1/16 1,152,600
253,000 FNMA, 5.38%, 1/1/17 261,277
134,810 FNMA, 4.00%, 6/1/19 132,035
994,116 FNMA, 4.50%, 6/1/19 992,737
862,103 FNMA, 4.50%, 8/1/19 860,907
91,066 FNMA, 6.00%, 10/1/19 93,826
107,388 FNMA, 4.50%, 12/1/19 107,239
177,012 FNMA, 5.00%, 3/1/20 179,103
180,099 FNMA, 5.00%, 3/1/20 182,462
142,599 FNMA, 5.00%, 4/1/20 144,284
343,317 FNMA, 5.00%, 5/1/20 347,373
199,171 FNMA, 5.00%, 5/1/20 201,524
45,482 FNMA, 5.00%, 5/1/20 46,019
501,866 FNMA, 4.50%, 7/1/20 500,286
425,204 FNMA, 5.50%, 9/1/34 430,381
776,899 FNMA, 6.00%, 10/1/34 798,728
546,591 FNMA, 6.00%, 11/1/34 561,949
39,917 FNMA, 5.50%, 3/1/35 40,383
86,880 FNMA, 5.50%, 3/1/35 87,893
294,196 FNMA, 5.50%, 3/1/35 297,625
58,511 FNMA, 5.50%, 3/1/35 59,193
331,585 FNMA, 5.50%, 3/1/35 335,451
403,441 FNMA, 5.00%, 4/1/35 399,958
40,492 FNMA, 6.00%, 5/1/35 41,559
9,506 FNMA, 6.00%, 6/1/35 9,757
44,165 FNMA, 6.00%, 6/1/35 45,329
1,360,806 FNMA, 5.00%, 7/1/35 1,349,059
262,380 FNMA, 5.50%, 7/1/35 265,438
245,005 FNMA, 6.00%, 7/1/35 251,465
424,394 FNMA, 5.50%, 8/1/35 429,342
586,411 FNMA, 5.50%, 9/1/35 593,247
505,936 FNMA, 5.50%, 9/1/35 511,834
120,520 FNMA, 5.50%, 9/1/35 121,925
279,781 FNMA, 5.50%, 9/1/35 283,043
301,320 FNMA, 5.50%, 9/1/35 304,832
469,395 FNMA, 5.00%, 10/1/35 465,343
1,180,903 FNMA, 5.50%, 10/1/35 1,194,670
189,046 FNMA, 6.00%, 10/1/35 194,031
1,766,592 FNMA, 5.50%, 11/1/35 1,787,187
452,239 FNMA, 5.50%, 11/1/35 457,511
248,480 FNMA, 6.50%, 11/1/35 257,877
201,096 FNMA, 6.50%, 4/1/36 208,491
436,877 FNMA, 6.00%, 9/1/36 448,111
Principal Amount Value
$ 495,472 FNMA, 6.50%, 7/1/37 $ 513,655
978,215 FNMA, 6.50%, 8/1/37 1,014,116
1,425,986 FNMA, 6.50%, 8/1/37 1,478,319
664,762 FNMA, 6.50%, 8/1/37 689,159
2,339,235 FNMA, 5.50%, 2/1/38 2,364,013
786,061 FNMA, 5.50%, 2/1/38 794,366
115,652 GNMA, 5.50%, 2/15/32 118,278
195,999 GNMA, 5.50%, 2/15/32 200,449
-----------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Cost $30,751,225) 31,229,177
-----------
Collateralized Mortgage Obligations(3) -- 15.2%
6,651,830 Asset Securitization Corp., Series 1997 D5, Class
PS1, STRIPS - COUPON, VRN, 1.60%, 4/11/08 262,548
163,308 Banc of America Alternative Loan Trust, Series
2006-3, Class 1CB1, 6.00%, 4/25/36 161,861
188,016 Banc of America Alternative Loan Trust, Series
2006-4, Class 4CB1, 6.50%, 5/25/46 185,542
225,000 Banc of America Commercial Mortgage Inc. STRIPS -
COUPON, Series 2007-3, Class A4, 5.84%, 5/10/17 222,588
563,000 Banc of America Mortgage Securities, Series 2004 G,
Class 2A6, 4.66%, 8/25/34 572,651
1,417,000 Bear Stearns Adjustable Rate Mortgage Trust, Series
2004-4, Class A6, 3.51%, 6/25/34 1,419,701
121,257 Chase Manhattan Auto Owner Trust, Series 2005 A,
Class A3 SEQ, 3.87%, 6/15/09 121,483
500,000 Citigroup Commercial Mortgage Trust STRIPS - COUPON,
Series 2007 C6, Class A4, 5.89%, 6/10/17 497,230
116,902 Citigroup Mortgage Loan Trust Inc., Series 2005-1,
Class 3A1 SEQ, 6.50%, 4/25/35 113,356
238,160 Credit Suisse Mortgage Capital Certificates, Series
2007-5, Class 3A19, 6.00%, 8/25/37 234,741
372,269 Criimi Mae Commercial Mortgage Trust, Series 1998
C1, Class B, 7.00%, 6/2/33 (Acquired 3/9/99, Cost
$294,965)(1) 372,269
2,711,743 DLJ Commercial Mortgage Corp., Series 1998 CF1,
Class S, STRIPS - COUPON, VRN, 0.88%, 4/1/08 91,245
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13
Select Bond
Principal Amount Value
$2,384,806 DLJ Mortgage Acceptance Corp., Series 1997 CF2,
Class S, STRIPS - COUPON, VRN, 0.68%, 4/1/08
(Acquired 1/22/98-2/25/98, Cost $64,534)(1) $ 69,806
244,974 FHLMC, Series 3065, Class TN, 4.50%, 10/15/33 246,288
876,821 FHLMC, Series K001, Class A2, 5.65%, 4/25/16 917,735
409,669 First Horizon Alternative Mortgage Securities,
Series 2004 FA1, Class 1A1 SEQ, 6.25%, 10/25/34 399,970
1,254,000 FNMA, Alternative Credit Enhancement Structures,
Series 2006 M1, Class C SEQ, 5.36%, 3/1/36 1,302,738
588,887 FNMA, Final Maturity Amortizing Notes, Series
2004-1, Class 1, 4.45%, 8/25/12 588,191
770,912 FNMA, Series 2002 W4, Class A4 SEQ, 6.25%, 5/25/42 822,357
123,853 Greenwich Capital Commercial Funding Corp., Series
2006 FL4A, Class A1, VRN, 3.18%, 4/7/08, resets
monthly off the 1-month LIBOR plus 0.09% with no
caps (Acquired 12/15/06, Cost $123,853)(1) 115,963
614,000 GS Mortgage Securities Corp. II, Series 2006 GG8,
Class A4 SEQ, 5.56%, 11/10/39 609,367
795,000 Honda Auto Receivables Owner Trust, Series 2007-2,
Class A3 SEQ, 5.46%, 5/23/11 813,965
368,339 Merrill Lynch Alternative Note Asset, Series 2007
A1, Class A2A, VRN, 2.67%, 4/25/08, resets monthly
off the 1-month LIBOR plus 0.07% with no caps 242,345
218,000 Merrill Lynch/Countrywide Commercial Mortgage Trust,
Series 2007-7, Class A4 SEQ, 5.75%, 6/12/50 216,614
160,823 RMF Commercial Mortgage Pass-Through Certificates,
Series 1997-1, Class F, VRN, 7.47%, 4/1/08 (Acquired
11/24/97, Cost $157,378)(1) 83,990
304,073 TBW Mortgage Backed Pass-Through Certificates,
Series 2007-1, Class A1, VRN, 2.69%, 4/25/08, resets
monthly off the 1-month LIBOR plus 0.09% with no caps 277,143
Principal Amount Value
$ 763,544 Thornburg Mortgage Securities Trust, Series 2006-1,
Class A3, VRN, 2.77%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.17% with a cap of 11.00% $ 749,791
287,525 Thornburg Mortgage Securities Trust, Series 2006-5,
Class A1, VRN, 2.72%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.12% with no caps 268,720
220,376 Thornburg Mortgage Securities Trust, Series 2007-1,
Class A1, VRN, 2.71%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.11% with no caps 206,040
347,924 Thornburg Mortgage Securities Trust, Series 2007-2,
Class A3A, VRN, 2.73%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.13% with no caps 327,165
299,262 Washington Mutual Asset Securities Corp., Series
2003 C1A, Class A SEQ, 3.83%, 1/25/35 (Acquired
2/3/06, Cost $289,899)(1) 292,921
301,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2003 AR10, Class A6, 4.08%,
10/25/33 300,523
146,452 Washington Mutual Mortgage Pass-Through
Certificates, Series 2006-6, Class 4A, 6.70%,
11/25/34 148,996
829,000 Wells Fargo Mortgage Backed Securities Trust, Series
2004 N, Class A6, 4.00%, 8/25/34 809,243
327,581 Wells Fargo Mortgage Backed Securities Trust, Series
2005-7, Class A1, 5.25%, 9/25/35 314,749
357,014 Wells Fargo Mortgage Backed Securities Trust, Series
2005-11, Class 1A1, 5.50%, 11/25/35 350,257
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $14,805,084) 14,730,092
-----------
U.S. Treasury Securities -- 8.0%
1,503,000 U.S. Treasury Bonds, 5.50%, 8/15/28(4) 1,743,599
350,000 U.S. Treasury Bonds, 4.75%, 2/15/37 376,715
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14
Select Bond
Principal Amount Value
$ 130,000 U.S. Treasury Bonds, 5.00%, 5/15/37 $ 145,498
488,779 U.S. Treasury Inflation Indexed Notes, 2.625%,
7/15/17 556,445
2,532,604 U.S. Treasury Inflation Indexed Notes, 1.625%,
1/15/18(4) 2,656,268
1,628,000 U.S. Treasury Notes, 2.125%, 1/31/10(4) 1,644,027
222,000 U.S. Treasury Notes, 3.375%, 11/30/12 231,539
175,000 U.S. Treasury Notes, 3.625%, 12/31/12 184,652
80,000 U.S. Treasury Notes, 2.875%, 1/31/13 81,650
124,000 U.S. Treasury Notes, 4.25%, 11/15/17 132,370
25,000 U.S. Treasury Notes, 3.50%, 2/15/18 25,164
-----------
TOTAL U.S. TREASURY SECURITIES
(Cost $7,500,205) 7,777,927
-----------
Commercial Paper(5) -- 4.4%
2,000,000 Ford Credit Auto Owner Trust, 3.03%, 4/21/08(4) 1,996,256
2,300,000 Lehman Brothers Holdings Inc., 3.20%, 4/1/08
(Acquired 3/31/08, Cost $2,299,796)(1)(4) 2,299,816
-----------
TOTAL COMMERCIAL PAPER
(Cost $4,296,633) 4,296,072
-----------
Asset-Backed Securities(3) -- 3.4%
2,242,000 AEP Texas Central Transition Funding II LLC, Series
2006 A-5, 5.31%, 6/14/19 2,197,453
300,521 Banc of America Funding Corp., Series 2007-1, Class
TA1A, VRN, 2.66%, 4/25/08, resets monthly off the
1-month LIBOR plus 0.06% with no caps 285,303
366,668 Banc of America Funding Corp., Series 2007-4, Class
TA1A SEQ, VRN, 2.69%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.09% with no caps 363,740
Principal Amount Value
$ 132,530 Countrywide Home Loans Mortgage Pass-Through Trust,
Series 2005-31, Class 2A1, 5.50%, 1/25/36 $ 129,362
192,308 Massachusetts RRB Special Purpose Trust WMECO-1,
Series 2001-1, Class A, 6.53%, 6/1/15 206,036
156,103 Mid-State Trust, Series 1997-6, Class A3 SEQ, 7.54%,
7/1/35 162,593
-----------
TOTAL ASSET-BACKED SECURITIES
(Cost $3,406,443) 3,344,487
-----------
U.S. Government Agency Securities -- 1.3%
559,000 Housing Urban Development, 6.08%, 8/1/13 612,088
745,000 TVA STRIPS - PRINCIPAL, VRN, 0.00%, 4/15/12(6) 678,055
-----------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES
(Cost $1,212,688) 1,290,143
-----------
Sovereign Governments & Agencies -- 0.8%
456,688 Overseas Private Investment Corp., 4.10%, 11/15/14 466,492
260,000 United Mexican States, 5.625%, 1/15/17 273,910
40,000 United Mexican States, 6.05%, 1/11/40 40,100
-----------
TOTAL SOVEREIGN GOVERNMENTS & AGENCIES
(Cost $753,410) 780,502
-----------
TOTAL INVESTMENT SECURITIES -- 99.2%
(Cost $96,310,463) 96,370,310
-----------
OTHER ASSETS AND LIABILITIES -- 0.8% 800,777
-----------
TOTAL NET ASSETS -- 100.0% $97,171,087
===========
Futures Contracts
Expiration Underlying Face Unrealized Gain
Contracts Purchased Date Amount at Value (Loss)
46 U.S. Treasury
5-Year Notes June 2008 $5,254,781 $86,827
========== =======
Expiration Underlying Face Unrealized Gain
Contracts Sold Date Amount at Value (Loss)
12 U.S. Long Bond June 2008 $1,425,563 $(18,787)
22 U.S. Treasury
10-Year Notes June 2008 2,616,969 (60,576)
---------- ---------
$4,042,532 $(79,363)
========== =========
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15
Select Bond
Notes to Schedule of Investments
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GMAC = General Motors Acceptance Corporation
GNMA = Government National Mortgage Association
LIBOR = London Interbank Offered Rate
resets = The frequency with which a security's coupon changes, based on
current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will
vary significantly from current market rates.
SEQ = Sequential Payer
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TVA = Tennessee Valley Authority
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at March 31, 2008, was $5,076,699,
which represented 5.2% of total net assets.
(2) Industry is less than 0.05% of total net assets.
(3) Final maturity indicated, unless otherwise noted.
(4) Security, or a portion thereof, has been segregated for futures contracts.
(5) The rate indicated is the yield to maturity at purchase.
(6) Step-coupon security. These securities are issued with a zero-coupon and
become interest bearing at a predetermined rate and date and are issued at a
substantial discount from their value at maturity. Rate shown is effective
March 31, 2008.
See Notes to Financial Statements.
------
16
PERFORMANCE
High-Yield Bond
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year 5 years 10 years Inception Date
A CLASS(1)
No sales charge* -3.57% 7.84% 3.57% 5.19%
With sales charge* -7.91% 6.87% 3.09% 4.76% 3/31/97
CITIGROUP HIGH-YIELD
CASH-PAY INDEX -3.16% 8.35% 5.22% 6.14% --
Investor Class -3.33%(1) -- -- 3.01%(1) 4/3/06
Institutional Class -3.14%(1) -- -- 3.21%(1) 4/3/06
B Class(1)
No sales charge* -4.16% 7.13% 2.87% 4.48%
With sales charge* -8.16% 6.98% 2.87% 4.48% 3/31/97
C Class -4.29%(1) -- -- 1.98%(1) 4/3/06
R Class -3.81%(1) -- -- 2.49%(1) 4/3/06
* Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 4.50% maximum initial
sales charge for fixed-income funds and may be subject to a maximum CDSC of
1.00%. B Class shares redeemed within six years of purchase are subject to a
CDSC that declines from 5.00% during the first year after purchase to 0.00%
the sixth year after purchase. C Class shares redeemed within 12 months of
purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual
funds provide performance information net of maximum sales charges in all
cases where charges could be applied.
High-Yield Bond acquired all of the net assets of the Mason Street High Yield
Bond Fund on March 31, 2006, pursuant to a plan of reorganization approved by
the acquired fund's shareholders on March 23, 2006. Performance information
prior to April 1, 2006 is that of the Mason Street High Yield Bond Fund.
(1) Class returns would have been lower if fees had not been waived.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline. In
addition, the lower-rated securities in which the fund invests are subject to
greater credit risk, default risk and liquidity risk.
Unless otherwise indicated, performance reflects A Class shares; performance
for other share classes will vary due to differences in fee structure. For
information about other share classes available, please consult the
prospectus. Data assumes reinvestment of dividends and capital gains, and none
of the charts reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares. Returns for the index are
provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
------
17
High-Yield Bond
Growth of $10,000 Over 10 Years
$10,000 investment made March 31, 1998*
One-Year Returns Over 10 Years
Periods ended March 31
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
A Class**
(no sales
charge) -7.87% 0.12% 4.42% -0.08% 1.15% 22.79% 7.16% 4.55% 9.99% -3.57%
Citigroup
High-Yield
Cash-Pay
Index 1.40% -3.00% 4.60% 2.97% 5.11% 21.65% 6.86% 6.55% 11.33% -3.16%
* High-Yield Bond A Class's initial investment is $9,550 to reflect the
maximum 4.50% initial sales charge.
** Class returns would have been lower, along with ending value, if fees had
not been waived.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline. In
addition, the lower-rated securities in which the fund invests are subject to
greater credit risk, default risk and liquidity risk.
Unless otherwise indicated, performance reflects A Class shares; performance
for other share classes will vary due to differences in fee structure. For
information about other share classes available, please consult the
prospectus. Data assumes reinvestment of dividends and capital gains, and none
of the charts reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares. Returns for the index are
provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
------
18
PORTFOLIO COMMENTARY
High-Yield Bond
Lead Portfolio Manager: Andrew Wassweiler
PERFORMANCE SUMMARY
High-Yield Bond returned -3.57%* in the 12 months ended March 31, 2008. By
comparison, the Lipper High Current Yield Bond Funds Index and Citigroup
High-Yield Cash-Pay Index had returns of -4.05% and -3.16%, respectively.**
See page 17 for additional performance comparisons. Portfolio and Lipper
returns reflect operating expenses, while Citigroup index returns do not.
It was a year of remarkable volatility and change in the high-yield market,
leading to the first negative fiscal-year return for the fund since 2002.
Though we generally got our credit and sector allocations right, some of our
security selection decisions detracted from performance.
TALE OF TWO HIGH-YIELD MARKETS
The fiscal year covered two distinct periods in the high-yield market, marked
by a radical shift in investor attitudes toward risk. Initially, the riskiest,
lowest-rated portion of the market did best by a wide margin, and the yield
spread offered by CCC bonds over Treasuries reached a record low of 413 basis
points (a basis point equals 0.01%) in May. When yield spreads narrow,
high-yield bonds outperform. But the opposite is also true--when spreads
widen, high-yield securities lag Treasuries.
This pattern continued until the summer of 2007, when the market reacted
negatively to the massive supply of poorly structured, risky deals to finance
leveraged buyouts. As the fiscal year progressed, the extent of the housing,
credit, and liquidity crises began to become apparent, weighing on the
financial sector and higher-quality corporate bonds. These events forced
high-yield spreads to widen, with spreads on CCC bonds surging to 1278 basis
points by March. For some perspective, CCC bonds returned 18.61% in the prior
fiscal year, but stumbled to a -9.33% return for the 12 months ended March 31,
2008. Add it all up, and higher-quality BB bonds significantly outperformed
the lower-rated segments of the market for the year.
Portfolio at a Glance
As of As of
3/31/08 3/31/07
Weighted Average Maturity 6.7 years 7.2 years
Average Duration (effective) 4.4 years 4.2 years
Yields as of March 31, 2008(1)
30-day SEC Yield
Investor Class 8.79%
Institutional Class 8.97%
A Class 8.11%
B Class 7.74%
C Class 7.75%
R Class 8.26%
(1) The yields presented reflect the waiver of a portion of the class's
management fees. Without such waiver, the 30-day yields would have been lower.
* All fund returns referenced in this commentary are for A Class shares and
are not reduced by sales charges. A Class shares are subject to a maximum
sales charge of 4.50%. Had the sales charge been applied or if management fees
had not been waived, returns would be lower than those shown.
** The Lipper High Current Yield Bond Funds Index returned 7.99% and 3.15% for
the five- and 10- year periods ended March 31, 2008, respectively. Data
provided by Lipper Inc. -- A Reuters Company. © 2008 Reuters. All rights
reserved. Any copying, republication or redistribution of Lipper content,
including by caching, framing or similar means, is expressly prohibited
without the prior written consent of Lipper. Lipper shall not be liable for
any errors or delays in the content, or for any actions taken in reliance
thereon.
------
19
High-Yield Bond
CREDIT, SECTOR DECISIONS HELPED
The leading contribution to relative performance was our overweight position
in BB and underweight position in CCC securities. Because there was little
difference in yield between BB and CCC bonds early in the year, we were able
to trade up in quality with little give-up in yield. Later in the period, we
favored the risk/reward trade-off offered by BBs relative to the lowest-rated
bonds in the face of ongoing economic and systemic challenges, as well as
supply and liquidity issues in the high-yield market.
In terms of our sector allocations, it helped to favor bonds of asset-rich
companies in less economically sensitive areas of the economy, such as
utilities and oil and gas. Our metals and mining securities performed well,
behind an overweight position in Freeport-McMoRan. In addition, an underweight
position in the poor-performing homebuilders was another source of relative
strength.
SECURITY SELECTION MIXED
However, our individual security selection decisions yielded mixed results.
For example, while it was beneficial to hold an underweight position in paper
and forest products companies, the securities we did hold in this space
underperformed. In addition, our stake in Idearc--a telephone directory
business dependent upon advertising revenue--lagged.
OUTLOOK
"We have a cautious outlook," says Lead Portfolio Manager Andrew Wassweiler,
"because we think it will take time to work through the problems confronting
the economy and housing market. In addition, default rates are still well
below historical averages--we think this will rise closer to its long-term
historical average in early 2009, further weighing on the market."
Wassweiler continues: "But a positive result of increased volatility and
market dislocations is that we're finding what we believe are some very
attractive situations with compelling risk/reward profiles. For example, we're
seeing select investment-grade, high-quality bonds priced like high-yield
securities. In terms of the portfolio's credit structure, we expect to
maintain our defensive bias in favor of BB bonds at the expense of CCC rated
securities. Finally, we're likely to continue our bias toward higher-quality
names from larger issuers in less cyclical sectors of the economy."
Top Five Industries as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Oil, Gas & Consumable Fuels 11.2% 10.0%
Media 8.6% 10.5%
Hotels, Restaurants & Leisure 7.0% 5.7%
Diversified Financial Services 4.6% 5.6%
Independent Power Producers & Energy Traders 4.0% 3.3%
Portfolio Composition by Credit Rating
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
AAA 8% 4%
BBB 1% 1%
BB 49% 42%
B 34% 43%
CCC or lower 8% 10%
------
20
SCHEDULE OF INVESTMENTS
High-Yield Bond
MARCH 31, 2008
Principal Amount Value
Corporate Bonds -- 89.8%
AEROSPACE & DEFENSE -- 1.8%
$ 382,000 Bombardier Inc., 8.00%, 11/15/14 (Acquired
11/10/06-7/30/07, Cost $378,250)(1) $ 395,369
360,000 DRS Technologies, Inc., 7.625%, 2/1/18 361,800
655,000 L-3 Communications Corp., 7.625%, 6/15/12 673,831
1,085,000 L-3 Communications Corp., 6.375%, 10/15/15 1,066,013
------------
2,497,013
------------
AUTO COMPONENTS -- 2.2%
492,000 American Axle & Manufacturing Inc., 7.875%, 3/1/17 419,430
360,000 Cooper Tire & Rubber Co., 8.00%, 12/15/19 338,400
215,000 Goodyear Tire & Rubber Co. (The), 8.625%, 12/1/11 226,556
480,000 Lear Corp., 8.75%, 12/1/16 412,200
140,000 Tenneco Inc., 8.125%, 11/15/15 (Acquired 11/1/07,
Cost $140,000)(1) 139,650
600,000 TRW Automotive Inc., 7.25%, 3/15/17 (Acquired
3/14/07, Cost $589,620)(1) 549,000
1,180,000 Visteon Corp., 8.25%, 8/1/10 970,550
------------
3,055,786
------------
AUTOMOBILES -- 1.4%
1,090,000 Ford Motor Co., 7.45%, 7/16/31 724,850
940,000 General Motors Corp., 8.375%, 7/15/33 667,400
830,000 GMAC LLC, 7.25%, 3/2/11 654,525
------------
2,046,775
------------
BEVERAGES -- 0.9%
230,000 Constellation Brands Inc., 8.375%, 12/15/14 238,050
560,000 Constellation Brands Inc., 7.25%, 9/1/16 547,400
450,000 Constellation Brands Inc., 7.25%, 5/15/17 438,750
------------
1,224,200
------------
CAPITAL MARKETS -- 0.9%
315,000 E*TRADE Financial Corp., 8.00%, 6/15/11 264,600
25,000 E*TRADE Financial Corp., 7.375%, 9/15/13 17,875
Principal Amount Value
$ 320,000 E*TRADE Financial Corp., 7.875%, 12/1/15 $ 228,800
413,000 LaBranche & Co. Inc., 11.00%, 5/15/12 421,260
420,000 Nuveen Investments Inc., 10.50%, 11/15/15 (Acquired
10/31/07, Cost $420,000)(1) 362,250
------------
1,294,785
------------
CHEMICALS -- 2.6%
305,000 Berry Plastics Holding Corp., 8.875%, 9/15/14 267,638
640,000 FMC Finance III SA, 6.875%, 7/15/17 643,199
1,072,000 Hexion US Finance Corp./Hexion Nova Scotia Finance
ULC, 9.75%, 11/15/14 1,155,080
432,000 Huntsman LLC, 11.50%, 7/15/12 462,240
245,000 Momentive Performance Materials Inc., 9.75%, 12/1/14 221,113
306,000 Momentive Performance Materials Inc., 10.125%,
12/1/14 267,750
184,000 Mosaic Co. (The), 7.375%, 12/1/14 (Acquired
11/16/06, Cost $184,000)(1) 197,800
424,000 Mosaic Co. (The), 7.625%, 12/1/16 (Acquired
11/16/06-2/5/07, Cost $430,600)(1) 457,920
------------
3,672,740
------------
COMMERCIAL SERVICES & SUPPLIES -- 1.2%
689,000 Allied Waste North America, Inc., 7.25%, 3/15/15 691,583
430,000 Allied Waste North America, Inc., 6.875%, 6/1/17 423,550
109,000 ARAMARK Corp., VRN, 6.74%, 5/1/08, resets quarterly
off the 3-month LIBOR plus 3.50% with no caps 96,738
495,000 WCA Waste Corp., 9.25%, 6/15/14 496,238
------------
1,708,109
------------
CONSTRUCTION MATERIALS -- 0.9%
1,105,000 FMG Finance Pty Ltd., 10.625%, 9/1/16 (Acquired
8/11/06-2/7/07, Cost $1,135,000)(1) 1,248,650
------------
CONSUMER FINANCE -- 0.7%
500,000 SLM Corp., 4.00%, 1/15/09 450,332
630,000 SLM Corp., 4.00%, 1/15/10 529,805
------------
980,137
------------
------
21
High-Yield Bond
Principal Amount Value
CONTAINERS & PACKAGING -- 2.4%
$ 252,000 Cascades Inc., 7.25%, 2/15/13 $ 223,650
543,000 Crown Americas LLC/Crown Americas Capital Corp.,
7.625%, 11/15/13 556,575
415,000 Crown Americas LLC/Crown Americas Capital Corp.,
7.75%, 11/15/15 428,488
547,000 Graphic Packaging International Corp., 9.50%,
8/15/13 527,855
375,000 Norampac Inc., 6.75%, 6/1/13 322,031
626,000 Owens-Brockway Glass Container Inc., 6.75%, 12/1/14 626,000
530,000 Smurfit-Stone Container Enterprises, Inc., 8.375%,
7/1/12 482,300
360,000 Smurfit-Stone Container Enterprises, Inc., 8.00%,
3/15/17 304,200
------------
3,471,099
------------
DIVERSIFIED CONSUMER SERVICES -- 1.2%
1,000,000 Education Management LLC/Education Management
Finance Corp., 10.25%, 6/1/16 800,000
100,000 Service Corp. International, 7.375%, 10/1/14 100,625
445,000 Service Corp. International, 6.75%, 4/1/15 439,994
380,000 Service Corp. International, 6.75%, 4/1/16 369,550
------------
1,710,169
------------
DIVERSIFIED FINANCIAL SERVICES -- 4.6%
285,000 Arch Western Finance LLC, 6.75%, 7/1/13 285,713
430,000 Ford Motor Credit Co. LLC, 8.625%, 11/1/10 375,123
1,510,000 Ford Motor Credit Co. LLC, 9.875%, 8/10/11 1,348,665
630,000 Ford Motor Credit Co. LLC, 8.00%, 12/15/16 494,161
285,000 General Motors Acceptance Corp., 7.75%, 1/19/10 246,736
2,060,000 General Motors Acceptance Corp., 8.00%, 11/1/31 1,479,530
214,000 Hawker Beechcraft Acquisition Co., LLC/Hawker
Beechcraft Notes Co., 8.50%, 4/1/15 220,955
404,000 Hawker Beechcraft Acquisition Co., LLC/Hawker
Beechcraft Notes Co., 8.875%, 4/1/15 415,110
504,000 NSG Holdings LLC/NSG Holdings Inc., 7.75%, 12/15/25
(Acquired 3/6/07, Cost $504,000)(1) 491,400
Principal Amount Value
$ 275,000 NXP BV/NXP Funding LLC, 9.50%, 10/15/15 $ 226,875
355,000 Pinnacle Foods Finance LLC/Pinnacle Foods Finance
Corp., 9.25%, 4/1/15 315,950
715,000 Pinnacle Foods Finance LLC/Pinnacle Foods Finance
Corp., 10.625%, 4/1/17 611,325
------------
6,511,543
------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.5%
1,060,000 Citizens Communications Co., 9.25%, 5/15/11 1,102,399
1,085,000 Citizens Communications Co., 9.00%, 8/15/31 954,800
940,000 Embarq Corp., 7.08%, 6/1/16 891,547
380,000 Intelsat Subsidiary Holding Co. Ltd., 8.25%, 1/15/13 384,750
255,000 Qwest Capital Funding Inc., 7.90%, 8/15/10 256,275
275,000 Qwest Communications International Inc., 7.50%,
11/1/08 277,750
471,000 Qwest Corp., 7.875%, 9/1/11 472,178
124,000 Qwest Corp., 7.50%, 10/1/14 121,520
530,000 Qwest Corp., 6.50%, 6/1/17 480,975
------------
4,942,194
------------
ELECTRIC UTILITIES -- 3.8%
41,000 Aquila, Inc., 9.95%, 2/1/11 43,387
815,000 Edison Mission Energy, 7.00%, 5/15/17 815,000
949,000 Edison Mission Energy, 7.20%, 5/15/19 941,883
572,276 Elwood Energy LLC, 8.16%, 7/5/26 556,850
560,000 Energy Future Holdings Corp., 10.875%, 11/1/17
(Acquired 10/24/07, Cost $560,000)(1) 568,400
560,000 Intergen N.V., 9.00%, 6/30/17 (Acquired 7/23/07,
Cost $555,458)(1) 588,000
202,000 Sierra Pacific Resources, 8.625%, 3/15/14 213,155
1,720,000 Texas Competitive Electric Holdings Co. LLC,
10.25%, 11/1/15 (Acquired 1/29/08, Cost
$1,698,500)(1) 1,722,149
------------
5,448,824
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.4%
570,000 Flextronics International Ltd., 6.50%, 5/15/13 547,200
94,000 Flextronics International Ltd., 6.25%, 11/15/14 86,950
------------
634,150
------------
------
22
High-Yield Bond
Principal Amount Value
ENERGY EQUIPMENT & SERVICES -- 1.7%
$ 216,000 Compagnie Generale de Geophysique SA, 7.50%, 5/15/15 $ 220,320
360,000 Compagnie Generale de Geophysique SA, 7.75%, 5/15/17 367,200
555,000 Helix Energy Solutions Group, Inc., 9.50%, 1/15/16
(Acquired 12/18/07, Cost $555,000)(1) 557,775
560,000 Key Energy Services, Inc., 8.375%, 12/1/14
(Acquired 11/14/07, Cost $560,000)(1) 561,400
145,000 Seitel, Inc., 9.75%, 2/15/14 122,888
665,000 SESI LLC, 6.875%, 6/1/14 638,400
------------
2,467,983
------------
FOOD & STAPLES RETAILING -- 1.4%
480,000 Albertson's, Inc., 7.25%, 5/1/13 482,942
180,000 Rite Aid Corp., 8.625%, 3/1/15 138,150
275,000 Rite Aid Corp., 9.375%, 12/15/15 217,250
540,000 Rite Aid Corp., 7.50%, 3/1/17 488,700
612,000 SUPERVALU INC., 7.50%, 11/15/14 621,180
------------
1,948,222
------------
FOOD PRODUCTS -- 1.7%
190,000 Dean Foods Co., 7.00%, 6/1/16 167,200
783,000 Dole Food Company, Inc., 8.625%, 5/1/09 685,125
453,000 Pilgrim's Pride Corp., 7.625%, 5/1/15 438,278
217,000 Pilgrim's Pride Corp., 8.375%, 5/1/17 192,045
626,000 Smithfield Foods, Inc., 7.75%, 5/15/13 622,870
385,000 Smithfield Foods, Inc., 7.75%, 7/1/17 377,300
------------
2,482,818
------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.3%
521,000 PTS Acquisition Corp., 9.50%, 4/15/15 (Acquired
4/4/07, Cost $521,000)(1) 424,615
------------
HEALTH CARE PROVIDERS & SERVICES -- 3.9%
1,120,000 Community Health Systems Inc., 8.875%, 7/15/15 1,129,800
255,000 Fresenius Medical Care Capital Trust IV, 7.875%,
6/15/11 265,838
480,000 HCA Inc., 6.75%, 7/15/13 427,200
429,000 HCA Inc., 9.125%, 11/15/14 442,943
Principal Amount Value
$1,634,000 HCA Inc., 9.25%, 11/15/16 $ 1,699,359
644,000 HCA Inc., 9.625%, 11/15/16 669,760
565,000 Health Management Associates Inc., 6.125%, 4/15/16 480,250
485,000 Tenet Healthcare Corp., 7.375%, 2/1/13 435,288
------------
5,550,438
------------
HOTELS, RESTAURANTS & LEISURE -- 7.0%
640,000 American Real Estate Partners L.P./American Real
Estate Finance Corp., 7.125%, 2/15/13 584,000
670,000 Boyd Gaming Corp., 7.75%, 12/15/12 623,100
590,000 Harrah's Operating Co. Inc., 10.75%, 2/1/16
(Acquired 3/26/08, Cost $495,600)(1) 500,025
940,000 Las Vegas Sands Corp., 6.375%, 2/15/15 834,249
370,000 Mandalay Resort Group, 9.375%, 2/15/10 382,950
700,000 Mashantucket Western Pequot Tribe, 8.50%, 11/15/15
(Acquired 11/8/07, Cost $700,000)(1) 619,500
930,000 MGM Mirage, 6.75%, 9/1/12 867,224
915,000 MGM Mirage, 7.50%, 6/1/16 828,075
190,000 Mohegan Tribal Gaming Authority, 7.125%, 8/15/14 156,750
555,000 Mohegan Tribal Gaming Authority, 6.875%, 2/15/15 449,550
375,000 Park Place Entertainment Corp., 7.875%, 3/15/10 353,438
980,000 Park Place Entertainment Corp., 8.125%, 5/15/11 828,100
500,000 Royal Caribbean Cruises Ltd., 7.00%, 6/15/13 470,259
290,000 Seminole Hard Rock Entertainment Inc./Seminole Hard
Rock International LLC, VRN, 5.30%, 6/15/08, resets
quarterly off the 3-month T-Bill plus 2.50% with no
caps (Acquired 2/27/07, Cost $290,000)(1) 231,275
750,000 Station Casinos Inc., 6.00%, 4/1/12 618,750
310,000 Station Casinos Inc., 6.875%, 3/1/16 182,125
365,000 Station Casinos Inc., 6.625%, 3/15/18 204,400
------
23
High-Yield Bond
Principal Amount Value
$ 718,000 Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp.,
6.625%, 12/1/14 $ 694,665
485,000 Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp.,
6.625%, 12/1/14 (Acquired 11/1/07, Cost $471,663)(1) 469,238
------------
9,897,673
------------
HOUSEHOLD DURABLES -- 0.7%
575,000 K. Hovnanian Enterprises, Inc., 7.75%, 5/15/13 307,625
715,000 KB Home, 7.75%, 2/1/10 687,294
------------
994,919
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 4.0%
910,000 AES Corp. (The), 9.375%, 9/15/10 966,875
420,000 AES Corp. (The), 8.00%, 10/15/17 427,350
275,000 Dynegy Holdings Inc., 7.50%, 6/1/15 259,188
815,000 Dynegy Holdings Inc., 8.375%, 5/1/16 810,925
415,000 Dynegy Holdings Inc., 7.75%, 6/1/19 390,100
1,085,000 Indiantown Cogeneration L.P., 9.77%, 12/15/20 1,214,921
480,000 NRG Energy Inc., 7.25%, 2/1/14 475,200
255,000 NRG Energy Inc., 7.375%, 2/1/16 250,538
723,000 NRG Energy Inc., 7.375%, 1/15/17 704,925
180,000 Reliant Energy, Inc., 7.625%, 6/15/14 179,550
------------
5,679,572
------------
INDUSTRIAL CONGLOMERATES -- 0.8%
1,185,000 Stena AB, 7.50%, 11/1/13 1,174,631
------------
INSURANCE -- 0.6%
398,000 Crum & Forster Holdings Corp., 7.75%, 5/1/17 379,095
420,000 UnumProvident Finance Co. plc, 6.85%, 11/15/15 424,915
------------
804,010
------------
INTEGRATED TELECOMMUNICATION SERVICES -- 1.0%
565,000 Windstream Corp., 8.125%, 8/1/13 557,938
620,000 Windstream Corp., 8.625%, 8/1/16 612,250
360,000 Windstream Corp., 7.00%, 3/15/19 315,000
------------
1,485,188
------------
Principal Amount Value
IT SERVICES -- 1.4%
$1,030,000 First Data Corp., 9.875%, 9/24/15 $ 848,463
475,000 Sabre Holdings Corp., 8.35%, 3/15/16 368,125
710,000 SunGard Data Systems Inc., 9.125%, 8/15/13 720,650
------------
1,937,238
------------
LEISURE EQUIPMENT & PRODUCTS -- 0.6%
495,000 Da-Lite Screen Co., Inc., 9.50%, 5/15/11 452,925
495,000 Travelport Ltd., 11.875%, 9/1/16 423,225
------------
876,150
------------
LEISURE FACILITIES -- 0.5%
418,000 Universal City Development Partners, 11.75%, 4/1/10 430,540
256,000 Universal City Florida Holding Co. I/Universal City
Florida Holdings Co.II, 8.375%, 5/1/10 252,160
------------
682,700
------------
MACHINERY -- 1.9%
360,000 American Railcar Industries Inc., 7.50%, 3/1/14 318,600
555,000 Case New Holland Inc., 7.125%, 3/1/14 546,675
974,000 Rental Service Corp., 9.50%, 12/1/14 818,160
415,000 SPX Corp., 7.625%, 12/15/14 (Acquired 12/10/07,
Cost $415,000)(1) 427,969
560,000 Terex Corp., 8.00%, 11/15/17 560,000
------------
2,671,404
------------
MEDIA -- 8.6%
717,000 AMC Entertainment Inc., 11.00%, 2/1/16 674,876
985,000 CCH II, LLC/CCH II Capital Corp., 10.25%, 9/15/10 898,812
1,300,000 Charter Communications Holdings, LLC/CCH I
Holdings, LLC, 11.75%, 5/15/14 663,000
370,000 Charter Communications Holdings, LLC/CCH I, LLC,
11.00%, 10/1/15 256,225
810,000 CSC Holdings, Inc., 7.625%, 4/1/11 804,938
1,296,000 CSC Holdings, Inc., 7.875%, 2/15/18 1,205,279
740,000 EchoStar DBS Corp., 7.00%, 10/1/13 701,150
255,000 EchoStar DBS Corp., 7.125%, 2/1/16 239,063
1,924,000 Idearc Inc., 8.00%, 11/15/16 1,255,409
------
24
High-Yield Bond
Principal Amount Value
$ 685,000 Kabel Deutschland GmbH, 10.625%, 7/1/14 $ 675,581
780,000 Lamar Media Corp., 6.625%, 8/15/15 690,300
140,000 Lamar Media Corp., 6.625%, 8/15/15 123,900
540,000 Mediacom Broadband LLC/Mediacom Broadband Corp.,
8.50%, 10/15/15 456,300
265,000 Mediacom LLC/Mediacom Capital Corp., 7.875%, 2/15/11 237,175
560,000 Quebecor Media Inc., 7.75%, 3/15/16 513,800
750,000 R.H. Donnelley Corp., 6.875%, 1/15/13 461,250
1,090,000 R.H. Donnelley Corp., 6.875%, 1/15/13 670,350
310,000 R.H. Donnelley Corp., 6.875%, 1/15/13 190,650
215,000 R.H. Donnelley Corp., 8.875%, 1/15/16 137,063
365,000 R.H. Donnelley Corp., 8.875%, 10/15/17 (Acquired
9/19/07-10/2/07, Cost $365,000)(1) 229,950
960,000 Univision Communications Inc., 9.75%, 3/15/15
(Acquired 3/1/07, Cost $960,000)(1) 585,600
425,000 Videotron Ltee, 6.875%, 1/15/14 394,188
235,000 Videotron Ltee, 6.375%, 12/15/15 206,800
------------
12,271,659
------------
METALS & MINING -- 2.6%
715,000 Freeport-McMoRan Copper & Gold, Inc., 8.25%, 4/1/15 756,113
1,495,000 Freeport-McMoRan Copper & Gold, Inc., 8.375%, 4/1/17 1,590,306
884,000 Novelis Inc., 7.25%, 2/15/15 786,760
525,000 Steel Dynamics Inc., 7.75%, 4/15/16 (Acquired
3/27/08, Cost $525,000)(1)(2) 528,281
------------
3,661,460
------------
MULTI-UTILITIES -- 0.5%
595,000 Basic Energy Services Inc., 7.125%, 4/15/16 569,712
160,000 PSEG Energy Holdings Inc., 8.50%, 6/15/11 170,085
------------
739,797
------------
OIL, GAS & CONSUMABLE FUELS -- 11.2%
605,000 Chaparral Energy Inc., 8.875%, 2/1/17 527,863
375,000 Chesapeake Energy Corp., 7.625%, 7/15/13 386,250
Principal Amount Value
$ 235,000 Chesapeake Energy Corp., 7.50%, 9/15/13 $ 243,225
383,000 Chesapeake Energy Corp., 6.375%, 6/15/15 373,425
862,000 Chesapeake Energy Corp., 6.625%, 1/15/16 849,069
520,000 Cimarex Energy Co., 7.125%, 5/1/17 518,700
444,000 Complete Production Services, Inc., 8.00%, 12/15/16 428,460
375,000 Connacher Oil and Gas Ltd., 10.25%, 12/15/15
(Acquired 11/16/07, Cost $369,964)(1) 379,688
430,000 Denbury Resources Inc., 7.50%, 12/15/15 441,825
560,000 El Paso Corp., 7.75%, 1/15/32 578,066
330,000 Forest Oil Corp., 7.25%, 6/15/19 337,425
365,000 Kinder Morgan Finance Co., ULC, 5.70%, 1/5/16 347,663
461,000 Knight Inc., 6.50%, 9/1/12 469,752
370,000 Mariner Energy Inc., 8.00%, 5/15/17 355,200
445,000 Massey Energy Co., 6.625%, 11/15/10 443,331
110,000 Newfield Exploration Co., 6.625%, 9/1/14 108,900
525,000 Newfield Exploration Co., 6.625%, 4/15/16 517,125
875,000 OPTI Canada Inc., 8.25%, 12/15/14 870,624
515,000 Peabody Energy Corp., 7.375%, 11/1/16 535,600
560,000 Peabody Energy Corp., 7.875%, 11/1/26 558,600
871,000 Petrohawk Energy Corp., 9.125%, 7/15/13 899,307
327,000 Petroplus Finance Ltd., 6.75%, 5/1/14 (Acquired
4/25/07, Cost $327,000)(1) 300,023
272,000 Petroplus Finance Ltd., 7.00%, 5/1/17 (Acquired
4/25/07, Cost $272,000)(1) 244,120
455,000 Plains Exploration & Production Co., 7.75%, 6/15/15 456,138
360,000 Plains Exploration & Production Co., 7.00%, 3/15/17 347,400
594,000 Range Resources Corp., 6.375%, 3/15/15 585,090
130,000 Range Resources Corp., 7.50%, 5/15/16 133,900
160,000 Sonat Inc., 7.625%, 7/15/11 166,222
------
25
High-Yield Bond
Principal Amount Value
$ 420,000 Southwestern Energy Co., 7.50%, 2/1/18 (Acquired
1/11/08, Cost $420,000)(1) $ 436,800
286,000 Stallion Oilfield Services/Stallion Oilfield
Finance Corp., 9.75%, 2/1/15 (Acquired 1/19/07,
Cost $286,000)(1) 197,340
235,000 Tesoro Corp., 6.25%, 11/1/12 222,663
1,230,000 Tesoro Corp., 6.625%, 11/1/15 1,143,899
530,000 W&T Offshore Inc., 8.25%, 6/15/14 (Acquired 6/8/07,
Cost $530,000)(1) 494,225
668,000 Whiting Petroleum Corp., 7.25%, 5/1/13 661,319
293,000 Williams Partners L.P./Williams Partners Finance
Corp., 7.25%, 2/1/17 295,930
------------
15,855,167
------------
PAPER & FOREST PRODUCTS -- 1.7%
908,000 Abitibi-Consolidated Co. of Canada, 7.75%, 6/15/11 494,860
740,000 Abitibi-Consolidated Co. of Canada, 8.375%, 4/1/15 384,800
470,000 Abitibi-Consolidated Inc., 8.55%, 8/1/10 272,600
180,000 Catalyst Paper Corp., 8.625%, 6/15/11 150,750
879,000 Georgia-Pacific Corp., 7.00%, 1/15/15 (Acquired
12/13/06, Cost $879,000)(1) 828,458
284,000 Georgia-Pacific Corp., 7.125%, 1/15/17 (Acquired
12/13/06, Cost $284,000)(1) 264,120
------------
2,395,588
------------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 2.1%
612,000 FelCor Lodging L.P., 8.50%, 6/1/11 602,820
1,515,000 Host Marriot, L.P., 7.125%, 11/1/13 1,492,275
384,000 Senior Housing Properties Trust, 8.625%, 1/15/12 396,480
400,000 Ventas Realty L.P./Ventas Capital Corp., 9.00%,
5/1/12 423,000
35,000 Ventas Realty L.P./Ventas Capital Corp., 6.50%,
6/1/16 33,950
------------
2,948,525
------------
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.6%
475,000 Realogy Corp., 12.375%, 4/15/15 213,750
665,000 Rouse Co. (The), 7.20%, 9/15/12 610,485
------------
824,235
------------
Principal Amount Value
ROAD & RAIL -- 0.5%
$ 690,000 Hertz Corp., 8.875%, 1/1/14 $ 657,225
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.0%
490,000 Freescale Semiconductor Inc., 8.875%, 12/15/14 385,875
735,000 Freescale Semiconductor Inc., 9.125%, 12/15/14 540,225
184,000 Freescale Semiconductor Inc., 10.125%, 12/15/16 125,120
342,000 STATS ChipPAC Ltd., 6.75%, 11/15/11 347,130
------------
1,398,350
------------
SPECIALTY RETAIL -- 1.1%
495,000 Claire's Stores Inc., 10.50%, 6/1/17 220,275
560,000 GSC Holdings Corp., 8.00%, 10/1/12 595,000
375,000 Michaels Stores, Inc., 11.375%, 11/1/16 296,250
395,000 Warnaco Inc., 8.875%, 6/15/13 410,800
------------
1,522,325
------------
TEXTILES, APPAREL & LUXURY GOODS -- 1.4%
520,000 Invista, 9.25%, 5/1/12 534,300
605,000 Levi Strauss & Co., 8.875%, 4/1/16 580,800
922,000 Oxford Industries, Inc., 8.875%, 6/1/11 880,510
------------
1,995,610
------------
THRIFTS & MORTGAGE FINANCE -- 0.2%
565,000 Residential Capital Corp., 8.00%, 2/22/11 279,675
------------
TRADING COMPANIES & DISTRIBUTORS -- 0.7%
305,000 Ashtead Capital Inc., 9.00%, 8/15/16 (Acquired
8/1/06, Cost $305,000)(1) 248,575
893,000 United Rentals North America, Inc., 6.50%, 2/15/12 812,630
------------
1,061,205
------------
TRANSPORTATION INFRASTRUCTURE -- 0.6%
83,000 Kansas City Southern de Mexico, SA de CV, 9.375%,
5/1/12 86,113
257,000 Kansas City Southern de Mexico, SA de CV, 7.625%,
12/1/13 242,865
585,000 Kansas City Southern de Mexico, SA de CV, 7.375%,
6/1/14 (Acquired 5/14/07, Cost $585,000)(1) 541,125
------------
870,103
------------
------
26
High-Yield Bond
Principal Amount Value
WIRELESS TELECOMMUNICATION SERVICES -- 1.0%
$ 560,000 Alltel Communications Inc., 10.375%, 12/1/17
(Acquired 11/16/07, Cost $512,400)(1) $ 484,400
420,000 American Tower Corp., 7.00%, 10/15/17 (Acquired
9/24/07, Cost $420,000)(1) 422,100
542,000 Rogers Wireless Inc., 8.00%, 12/15/12 563,680
------------
1,470,180
------------
TOTAL CORPORATE BONDS
(Cost $137,412,106) 127,474,839
------------
Commercial Paper(3) -- 7.7%
3,000,000 DaimlerChrysler N.A. Holding Corp., 2.80%, 4/22/08 2,994,138
3,900,000 Lehman Brothers Holdings Inc., 3.20%, 4/1/08
(Acquired 3/31/08, Cost $3,899,653)(1)(4) 3,899,688
2,000,000 Park Avenue Receivables, 3.18%, 4/11/08 (Acquired
3/6/08, Cost $1,993,640)(1) 1,997,990
2,000,000 Windmill Funding Corp., 3.23%, 4/14/08 (Acquired
3/6/08, Cost $1,993,002)(1) 1,997,492
------------
TOTAL COMMERCIAL PAPER
(Cost $10,891,000) 10,889,308
------------
TOTAL INVESTMENT SECURITIES -- 97.5%
(Cost $148,303,106) 138,364,147
------------
OTHER ASSETS AND LIABILITIES -- 2.5% 3,615,350
------------
TOTAL NET ASSETS -- 100.0% $141,979,497
============
Notes to Schedule of Investments
GMAC = General Motors Acceptance Corporation
LIBOR = London Interbank Offered Rate
resets = The frequency with which a security's coupon changes, based on
current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will
vary significantly from current market rates.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at March 31, 2008, was $24,592,360,
which represented 17.3% of total net assets.
(2) When-issued security.
(3) The rate indicated is the yield to maturity at purchase.
(4) Security, or a portion thereof, has been segregated for a when-issued
security.
See Notes to Financial Statements.
------
27
SHAREHOLDER FEE EXAMPLES (UNAUDITED)
Fund shareholders may incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments and redemption/exchange
fees; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in your fund
and to compare these costs with the ongoing cost of investing in other mutual
funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2007 to March 31, 2008.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or
Institutional Class shares of the American Century Diversified Bond Fund, in
an American Century account (i.e., not a financial intermediary or retirement
plan account), American Century may charge you a $12.50 semiannual account
maintenance fee if the value of those shares is less than $10,000. We will
redeem shares automatically in one of your accounts to pay the $12.50 fee. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. PERSONAL ACCOUNTS
include individual accounts, joint accounts, UGMA/UTMA accounts, personal
trusts, Coverdell Education Savings Accounts and IRAs (including traditional,
Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement
accounts. If you have only business, business retirement, employer-sponsored
or American Century Brokerage accounts, you are currently not subject to this
fee. We will not charge the fee as long as you choose to manage your accounts
exclusively online. If you are subject to the Account Maintenance Fee, your
account value could be reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is
not the actual return of a fund's share class. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
------
28
Expenses Paid
Beginning During
Account Ending Period(1) Annualized
Value Account Value 10/1/07 - Expense
10/1/07 3/31/08 3/31/08 Ratio(1)
Select Bond
ACTUAL
Investor Class $1,000 $1,048.40 $3.18 0.62%
Institutional Class $1,000 $1,049.40 $2.15 0.42%
A Class (after
waiver)(2) $1,000 $1,047.20 $4.35 0.85%
A Class (before
waiver) $1,000 $1,047.20(3) $4.45 0.87%
B Class (after
waiver)(2) $1,000 $1,043.80 $7.66 1.50%
B Class (before
waiver) $1,000 $1,043.80(3) $8.28 1.62%
C Class $1,000 $1,043.20 $8.27 1.62%
R Class $1,000 $1,045.80 $5.73 1.12%
HYPOTHETICAL
Investor Class $1,000 $1,021.90 $3.13 0.62%
Institutional Class $1,000 $1,022.90 $2.12 0.42%
A Class (after
waiver)(2) $1,000 $1,020.75 $4.29 0.85%
A Class (before
waiver) $1,000 $1,020.65 $4.39 0.87%
B Class (after
waiver)(2) $1,000 $1,017.50 $7.57 1.50%
B Class (before
waiver) $1,000 $1,016.90 $8.17 1.62%
C Class $1,000 $1,016.90 $8.17 1.62%
R Class $1,000 $1,019.40 $5.65 1.12%
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
(2) During the six months ended March 31, 2008, the class received a partial
waiver of its distribution and service fees.
(3) Ending account value assumes the return earned after waiver. The return
would have been lower had fees not been waived and would have resulted in a
lower ending account value.
------
29
Expenses Paid
Beginning Ending During
Account Account Period(1) Annualized
Value Value 10/1/07 - Expense
10/1/07 3/31/08 3/31/08 Ratio(1)
High-Yield Bond
ACTUAL
Investor Class (after
waiver)(2) $1,000 $960.00 $3.92 0.80%
Investor Class (before
waiver) $1,000 $960.00(3) $4.26 0.87%
Institutional Class
(after waiver)(2) $1,000 $961.00 $2.94 0.60%
Institutional Class
(before waiver) $1,000 $961.00(3) $3.28 0.67%
A Class (after waiver)(2) $1,000 $958.80 $5.14 1.05%
A Class (before waiver) $1,000 $958.80(3) $5.48 1.12%
B Class (after waiver)(2) $1,000 $956.60 $8.80 1.80%
B Class (before waiver) $1,000 $956.60(3) $9.15 1.87%
C Class (after waiver)(2) $1,000 $955.20 $8.80 1.80%
C Class (before waiver) $1,000 $955.20(3) $9.14 1.87%
R Class (after waiver)(2) $1,000 $957.60 $6.36 1.30%
R Class (before waiver) $1,000 $957.60(3) $6.70 1.37%
HYPOTHETICAL
Investor Class (after
waiver)(2) $1,000 $1,021.00 $4.04 0.80%
Investor Class (before
waiver) $1,000 $1,020.65 $4.39 0.87%
Institutional Class
(after waiver)(2) $1,000 $1,022.00 $3.03 0.60%
Institutional Class
(before waiver) $1,000 $1,021.65 $3.39 0.67%
A Class (after waiver)(2) $1,000 $1,019.75 $5.30 1.05%
A Class (before waiver) $1,000 $1,019.40 $5.65 1.12%
B Class (after waiver)(2) $1,000 $1,016.00 $9.07 1.80%
B Class (before waiver) $1,000 $1,015.65 $9.42 1.87%
C Class (after waiver)(2) $1,000 $1,016.00 $9.07 1.80%
C Class (before waiver) $1,000 $1,015.65 $9.42 1.87%
R Class (after waiver)(2) $1,000 $1,018.50 $6.56 1.30%
R Class (before waiver) $1,000 $1,018.15 $6.91 1.37%
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
(2) During the six months ended March 31, 2008, the class received a partial
waiver of its management fee.
(3) Ending account value assumes the return earned after waiver. The return
would have been lower had fees not been waived and would have resulted in a
lower ending account value.
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30
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
High-Yield
Select Bond Bond
ASSETS
Investment securities, at value (cost of
$96,310,463 and $148,303,106, respectively) $96,370,310 $138,364,147
Cash 138,578 107,131
Receivable for investments sold 39,967 1,119,035
Receivable for capital shares sold 429 --
Receivable for variation margin on futures contracts 2,080 --
Interest receivable 795,348 3,297,171
----------- ------------
97,346,712 142,887,484
----------- ------------
LIABILITIES
Payable for investments purchased 38,932 795,722
Payable for capital shares redeemed 67,436 15,270
Accrued management fees 44,050 73,698
Distribution fees payable 4,640 1,487
Service fees (and distribution fees -- A Class and
R Class) payable 11,022 3,465
Dividends payable 9,545 18,345
----------- ------------
175,625 907,987
----------- ------------
NET ASSETS $97,171,087 $141,979,497
=========== ============
See Notes to Financial Statements.
------
31
MARCH 31, 2008
Select Bond High-Yield Bond
NET ASSETS CONSIST OF:
Capital paid in $104,749,930 $160,916,898
Undistributed net investment income 262,856 189,725
Accumulated net realized loss on investment
transactions (7,909,010) (9,188,167)
Net unrealized appreciation (depreciation) on
investments 67,311 (9,938,959)
------------ ------------
$ 97,171,087 $141,979,497
============ ============
INVESTOR CLASS
Net assets $990,461 $1,577,635
Shares outstanding 103,161 243,293
Net asset value per share $9.60 $6.48
INSTITUTIONAL CLASS
Net assets $36,153,389 $123,973,807
Shares outstanding 3,765,519 19,120,617
Net asset value per share $9.60 $6.48
A CLASS
Net assets $52,731,867 $14,070,407
Shares outstanding 5,492,229 2,170,099
Net asset value per share $9.60 $6.48
Maximum offering price (net asset value divided
by 0.955) $10.05 $6.79
B CLASS
Net assets $7,045,420 $2,261,727
Shares outstanding 733,902 349,027
Net asset value per share $9.60 $6.48
C CLASS
Net assets $216,981 $69,354
Shares outstanding 22,597 10,696
Net asset value per share $9.60 $6.48
R CLASS
Net assets $32,969 $26,567
Shares outstanding 3,434 4,098
Net asset value per share $9.60 $6.48
See Notes to Financial Statements.
------
32
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
Select Bond High-Yield Bond
INVESTMENT INCOME (LOSS)
INCOME:
Interest $5,193,407 $ 11,880,020
EXPENSES:
Management fees 540,642 1,021,033
Distribution fees:
B Class 57,893 20,855
C Class 1,509 635
Service fees:
B Class 19,298 6,952
C Class 503 212
Distribution and service fees:
A Class 140,316 42,762
R Class 153 136
Trustees' fees and expenses 4,048 5,957
Other expenses 139 208
---------- -------------
764,501 1,098,750
Amount waived (20,488) (103,627)
---------- -------------
744,013 995,123
---------- -------------
NET INVESTMENT INCOME (LOSS) 4,449,394 10,884,897
---------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
Investment transactions 169,592 (1,742,625)
Futures transactions 536,293 --
---------- -------------
705,885 (1,742,625)
---------- -------------
CHANGE IN NET UNREALIZED APPRECIATION
(DEPRECIATION) ON:
Investments 523,121 (13,693,466)
Futures 7,464 --
---------- -------------
530,585 (13,693,466)
---------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 1,236,470 (15,436,091)
---------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $5,685,864 $ (4,551,194)
========== =============
See Notes to Financial Statements.
------
33
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Select Bond High-Yield Bond
Increase (Decrease)
in Net Assets 2008 2007 2008 2007
OPERATIONS
Net investment
income (loss) $ 4,449,394 $ 5,104,412 $ 10,884,897 $ 9,960,875
Net realized gain
(loss) 705,885 (1,807,284) (1,742,625) 337,593
Change in net
unrealized
appreciation
(depreciation) 530,585 3,264,050 (13,693,466) 4,205,432
------------ ------------ ------------ -------------
Net increase
(decrease) in net
assets resulting
from operations 5,685,864 6,561,178 (4,551,194) 14,503,900
------------ ------------ ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment
income:
Investor Class (18,846) (2,333) (46,729) (9,834)
Institutional
Class (1,682,787) (1,540,109) (9,465,278) (8,227,506)
A Class (2,485,963) (3,290,481) (1,194,693) (1,509,725)
B Class (291,156) (323,490) (173,496) (208,448)
C Class (7,344) (2,514) (5,249) (3,774)
R Class (1,267) (1,077) (1,840) (1,589)
------------ ------------ ------------ -------------
Decrease in net
assets from
distributions (4,487,363) (5,160,004) (10,887,285) (9,960,876)
------------ ------------ ------------ -------------
CAPITAL SHARE TRANSACTIONS
Net increase
(decrease) in net
assets from capital
share transactions (13,231,155) (24,651,321) 4,651,057 1,935,749
------------ ------------ ------------ -------------
NET INCREASE
(DECREASE) IN NET
ASSETS (12,032,654) (23,250,147) (10,787,422) 6,478,773
NET ASSETS
Beginning of period 109,203,741 132,453,888 152,766,919 146,288,146
------------ ------------ ------------ -------------
End of period $ 97,171,087 $109,203,741 $141,979,497 $152,766,919
============ ============ ============ =============
Undistributed net
investment income $262,856 $195,339 $189,725 $193,295
============ ============ ============ =============
See Notes to Financial Statements.
------
34
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. American Century-Mason Street Select Bond Fund
(Select Bond) and American Century-Mason Street High-Yield Bond Fund
(High-Yield Bond) (the funds) are two funds in a series issued by the
corporation. The funds are diversified under the 1940 Act. Select Bond's
investment objective is to seek high income and capital appreciation,
consistent with capital preservation. Select Bond invests primarily in
investment-grade debt securities with maturities exceeding one year.
High-Yield Bond's investment objective is to seek high current income and
capital appreciation. High-Yield Bond invests primarily in
non-investment-grade debt securities, which are subject to greater credit risk
and consequently offer higher yields. The following is a summary of the funds'
significant accounting policies.
MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the
Institutional Class, the A Class, the B Class, the C Class and the R Class.
The A Class may incur an initial sales charge. The A Class, B Class and C
Class may be subject to a contingent deferred sales charge. The share classes
differ principally in their respective sales charges and distribution and
shareholder servicing expenses and arrangements. All shares of each fund
represent an equal pro rata interest in the net assets of the class to which
such shares belong, and have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except for class specific expenses
and exclusive rights to vote on matters affecting only individual classes.
Income, non-class specific expenses, and realized and unrealized capital gains
and losses of the funds are allocated to each class of shares based on their
relative net assets. Sale of the funds' Investor Class, Institutional Class, C
Class and R Class commenced on April 3, 2006.
SECURITY VALUATIONS -- Debt securities maturing in greater than 60 days are
valued at current market value as provided by a commercial pricing service or
at the mean of the most recent bid and asked prices. Debt securities maturing
within 60 days may be valued at cost, plus or minus any amortized discount or
premium. Securities traded on foreign securities exchanges and
over-the-counter markets are normally completed before the close of business
on days that the New York Stock Exchange (the Exchange) is open and may also
take place on days when the Exchange is not open. If an event occurs after the
value of a security was established but before the net asset value per share
was determined that was likely to materially change the net asset value, that
security would be valued as determined in accordance with procedures adopted
by the Board of Trustees. If the funds determine that the market price of a
portfolio security is not readily available, or that the valuation methods
mentioned above do not reflect the security's fair value, such security is
valued as determined by the Board of Trustees or its designee, in accordance
with procedures adopted by the Board of Trustees, if such determination would
materially impact a fund's net asset value. Certain other circumstances may
cause the funds to use alternative procedures to value a security such as: a
security has been declared in default; trading in a security has been halted
during the trading day; or there is a foreign market holiday and no trading
will commence.
SECURITY TRANSACTIONS -- For financial reporting purposes, security
transactions are accounted for as of the trade date. Net realized gains and
losses are determined on the identified cost basis, which is also used for
federal income tax purposes.
INVESTMENT INCOME -- Interest income less foreign taxes withheld, if any, is
recorded on the accrual basis and includes paydown gain (loss) and accretion
of discounts and amortization of premiums.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The funds may engage in securities
transactions on a when-issued or forward commitment basis. In these
transactions, the securities' prices and yields are fixed on the date of the
commitment. In a when-issued transaction, the payment and delivery are
scheduled for a future date and during this period, securities are subject to
market fluctuations. In a forward commitment transaction, the funds may sell a
security and at the same time make a commitment to purchase the same security
at a future date at a specified price. Conversely, the funds may purchase a
security and at the same time make a commitment to sell the same security at a
future date at a specified price. These types of transactions are executed
simultaneously in what are known as "roll" transactions. The funds will
segregate cash, cash equivalents or other appropriate liquid securities on
their records in amounts sufficient to meet the purchase price. The funds
account for "roll" transactions as purchases and sales; as such these
transactions may increase portfolio turnover.
------
35
FUTURES CONTRACTS -- The funds may enter into futures contracts in order to
manage the funds' exposure to changes in market conditions. One of the risks
of entering into futures contracts is the possibility that the change in value
of the contract may not correlate with the changes in value of the underlying
securities. Upon entering into a futures contract, the funds are required to
deposit either cash or securities in an amount equal to a certain percentage
of the contract value (initial margin). Subsequent payments (variation margin)
are made or received daily, in cash, by the funds. The variation margin is
equal to the daily change in the contract value and is recorded as unrealized
gains and losses. The funds recognize a realized gain or loss when the
contract is closed or expires. Net realized and unrealized gains or losses
occurring during the holding period of futures contracts are a component of
realized gain (loss) on futures transactions and unrealized appreciation
(depreciation) on futures, respectively.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially
expressed in foreign currencies are translated into U.S. dollars at prevailing
exchange rates at period end. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are translated at the rates
of exchange prevailing on the respective dates of such transactions. For
assets and liabilities, other than investments in securities, net realized and
unrealized gains and losses from foreign currency translations arise from
changes in currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses
occurring during the holding period of investment securities are a component
of realized gain (loss) on investment transactions and unrealized appreciation
(depreciation) on investments, respectively. Certain countries may impose
taxes on the contract amount of purchases and sales of foreign currency
contracts in their currency. The funds record the foreign tax expense, if any,
as a reduction to the net realized gain (loss) on foreign currency
transactions.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at
cost. Each fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a
manner sufficient to enable each fund to obtain those securities in the event
of a default under the repurchase agreement. ACIM monitors, on a daily basis,
the securities transferred to ensure the value, including accrued interest, of
the securities under each repurchase agreement is equal to or greater than
amounts owed to each fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, each fund, along with other registered
investment companies having management agreements with ACIM or American
Century Global Investment Management, Inc. (ACGIM), may transfer uninvested
cash balances into a joint trading account. These balances are invested in one
or more repurchase agreements that are collateralized by U.S. Treasury or
Agency obligations.
INCOME TAX STATUS -- It is each fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. The funds are no longer subject to examination by tax
authorities for years prior to 2005. At this time, management has not
identified any uncertain tax positions for which it is reasonably possible
that the total amounts of unrecognized tax benefits will significantly change
in the next twelve months. Accordingly, no provision has been made for federal
or state income taxes. Interest and penalties associated with any federal or
state income tax obligations, if any, are recorded as interest expense.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income for
the funds are declared daily and paid monthly. Distributions from net realized
gains for the funds, if any, are generally declared and paid annually.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the funds. In addition, in the normal course of
business, the funds enter into contracts that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the
funds. The risk of material loss from such claims is considered by management
to be remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America,
which may require management to make certain estimates and assumptions at the
date of the financial statements. Actual results could differ from
------
36
these estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
ACIM, under which ACIM provides the funds with investment advisory and
management services in exchange for a single, unified management fee (the fee)
per class. The Agreement provides that all expenses of the funds, except
brokerage commissions, taxes, interest, fees and expenses of those trustees
who are not considered "interested persons" as defined in the 1940 Act
(including counsel fees) and extraordinary expenses, will be paid by ACIM. The
fee is computed and accrued daily based on the daily net assets of each
specific class of shares of each fund and paid monthly in arrears. The fee
consists of (1) an Investment Category Fee based on the daily net assets of
the funds and certain other accounts managed by the investment advisor that
are in the same broad investment category as each fund and (2) a Complex Fee
based on the assets of all the funds in the American Century family of funds.
The rates for the Investment Category Fee range from 0.2925% to 0.4100% for
Select Bond and from 0.5425% to 0.6600% for High-Yield Bond. The rates for the
Complex Fee (Investor Class, A Class, B Class, C Class and R Class) range from
0.2500% to 0.3100%. The Institutional Class is 0.2000% less at each point
within the Complex Fee range. From August 1, 2006 through July 31, 2007, the
investment advisor voluntarily agreed to waive 0.071% of its management fee
for High-Yield Bond. Effective August 1, 2007, the investment advisor
voluntarily agreed to waive 0.070% of its management fee for High-Yield Bond.
The total amount of the waiver for the year ended March 31, 2008, was $434,
$89,117, $12,041, $1,957, $59 and $19 for the Investor Class, Institutional
Class, A Class, B Class, C Class and R Class, respectively. The fee waiver may
be revised or terminated at any time without notice.
The effective annual management fee for each class of each fund for the year
ended March 31, 2008, was as follows:
Investor, A, B, C & R Institutional
Select Bond 0.62% 0.42%
High-Yield Bond (before waiver) 0.87% 0.67%
High-Yield Bond (after waiver) 0.80% 0.60%
ACIM has entered into a Subadvisory Agreement with Mason Street Advisors LLC
(the subadvisor) on behalf of the funds. The subadvisor makes investment
decisions for the funds in accordance with the funds' investment objectives,
policies, and restrictions under the supervision of ACIM and the Board of
Trustees. ACIM pays all costs associated with retaining Mason Street Advisors
LLC as the subadvisor of the funds.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a separate
Master Distribution and Individual Shareholder Services Plan for each of the A
Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule
12b-1 of the 1940 Act. The plans provide that the A Class and the R Class will
pay American Century Investment Services, Inc. (ACIS) an annual distribution
and service fee of 0.25% for the A Class and 0.50% for the R Class. The plans
provide that the B Class and C Class will each pay ACIS an annual distribution
fee and service fee of 0.75% and 0.25%, respectively. The fees are computed
and accrued daily based on each class's daily net assets and paid monthly in
arrears. The distribution fee provides compensation for expenses incurred in
connection with distributing shares of the classes including, but not limited
to, payments to brokers, dealers, and financial institutions that have entered
into sales agreements with respect to shares of the funds. The service fee
provides compensation for individual shareholder services rendered by
broker/dealers or other independent financial intermediaries. ACIS has agreed
to voluntarily waive a portion of its distribution and service fees through
March 31, 2008, by 0.02% and 0.12% for the A Class and B Class, respectively,
of Select Bond. The total amount of the waiver for the year ended March 31,
2008, was $11,225 and $9,263 for the A Class and B Class, respectively. Fees
incurred under the plans during the year ended March 31, 2008, are detailed in
the Statement of Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also
officers and/or directors, and, as a group, controlling stockholders of
American Century Companies, Inc. (ACC), the parent of the trust's investment
advisor, ACIM, the distributor of the trust, ACIS, and the trust's transfer
agent, American Century Services, LLC.
Prior to December 12, 2007, the funds had a bank line of credit agreement with
JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds and a wholly
owned subsidiary of JPMorgan Chase & Co. (JPM). JPM is an equity investor in
ACC.
------
37
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
March 31, 2008, were as follows:
High-Yield
Select Bond Bond
PURCHASES
U.S. Treasury & Government Agency Obligations $103,732,477 --
Investment securities other than U.S. Treasury &
Government Agency Obligations $17,062,897 $68,111,889
PROCEEDS FROM SALES
U.S. Treasury & Government Agency Obligations $116,190,621 --
Investment securities other than U.S. Treasury &
Government Agency Obligations $22,091,251 $69,651,265
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows (unlimited number of
shares authorized):
Year ended March 31, 2008 Year ended March 31, 2007(1)
Shares Amount Shares Amount
Select Bond
INVESTOR CLASS
Sold 113,468 $ 1,081,771 10,589 $ 99,072
Issued in
reinvestment of
distributions 1,639 15,646 244 2,295
Redeemed (22,779) (217,311) -- --
----------- ------------- ----------- -------------
92,328 880,106 10,833 101,367
----------- ------------- ----------- -------------
INSTITUTIONAL CLASS
Sold -- -- 3,423,279 31,964,191
Issued in
reinvestment of
distributions 177,377 1,676,818 164,863 1,540,109
----------- ------------- ----------- -------------
177,377 1,676,818 3,588,142 33,504,300
----------- ------------- ----------- -------------
A CLASS
Sold 1,299,480 12,337,176 1,553,876 14,580,154
Issued in
reinvestment of
distributions 244,760 2,312,100 319,707 2,996,126
Redeemed (3,111,588) (29,244,130) (8,005,164) (74,708,637)
----------- ------------- ----------- -------------
(1,567,348) (14,594,854) (6,131,581) (57,132,357)
----------- ------------- ----------- -------------
B CLASS
Sold 27,949 265,416 45,005 425,746
Issued in
reinvestment of
distributions 26,402 249,454 29,408 275,223
Redeemed (188,410) (1,786,085) (212,818) (1,990,778)
----------- ------------- ----------- -------------
(134,059) (1,271,215) (138,405) (1,289,809)
----------- ------------- ----------- -------------
C CLASS
Sold 13,500 127,593 14,458 134,369
Issued in
reinvestment of
distributions 742 7,019 269 2,514
Redeemed (6,372) (60,312) -- --
----------- ------------- ----------- -------------
7,870 74,300 14,727 136,883
----------- ------------- ----------- -------------
R CLASS
Sold 255 2,428 4,489 41,957
Issued in
reinvestment of
distributions 133 1,262 112 1,053
Redeemed -- -- (1,555) (14,715)
----------- ------------- ----------- -------------
388 3,690 3,046 28,295
----------- ------------- ----------- -------------
Net increase
(decrease) (1,423,444) $(13,231,155) (2,653,238) $(24,651,321)
=========== ============= =========== =============
(1) April 3, 2006 (commencement of sale) through March 31, 2007 for Investor
Class, Institutional Class, C Class and R Class.
------
38
Year ended March 31, 2008 Year ended March 31, 2007(1)
Shares Amount Shares Amount
High-Yield Bond
INVESTOR CLASS
Sold 303,145 $ 2,022,283 46,821 $ 329,531
Issued in reinvestment
of distributions 5,283 35,695 1,367 9,777
Redeemed (106,656) (699,598) (6,667) (47,688)
----------- ----------- ------------ -------------
201,772 1,358,380 41,521 291,620
----------- ----------- ------------ -------------
INSTITUTIONAL CLASS
Sold -- -- 16,575,523 116,357,372
Issued in reinvestment
of distributions 1,376,097 9,441,541 1,168,997 8,227,506
----------- ----------- ------------ -------------
1,376,097 9,441,541 17,744,520 124,584,878
----------- ----------- ------------ -------------
A CLASS
Sold 380,211 2,606,046 738,562 5,219,940
Issued in reinvestment
of distributions 141,253 972,254 158,029 1,136,977
Redeemed (1,312,247) (9,113,292) (18,265,197) (128,220,528)
----------- ----------- ------------ -------------
(790,783) (5,534,992) (17,368,606) (121,863,611)
----------- ----------- ------------ -------------
B CLASS
Sold 9,047 64,743 29,791 208,698
Issued in reinvestment
of distributions 20,677 142,113 23,801 167,556
Redeemed (115,891) (796,040) (224,281) (1,580,291)
----------- ----------- ------------ -------------
(86,167) (589,184) (170,689) (1,204,037)
----------- ----------- ------------ -------------
C CLASS
Sold 620 4,240 14,012 96,457
Issued in reinvestment
of distributions 739 5,086 534 3,774
Redeemed (5,209) (36,070) -- --
----------- ----------- ------------ -------------
(3,850) (26,744) 14,546 100,231
----------- ----------- ------------ -------------
R CLASS
Sold 79 530 3,724 26,166
Issued in reinvestment
of distributions 267 1,835 225 1,589
Redeemed (47) (309) (150) (1,087)
----------- ----------- ------------ -------------
299 2,056 3,799 26,668
----------- ----------- ------------ -------------
Net increase (decrease) 697,368 $ 4,651,057 265,091 $ 1,935,749
=========== =========== ============ =============
(1) April 3, 2006 (commencement of sale) through March 31, 2007 for Investor
Class, Institutional Class, C Class and R Class.
5. BANK LINE OF CREDIT
Effective December 12, 2007, the funds, along with certain other funds managed
by ACIM or ACGIM, have a $500,000,000 unsecured bank line of credit agreement
with Bank of America, N.A. Prior to December 12, 2007, the funds, along with
certain other funds managed by ACIM or ACGIM, had a $500,000,000 unsecured
bank line of credit agreement with JPMCB. The funds may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement, which is subject to annual renewal, bear interest at the
Federal Funds rate plus 0.40%. The funds did not borrow from the line during
the year ended March 31, 2008.
------
39
6. RISK FACTORS
High-Yield Bond invests primarily in lower-rated debt securities, which are
subject to substantial risks including price volatility, liquidity risk, and
default risk.
7. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2008
and March 31, 2007, were as follows:
Select Bond High-Yield Bond
2008 2007 2008 2007
DISTRIBUTIONS PAID FROM
Ordinary income $4,487,363 $5,160,004 $10,887,285 $9,960,876
Long-term capital gains -- -- -- --
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of paydown losses, certain income items and net
realized gains and losses for financial statement and tax purposes, and may
result in reclassification among certain capital accounts on the financial
statements. The reclassifications between income and realized gain in Select
Bond relate primarily to the character of paydown losses.
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
High-Yield
Select Bond Bond
Federal tax cost of investments $96,581,449 $148,679,170
=========== =============
Gross tax appreciation of investments $ 1,229,272 $ 1,071,136
Gross tax depreciation of investments (1,440,411) (11,386,159)
----------- -------------
Net tax appreciation (depreciation) of investments $ (211,139) $(10,315,023)
=========== =============
Net tax appreciation (depreciation) on derivatives
and translation of assets and liabilities in
foreign currencies -- --
----------- -------------
Net tax appreciation (depreciation) $(211,139) $(10,315,023)
=========== =============
Undistributed ordinary income $262,856 $189,725
Accumulated capital losses $(7,630,560) $(7,413,457)
Capital loss deferrals -- $(1,398,646)
The difference between book-basis and tax-basis cost and unrealized
appreciation (depreciation) is attributable primarily to the tax deferral of
losses on wash sales, the realization for tax purposes of unrealized gains on
certain futures contracts and merger related cost adjustments.
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for
federal income tax purposes. Future capital loss carryover utilization in any
given year may be limited due to large shareholder redemptions. The capital
loss carryovers expire as follows:
2011 2012 2013 2014 2015 2016
Select Bond -- -- -- $(3,941,916) $(3,688,644) --
High-Yield
Bond $(4,165,343) -- -- $(2,056,361) $(1,025,448) $(166,305)
The capital loss deferrals listed above for High-Yield Bond represent net
capital losses incurred in the five-month period ended March 31, 2008.
High-Yield Bond has elected to treat such losses as having been incurred in
the following fiscal year for federal income tax purposes.
------
40
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is taxable
in a particular jurisdiction), and requires certain expanded tax disclosures.
FIN 48 is effective for fiscal years beginning after December 15, 2006, and is
to be applied to all open tax years as of the date of effectiveness. The
adoption of FIN 48 did not materially impact the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" (FAS 157), in September 2006, which is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands the required
financial statement disclosures about fair value measurements. Management is
currently evaluating the impact that adopting FAS 157 will have on the
financial statement disclosures.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
------
41
FINANCIAL HIGHLIGHTS
Select Bond
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.46 $9.33
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.44 0.41
Net Realized and Unrealized Gain (Loss) 0.14 0.14
------ ------
Total From Investment Operations 0.58 0.55
------ ------
Distributions
From Net Investment Income (0.44) (0.42)
------ ------
Net Asset Value, End of Period $9.60 $9.46
====== ======
TOTAL RETURN(3) 6.30% 6.06%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.62% 0.62%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 4.63% 4.52%(4)
Portfolio Turnover Rate 129% 161%
Net Assets, End of Period (in thousands) $990 $102
(1) April 3, 2006 (commencement of sale) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
42
Select Bond
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.46 $9.33
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.46 0.44
Net Realized and Unrealized Gain (Loss) 0.14 0.13
------ ------
Total From Investment Operations 0.60 0.57
------ ------
Distributions
From Net Investment Income (0.46) (0.44)
------ ------
Net Asset Value, End of Period $9.60 $9.46
====== ======
TOTAL RETURN(3) 6.51% 6.27%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.42% 0.42%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 4.83% 4.72%(4)
Portfolio Turnover Rate 129% 161%
Net Assets, End of Period (in thousands) $36,153 $33,943
(1) April 3, 2006 (commencement of sale) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
43
Select Bond
A Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $9.46 $9.33 $9.56 $10.01 $9.98
------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.41 0.41 0.35 0.32 0.31
Net Realized and
Unrealized Gain (Loss) 0.15 0.12 (0.21) (0.34) 0.32
------ ------ ------ ------ ------
Total From Investment
Operations 0.56 0.53 0.14 (0.02) 0.63
------ ------ ------ ------ ------
Distributions
From Net Investment
Income (0.42) (0.40) (0.37) (0.36) (0.36)
From Net Realized Gains -- -- -- (0.07) (0.24)
------ ------ ------ ------ ------
Total Distributions (0.42) (0.40) (0.37) (0.43) (0.60)
------ ------ ------ ------ ------
Net Asset Value, End of
Period $9.60 $9.46 $9.33 $9.56 $10.01
====== ====== ====== ====== ======
TOTAL RETURN(2) 6.06% 5.86% 1.47% (0.27)% 6.50%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.85%(3) 0.85%(3) 0.85%(4) 0.85%(4) 0.85%(4)
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 0.87% 0.87% 0.86% 0.88% 0.93%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 4.40%(3) 4.29%(3) 3.66%(4) 3.29%(4) 3.08%(4)
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before Expense
Waiver) 4.38% 4.27% 3.65% 3.26% 3.00%
Portfolio Turnover Rate 129% 161% 251%(5) 233% 168%
Net Assets, End of Period
(in thousands) $52,732 $66,781 $121,069 $195,684 $146,431
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
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.
(3) During the years ended March 31, 2008 and March 31, 2007, the distributor
voluntarily waived a portion of its distribution and service fees.
(4) The investment advisor voluntarily agreed to waive fees and absorb certain
operating expenses.
(5) Portfolio turnover rate excludes the impact of mortgage dollar roll
transactions.
See Notes to Financial Statements.
------
44
Select Bond
B Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $9.46 $9.33 $9.56 $10.01 $9.98
------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.35 0.35 0.29 0.25 0.24
Net Realized and
Unrealized Gain (Loss) 0.15 0.12 (0.21) (0.35) 0.33
------ ------ ------ ------ ------
Total From Investment
Operations 0.50 0.47 0.08 (0.10) 0.57
------ ------ ------ ------ ------
Distributions
From Net Investment
Income (0.36) (0.34) (0.31) (0.29) (0.30)
From Net Realized Gains -- -- -- (0.06) (0.24)
------ ------ ------ ------ ------
Total Distributions (0.36) (0.34) (0.31) (0.35) (0.54)
------ ------ ------ ------ ------
Net Asset Value, End of
Period $9.60 $9.46 $9.33 $9.56 $10.01
====== ====== ====== ====== ======
TOTAL RETURN(2) 5.37% 5.18% 0.82% (0.91)% 5.80%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.50%(3) 1.50%(3) 1.50%(4) 1.50%(4) 1.50%(4)
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.62% 1.62% 1.54% 1.55% 1.57%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 3.75%(3) 3.64%(3) 2.99%(4) 2.64%(4) 2.44%(4)
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before Expense
Waiver) 3.63% 3.52% 2.95% 2.59% 2.37%
Portfolio Turnover Rate 129% 161% 251%(5) 233% 168%
Net Assets, End of Period
(in thousands) $7,045 $8,210 $9,388 $10,010 $11,353
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
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.
(3) During the years ended March 31, 2008 and March 31, 2007, the distributor
voluntarily waived a portion of its distribution and service fees.
(4) The investment advisor voluntarily agreed to waive fees and absorb certain
operating expenses.
(5) Portfolio turnover rate excludes the impact of mortgage dollar roll
transactions.
See Notes to Financial Statements.
------
45
Select Bond
C Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.46 $9.33
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.34 0.32
Net Realized and Unrealized Gain (Loss) 0.15 0.14
------ ------
Total From Investment Operations 0.49 0.46
------ ------
Distributions
From Net Investment Income (0.35) (0.33)
------ ------
Net Asset Value, End of Period $9.60 $9.46
====== ======
TOTAL RETURN(3) 5.25% 5.02%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.62% 1.62%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 3.63% 3.52%(4)
Portfolio Turnover Rate 129% 161%
Net Assets, End of Period (in thousands) $217 $139
(1) April 3, 2006 (commencement of sale) through March 31, 2007.
(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 values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
46
Select Bond
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.46 $9.33
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.39 0.38
Net Realized and Unrealized Gain (Loss) 0.14 0.13
------ ------
Total From Investment Operations 0.53 0.51
------ ------
Distributions
From Net Investment Income (0.39) (0.38)
------ ------
Net Asset Value, End of Period $9.60 $9.46
====== ======
TOTAL RETURN(3) 5.77% 5.54%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.12% 1.12%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 4.13% 4.02%(4)
Portfolio Turnover Rate 129% 161%
Net Assets, End of Period (in thousands) $33 $29
(1) April 3, 2006 (commencement of sale) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
47
High-Yield Bond
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $7.21 $7.02
------ ------
Income From Investment Operations
Net Investment Income (Loss) 0.50 0.47
Net Realized and Unrealized Gain (Loss) (0.73) 0.19
------ ------
Total From Investment Operations (0.23) 0.66
------ ------
Distributions
From Net Investment Income (0.50) (0.47)
------ ------
Net Asset Value, End of Period $6.48 $7.21
====== ======
TOTAL RETURN(2) (3.33)% 9.73%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(3) 0.80% 0.79%(4)
Ratio of Operating Expenses to Average Net Assets (Before
Expense Waiver) 0.87% 0.87%(4)
Ratio of Net Investment Income (Loss) to Average Net
Assets(3) 7.28% 6.71%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Before Expense Waiver) 7.21% 6.63%(4)
Portfolio Turnover Rate 51% 86%
Net Assets, End of Period (in thousands) $1,578 $299
(1) April 3, 2006 (commencement of sale) through March 31, 2007.
(2) 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.
(3) Effective April 3, 2006, the investment advisor voluntarily agreed to
waive of portion of its management fee.
(4) Annualized.
See Notes to Financial Statements.
------
48
High-Yield Bond
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $7.21 $7.02
------ ------
Income From Investment Operations
Net Investment Income (Loss) 0.52 0.48
Net Realized and Unrealized Gain (Loss) (0.73) 0.19
------ ------
Total From Investment Operations (0.21) 0.67
------ ------
Distributions
From Net Investment Income (0.52) (0.48)
------ ------
Net Asset Value, End of Period $6.48 $7.21
====== ======
TOTAL RETURN(2) (3.14)% 9.95%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(3) 0.60% 0.59%(4)
Ratio of Operating Expenses to Average Net Assets (Before
Expense Waiver) 0.67% 0.67%(4)
Ratio of Net Investment Income (Loss) to Average Net
Assets(3) 7.48% 6.91%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Before Expense Waiver) 7.41% 6.83%(4)
Portfolio Turnover Rate 51% 86%
Net Assets, End of Period (in thousands) $123,974 $127,865
(1) April 3, 2006 (commencement of sale) through March 31, 2007.
(2) 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.
(3) Effective April 3, 2006, the investment advisor voluntarily agreed to
waive of portion of its management fee.
(4) Annualized.
See Notes to Financial Statements.
------
49
High-Yield Bond
A Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $7.21 $6.99 $7.14 $7.13 $6.25
------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income
(Loss) 0.48 0.45 0.45(1) 0.48(1) 0.50(1)
Net Realized and
Unrealized Gain (Loss) (0.73) 0.22 (0.14) 0.02 0.88
------ ------ ------ ------ ------
Total From Investment
Operations (0.25) 0.67 0.31 0.50 1.38
------ ------ ------ ------ ------
Distributions
From Net Investment
Income (0.48) (0.45) (0.46) (0.49) (0.50)
------ ------ ------ ------ ------
Net Asset Value, End of
Period $6.48 $7.21 $6.99 $7.14 $7.13
====== ====== ====== ====== ======
TOTAL RETURN(2) (3.57)% 9.99% 4.55% 7.16% 22.79%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.05%(3) 1.04%(3) 1.26% 1.30%(4) 1.30%(4)
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.12% 1.12% 1.26% 1.31% 1.35%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 7.03%(3) 6.45%(3) 6.38% 6.70%(4) 7.29%(4)
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before Expense
Waiver) 6.96% 6.37% 6.38% 6.69% 7.24%
Portfolio Turnover Rate 51% 86% 116% 141% 199%
Net Assets, End of Period
(in thousands) $14,070 $21,336 $141,593 $157,118 $140,330
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
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.
(3) Effective April 1, 2006, the investment advisor voluntarily agreed to
waive a portion of its management fee.
(4) The investment advisor voluntarily agreed to waive fees and absorb certain
operating expenses.
See Notes to Financial Statements.
------
50
High-Yield Bond
B Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $7.20 $6.98 $7.13 $7.13 $6.24
------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income
(Loss) 0.43 0.40 0.40(1) 0.43(1) 0.45(1)
Net Realized and
Unrealized Gain (Loss) (0.72) 0.22 (0.14) 0.01 0.90
------ ------ ------ ------ ------
Total From Investment
Operations (0.29) 0.62 0.26 0.44 1.35
------ ------ ------ ------ ------
Distributions
From Net Investment
Income (0.43) (0.40) (0.41) (0.44) (0.46)
------ ------ ------ ------ ------
Net Asset Value, End of
Period $6.48 $7.20 $6.98 $7.13 $7.13
====== ====== ====== ====== ======
TOTAL RETURN(2) (4.16)% 9.18% 3.84% 6.32% 22.19%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.80%(3) 1.79%(3) 1.95%(4) 1.95%(4) 1.95%(4)
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.87% 1.87% 1.99% 1.99% 2.00%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 6.28%(3) 5.70%(3) 5.69%(4) 6.06%(4) 6.63%(4)
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before Expense
Waiver) 6.21% 5.62% 5.65% 6.02% 6.58%
Portfolio Turnover Rate 51% 86% 116% 141% 199%
Net Assets, End of Period
(in thousands) $2,262 $3,134 $4,231 $5,028 $5,316
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
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.
(3) Effective April 1, 2006, the investment advisor voluntarily agreed to
waive a portion of its management fee.
(4) The investment advisor voluntarily agreed to waive fees and absorb certain
operating expenses.
See Notes to Financial Statements.
------
51
High-Yield Bond
C Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $7.21 $7.02
------ ------
Income From Investment Operations
Net Investment Income (Loss) 0.43 0.40
Net Realized and Unrealized Gain (Loss) (0.73) 0.19
------ ------
Total From Investment Operations (0.30) 0.59
------ ------
Distributions
From Net Investment Income (0.43) (0.40)
------ ------
Net Asset Value, End of Period $6.48 $7.21
====== ======
TOTAL RETURN(2) (4.29)% 8.65%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(3) 1.80% 1.79%(4)
Ratio of Operating Expenses to Average Net Assets (Before
Expense Waiver) 1.87% 1.87%(4)
Ratio of Net Investment Income (Loss) to Average Net
Assets(3) 6.28% 5.71%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Before Expense Waiver) 6.21% 5.63%(4)
Portfolio Turnover Rate 51% 86%
Net Assets, End of Period (in thousands) $69 $105
(1) April 3, 2006 (commencement of sale) through March 31, 2007.
(2) 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.
(3) Effective April 3, 2006, the investment advisor voluntarily agreed to
waive of portion of its management fee.
(4) Annualized.
See Notes to Financial Statements.
------
52
High-Yield Bond
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $7.21 $7.02
------ ------
Income From Investment Operations
Net Investment Income (Loss) 0.47 0.43
Net Realized and Unrealized Gain (Loss) (0.73) 0.19
------ ------
Total From Investment Operations (0.26) 0.62
------ ------
Distributions
From Net Investment Income (0.47) (0.43)
------ ------
Net Asset Value, End of Period $6.48 $7.21
====== ======
TOTAL RETURN(2) (3.81)% 9.19%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(3) 1.30% 1.29%(4)
Ratio of Operating Expenses to Average Net Assets (Before
Expense Waiver) 1.37% 1.37%(4)
Ratio of Net Investment Income (Loss) to Average Net
Assets(3) 6.78% 6.21%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Before Expense Waiver) 6.71% 6.13%(4)
Portfolio Turnover Rate 51% 86%
Net Assets, End of Period (in thousands) $27 $27
(1) April 3, 2006 (commencement of sale) through March 31, 2007.
(2) 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.
(3) Effective April 3, 2006, the investment advisor voluntarily agreed to
waive of portion of its management fee.
(4) Annualized.
See Notes to Financial Statements.
------
53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the American Century Investment Trust and Shareholders of
the American Century-Mason Street Select Bond Fund and the American
Century-Mason Street High-Yield Bond Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the American
Century-Mason Street Select Bond Fund and the American Century-Mason Street
High-Yield Bond Fund (two of the ten funds comprising the American Century
Investment Trust, hereafter referred to as the "Funds") at March 31, 2008, the
results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended
and the financial highlights for each of the periods presented, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 19, 2008
------
54
MANAGEMENT
The individuals listed below serve as trustees or officers of the funds. Each
trustee serves until his or her successor is duly elected and qualified or
until he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the
remaining independent trustees. Those listed as interested trustees are
"interested" primarily by virtue of their engagement as directors and/or
officers of, or ownership interest in, American Century Companies, Inc. (ACC)
or its wholly owned, direct or indirect, subsidiaries, including the funds'
investment advisor, American Century Investment Management, Inc. (ACIM or the
advisor); the funds' principal underwriter, American Century Investment
Services, Inc. (ACIS); and the funds' transfer agent, American Century
Services, LLC (ACS).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS, and ACS. The trustees serve
in this capacity for eight registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the funds also serve in similar capacities
for the other 14 investment companies in the American Century Investments
family of funds advised by ACIM, or American Century Global Investment
Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise
noted. Only officers with policy-making functions are listed. No officer is
compensated for his or her service as an officer of the funds. The listed
officers are interested persons of the funds 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 FUNDS: 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, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 105
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
INDEPENDENT TRUSTEES
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUNDS: Trustee (since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
------
55
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUNDS: Trustee (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of
Law and Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
FREDERICK L.A. GRAUER, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 2008)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Advisor, Barclays Global
Investors (2003 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
PETER F. PERVERE, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUNDS: Trustee (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Vice President
and Chief Financial Officer, Commerce One, Inc. (software and services
provider)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Intraware, Inc.
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUNDS: Trustee (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Platinum Grove Asset
Management, L.P., and a Partner, Oak Hill Capital Management (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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUNDS: 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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present)
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Trustee (since 1984)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
------
56
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUNDS: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUNDS: 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 FUNDS: Tax Officer (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the funds' trustees and is available
without charge, upon request, by calling 1-800-345-2021.
------
57
ADDITIONAL INFORMATION
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain
403(b), 457 and qualified plans [those not eligible for rollover to an IRA or
to another qualified plan] are subject to federal income tax withholding,
unless you elect not to have withholding apply. Tax will be withheld on the
total amount withdrawn even though you may be receiving amounts that are not
subject to withholding, such as nondeductible contributions. In such case,
excess amounts of withholding could occur. You may adjust your withholding
election so that a greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right
to revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
State tax will be withheld if, at the time of your distribution, your address
is within one of the mandatory withholding states and you have federal income
tax withheld. State taxes will be withheld from your distribution in
accordance with the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' investment advisor,
is responsible for exercising the voting rights associated with the securities
purchased and/or held by the funds. A description of the policies and
procedures the advisor uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's website at americancentury.com and on the Securities and
Exchange Commission's website at sec.gov. Information regarding how the
investment advisor voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available on the "About Us" page
at americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The funds file their complete schedule of portfolio holdings with the
Securities and Exchange Commission (SEC) for the first and third quarters of
each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's
website at sec.gov, and may be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330. The funds also make
their complete schedule of portfolio holdings for the most recent quarter of
their fiscal year available on their website at americancentury.com and, upon
request, by calling 1-800-345-2021.
------
58
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The CITIGROUP AGENCY INDEX is a market-capitalization-weighted index that
includes US government sponsored agencies with a remaining maturity of at
least one year.
The CITIGROUP CREDIT INDEX includes US and non-US corporate securities and
non-US sovereign and provincial securities.
The CITIGROUP HIGH-YIELD CASH-PAY INDEX is composed of those cash-pay
securities included in the Citigroup US High-Yield Market Index with remaining
maturities of at least one year.
The CITIGROUP MORTGAGE INDEX measures the mortgage component of the US BIG
Bond Index, comprising 30- and 15-year GNMA, FNMA, and FHLMC pass-throughs and
FNMA and FHLMC balloon mortgages.
The CITIGROUP TREASURY INDEX is comprised of US Treasury securities with an
amount outstanding of at least $5 billion and a remaining maturity of at least
one year.
The CITIGROUP US BROAD INVESTMENT-GRADE (BIG) BOND INDEX is a market-
capitalization-weighted index that includes fixed-rate Treasury, government-
sponsored, mortgage, asset-backed, and investment-grade issues with a maturity
of one year or longer.
The CITIGROUP US HIGH-YIELD MARKET INDEX captures the performance of
below-investment-grade debt issued by corporations domiciled in the United
States or Canada. This index includes cash-pay and deferred-interest
securities that are publicly placed, have a fixed coupon, and are
nonconvertible.
The CITIGROUP US INFLATION-LINKED SECURITIES INDEX (ILSI) (SM) measures the
return of bonds with fixed-rate coupon payments that adjust for inflation as
measured by the Consumer Price Index (CPI).
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59
NOTES
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60
[back cover]
[american century investments logo and text logo ®]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE. . . . . . . . . . . . . . . . . 1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE. . . . . . . . . . . . . . 1-800-345-2021 or
816-531-5575
INVESTORS USING ADVISORS. . . . . . . . . . . . . . . . . . 1-800-378-9878
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . 1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL PROFESSIONALS, INSURANCE COMPANIES. . . . . . . . 1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF. . . . . . . . . . . 1-800-634-4113
AMERICAN CENTURY INVESTMENT TRUST
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60034N
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
NT DIVERSIFIED BOND FUND
PRESIDENT'S LETTER
[photo of Jonathan Thomas]
JONATHAN THOMAS
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century® NT
Diversified Bond Fund for the 12 months ended March 31, 2008. We also
recommend our website, americancentury.com, where we provide company news,
quarterly portfolio commentaries, investment views, and other useful
information about portfolio strategy, personal finance, government policy, and
the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan S. Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
TABLE OF CONTENTS
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Fixed-Income Total Returns. . . . . . . . . . . . . . . . . . . 2
NT DIVERSIFIED BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . 4
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . 5
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . 5
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 8
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 19
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 20
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 21
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 22
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 27
Report of Independent Registered Public Accounting Firm . . . . . . . 28
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 32
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 33
The opinions expressed in the Market Perspective and the Portfolio Commentary
reflect those of the portfolio management team as of the date of the report,
and do not necessarily represent the opinions of American Century or any other
person in the American Century organization. Any such opinions are subject to
change at any time based upon market or other conditions and American Century
disclaims any responsibility to update such opinions. These opinions may not
be relied upon as investment advice and, because investment decisions made by
American Century funds are based on numerous factors, may not be relied upon
as an indication of trading intent on behalf of any American Century fund.
Security examples are used for representational purposes only and are not
intended as recommendations to purchase or sell securities. Performance
information for comparative indices and securities is provided to American
Century by third party vendors. To the best of American Century's knowledge,
such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of chief investment officer]
By David MacEwen, Chief Investment Officer, Fixed Income
VOLATILITY REIGNED
The 12 months ended March 31, 2008, saw widely divergent bond returns as
market volatility surged in the wake of the subprime credit crisis. Credit
woes spread across the financial system, affecting banks, brokers, bond
insurers, hedge funds, and other big, institutional players important for the
functioning of the markets. This led to risk aversion that colored the return
picture for assets ranging from the riskiest high-yield bonds to even some of
the highest-quality money market securities.
The subprime meltdown had direct economic effects as well, weighing on
consumer spending and confidence, leading many economists to suggest that the
economy is already in recession. But even as growth slowed, higher commodity
prices (led by oil) meant rising inflation. The government consumer price
index (CPI) rose 4% during the reporting period.
The Federal Reserve (The Fed) took a series of extraordinary steps, slashing
interest rates and acting as a lender of last resort not only for banks, but
also major brokers. For the year, the federal funds rate target declined from
5.25% to 2.25%.
TREASURY BONDS RULED ROOST
The volatility, credit, and liquidity concerns in the market all favored
Treasury securities over higher-yielding, lower-quality alternatives (see the
accompanying returns table). Inflation-linked bonds -- particularly Treasury
inflation-indexed securities -- performed best because of their combination of
high quality and inflation protection. Meanwhile, risky corporate high-yield
bonds posted negative returns.
RATES FELL, CURVE STEEPENED
Against this backdrop, Treasury yields declined. The yield on the two-year
Treasury note tumbled from 4.58% to 1.59%, while yields on longer-term notes
and bonds fell less. That's because investors worried about the potential
long-term inflation effects of Fed rate cuts, high energy and commodity
prices, and a weaker dollar. As a result, the yield curve fell and steepened
-- the difference in yield between two- and 10-year Treasury securities
increased sharply from seven to 182 basis points (a basis point equals 0.01%).
U.S. Fixed-Income Total Returns
For the 12 months ended March 31, 2008
TREASURY SECURITIES
3-Month Bill 4.81%
2-Year Note 9.39%
5-Year Note 14.37%
10-Year Note 14.35%
30-Year Bond 13.86%
CITIGROUP U.S. BOND MARKET INDICES
High-Yield Market (corporate) -3.58%
Credit (investment-grade corporate) 4.41%
Mortgage (mortgage-backed) 7.95%
Broad Investment-Grade (multi-sector) 8.41%
Agency 10.37%
Treasury 12.24%
Inflation-Linked Securities 14.64%
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2
PERFORMANCE
NT Diversified Bond
Total Returns as of March 31, 2008
Average Annual
Returns
Since Inception
1 year Inception Date
INSTITUTIONAL CLASS 9.32% 8.64% 5/12/06
CITIGROUP US BROAD INVESTMENT-GRADE
BOND INDEX 8.41% 8.38% --
Growth of $10,000 Over Life of Class
$10,000 investment made May 12, 2006
One-Year Returns Over Life of Class
Periods ended March 31
2007* 2008
Institutional Class 6.96% 9.32%
Citigroup US Broad Investment-Grade Bond Index 7.37% 8.41%
*From 5/12/06, the Institutional Class's inception date. Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Data assumes reinvestment of dividends and capital gains, and none of the
charts reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Returns for the index are
provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
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3
PORTFOLIO COMMENTARY
NT Diversified Bond
Lead Portfolio Managers: Jeff Houston, Hando Aguilar, Brian Howell, John
Walsh, Dan Shiffman, Jim Platz, and Seth Plunkett
Macro Strategy Team Representatives: Dave MacEwen and Bob Gahagan
PERFORMANCE SUMMARY
NT Diversified Bond returned 9.32% for the 12 months ended March 31, 2008. By
comparison, the Citigroup US Broad Investment-Grade (BIG) Bond Index advanced
8.41%. See page 3 for additional performance comparisons.
The portfolio's solid return over the last 12 months reflected favorable
conditions for high-quality bonds (see page 2). The fund also outperformed its
benchmark thanks to contributions from our sector, yield curve, and currency
positions.
SECTOR SELECTION HELPED
Our concern over high valuations and low risk premiums for corporate
securities was a key factor in fund positioning for the period, given the
economic fundamentals and market technical factors that included deleveraging
and re-pricing of risk assets. This view led us to hold an underweight
position in the corporate sector relative to the Citigroup BIG Index. This
trade was a leading contributor to performance, as the 12-month period was the
worst on record for corporate bonds relative to Treasuries. It also helped
that we had an underweight position in the hardest-hit financial bonds and
essentially no exposure to subprime debt.
By the end of the reporting period, corporate bond valuations were beginning
to look more attractive, so we added incrementally to our corporate position.
Similarly, we bought some very high-quality mortgage-backed and municipal
bonds because their yields were at such historically attractive levels
compared with Treasuries. Indeed, we were able to add some pre-refunded
municipals (backed by Treasury bonds) offering yields higher than Treasuries.
Our decision to overweight Treasury inflation-indexed securities also added
value.
CURVE, CURRENCY TRADES CONTRIBUTED
The portfolio benefited significantly from a yield-curve steepening bias we
had in place throughout the year using two- and 10-year Treasury futures. We
put this trade on in 2007 when the yield curve was "inverted" (an unusual
situation where yields on short-term notes exceed those of long-term bonds).
During the period, Fed rate cuts and economic and financial concerns drove
short-term yields down dramatically, while long-term yields didn't fall nearly
as much because of inflation concerns.
Finally, our Japanese yen exposure also contributed to relative performance.
We established this position in early 2007 when the yen reached a 41/2-year
low to the U.S. dollar. This positioning added value in the reporting period,
before we closed it out in the first quarter of 2008 as the economic and
valuation fundamentals underpinning the trade became less compelling.
Portfolio at a Glance
As of As of
3/31/08 3/31/07
Average Duration (effective) 4.6 years 4.6 years
Weighted Average Life 6.8 years 6.6 years
Yields as of March 31, 2008
30-day SEC Yield
Institutional Class 4.33%
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4
NT Diversified Bond
MANAGEMENT CHANGE
In March 2008, Macro Strategy Team Representative Jim Keegan left American
Century Investments to accept an asset management position in his native New
York. We wish him well. NT Diversified Bond continues to be actively managed
by the investment team shown at the top of page 4, demonstrating a key
advantage of our team approach to managing portfolios.
OUTLOOK
"We think the probability of recession is very high," says Macro Strategy Team
Representative Bob Gahagan. "So we expect the Fed to continue cutting interest
rates as the economy slows and the unemployment rate rises. But inflation
pressures are a growing longer-term concern; as a result, we believe
'stagflation' is a real risk. In that sort of environment, we think it's
reasonable to expect short-term rates to decline from current levels, while
yields on longer-term notes and bonds remain volatile, particularly as
deleveraging continues, risk is re-priced, and inflation fears rise."
"We're likely to overweight short- and intermediate-term bonds," Gahagan
continues. "In terms of our sector allocations, we think mortgages represent
good value, and expect to maintain our overweight position in
inflation-indexed bonds. Finally, we're looking carefully at the relative
values between government and corporate bonds for an entry point into select,
high-quality corporates that we believe represent compelling values."
Types of Investments in Portfolio
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
Mortgage-Backed Securities 23.5% 23.9%
U.S. Treasury Securities 18.8% 16.4%
Collateralized Mortgage Obligations 15.7% 13.6%
Corporate Bonds 12.3% 10.3%
Municipal Securities 4.0% 0.1%
U.S. Government Agency Securities 1.9% 9.2%
Asset-Backed Securities 1.3% 3.2%
Sovereign Governments & Agencies 0.1% 1.4%
Temporary Cash Investments 3.3% 3.4%
Temporary Cash Investments -- Securities Lending
Collateral 19.1% 18.5%
Portfolio Composition by Credit Rating
% of fund % of fund
investments investments
as of as of
3/31/08 9/30/07
AAA 83% 87%
AA 3% 3%
A 9% 4%
BBB 5% 6%
Ratings provided by independent research companies. These ratings are listed
in Standard & Poor's format even if they were provided by other sources.
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5
SHAREHOLDER FEE EXAMPLE (UNAUDITED)
Fund shareholders may incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments and redemption/exchange
fees; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in your fund
and to compare these costs with the ongoing cost of investing in other mutual
funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2007 to March 31, 2008.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or
Institutional Class shares of the American Century Diversified Bond Fund, in
an American Century account (i.e., not a financial intermediary or retirement
plan account), American Century may charge you a $12.50 semiannual account
maintenance fee if the value of those shares is less than $10,000. We will
redeem shares automatically in one of your accounts to pay the $12.50 fee. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. PERSONAL ACCOUNTS
include individual accounts, joint accounts, UGMA/UTMA accounts, personal
trusts, Coverdell Education Savings Accounts and IRAs (including traditional,
Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement
accounts. If you have only business, business retirement, employer-sponsored
or American Century Brokerage accounts, you are currently not subject to this
fee. We will not charge the fee as long as you choose to manage your accounts
exclusively online. If you are subject to the Account Maintenance Fee, your
account value could be reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is
not the actual return of a fund's share class. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
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6
Ending Expenses Paid
Beginning Account During Period*
Account Value Value 10/1/07 - Annualized Expense
10/1/07 3/31/08 3/31/08 Ratio*
Actual $1,000 $1,066.00 $2.17 0.42%
Hypothetical $1,000 $1,022.90 $2.12 0.42%
*Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
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7
SCHEDULE OF INVESTMENTS
NT Diversified Bond
MARCH 31, 2008
Principal Amount Value
U.S. Government Agency Mortgage- Backed Securities(1) -- 28.4%
$ 622 FHLMC, 6.50%, 2/1/09 $ 636
1,550 FHLMC, 6.50%, 12/1/12 1,624
20,020 FHLMC, 6.00%, 1/1/13 20,670
2,958 FHLMC, 7.00%, 11/1/13 3,102
6,118 FHLMC, 7.00%, 6/1/14 6,428
11,372 FHLMC, 6.50%, 6/1/16 11,918
19,140 FHLMC, 6.50%, 6/1/16 20,059
260,956 FHLMC, 5.00%, 11/1/17 265,057
448,245 FHLMC, 4.50%, 1/1/19(2) 447,796
1,631,957 FHLMC, 5.00%, 1/1/21(2) 1,652,231
2,226 FHLMC, 7.00%, 9/1/27 2,366
3,617 FHLMC, 6.50%, 1/1/28 3,792
553 FHLMC, 7.00%, 2/1/28 588
21,245 FHLMC, 6.50%, 3/1/29 22,247
13,060 FHLMC, 6.50%, 6/1/29 13,687
1,989 FHLMC, 7.00%, 8/1/29 2,114
4,933 FHLMC, 7.50%, 8/1/29 5,348
12,278 FHLMC, 6.50%, 5/1/31 12,842
322 FHLMC, 6.50%, 5/1/31 337
336 FHLMC, 6.50%, 6/1/31 352
466 FHLMC, 6.50%, 6/1/31 487
7,455 FHLMC, 6.50%, 6/1/31 7,798
1,105 FHLMC, 6.50%, 6/1/31 1,156
270,131 FHLMC, 5.50%, 12/1/33 273,716
151,729 FHLMC, 6.50%, 7/1/47 155,979
9,506,354 FNMA, 6.00%, settlement date 4/14/08(3) 9,739,553
4,929,000 FNMA, 6.50%, settlement date 4/14/08(3) 5,105,364
1,578 FNMA, 6.00%, 2/1/09 1,605
1,374 FNMA, 6.00%, 5/1/13 1,423
2,654 FNMA, 6.00%, 5/1/13 2,741
7,051 FNMA, 6.00%, 7/1/13 7,283
11,320 FNMA, 6.00%, 12/1/13 11,693
8,389 FNMA, 6.00%, 1/1/14 8,666
14,328 FNMA, 6.00%, 2/1/14 14,801
15,407 FNMA, 6.00%, 4/1/14 15,915
58,887 FNMA, 5.50%, 12/1/16 60,453
113,439 FNMA, 5.50%, 12/1/16 116,456
448,303 FNMA, 4.50%, 5/1/19 447,682
11,920 FNMA, 6.50%, 1/1/26 12,479
1,426 FNMA, 7.00%, 12/1/27 1,519
738 FNMA, 6.50%, 1/1/28 773
702 FNMA, 7.00%, 1/1/28 748
3,126 FNMA, 7.50%, 4/1/28 3,385
11,956 FNMA, 7.00%, 5/1/28 12,734
Principal Amount Value
$ 651 FNMA, 7.00%, 6/1/28 $ 694
2,828 FNMA, 6.50%, 1/1/29 2,958
7,689 FNMA, 6.50%, 4/1/29 8,040
3,947 FNMA, 7.00%, 7/1/29 4,204
4,637 FNMA, 7.00%, 7/1/29 4,939
12,339 FNMA, 7.50%, 7/1/29 13,345
11,726 FNMA, 7.50%, 8/1/30 12,661
5,439 FNMA, 7.50%, 9/1/30 5,873
28,330 FNMA, 7.00%, 9/1/31 30,146
17,130 FNMA, 6.50%, 1/1/32 17,878
144,334 FNMA, 7.00%, 6/1/32 153,426
63,501 FNMA, 6.50%, 8/1/32 66,274
376,767 FNMA, 5.50%, 6/1/33 381,631
1,827,452 FNMA, 5.50%, 7/1/33(2) 1,851,043
311,355 FNMA, 5.50%, 8/1/33 315,374
396,517 FNMA, 5.50%, 9/1/33 401,635
2,913,544 FNMA, 5.00%, 11/1/33(2) 2,892,221
813,670 FNMA, 5.50%, 1/1/34(2) 824,174
2,278,004 FNMA, 5.50%, 12/1/34(2) 2,305,739
2,067,436 FNMA, 5.00%, 8/1/35(2) 2,049,587
2,105,269 FNMA, 4.50%, 9/1/35(2) 2,032,388
1,195,276 FNMA, 5.00%, 2/1/36(2) 1,184,958
7,655,827 FNMA, 5.50%, 4/1/36(2) 7,745,078
1,300,000 FNMA, 5.50%, 7/1/36 1,314,113
1,952,718 FNMA, 6.50%, 8/1/37(2) 2,006,547
73,822 FNMA, 6.50%, 6/1/47 75,483
194,417 FNMA, 6.50%, 8/1/47 198,791
262,992 FNMA, 6.50%, 8/1/47 269,402
242,297 FNMA, 6.50%, 9/1/47 247,749
426,389 FNMA, 6.50%, 9/1/47 435,983
236,023 FNMA, 6.50%, 9/1/47 241,334
306,140 FNMA, 6.50%, 9/1/47 313,029
32,157 FNMA, 6.50%, 9/1/47 32,880
4,835 GNMA, 7.50%, 8/20/17 5,171
6,211 GNMA, 7.00%, 11/15/22 6,651
6,220 GNMA, 8.75%, 3/15/25 6,819
1,481 GNMA, 7.00%, 4/20/26 1,585
2,843 GNMA, 7.50%, 8/15/26 3,069
1,399 GNMA, 8.00%, 8/15/26 1,534
173 GNMA, 7.50%, 4/15/27 186
3,189 GNMA, 7.50%, 5/15/27 3,441
2,436 GNMA, 8.00%, 6/15/27 2,672
267 GNMA, 7.50%, 11/15/27 288
1,225 GNMA, 7.00%, 2/15/28 1,311
1,921 GNMA, 7.50%, 2/15/28 2,072
1,848 GNMA, 6.50%, 3/15/28 1,933
342 GNMA, 7.00%, 4/15/28 366
6,156 GNMA, 6.50%, 5/15/28 6,440
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8
NT Diversified Bond
Principal Amount Value
$ 1,578 GNMA, 6.50%, 5/15/28 $ 1,651
2,024 GNMA, 7.00%, 12/15/28 2,166
207 GNMA, 8.00%, 12/15/29 227
14,885 GNMA, 7.00%, 5/15/31 15,903
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TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Cost $44,874,859) 46,000,665
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U.S. Treasury Securities -- 25.5%
4,700,000 U.S. Treasury Bonds, 10.625%, 8/15/15(2)(4) 7,068,363
1,160,000 U.S. Treasury Bonds, 8.125%, 8/15/21(2)(4) 1,646,929
800,000 U.S. Treasury Bonds, 4.75%, 2/15/37(4) 861,063
6,849,473 U.S. Treasury Inflation Indexed Bonds, 2.375%,
1/15/27(2)(4) 7,470,747
2,875,761 U.S. Treasury Inflation Indexed Notes, 3.00%,
7/15/12(2)(4) 3,222,653
1,599,066 U.S. Treasury Inflation Indexed Notes, 2.00%,
1/15/14(2)(4) 1,730,739
1,712,580 U.S. Treasury Inflation Indexed Notes, 1.625%,
1/15/18(2)(4) 1,796,204
10,000,000 U.S. Treasury Notes, 4.875%, 6/30/09(2)(4) 10,414,070
5,000,000 U.S. Treasury Notes, 2.50%, 3/31/13(2)(4) 5,011,330
1,907,000 U.S. Treasury Notes, 4.75%, 8/15/17(2)(4) 2,110,662
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TOTAL U.S. TREASURY SECURITIES
(Cost $40,123,435) 41,332,760
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Collateralized Mortgage Obligations(1) -- 21.3%
1,155,375 Banc of America Alternative Loan Trust, Series
2007-2, Class 2A4, 5.75%, 6/25/37(2) 1,104,193
1,996,295 Banc of America Commercial Mortgage Inc. STRIPS -
COUPON, Series 2004-1, Class XP, VRN, 0.80%, 4/1/08 31,430
950,000 Banc of America Commercial Mortgage Inc., Series
2002 PB2, Class B SEQ, 6.31%, 6/11/35(2) 990,257
600,000 Banc of America Commercial Mortgage Inc., Series
2004-2, Class A3 SEQ, 4.05%, 11/10/38 585,226
570,000 Banc of America Commercial Mortgage Inc., Series
2006-6, Class A3 SEQ, 5.37%, 12/10/16 542,099
610,000 Banc of America Commercial Mortgage Inc., Series
2007-4, Class A3 SEQ, 5.81%, 8/10/14 591,255
Principal Amount Value
$121,899 Banc of America Large Loan, Series 2005 MIB1,
Class A1, VRN, 2.97%, 4/15/08, resets monthly off
the 1-month LIBOR plus 0.15% with no caps
(Acquired 5/12/06, Cost $121,945)(5) $ 114,019
3,165,850 Bear Stearns Commercial Mortgage Securities Trust
STRIPS - COUPON, Series 2004 T16, Class X2, VRN,
0.91%, 4/1/08 75,645
417,005 Bear Stearns Commercial Mortgage Securities Trust,
Series 2006 BBA7, Class A1, VRN, 2.93%, 4/15/08,
resets monthly off the 1-month LIBOR plus 0.11%
with no caps (Acquired 6/5/06, Cost $417,005)(5) 396,943
1,200,000 Bear Stearns Commercial Mortgage Securities Trust,
Series 2006 PW14, Class A4 SEQ, 5.20%, 12/1/38(2) 1,160,077
1,072,496 Commercial Mortgage Acceptance Corp. STRIPS -
COUPON, Series 1998 C2, Class X, VRN, 1.09%, 4/1/08 28,454
15,101 Commercial Mortgage Pass-Through Certificates,
Series 2005 F10A, Class A1, VRN, 2.92%, 4/15/08,
resets monthly off the 1-month LIBOR plus 0.10%
with no caps (Acquired 5/12/06, Cost $15,112)(5) 14,662
9,686 Commercial Mortgage Pass-Through Certificates,
Series 2005 FL11, Class A1, VRN, 2.97%, 4/15/08,
resets monthly off the 1-month LIBOR plus 0.15%
with no caps (Acquired 5/12/06, Cost $9,692)(5) 9,368
2,539,229 Countrywide Home Loan Mortgage Pass-Through Trust,
Series 2007-16, Class A1, 6.50%, 10/25/37(2) 2,506,808
400,000 Credit Suisse First Boston Mortgage Securities
Corp., Series 2001 CK3, Class A4 SEQ, 6.53%,
6/15/34 410,852
935,272 Credit Suisse First Boston Mortgage Securities
Corp., Series 2003 AR28, Class 2A1, 4.41%,
12/25/33(2) 939,058
------
9
NT Diversified Bond
Principal Amount Value
$1,600,000 Credit Suisse Mortgage Capital Certificates,
Series 2007 TF2A, Class A1, VRN, 3.00%, 4/15/08,
resets monthly off the 1-month LIBOR plus 0.18%
with no caps (Acquired 7/24/07, Cost
$1,600,000)(2)(5) $1,526,622
538,404 FHLMC, Series 2567, Class OD, 5.00%, 8/15/15 545,845
315,018 FHLMC, Series 2900, Class PA, 4.50%, 3/15/14 316,804
700,000 FHLMC, Series 2926, Class EW SEQ, 5.00%, 1/15/25 695,802
169,945 FHLMC, Series 2937, Class KA, 4.50%, 12/15/14 170,965
3,000,000 FHLMC, Series 3203, Class VN SEQ, 5.00%, 6/15/22(2) 2,893,916
3,224 FNMA, Series 1989-35, Class G SEQ, 9.50%, 7/25/19 3,560
688,000 FNMA, Series 2003-92, Class PD, 4.50%, 3/25/17(2) 698,436
1,072,723 FNMA, Series 2005-63, Class HA SEQ, 5.00%,
4/25/23(2) 1,101,631
790,296 GMAC Commercial Mortgage Securities, Inc., Series
2005 C1, Class A2 SEQ, 4.47%, 5/10/43(2) 780,480
860,000 Greenwich Capital Commercial Funding Corp., Series
2005 GG3, Class A2 SEQ, 4.31%, 8/10/42(2) 848,903
494,094 Greenwich Capital Commercial Funding Corp., Series
2006 FL4A, Class A1, VRN, 3.18%, 4/5/08, resets
monthly off the 1-month LIBOR plus 0.09% with no
caps (Acquired 12/14/06, Cost $494,094)(5) 462,619
238,024 GS Mortgage Securities Corp. II, Series 2007 EOP,
Class A1 VRN, 3.17%, 4/7/08, resets monthly off
the 1-month LIBOR plus 0.09% with no caps 220,046
629,500 J.P. Morgan Mortgage Trust, Series 2004 A2, Class
1A1, 3.81%, 5/25/34 641,010
838,852 J.P. Morgan Mortgage Trust, Series 2005 A8, Class
6A2, 5.13%, 11/25/35 818,024
1,750,000 LB-UBS Commercial Mortgage Trust, Series 2003 C3,
Class A3 SEQ, 3.85%, 5/15/27(2) 1,669,934
726,758 LB-UBS Commercial Mortgage Trust, Series 2003 C5,
Class A2 SEQ, 3.48%, 7/15/27 723,153
Principal Amount Value
$500,000 LB-UBS Commercial Mortgage Trust, Series 2004 C1,
Class A2 SEQ, 3.62%, 1/15/29 $ 492,270
560,263 LB-UBS Commercial Mortgage Trust, Series 2005 C2,
Class A2 SEQ, 4.82%, 4/15/30 556,672
671,000 LB-UBS Commercial Mortgage Trust, Series 2005 C3,
Class A3 SEQ, 4.65%, 7/30/30 651,889
1,000,000 LB-UBS Commercial Mortgage Trust, Series 2006 C1,
Class A4 SEQ, 5.16%, 2/15/31(2) 975,425
83,155 Lehman Brothers Floating Rate Commercial Mortgage
Trust, Series 2006 LLFA, Class A1, VRN, 2.90%,
4/15/08, resets monthly off the 1-month LIBOR plus
0.08% with no caps (Acquired 8/7/06, Cost
$83,155)(5) 78,241
16,931 MASTR Alternative Loans Trust, Series 2003-8,
Class 4A1, 7.00%,12/25/33 16,813
336,617 Merrill Lynch Floating Trust, Series 2006-1, Class
A1, VRN, 2.89%,4/15/08, resets monthly off the
1-month LIBOR plus 0.07% with no caps (Acquired
10/31/06, Cost $336,617)(5) 315,255
747,485 Morgan Stanley Capital I, Series 2004 HQ3, Class
A2 SEQ, 4.05%, 1/13/41 734,878
304,259 Thornburg Mortgage Securities Trust, Series
2006-5, Class A1, VRN, 2.72%, 4/25/08, resets
monthly off the 1-month LIBOR plus 0.12% with no
caps 284,360
2,511,000 Wachovia Bank Commercial Mortgage Trust, Series
2006 C23, Class A4, 5.42%, 1/15/45(2) 2,485,800
275,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2005 AR4, Class A3, 4.59%,
4/25/35 275,986
1,642,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2005 AR4, Class A4B, 4.68%,
4/25/35(2) 1,649,757
562,846 Wells Fargo Mortgage Backed Securities Trust,
Series 2004 EE, Class 3A1, 3.99%, 12/25/34 546,838
------
10
NT Diversified Bond
Principal Amount Value
$600,000 Wells Fargo Mortgage Backed Securities Trust,
Series 2004 N, Class A4, 4.10%, 12/23/08 $ 598,273
1,315,180 Wells Fargo Mortgage Backed Securities Trust,
Series 2007-11, Class A19 SEQ, 6.00%, 8/25/37(2) 1,304,092
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $34,688,240) 34,584,645
------------
Corporate Bonds -- 16.7%
AEROSPACE & DEFENSE -- 0.6%
160,000 Honeywell International Inc., 5.30%, 3/15/17(4) 165,009
130,000 Honeywell International Inc., 5.30%, 3/1/18 133,575
169,000 Lockheed Martin Corp., 6.15%, 9/1/36 175,134
197,000 United Technologies Corp., 4.375%, 5/1/10 202,132
230,000 United Technologies Corp., 6.05%, 6/1/36 238,400
------------
914,250
------------
AUTOMOBILES -- 0.2%
150,000 DaimlerChrysler N.A. Holding Corp., 5.875%, 3/15/11 153,601
170,000 DaimlerChrysler N.A. Holding Corp., 6.50%, 11/15/13 179,437
------------
333,038
------------
BEVERAGES -- 0.7%
320,000 Coca-Cola Co. (The), 5.35%, 11/15/17 334,789
250,000 Diageo Capital plc, 5.75%, 10/23/17 256,690
207,000 Miller Brewing Co., 4.25%, 8/15/08 (Acquired
5/12/06-12/4/06, Cost $202,072)(5) 207,854
150,000 PepsiCo, Inc., 4.65%, 2/15/13 155,490
240,000 SABMiller plc, 6.20%, 7/1/11 (Acquired 6/27/06,
Cost $239,830)(5) 255,599
------------
1,210,422
------------
CAPITAL MARKETS -- 0.7%
690,000 Goldman Sachs Group, Inc. (The), 6.15%, 4/1/18 690,759
124,000 Merrill Lynch & Co., Inc., 4.25%, 2/8/10 121,172
292,000 Merrill Lynch & Co., Inc., 4.79%, 8/4/10 291,404
------------
1,103,335
------------
Principal Amount Value
CHEMICALS -- 0.3%
$190,000 Air Products and Chemicals, Inc., 4.15%, 2/1/13 $ 190,528
150,000 du Pont (E.I.) de Nemours & Co., 5.00%, 1/15/13 156,420
130,000 Rohm and Haas Co., 5.60%, 3/15/13 134,213
------------
481,161
------------
COMMERCIAL BANKS -- 0.8%
178,000 PNC Bank N.A., 4.875%, 9/21/17 160,118
160,000 PNC Bank N.A., 6.00%, 12/7/17 154,504
133,000 PNC Funding Corp., 5.125%, 12/14/10 134,420
100,000 SunTrust Bank, 7.25%, 3/15/18 102,484
139,000 Wachovia Bank N.A., 4.80%, 11/1/14 131,699
218,000 Wachovia Bank N.A., 4.875%, 2/1/15 206,299
193,000 Wells Fargo & Co., 4.625%, 8/9/10 198,411
190,000 Wells Fargo & Co., 4.375%, 1/31/13 189,312
------------
1,277,247
------------
COMMERCIAL SERVICES & SUPPLIES -- 0.1%
130,000 Pitney Bowes, Inc., 5.75%, 9/15/17 132,606
------------
COMPUTERS & PERIPHERALS -- 0.2%
340,000 Hewlett-Packard Co., 4.50%, 3/1/13 345,455
------------
CONSUMER FINANCE -- 0.2%
99,000 American Express Centurion Bank, 4.375%, 7/30/09 99,246
300,000 American Express Centurion Bank, 5.55%, 10/17/12 303,138
------------
402,384
------------
DIVERSIFIED FINANCIAL SERVICES -- 1.3%
384,000 Bank of America Corp., 4.375%, 12/1/10 391,218
250,000 Bank of America N.A., 5.30%, 3/15/17 248,927
200,000 Bank of America N.A., 6.00%, 10/15/36 191,965
149,000 Citigroup Inc., 5.00%, 9/15/14 140,646
127,000 General Electric Capital Corp., 6.125%, 2/22/11 135,217
250,000 General Electric Capital Corp., 5.625%, 9/15/17 256,469
130,000 John Deere Capital Corp., 4.50%, 4/3/13 129,787
------
11
NT Diversified Bond
Principal Amount Value
$220,000 John Deere Capital Corp., 5.50%, 4/13/17 $ 226,341
240,000 Pricoa Global Funding I, 5.40%, 10/18/12 (Acquired
10/11/07, Cost $239,522)(5) 253,920
------------
1,974,490
------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.2%
193,000 AT&T Corp., 7.30%, 11/15/11 209,278
195,000 AT&T Inc., 6.80%, 5/15/36 201,055
29,000 BellSouth Corp., 6.875%, 10/15/31 29,575
190,000 British Telecommunications plc, 5.95%, 1/15/18(4) 184,503
82,000 Embarq Corp., 7.08%, 6/1/16 77,773
60,000 Qwest Corp., 7.875%, 9/1/11 60,150
120,000 Qwest Corp., 7.50%, 10/1/14 117,600
227,000 Telecom Italia Capital SA, 4.00%, 1/15/10 222,822
150,000 Telefonica Emisiones SAU, 7.05%, 6/20/36 157,363
140,000 Verizon Communications Inc., 5.55%, 2/15/16 139,549
130,000 Verizon Communications Inc., 5.50%, 2/15/18 126,901
90,000 Verizon Communications Inc., 6.25%, 4/1/37(4) 86,221
190,000 Verizon Communications Inc., 6.40%, 2/15/38 185,632
------------
1,798,422
------------
ELECTRIC UTILITIES -- 0.6%
185,000 Carolina Power & Light Co., 5.15%, 4/1/15 188,698
90,000 Carolina Power & Light Co., 5.25%, 12/15/15 92,516
260,000 Cleveland Electric Illuminating Co. (The), 5.70%,
4/1/17(4) 252,881
60,000 Florida Power Corp., 4.50%, 6/1/10 61,691
130,000 Florida Power Corp., 6.35%, 9/15/37 135,584
179,000 Southern California Edison Co., 5.625%, 2/1/36 172,153
80,000 Toledo Edison Co., 6.15%, 5/15/37 71,084
------------
974,607
------------
ELECTRICAL EQUIPMENT -- 0.1%
200,000 Rockwell Automation, Inc., 6.25%, 12/1/37 205,884
------------
Principal Amount Value
FOOD & STAPLES RETAILING -- 1.0%
$190,000 CVS Caremark Corp., 5.75%, 6/1/17 $ 193,435
350,000 Kroger Co. (The), 5.00%, 4/15/13(4) 352,481
260,000 SYSCO Corp., 4.20%, 2/12/13 264,160
168,000 Wal-Mart Stores, Inc., 4.125%, 7/1/10 172,878
235,000 Wal-Mart Stores, Inc., 5.875%, 4/5/27(4) 234,200
200,000 Wal-Mart Stores, Inc., 6.50%, 8/15/37 210,708
------------
1,427,862
------------
FOOD PRODUCTS -- 0.8%
279,000 Cadbury Schweppes U.S. Finance LLC, 3.875%,
10/1/08 (Acquired 5/12/06-10/17/06, Cost
$268,811)(5) 278,433
190,000 Cargill Inc., 5.20%, 1/22/13 (Acquired 1/16/08,
Cost $189,842)(5) 191,954
330,000 General Mills, Inc., 5.65%, 9/10/12 343,682
120,000 Kellogg Co., 6.60%, 4/1/11 129,547
200,000 Kellogg Co., 5.125%, 12/3/12 207,111
200,000 Kraft Foods Inc., 6.00%, 2/11/13 207,076
------------
1,357,803
------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.3%
179,000 Baxter Finco BV, 4.75%, 10/15/10 185,041
230,000 Baxter International Inc., 5.90%, 9/1/16 243,332
130,000 Baxter International Inc., 6.25%, 12/1/37 133,461
------------
561,834
------------
HEALTH CARE PROVIDERS & SERVICES -- 0.1%
214,000 Laboratory Corp. of America Holdings, 5.625%,
12/15/15 212,105
------------
HOTELS, RESTAURANTS & LEISURE -- 0.5%
340,000 McDonald's Corp., 5.35%, 3/1/18 345,076
130,000 McDonald's Corp., 6.30%, 10/15/37 133,989
160,000 Royal Caribbean Cruises Ltd., 7.00%, 6/15/13 150,483
250,000 Yum! Brands, Inc., 6.875%, 11/15/37 239,920
------------
869,468
------------
------
12
NT Diversified Bond
Principal Amount Value
HOUSEHOLD PRODUCTS -- 0.2%
$120,000 Kimberly-Clark Corp., 6.125%, 8/1/17 $ 130,003
255,000 Procter & Gamble Co. (The), 5.55%, 3/5/37 255,536
------------
385,539
------------
INDUSTRIAL CONGLOMERATES -- 0.5%
652,000 General Electric Co., 5.00%, 2/1/13(2) 676,368
130,000 General Electric Co., 5.25%, 12/6/17 130,162
------------
806,530
------------
INSURANCE -- 0.7%
210,000 Allstate Financial Global Funding, 4.25%, 9/10/08
(Acquired 5/12/06, Cost $204,511)(5) 211,070
250,000 Hartford Financial Services Group Inc. (The),
5.375%, 3/15/17 242,859
130,000 Hartford Financial Services Group Inc. (The),
6.30%, 3/15/18(4) 130,581
250,000 Lincoln National Corp., 6.30%, 10/9/37 226,698
200,000 Prudential Financial, Inc., 6.00%, 12/1/17(4) 202,095
100,000 Prudential Financial, Inc., 5.40%, 6/13/35 82,902
110,000 Travelers Companies, Inc. (The), 6.25%, 6/15/37 102,286
------------
1,198,491
------------
IT SERVICES -- 0.4%
340,000 Computer Sciences Corp., 5.50%, 3/15/13 (Acquired
2/27/08, Cost $338,310)(5) 341,654
260,000 International Business Machines Corp., 5.70%,
9/14/17 273,063
------------
614,717
------------
MACHINERY -- 0.6%
110,000 Atlas Copco AB, 5.60%, 5/22/17 (Acquired 5/15/07,
Cost $109,951)(5) 109,991
130,000 Caterpillar Financial Services Corp., 4.85%,
12/7/12 133,149
690,000 Caterpillar Financial Services Corp., 5.45%,
4/15/18 703,835
------------
946,975
------------
Principal Amount Value
MEDIA -- 0.7%
$230,000 Comcast Corp., 5.90%, 3/15/16 $ 228,554
105,000 News America Holdings, 7.75%, 1/20/24 116,021
340,000 Rogers Cable Inc., 6.25%, 6/15/13 355,532
300,000 Time Warner Cable Inc., 5.40%, 7/2/12 295,146
130,000 Time Warner Inc., 5.50%, 11/15/11 129,223
29,000 Time Warner Inc., 7.625%, 4/15/31 30,422
------------
1,154,898
------------
METALS & MINING -- 0.2%
200,000 Xstrata Finance Canada Ltd., 5.50%, 11/16/11
(Acquired 11/8/06-11/17/06, Cost $200,159)(5) 205,438
80,000 Xstrata Finance Canada Ltd., 5.80%, 11/15/16
(Acquired 11/8/06, Cost $79,802)(5) 77,416
------------
282,854
------------
MULTI-UTILITIES -- 0.7%
130,000 CenterPoint Energy Resources Corp., 6.125%, 11/1/17 133,064
140,000 CenterPoint Energy Resources Corp., 6.25%, 2/1/37 131,042
230,000 Consolidated Edison Co. of New York, Inc., Series
2006 C, 5.50%, 9/15/16 237,041
96,000 Dominion Resources Inc., 4.75%, 12/15/10 98,342
250,000 NSTAR Electric Co., 5.625%, 11/15/17 262,773
101,000 Pacific Gas and Electric Co., 6.05%, 3/1/34 99,359
100,000 Pacific Gas and Electric Co., 5.80%, 3/1/37 94,955
130,000 Pacific Gas and Electric Co., 6.35%, 2/15/38 132,162
------------
1,188,738
------------
MULTILINE RETAIL -- 0.3%
100,000 Federated Retail Holdings, Inc., 5.35%, 3/15/12 95,402
130,000 Kohl's Corp., 6.875%, 12/15/37 115,376
320,000 Macy's Retail Holdings, Inc., 5.875%, 1/15/13 308,234
------------
519,012
------------
------
13
NT Diversified Bond
Principal Amount Value
OIL, GAS & CONSUMABLE FUELS -- 1.3%
$100,000 Canadian Natural Resources Ltd., 5.70%, 5/15/17 $ 101,341
130,000 Canadian Natural Resources Ltd., 6.75%, 2/1/39(4) 133,130
270,000 Enbridge Energy Partners, L.P., 6.50%, 4/15/18
(Acquired 3/31/08, Cost $268,558)(5) 268,558
343,000 Enterprise Products Operating L.P., 4.95%, 6/1/10 350,294
140,000 Enterprise Products Operating L.P., 6.30%, 9/15/17 141,034
170,000 Nexen Inc., 6.40%, 5/15/37 163,363
279,000 Premcor Refining Group Inc. (The), 6.125%, 5/1/11 295,573
100,000 Tesoro Corp., 6.25%, 11/1/12 94,750
100,000 Tesoro Corp., 6.50%, 6/1/17 90,000
60,000 TransCanada PipeLines Ltd., 6.20%, 10/15/37 58,060
138,000 XTO Energy Inc., 5.30%, 6/30/15 139,866
102,000 XTO Energy Inc., 6.10%, 4/1/36 101,255
------------
1,937,224
------------
PHARMACEUTICALS -- 0.8%
179,000 Abbott Laboratories, 5.875%, 5/15/16 191,241
130,000 Abbott Laboratories, 6.15%, 11/30/37 134,789
550,000 AstraZeneca plc, 5.40%, 9/15/12 581,023
190,000 AstraZeneca plc, 5.90%, 9/15/17 201,280
220,000 Wyeth, 5.95%, 4/1/37 215,683
------------
1,324,016
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
250,000 ProLogis, 5.625%, 11/15/16 227,861
------------
ROAD & RAIL -- 0.1%
180,000 Union Pacific Corp., 5.75%, 11/15/17 182,709
------------
SOFTWARE -- 0.2%
150,000 Intuit Inc., 5.75%, 3/15/17 145,661
164,000 Oracle Corp., 5.00%, 1/15/11 168,504
------------
314,165
------------
SPECIALTY RETAIL -- 0.1%
130,000 Lowe's Companies, Inc., 5.60%, 9/15/12 136,369
------------
Principal Amount Value
WIRELESS TELECOMMUNICATION SERVICES -- 0.1%
$200,000 Vodafone Group plc, 5.625%, 2/27/17 $ 194,873
------------
TOTAL CORPORATE BONDS
(Cost $26,597,553) 26,997,344
------------
Municipal Securities -- 5.4%
1,500,000 California Department of Water Resources Power
Supply Rev., Series 2002 A, 5.125%, 5/1/12,
Prerefunded at 101% of Par(2)(6) 1,647,765
2,300,000 Clark County School District GO, Series 2004 D,
(Building Bonds), 5.00%, 12/15/14, Prerefunded at
100% of Par (MBIA)(2)(6) 2,541,523
2,200,000 Clark County School District GO, Series 2005 C,
(Building Bonds), 5.00%, 12/15/15, Prerefunded at
100% of Par (FSA)(2)(6) 2,450,316
173,000 Illinois GO, (Taxable Pension), 5.10%, 6/1/33 172,209
1,700,000 Massachusetts GO, Series 2005 C, 5.00%, 9/1/15,
Prerefunded at 100% of Par(2)(6) 1,888,938
------------
TOTAL MUNICIPAL SECURITIES
(Cost $8,491,232) 8,700,751
------------
Adjustable-Rate U.S. Government Agency Mortgage-Backed Securities(1) -- 3.5%
1,116,104 FHLMC, 6.80%, 8/1/36(2) 1,142,037
1,457,226 FHLMC, 5.99%, 11/1/36(2) 1,488,490
941,337 FNMA, 6.49%, 5/1/36(2) 972,557
620,931 FNMA, 6.42%, 9/1/36(2) 639,084
679,041 FNMA, 6.45%, 9/1/36(2) 703,142
799,822 FNMA, 5.97%, 6/1/37(2) 818,168
------------
TOTAL ADJUSTABLE-RATE U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES
(Cost $5,731,452) 5,763,478
------------
U.S. Government Agency Securities -- 2.6%
1,800,000 FHLMC, 2.875%, 4/30/10(2)(4) 1,821,819
639,000 FNMA, 4.375%, 7/17/13(2)(4) 671,533
1,620,000 FNMA, 5.375%, 6/12/17(2)(4) 1,783,759
------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES
(Cost $4,025,430) 4,277,111
------------
------
14
NT Diversified Bond
Principal Amount Value
Asset-Backed Securities(1) -- 1.7%
$128,771 Accredited Mortgage Loan Trust, Series 2006-2,
Class A1, VRN, 2.64%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.04% with no caps $ 126,462
500,000 CNH Equipment Trust, Series 2007 C, Class A3A SEQ,
5.21%, 12/15/11 508,200
136,000 Detroit Edison Securitization Funding LLC, Series
2001-1, Class A4 SEQ, 6.19%, 3/1/13 142,556
180,972 Long Beach Mortgage Loan Trust, Series 2006-6,
Class 2A1, VRN, 2.64%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.04% with no caps 179,092
67,502 Nomura Home Equity Loan, Inc., Series 2006 HE2,
Class A1, VRN, 2.66%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.06% with no caps 66,748
162,978 SLM Student Loan Trust, Series 2006-5, Class A2,
VRN, 3.32%, 4/25/08, resets quarterly off the
3-month LIBOR minus 0.01% with no caps 162,024
340,251 SLM Student Loan Trust, Series 2006-10, Class A2,
VRN, 3.34%, 4/25/08, resets quarterly off the
3-month LIBOR plus 0.01% with no caps 338,926
1,272,947 SLM Student Loan Trust, Series 2007-8, Class A1,
VRN, 3.56%, 4/25/08, resets quarterly off the
3-month LIBOR plus 0.23% with no caps(2) 1,255,697
88,672 Soundview Home Equity Loan Trust, Series 2006-3,
Class A1, VRN, 2.64%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.04% with no caps 88,126
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $2,879,693) 2,867,831
------------
Principal Amount Value
Sovereign Governments & Agencies -- 0.2%
$ 29,000 Hydro Quebec, 8.40%, 1/15/22 $ 39,771
215,000 Province of Quebec, 5.00%, 7/17/09 222,214
------------
TOTAL SOVEREIGN GOVERNMENTS & AGENCIES
(Cost $249,499) 261,985
------------
Temporary Cash Investments -- 4.5%
Repurchase Agreement, Deutsche Bank Securities, Inc.,
(collateralized by various U.S. Treasury obligations, 2.375%,
4/15/11, valued at $7,364,724), in a joint trading account at
1.35%, dated 3/31/08, due 4/1/08 (Delivery value $7,223,271)(2)
(Cost $7,223,000) 7,223,000
------------
Temporary Cash Investments -- Securities Lending Collateral(7) -- 25.7%
1,000,024 Bancaja US Debt, SAu, VRN, 4.55%, 4/10/08, resets
quarterly off the 3-month LIBOR plus 0.05% with no
caps 999,726
999,954 BASF AG, VRN, 3.89%, 4/21/08, resets quarterly off
the 3-month LIBOR minus 0.01% with no caps 999,249
1,399,477 K2 (USA) LLC, VRN, 2.37%, 4/1/08, resets quarterly
off the Federal Reserve Prime Loan Rate minus
2.91% with no caps 1,373,733
999,626 Links Finance LLC, VRN, 2.37%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps 975,960
1,100,000 Merrill Lynch & Co., Inc., VRN, 2.42%, 4/1/08,
resets quarterly off the Federal Reserve Prime
Loan Rate minus 2.83% with no caps 1,076,665
------
15
NT Diversified Bond
Principal Amount Value
$1,001,099 Nationwide Building Society, VRN, 3.00%, 6/9/08,
resets quarterly off the 3-month LIBOR plus 0.13%
with no caps $ 999,232
999,549 Tango Finance Corp., VRN, 2.38%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps 984,854
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery
value $7,126,864) 7,126,409
Repurchase Agreement, BNP Paribas, (collateralized by various U.S.
Government Agency obligations in a pooled account at the lending
agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value
$8,534,652) 8,534,107
Repurchase Agreement, Deutsche Bank AG, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.25%, dated 3/31/08, due 4/1/08 (Delivery value
$6,675,417) 6,675,000
Principal Amount Value
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in a
pooled account at the lending agent), 2.15%, dated 3/31/08, due
4/1/08 (Delivery value $11,956,789) $ 11,956,075
------------
TOTAL TEMPORARY CASH INVESTMENTS -- SECURITIES LENDING COLLATERAL
(Cost $41,791,341) 41,701,010
------------
TOTAL INVESTMENT SECURITIES -- 135.5%
(Cost $216,675,734) 219,710,580
------------
OTHER ASSETS AND LIABILITIES -- (35.5)% (57,591,345)
------------
TOTAL NET ASSETS -- 100.0% $162,119,235
============
Futures Contracts
Expiration Underlying Face Unrealized Gain
Contracts Purchased Date Amount at Value (Loss)
5 U.S. Long Bond June 2008 $ 593,984 $ 14,442
278 U.S. Treasury June 2008 59,674,437 438,500
2-Year Notes
68 U.S. Treasury June 2008 7,767,938 11,269
5-Year Notes
----------- -----------
$68,036,359 $ 464,211
=========== ===========
Expiration Underlying Face Unrealized Gain
Contracts Sold Date Amount at Value (Loss)
180 U.S. Treasury June 2008 $21,411,563 $ (532,176)
10-Year Notes
=========== ===========
------
16
NT Diversified Bond
Swap Agreements
Notional Expiration Unrealized
Amount Description of Agreement Date Gain (Loss)
CREDIT DEFAULT
$3,350,000 Pay quarterly a fixed rate equal to June 2012 $ 162,102
0.35% multiplied by the notional
amount and receive from Barclays Bank
plc upon each default event of one of
the issues of Dow Jones CDX N.A.
Investment Grade 8, par value of the
proportional notional amount.
630,000 Pay quarterly a fixed rate equal to December 2,535
0.40% multiplied by the notional 2012
amount and receive from Bank of
America N.A. upon each default event
of FHLMC, par value of the
proportional notional amount of
FHLMC, VRN, 5.08%, 2/7/11.
750,000 Pay quarterly a fixed rate equal to December 31,476
0.70% multiplied by the notional 2012
amount and receive from Morgan
Stanley Capital Services, Inc. upon
each default event of Citigroup Inc.,
par value of the proportional
notional amount of Citigroup Inc.,
6.50%, 1/18/11.
320,000 Pay quarterly a fixed rate equal to December 15,167
0.73% multiplied by the notional 2012
amount and receive from Barclays Bank
plc upon each default event of
American International Group, Inc.,
par value of the proportional
notional amount of American
International Group, Inc., 4.25%,
5/15/13.
320,000 Pay quarterly a fixed rate equal to December 7,132
2.45% multiplied by the notional 2012
amount and receive from Bank of
America N.A. upon each default event
of Toll Brothers, Inc., par value of
the proportional notional amount of
Toll Brothers Finance Corp., 6.875%,
11/15/12.
320,000 Pay quarterly a fixed rate equal to December 2,172
2.85% multiplied by the notional 2012
amount and receive from Barclays Bank
plc upon each default event of Toll
Brothers, Inc., par value of the
proportional notional amount of Toll
Brothers Finance Corp., 6.875%,
11/15/12.
130,000 Pay quarterly a fixed rate equal to March 2013 1,613
0.70% multiplied by the notional
amount and receive from Barclays Bank
plc upon each default event of Rohm &
Haas Company, par value of the
proportional notional amount of Rohm
& Haas Company, 7.85%, 7/15/29.
1,100,000 Pay quarterly a fixed rate equal to March 2017 35,935
0.12% multiplied by the notional
amount and receive from Barclays Bank
plc upon each default event of Pfizer
Inc., par value of the proportional
notional amount of Pfizer Inc.,
4.65%, 3/1/18.
2,000,000 Pay quarterly a fixed rate equal to September 137,279
0.69% multiplied by the notional 2017
amount and receive from Barclays Bank
plc upon each default event of
JPMorgan Chase & Co., par value of
the proportional notional amount of
JPMorgan Chase & Co., 6.75%, 2/1/11.
-----------
$ 395,411
===========
------
17
NT Diversified Bond
Notes to Schedule of Investments
CDX = Credit Derivative Indexes
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance, Inc.
GMAC = General Motors Acceptance Corporation
GNMA = Government National Mortgage Association
GO = General Obligation
LB-UBS = Lehman Brothers Inc. -- UBS AG
LIBOR = London Interbank Offered Rate
MASTR = Mortgage Asset Securitization Transactions, Inc.
MBIA = MBIA Insurance Corporation
resets = The frequency with which a security's coupon changes, based on
current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will
vary significantly from current market rates.
SEQ = Sequential Payer
STRIPS = Separate Trading of Registered Interest and Principal of Securities
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) Final maturity indicated, unless otherwise noted.
(2) Security, or a portion thereof, has been segregated for forward
commitments, futures contracts and/or swap agreements.
(3) Forward commitment.
(4) Security, or a portion thereof, was on loan as of March 31, 2008.
(5) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at March 31, 2008 was $5,319,616,
which represented 3.3% of total net assets.
(6) Escrowed to maturity in U.S. government securities or state and local
government securities.
(7) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
------
18
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
ASSETS
Investment securities, at value (cost of $174,884,393) --
including $41,068,913 of securities on loan $178,009,570
Investments made with cash collateral received for securities on
loan, at value (cost of $41,791,341) 41,701,010
------------
Total investment securities, at value (cost of $216,675,734) 219,710,580
Cash 141,191
Receivable for investments sold 261,193
Receivable for variation margin on futures contracts 2,651
Unrealized appreciation on swap agreements 395,411
Interest receivable 1,134,035
------------
221,645,061
------------
LIABILITIES
Payable for collateral received for securities on loan 41,791,341
Payable for investments purchased 17,092,524
Dividends payable 586,323
Accrued management fees 55,638
------------
59,525,826
------------
NET ASSETS $162,119,235
============
INSTITUTIONAL CLASS CAPITAL SHARES
Outstanding (unlimited number of shares authorized) 15,355,298
============
NET ASSET VALUE PER SHARE $10.56
============
NET ASSETS CONSIST OF:
Capital paid-in $154,836,443
Undistributed net investment income 514,972
Undistributed net realized gain on investment transactions 3,405,514
Net unrealized appreciation on investments 3,362,306
------------
$162,119,235
============
See Notes to Financial Statements.
------
19
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
INVESTMENT INCOME (LOSS)
INCOME:
Interest $ 7,270,680
Securities lending, net 138,301
-----------
7,408,981
-----------
EXPENSES:
Management fees 587,525
Trustees' fees and expenses 5,431
Other expenses 3,638
-----------
596,594
-----------
NET INVESTMENT INCOME (LOSS) 6,812,387
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
Investment transactions 2,485,200
Futures and swaps transactions 2,033,171
-----------
4,518,371
-----------
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments 1,980,606
Futures and swaps 207,341
-----------
2,187,947
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) 6,706,318
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $13,518,705
===========
See Notes to Financial Statements.
------
20
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MARCH 31, 2008 AND PERIOD ENDED MARCH 31, 2007
Increase (Decrease) in Net Assets 2008 2007(1)
OPERATIONS
Net investment income (loss) $6,812,387 $4,073,733
Net realized gain (loss) 4,518,371 765,416
Change in net unrealized appreciation (depreciation) 2,187,947 1,172,794
------------ ------------
Net increase (decrease) in net assets resulting
from operations 13,518,705 6,011,943
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (6,780,748) (4,058,434)
From net realized gains (851,940) (556,734)
------------ ------------
Decrease in net assets from distributions (7,632,688) (4,615,168)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 75,174,936 130,733,727
Payments for shares redeemed (32,395,226) (18,676,994)
------------ ------------
Net increase (decrease) in net assets from capital
share transactions 42,779,710 112,056,733
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 48,665,727 113,453,508
NET ASSETS
Beginning of period 113,453,508 --
------------ ------------
End of period $162,119,235 $113,453,508
============ ============
Accumulated undistributed net investment income
(loss) $514,972 $(1,197)
============ ============
TRANSACTIONS IN SHARES OF THE FUND
Sold 7,355,217 12,974,017
Redeemed (3,131,359) (1,842,577)
------------ ------------
Net increase (decrease) in shares of the fund 4,223,858 11,131,440
============ ============
(1) May 12, 2006 (fund inception) through March 31, 2007.
See Notes to Financial Statements.
------
21
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. NT Diversified Bond Fund (NT Diversified Bond)
(the fund) is one fund in a series issued by the trust. The fund is
diversified under the 1940 Act. The fund's investment objective is to seek a
high level of income by investing in non-money market debt securities. The
fund is not permitted to invest in any securities issued by companies assigned
by the Global Industry Classification Standard to the tobacco industry. The
fund incepted on May 12, 2006. The following is a summary of the fund's
significant accounting policies.
SECURITY VALUATIONS -- Debt securities maturing in greater than 60 days are
valued at current market value as provided by a commercial pricing service or
at the mean of the most recent bid and asked prices. Debt securities maturing
within 60 days may be valued at cost, plus or minus any amortized discount or
premium. Securities traded on foreign securities exchanges and
over-the-counter markets are normally completed before the close of business
on days that the New York Stock Exchange (the Exchange) is open and may also
take place on days when the Exchange is not open. If an event occurs after the
value of a security was established but before the net asset value per share
was determined that was likely to materially change the net asset value, that
security would be valued as determined in accordance with procedures adopted
by the Board of Trustees. If the fund determines that the market price of a
portfolio security is not readily available, or that the valuation methods
mentioned above do not reflect the security's fair value, such security is
valued as determined by the Board of Trustees or its designee, in accordance
with procedures adopted by the Board of Trustees, if such determination would
materially impact a fund's net asset value. Certain other circumstances may
cause the fund to use alternative procedures to value a security such as: a
security has been declared in default; trading in a security has been halted
during the trading day; or there is a foreign market holiday and no trading
will commence.
SECURITY TRANSACTIONS -- For financial reporting purposes, security
transactions are accounted for as of the trade date. Net realized gains and
losses are determined on the identified cost basis, which is also used for
federal income tax purposes.
INVESTMENT INCOME -- Interest income less foreign taxes withheld, if any, is
recorded on the accrual basis and includes paydown gain (loss) and accretion
of discounts and amortization of premiums.
SECURITIES ON LOAN -- The fund may lend portfolio securities through its
lending agent to certain approved borrowers in order to earn additional
income. The income earned, net of any rebates or fees, is included in the
Statement of Operations. The fund continues to recognize any gain or loss in
the market price of the securities loaned and records any interest earned or
dividends declared.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially
expressed in foreign currencies are translated into U.S. dollars at prevailing
exchange rates at period end. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are translated at the rates
of exchange prevailing on the respective dates of such transactions. For
assets and liabilities, other than investments in securities, net realized and
unrealized gains and losses from foreign currency translations arise from
changes in currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses
occurring during the holding period of investment securities are a component
of realized gain (loss) on investment transactions and unrealized appreciation
(depreciation) on investments, respectively. Certain countries may impose
taxes on the contract amount of purchases and sales of foreign currency
contracts in their currency. The fund records the foreign tax expense, if any,
as a reduction to the net realized gain (loss) on foreign currency
transactions.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The fund may engage in securities
transactions on a when-issued or forward commitment basis. In these
transactions, the securities' prices and yields are fixed on the date of the
commitment. In a when-issued transaction, the payment and delivery are
scheduled for a future date and during this period, securities are subject to
market fluctuations. In a forward commitment transaction, the fund may sell a
security and at the same time make a commitment to purchase the same security
at a future date at a specified price. Conversely, the fund may purchase a
security and at the same time make a commitment to sell the same security at a
future date at a specified price. These types of transactions are executed
simultaneously in what are known as
------
22
"roll" transactions. The fund will segregate cash, cash equivalents or other
appropriate liquid securities on its records in amounts sufficient to meet the
purchase price. The fund accounts for "roll" transactions as purchases and
sales; as such these transactions may increase portfolio turnover.
FUTURES CONTRACTS -- The fund may enter into futures contracts in order to
manage the fund's exposure to changes in market conditions. One of the risks
of entering into futures contracts is the possibility that the change in value
of the contract may not correlate with the changes in value of the underlying
securities. Upon entering into a futures contract, the fund is required to
deposit either cash or securities in an amount equal to a certain percentage
of the contract value (initial margin). Subsequent payments (variation margin)
are made or received daily, in cash, by the fund. The variation margin is
equal to the daily change in the contract value and is recorded as unrealized
gains and losses. The fund recognizes a realized gain or loss when the
contract is closed or expires. Net realized and unrealized gains or losses
occurring during the holding period of futures contracts are a component of
realized gain (loss) on futures and swaps transactions and unrealized
appreciation (depreciation) on futures and swaps, respectively.
SWAP AGREEMENTS -- The fund may enter into swap agreements in order to attempt
to obtain or preserve a particular return or spread at a lower cost than
obtaining a return or spread through purchases and/or sales of instruments in
other markets; protect against currency fluctuations; attempt to manage
duration to protect against any increase in the price of securities the fund
anticipates purchasing at a later date; or gain exposure to certain markets in
the most economical way possible. A basic swap agreement is a contract in
which two parties agree to exchange the returns earned or realized on
predetermined investments or instruments. Credit default swaps enable an
investor to buy/sell protection against a credit event of a specific issuer.
The seller of credit protection against a security or basket of securities
receives an up-front or periodic payment to compensate against potential
default events. The fund may enhance returns by selling protection or attempt
to mitigate credit risk by buying protection. The fund will segregate cash,
cash equivalents or other appropriate liquid securities on its records in
amounts sufficient to meet requirements. Unrealized gains are reported as an
asset and unrealized losses are reported as a liability on the Statement of
Assets and Liabilities. Swap agreements are valued daily and changes in value,
including the periodic amounts of interest to be paid or received on swaps,
are recorded as unrealized appreciation (depreciation) on futures and swaps.
Realized gain or loss is recorded upon receipt or payment of a periodic
settlement or termination of swap agreements. The risks of entering into swap
agreements include the possible lack of liquidity, failure of the counterparty
to meet its obligations, and that there may be unfavorable changes in the
underlying investments and instruments.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a
manner sufficient to enable the fund to obtain those securities in the event
of a default under the repurchase agreement. ACIM monitors, on a daily basis,
the securities transferred to ensure the value, including accrued interest, of
the securities under each repurchase agreement is equal to or greater than
amounts owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM or American
Century Global Investment Management, Inc. (ACGIM), may transfer uninvested
cash balances into a joint trading account. These balances are invested in one
or more repurchase agreements that are collateralized by U.S. Treasury or
Agency obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. At this time, management has not identified any uncertain tax
positions for which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next twelve months.
Accordingly, no provision has been made for federal or state income taxes.
Interest and penalties associated with any federal or state income tax
obligations, if any, are recorded as interest expense.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income for
the fund are declared daily and paid monthly. Distributions from net realized
gains for the fund, if any, are generally declared and paid annually.
------
23
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the fund. In addition, in the normal course of
business, the fund enters into contracts that provide general
indemnifications. The fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the fund.
The risk of material loss from such claims is considered by management to be
remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America,
which may require management to make certain estimates and assumptions at the
date of the financial statements. Actual results could differ from these
estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
ACIM, under which ACIM provides the fund with investment advisory and
management services in exchange for a single, unified management fee (the
fee). The Agreement provides that all expenses of the fund, except brokerage
commissions, taxes, interest, fees and expenses of those trustees who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee is computed
and accrued daily based on the daily net assets of the specific class of
shares of the fund and paid monthly in arrears. The fee consists of (1) an
Investment Category Fee based on the daily net assets of the fund and certain
other accounts managed by the investment advisor that are in the same broad
investment category as the fund and (2) a Complex Fee based on the assets of
all the funds in the American Century family of funds. The rates for the
Investment Category Fee range from 0.2925% to 0.4100% and the rates for the
Complex Fee range from 0.0500% to 0.1100%. The effective annual management fee
for the year ended March 31, 2008 was 0.42%.
RELATED PARTIES -- Certain officers and trustees of the trust are also
officers and/or directors, and, as a group, controlling stockholders of
American Century Companies, Inc. (ACC), the parent of the trust's investment
advisor, ACIM, the distributor of the trust, American Century Investment
Services, Inc., and the trust's transfer agent, American Century Services,
LLC. The fund is wholly owned by American Century Asset Allocation Portfolios,
Inc. (ACAAP). ACAAP does not invest in the fund for the purpose of exercising
management or control.
The fund has a securities lending agreement with JPMorgan Chase Bank (JPMCB).
Prior to December 12, 2007, the fund had a bank line of credit agreement with
JPMCB. JPMCB is a custodian of the fund and a wholly owned subsidiary of
JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. INVESTMENT TRANSACTIONS
Purchases of investment securities, excluding short-term investments, for the
year ended March 31, 2008, totaled $366,376,144, of which $325,850,263
represented U.S. Treasury and Agency obligations. Sales of investment
securities, excluding short-term investments, for the year ended March 31,
2008, totaled $332,320,026, of which $320,470,783 represented U.S. Treasury
and Agency obligations.
4. SECURITIES LENDING
As of March 31, 2008, securities in the fund valued at $41,068,913 were on
loan through the lending agent, JPMCB, to certain approved borrowers. JPMCB
receives and maintains collateral in the form of cash and/or acceptable
securities as approved by ACIM. Cash collateral is invested in authorized
investments by the lending agent in a pooled account. The value of cash
collateral received at period end is disclosed in the Statement of Assets and
Liabilities and investments made with the cash by the lending agent are listed
in the Schedule of Investments. Any deficiencies or excess of collateral must
be delivered or transferred by the member firms no later than the close of
business on the next business day. The total market value of all collateral
received, at this date, was $41,701,010. The fund's risks in securities
lending are that the borrower may not provide additional collateral when
required or return the securities when due. If the borrower defaults, receipt
of the collateral by the fund may be delayed or limited.
------
24
5. BANK LINE OF CREDIT
Effective December 12, 2007, the fund, along with certain other funds managed
by ACIM or ACGIM, has a $500,000,000 unsecured bank line of credit agreement
with Bank of America, N.A. Prior to December 12, 2007, the fund, along with
certain other funds managed by ACIM or ACGIM, had a $500,000,000 unsecured
bank line of credit agreement with JPMCB. The fund may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement, which is subject to annual renewal, bear interest at the
Federal Funds rate plus 0.40%. The fund did not borrow from the line during
the year ended March 31, 2008.
6. FEDERAL TAX INFORMATION
The tax character of distributions paid during the year ended March 31, 2008
and the period May 12, 2006 (fund inception) through March 31, 2007, were as
follows:
2008 2007
DISTRIBUTIONS PAID FROM
Ordinary income $7,247,149 $4,615,168
Long-term capital gains $385,539 --
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of paydown losses, certain income items and net
realized gains and losses for financial statement and tax purposes, and may
result in reclassification among certain capital accounts on the financial
statements. The reclassifications, which reflect character differences
primarily related to federal income tax treatment of paydown losses and
income, expense and gain (loss) settlements on swap agreements, were as
follows:
Undistributed net investment income $484,530
Accumulated net realized loss $(485,686)
Unrealized appreciation (depreciation) $1,156
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
Federal tax cost of investments $216,675,734
============
Gross tax appreciation of investments $3,834,287
Gross tax depreciation of investments (799,441)
------------
Net tax appreciation (depreciation) of investments $3,034,846
============
Net tax appreciation (depreciation) on derivatives and translation
of assets and liabilities in foreign currencies $ 395,425
------------
Net tax appreciation (depreciation) $3,430,271
============
Undistributed ordinary income $2,851,350
Accumulated long-term gains $1,001,171
The cost of investments for federal income tax purposes was the same as the
cost for financial statement purposes. The difference between book-basis and
tax-basis unrealized appreciation (depreciation) is attributable primarily to
the realization for tax purposes of unrealized gains for certain futures
contracts.
------
25
7. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is taxable
in a particular jurisdiction), and requires certain expanded tax disclosures.
FIN 48 is effective for fiscal years beginning after December 15, 2006, and is
to be applied to all open tax years as of the date of effectiveness. The
adoption of FIN 48 did not materially impact the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" (FAS 157), in September 2006, which is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands the required
financial statement disclosures about fair value measurements. Management is
currently evaluating the impact that adopting FAS 157 will have on the
financial statement disclosures.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
8. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The fund hereby designates $385,539 of long-term capital gain distributions,
respectively, for the fiscal year ended March 31, 2008.
The fund hereby designates $466,401 of distributions as qualified short-term
capital gains for purposes of Internal Revenue Code Section 871.
------
26
FINANCIAL HIGHLIGHTS
NT Diversified Bond
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.19 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.49 0.44
Net Realized and Unrealized Gain (Loss) 0.43 0.24
-------- --------
Total From Investment Operations 0.92 0.68
-------- --------
Distributions
From Net Investment Income (0.49) (0.44)
From Net Realized Gains (0.06) (0.05)
-------- --------
Total Distributions (0.55) (0.49)
-------- --------
Net Asset Value, End of Period $10.56 $10.19
======== ========
TOTAL RETURN(3) 9.32% 6.96%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.42% 0.42%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 4.82% 4.95%(4)
Portfolio Turnover Rate 246% 308%
Net Assets, End of Period (in thousands) $162,119 $113,454
(1) May 12, 2006 (fund inception) through March 31, 2007.
(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.
(4) Annualized.
See Notes to Financial Statements.
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27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the American Century Investment Trust and Shareholders of
NT Diversified Bond Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the NT Diversified
Bond Fund (one of the ten funds comprising the American Century Investment
Trust, hereafter referred to as the "Fund") at March 31, 2008, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for the
period May 12, 2006 (commencement of operations) through March 31, 2007, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audits of these financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at March 31, 2008 by correspondence with the custodian and brokers,
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 19, 2008
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28
MANAGEMENT
The individuals listed below serve as trustees or officers of the fund. Each
trustee serves until his or her successor is duly elected and qualified or
until he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the
remaining independent trustees. Those listed as interested trustees are
"interested" primarily by virtue of their engagement as directors and/or
officers of, or ownership interest in, American Century Companies, Inc. (ACC)
or its wholly owned, direct or indirect, subsidiaries, including the fund's
investment advisor, American Century Investment Management, Inc. (ACIM or the
advisor); the fund's principal underwriter, American Century Investment
Services, Inc. (ACIS); and the fund's transfer agent, American Century
Services, LLC (ACS).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS, and ACS. The trustees serve
in this capacity for eight registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the fund also serve in similar capacities for
the other 14 investment companies in the American Century Investments family
of funds advised by ACIM, or American Century Global Investment Management,
Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated
for his or her service as an officer of the fund. The listed officers are
interested persons of the fund and are appointed or re-appointed on an annual
basis.
INTERESTED TRUSTEE
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Trustee and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 105
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
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29
INDEPENDENT TRUSTEES
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Trustee (since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
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 Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
FREDERICK L.A. GRAUER, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 2008)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Advisor, Barclays Global
Investors (2003 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
PETER F. PERVERE, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Vice President
and Chief Financial Officer, Commerce One, Inc. (software and services
provider)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Intraware, Inc.
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Platinum Grove Asset
Management, L.P., and a Partner, Oak Hill Capital Management (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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee (since 2002)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1973 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present)
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee (since 1984)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
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30
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present); and Controller, various American Century Investments funds
(1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the fund's trustees and is available
without charge, upon request, by calling 1-800-345-2021.
------
31
ADDITIONAL INFORMATION
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain
403(b), 457 and qualified plans [those not eligible for rollover to an IRA or
to another qualified plan] are subject to federal income tax withholding,
unless you elect not to have withholding apply. Tax will be withheld on the
total amount withdrawn even though you may be receiving amounts that are not
subject to withholding, such as nondeductible contributions. In such case,
excess amounts of withholding could occur. You may adjust your withholding
election so that a greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right
to revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
State tax will be withheld if, at the time of your distribution, your address
is within one of the mandatory withholding states and you have federal income
tax withheld. State taxes will be withheld from your distribution in
accordance with the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment advisor,
is responsible for exercising the voting rights associated with the securities
purchased and/or held by the fund. A description of the policies and
procedures the advisor uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's website at americancentury.com and on the Securities and
Exchange Commission's website at sec.gov. Information regarding how the
investment advisor voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available on the "About Us" page
at americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The fund's Form N-Q is available on the SEC's website at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may
be obtained by calling 1-800-SEC-0330. The fund also makes its complete
schedule of portfolio holdings for the most recent quarter of its fiscal year
available on its website at americancentury.com and, upon request, by calling
1-800-345-2021.
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32
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The CITIGROUP AGENCY INDEX is a market-capitalization-weighted index that
includes US government sponsored agencies with a remaining maturity of at
least one year.
The CITIGROUP CREDIT INDEX includes US and non-US corporate securities and
non-US sovereign and provincial securities.
The CITIGROUP MORTGAGE INDEX measures the mortgage component of the US BIG
Bond Index, comprising 30- and 15-year GNMA, FNMA, and FHLMC pass-throughs and
FNMA and FHLMC balloon mortgages.
The CITIGROUP TREASURY INDEX is comprised of US Treasury securities with an
amount outstanding of at least $5 billion and a remaining maturity of at least
one year.
The CITIGROUP US BROAD INVESTMENT-GRADE (BIG) BOND INDEX is a market-
capitalization-weighted index that includes fixed-rate Treasury, government-
sponsored, mortgage, asset-backed, and investment-grade issues with a maturity
of one year or longer.
The CITIGROUP US HIGH-YIELD MARKET INDEX captures the performance of
below-investment-grade debt issued by corporations domiciled in the United
States or Canada. This index includes cash-pay and deferred-interest
securities that are publicly placed, have a fixed coupon, and are
nonconvertible.
The CITIGROUP US INFLATION-LINKED SECURITIES INDEX (ILSI)SM measures the
return of bonds with fixed-rate coupon payments that adjust for inflation as
measured by the Consumer Price Index (CPI).
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33
NOTES
------
34
NOTES
------
35
NOTES
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36
[back cover]
[american century investments logo and text logo ®]
Contact Us
americancentury.com
Automated Information Line . . . . . . . . . . . . . . . . 1-800-345-8765
Investor Services Representative . . . . . . . . . . . . . 1-800-345-2021 or
816-531-5575
Business, Not-For-Profit, Employer-Sponsored
Retirement Plans . . . . . . . . . . . . . . . . . . . . . 1-800-345-3533
Banks and Trust Companies, Broker-Dealers,
Financial Professionals, Insurance Companies. . . . . . . 1-800-345-6488
Telecommunications Device for the Deaf . . . . . . . . . . 1-800-634-4113
American Century Investment Trust
Investment Advisor:
American Century Investment Management, Inc.
Kansas City, Missouri
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60033N
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo®]
AMERICAN CENTURY INVESTMENTS
SHORT DURATION FUND
CORE PLUS FUND
PRESIDENT'S LETTER
JONATHAN THOMAS
[photo of Jonathan Thomas]
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century® Short
Duration and Core Plus funds for the 12 months ended March 31, 2008. We also
recommend our website, americancentury.com, where we provide company news,
quarterly portfolio commentaries, investment views, and other useful
information about portfolio strategy, personal finance, government policy, and
the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
TABLE OF CONTENTS
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Fixed-Income Total Returns. . . . . . . . . . . . . . . . . . . 2
SHORT DURATION
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 5
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . 5
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 7
CORE PLUS
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 13
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . 13
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . 14
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . 14
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 15
Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . . . . 23
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 25
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 27
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 28
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 29
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 37
Report of Independent Registered Public Accounting Firm . . . . . . . 49
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 53
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 54
The opinions expressed in the Market Perspective and each of the Portfolio
Commentaries reflect those of the portfolio management team as of the date of
the report, and do not necessarily represent the opinions of American Century
or any other person in the American Century organization. Any such opinions
are subject to change at any time based upon market or other conditions and
American Century disclaims any responsibility to update such opinions. These
opinions may not be relied upon as investment advice and, because investment
decisions made by American Century funds are based on numerous factors, may
not be relied upon as an indication of trading intent on behalf of any
American Century fund. Security examples are used for representational
purposes only and are not intended as recommendations to purchase or sell
securities. Performance information for comparative indices and securities is
provided to American Century by third party vendors. To the best of American
Century's knowledge, such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of Chief Investment Officer]
By David MacEwen, Chief Investment Officer, Fixed Income
VOLATILITY REIGNED
The 12 months ended March 31, 2008, saw widely divergent bond returns as
market volatility surged in the wake of the subprime credit crisis. Credit
woes spread across the financial system, affecting banks, brokers, bond
insurers, hedge funds, and other big, institutional players important for the
functioning of the markets. This led to risk aversion that colored the return
picture for assets ranging from the riskiest high-yield bonds to even some of
the highest-quality money market securities.
The subprime meltdown had direct economic effects as well, weighing on
consumer spending and confidence, leading many economists to suggest that the
economy is already in recession. But even as growth slowed, higher commodity
prices (led by oil) meant rising inflation. The government consumer price
index (CPI) rose 4% during the reporting period.
The Federal Reserve (the Fed) took a series of extraordinary steps, slashing
interest rates and acting as a lender of last resort not only for banks, but
also major brokers. For the year, the federal funds rate target declined from
5.25% to 2.25%.
TREASURY BONDS RULED ROOST
The volatility, credit, and liquidity concerns in the market all favored
Treasury securities over higher-yielding, lower-quality alternatives (see the
returns table). Inflation-linked bonds -- particularly Treasury
inflation-indexed securities -- performed best because of their combination of
high quality and inflation protection. Meanwhile, risky corporate high-yield
bonds posted negative returns.
RATES FELL, CURVE STEEPENED
Against this backdrop, Treasury yields declined. The yield on the two-year
Treasury note tumbled from 4.58% to 1.59%, while yields on longer-term notes
and bonds fell less. That's because investors worried about the potential
long-term inflation effects of Fed rate cuts, high energy and commodity
prices, and a weaker dollar. As a result, the yield curve fell and steepened
-- the difference in yield between two- and 10-year Treasury securities
increased sharply from seven to 182 basis points (a basis point equals 0.01%).
U.S. Fixed-Income Total Returns
For the 12 months ended March 31, 2008
TREASURY SECURITIES
3-Month Bill 4.81%
2-Year Note 9.39%
5-Year Note 14.37%
10-Year Note 14.35%
30-Year Bond 13.86%
CITIGROUP U.S. BOND MARKET INDICES
High-Yield Market (corporate) -3.58%
Credit (investment-grade corporate) 4.41%
Mortgage (mortgage-backed) 7.95%
Broad Investment-Grade (multi-sector) 8.41%
Agency 10.37%
Treasury 12.24%
Inflation-Linked Securities 14.64%
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2
PERFORMANCE
Short Duration
Total Returns as of March 31, 2008
Average Annual
Returns
1 year Since Inception Inception Date
INVESTOR CLASS 7.17% 6.48% 11/30/06
CITIGROUP
GOVERNMENT/CORPORATE
1- TO 3-YEAR INDEX 8.26% 7.30% --
Institutional Class 7.38% 6.69% 11/30/06
A Class
No sales charge* 6.91% 6.21%
With sales charge* 4.50% 4.42% 11/30/06
B Class
No sales charge* 6.11% 5.42%
With sales charge* 2.11% 2.47% 11/30/06
C Class 6.11% 5.43% 11/30/06
R Class 6.64% 5.95% 11/30/06
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 2.25% maximum initial
sales charge and may be subject to a maximum CDSC of 1.00%. B Class shares
redeemed within six years of purchase are subject to a CDSC that declines from
5.00% during the first year after purchase to 0.00% the sixth year after
purchase. C Class shares redeemed within 12 months of purchase are subject to
a maximum CDSC of 1.00%. The SEC requires that mutual funds provide
performance information net of maximum sales charges in all cases where
charges could be applied.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
International investing involves special risks, such as political instability
and currency fluctuations. Investing in emerging markets may accentuate these
risks.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
------
3
Short Duration
Growth of $10,000 Over Life of Class
$10,000 investment made November 30, 2006
One-Year Returns Over Life of Class
Periods ended March 31
2007* 2008
Investor Class 1.46% 7.17%
Citigroup Government/Corporate 1- to 3-Year Index 1.47% 8.26%
*From 11/30/06, the Investor Class's inception date. Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
International investing involves special risks, such as political instability
and currency fluctuations. Investing in emerging markets may accentuate these
risks.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
------
4
PORTFOLIO COMMENTARY
Short Duration
Lead Portfolio Managers: Jeff Houston, Hando Aguilar, Brian Howell, John
Walsh, Dan Shiffman, Jim Platz, Seth Plunkett, and Mike Difley
Macro Strategy Team Representatives: Dave MacEwen and Bob Gahagan
PERFORMANCE SUMMARY
Short Duration returned 7.17%* for the 12 months ended March 31, 2008. By
comparison, the Citigroup Government/Corporate 1- to 3-Year Index and Lipper
Short Investment Grade Debt Funds category average returned 8.26% and 2.17%**,
respectively.
The portfolio's absolute return over the last 12 months reflected the
performance of the broader market, as short-term, high-quality securities
performed very well amid worries about the health of the economy and financial
system (see page 2). Short Duration trailed the index because the portfolio's
sector weightings more closely reflect the composition of the broad taxable
market, which underperformed Treasury and high-quality government bonds.
Nevertheless, the portfolio outperformed its peers thanks to contributions to
return from our sector, yield curve, and currency allocations.
SECTOR ALLOCATION WAS KEY
A key factor in explaining the fund's performance was its sector allocation.
Relative to the index, we held fewer Treasury and high-quality government
bonds, the best-performing portion of the market for the year. But relative to
the peers, we held an underweight position in the corporate sector because of
our concern over high valuations and low risk premiums at a time of
unfavorable economic fundamentals and market technical factors.
This positioning was a leading contributor to performance, as the 12-month
period was the worst on record for corporate bonds relative to Treasuries. In
addition, it helped performance compared with the Lipper group to be
underweight in high-yield and emerging market debt, which underperformed.
Another sector trade that added value was our decision to overweight Treasury
inflation-indexed securities. But we should point out that by the end of the
reporting period, corporate bonds were beginning to look more attractive
because of their record underperformance, so we added incrementally to our
corporate position.
Portfolio at a Glance
As of As of
3/31/08 3/31/07
Average Duration (effective) 1.6 years 1.8 years
Weighted Average Life 2.8 years 2.5 years
Yields as of March 31, 2008
30-day SEC Yield
Investor Class 3.87%
Institutional Class 4.04%
A Class 3.53%
B Class 2.84%
C Class 2.85%
R Class 3.34%
*All fund returns referenced in this commentary are for Investor Class shares.
**The Lipper Short Investment Grade Debt Funds average return since the fund's
inception was 3.46%.
Data provided by Lipper Inc. - A Reuters Company. © 2008 Reuters. All rights
reserved. Any copying, republication or redistribution of Lipper content,
including by caching, framing or similar means, is expressly prohibited
without the prior written consent of Lipper. Lipper shall not be liable for
any errors or delays in the content, or for any actions taken in reliance
thereon.
Lipper Fund Performance - Performance data is total return, and is
preliminary and subject to revision.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
------
5
Short Duration
CURVE, CURRENCY TRADES CONTRIBUTED
The portfolio benefited significantly from a yield-curve steepening bias we
had in place throughout the year using two- and five-year Treasury futures. We
put this trade on in 2007 when the yield curve was "inverted" (an unusual
situation where yields on short-term notes exceed those of long-term bonds).
During the period, Fed rate cuts and economic and financial concerns drove
two-year yields down more than any other area on the curve.
Finally, our Japanese yen exposure also contributed to relative performance.
We established this position in early 2007 when the yen reached a 41/2-year
low to the U.S. dollar. This positioning added value in the reporting period,
before we closed it out in the first quarter of 2008 as the economic and
valuation fundamentals underpinning the trade became less compelling.
MANAGEMENT CHANGE
In March 2008, Macro Strategy Team Representative Jim Keegan left American
Century Investments to accept an asset management position in his native New
York. We wish him well. Short Duration continues to be actively managed by the
investment team shown at the top of page 5, demonstrating a key advantage of
our team approach to managing portfolios.
OUTLOOK
"We think the probability of recession is very high," says Macro Strategy Team
Representative Bob Gahagan. "So we expect the Fed to continue cutting interest
rates as the economy slows and the unemployment rate rises. But inflation
pressures are a growing longer-term concern; as a result, we believe
'stagflation' is a real risk. In that sort of environment, we think it's
reasonable to expect short-term rates to decline from current levels, while
yields on longer-term notes and bonds remain volatile, particularly as
deleveraging continues, risk is re-priced, and inflation fears rise."
"We're likely to overweight short- and intermediate-term bonds," Gahagan
continues. "In terms of our sector allocations, we think mortgages represent
good value, and expect to maintain our overweight position in
inflation-indexed bonds. Finally, we're looking carefully at the relative
values between government and corporate bonds for an entry point into select,
high-quality corporates that we believe represent compelling values."
Types of Investments in Portfolio
% of fund % of fund
investments investments
as of 3/31/08 as of 9/30/07
Collateralized Mortgage Obligations 46.0% 35.2%
U.S. Treasury Securities 21.8% 21.9%
Mortgage-Backed Securities 6.2% 4.3%
Corporate Bonds 4.7% 0.6%
Municipal Securities 1.9% --
Asset-Backed Securities 1.8% 1.7%
U.S. Government Agency Securities 1.4% 6.4%
Sovereign Governments & Agencies -- 0.6%
Temporary Cash Investments 5.0% 6.8%
Temporary Cash Investments - Securities Lending
Collateral 11.2% 22.5%
------
6
SCHEDULE OF INVESTMENTS
Short Duration
MARCH 31, 2008
Principal Amount Value
Collateralized Mortgage Obligations(1) -- 52.7%
$ 300,000 Banc of America Commercial Mortgage Inc., Series
2000-2, Class B, 7.38%, 9/15/32(2) $ 312,520
150,000 Banc of America Commercial Mortgage Inc., Series
2002 PB2, Class A3 SEQ, 6.09%, 6/11/35(2) 151,176
300,000 Banc of America Commercial Mortgage Inc., Series
2002 PB2, Class B SEQ, 6.31%, 6/11/35(2) 312,713
350,000 Banc of America Commercial Mortgage Inc., Series
2004-2, Class A3 SEQ, 4.05%, 11/10/38(2) 341,382
175,000 Banc of America Mortgage Securities, Inc., Series
2004 G, Class 2A6, 4.66%, 8/25/34(2) 178,000
1,294,297 Bear Stearns Commercial Mortgage Securities Trust
STRIPS - COUPON, Series 2004 T16, Class X2, VRN,
0.91%, 4/1/08 30,926
300,000 Chase Commercial Mortgage Securities Corp., Series
2000-2, Class C, 7.93%, 7/15/32(2) 315,879
677,937 Commercial Mortgage Acceptance Corp. STRIPS -
COUPON, Series 1998 C2, Class X, VRN, 1.09%, 4/1/08 17,986
369,549 Countrywide Home Loan Mortgage Pass-Through Trust,
Series 2003-37, Class 2A2, 4.25%, 9/25/33(2) 369,641
339,000 Credit Suisse First Boston Mortgage Securities
Corp., Series 2000 C1, Class B, VRN, 7.80%,
4/11/08(2) 356,302
187,054 Credit Suisse First Boston Mortgage Securities
Corp., Series 2003 AR28, Class 2A1, 4.41%,
12/25/33(2) 187,812
147,866 FHLMC, Series 2522, Class XA SEQ, 5.00%, 8/15/16(2) 150,288
80,280 FHLMC, Series 2632, Class TE, 2.50%, 6/15/22 80,143
133,115 FHLMC, Series 2750, Class WD SEQ, 4.50%, 9/15/15(2) 134,116
118,555 FHLMC, Series 2763, Class PB, 4.50%, 6/15/14(2) 119,139
250,000 FNMA, Series 2003-54, Class TC, 4.50%, 5/25/15(2) 252,390
Principal Amount Value
$ 123,183 FNMA, Series 2004-9, Class YJ, 4.00%, 10/25/13(2) $ 123,410
173,842 FNMA, Series 2005-47, Class AN SEQ, 5.00%,
12/25/16(2) 177,534
241,654 FNMA, Series 2006-4, Class A SEQ, 6.00%, 11/25/22(2) 246,983
297,850 GMAC Commercial Mortgage Securities, Inc., Series
2005 C1, Class A2 SEQ, 4.47%, 5/10/43(2) 294,151
305,247 GNMA, Series 2003-51, Class KA, 3.50%, 10/20/28 303,073
112,036 J.P. Morgan Mortgage Trust, Series 2004 A2, Class
1A1, 3.81%, 5/25/34(2) 114,085
176,543 J.P. Morgan Mortgage Trust, Series 2004 A4, Class
2A2, 4.61%, 9/25/34(2) 167,170
392,000 LB-UBS Commercial Mortgage Trust, Series 2004 C4,
Class A2, 4.57%, 6/15/29(2) 390,079
320,150 LB-UBS Commercial Mortgage Trust, Series 2005 C2,
Class A2 SEQ, 4.82%, 4/15/30(2) 318,098
250,000 LB-UBS Commercial Mortgage Trust, Series 2005 C3,
Class A3 SEQ, 4.65%, 7/30/30(2) 242,880
37,794 Lehman Brothers Commercial Conduit Mortgage Trust,
Series 1998 C1, Class C, 6.68%, 2/18/30 37,695
380,000 Lehman Brothers Commercial Conduit Mortgage Trust,
Series 1999 C1, Class B, 6.93%, 6/15/31(2) 386,251
250,000 Merrill Lynch Mortgage Trust STRIPS - COUPON,
Series 2006 C1, Class A2, VRN, 5.80%, 4/1/08(2) 249,347
186,871 Morgan Stanley Capital I, Series 2004 HQ3, Class A2
SEQ, 4.05%, 1/13/41(2) 183,720
91,843 Washington Mutual Mortgage Pass-Through
Certificates, Series 2003 AR9, Class 1A4, 3.70%,
4/15/08 91,908
245,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2004 AR4, Class A6, 3.81%,
6/25/34(2) 244,768
195,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2004 AR9, Class A7, VRN,
4.14%, 4/1/08(2) 193,635
------
7
Short Duration
Principal Amount Value
$ 475,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2005 AR4, Class A3, 4.59%,
4/25/35(2) $ 476,702
200,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2005 AR4, Class A4B, 4.68%,
4/25/35(2) 200,945
175,889 Wells Fargo Mortgage Backed Securities Trust,
Series 2004 EE, Class 3A1, 3.99%, 12/25/34 170,887
140,912 Wells Fargo Mortgage Backed Securities Trust,
Series 2007-11, Class A19 SEQ, 6.00%, 8/25/37 139,724
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $8,005,261) 8,063,458
------------
U.S. Treasury Securities -- 24.9%
639,710 U.S. Treasury Inflation Indexed Notes, 3.00%,
7/15/12(2) 716,882
228,438 U.S. Treasury Inflation Indexed Notes, 2.00%,
1/15/14(2)(3) 247,249
496,389 U.S. Treasury Inflation Indexed Notes, 2.50%,
7/15/16(2)(3) 558,477
700,000 U.S. Treasury Notes, 4.75%, 2/15/10(2)(3) 741,126
700,000 U.S. Treasury Notes, 1.75%, 3/31/10(2) 702,078
800,000 U.S. Treasury Notes, 4.125%, 8/15/10(2)(3) 847,188
------------
TOTAL U.S. TREASURY SECURITIES
(Cost $3,770,634) 3,813,000
------------
U.S. Government Agency Mortgage-Backed Securities(1) -- 7.1%
345,370 FHLMC, 5.00%, 10/1/10(2) 355,078
246,725 FHLMC, 5.50%, 12/1/36 249,480
371,184 FNMA, 5.00%, 7/1/20(2) 375,569
100,001 FNMA, 5.50%, 7/1/36 101,086
------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Cost $1,060,884) 1,081,213
------------
Corporate Bonds -- 5.4%
AUTOMOBILES -- 0.7%
100,000 DaimlerChrysler N.A. Holding Corp., 5.875%,
3/15/11(2) 102,401
------------
BEVERAGES -- 0.7%
100,000 PepsiCo, Inc., 4.65%, 2/15/13 103,660
------------
CHEMICALS -- 0.7%
100,000 du Pont (E.I.) de Nemours & Co., 5.00%, 1/15/13(2) 104,280
------------
Principal Amount Value
DIVERSIFIED FINANCIAL SERVICES -- 0.7%
$ 100,000 Pricoa Global Funding I, 5.40%, 10/18/12 (Acquired
10/11/07, Cost $99,801)(4) $ 105,800
------------
FOOD PRODUCTS -- 1.6%
100,000 General Mills, Inc., 5.65%, 9/10/12(2) 104,146
150,000 Kellogg Co., 6.60%, 4/1/11(2) 161,935
------------
266,081
------------
SPECIALTY RETAIL -- 1.0%
150,000 Home Depot, Inc. (The), 4.625%, 8/15/10(2) 150,350
------------
TOTAL CORPORATE BONDS
(Cost $803,938) 832,572
------------
Municipal Securities -- 2.1%
150,000 California Department of Water Resources Power
Supply Rev., Series 2002 A, 5.125%, 5/1/12,
Prerefunded at 101% of Par(5) 164,776
150,000 City of Lincoln Electric System Rev., 5.25%,
9/1/11, Prerefunded at 100% of Par(5) 163,076
------------
TOTAL MUNICIPAL SECURITIES
(Cost $327,319) 327,852
------------
Asset-Backed Securities(1) -- 2.1%
170,000 Detroit Edison Securitization Funding LLC, Series
2001-1, Class A4 SEQ, 6.19%, 3/1/13(2) 178,195
141,237 FHLMC, Series T7, Class A5 SEQ, 7.27%, 8/25/28 143,058
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $313,965) 321,253
------------
U.S. Government Agency Securities -- 1.6%
250,000 FNMA, 2.50%, 4/9/10(3)
(Cost $249,417) 251,217
------------
Temporary Cash Investments -- 5.7%
Repurchase Agreement, Deutsche Bank Securities, Inc.,
(collateralized by various U.S. Treasury obligations, 2.375%,
4/15/11, valued at $776,951), in a joint trading account at
1.35%, dated 3/31/08, due 4/1/08 (Delivery value $762,029)(2) 762,000
Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized
by various U.S. Treasury obligations, 7.875%, 2/15/21, valued at
$116,623), in a joint trading account at 1.30%, dated 3/31/08,
due 4/1/08 (Delivery value $114,004)(2) 114,000
------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $876,000) 876,000
------------
------
8
Short Duration Value
Temporary Cash Investments - Securities
Lending Collateral(6) -- 12.8%
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery
value $509,115) $ 509,082
Repurchase Agreement, BNP Paribas, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value
$485,001) 484,970
Repurchase Agreement, Deutsche Bank AG, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.25%, dated 3/31/08, due 4/1/08 (Delivery
value $483,030) 483,000
Value
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in
a pooled account at the lending agent), 2.15%, dated 3/31/08, due
4/1/08 (Delivery value $488,133) $ 488,104
------------
TOTAL TEMPORARY CASH INVESTMENTS - SECURITIES
LENDING COLLATERAL
(Cost $1,965,156) 1,965,156
------------
TOTAL INVESTMENT SECURITIES -- 114.4%
(Cost $17,372,574) 17,531,721
------------
OTHER ASSETS AND LIABILITIES -- (14.4)% (2,212,486)
------------
TOTAL NET ASSETS -- 100.0% $ 15,319,235
============
Futures Contracts
Expiration Underlying Face Unrealized
Contracts Purchased Date Amount at Value Gain (Loss)
42 U.S. Treasury
2-Year Notes June 2008 $9,015,563 $66,248
============ ============
Expiration Underlying Face Unrealized
Contracts Sold Date Amount at Value Gain (Loss)
25 U.S. Treasury
10-Year Notes June 2008 $2,973,828 $(69,255)
============ =============
Swap Agreements
Notional Unrealized
Amount Description of Agreement Expiration Date Gain (Loss)
CREDIT DEFAULT
$450,000 Pay semiannually a fixed rate June 2012 $15,717
equal to 1.25% multiplied by the
notional amount and receive from
Barclays Bank plc upon each
default event of one of the issues
of Dow Jones CDX Emerging Markets
7, par value of the proportional
notional amount.
130,000 Pay quarterly a fixed rate equal December 2012 5,456
to 0.70% multiplied by the
notional amount and receive from
Morgan Stanley Capital Services,
Inc. upon each default event of
Citigroup Inc., par value of the
proportional notional amount of
Citigroup Inc., 6.50%, 1/18/11.
60,000 Pay quarterly a fixed rate equal December 2012 2,844
to 0.73% multiplied by the
notional amount and receive from
Barclays Bank plc upon each
default event of American
International Group, Inc., par
value of the proportional notional
amount of American International
Group, Inc., 4.25%, 5/15/13.
200,000 Pay quarterly a fixed rate equal September 2017 13,728
to 0.69% multiplied by the
notional amount and receive from
Barclays Bank plc upon each
default event of JPMorgan Chase &
Co., par value of the proportional
notional amount of JPMorgan Chase
& Co., 6.75%, 2/1/11.
------------
$37,745
============
------
9
Short Duration
Notes to Schedule of Investments
CDX = Credit Derivative Indexes
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GMAC = General Motors Acceptance Corporation
GNMA = Government National Mortgage Association
LB-UBS = Lehman Brothers Inc. -- UBS AG
SEQ = Sequential Payer
STRIPS = Separate Trading of Registered Interest and Principal of Securities
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) Final maturity indicated, unless otherwise noted.
(2) Security, or a portion thereof, has been segregated for futures contracts
and/or swap agreements.
(3) Security, or a portion thereof, was on loan as of March 31, 2008.
(4) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at March 31, 2008 was $105,800, which
represented 0.7% of total net assets.
(5) Escrowed to maturity in U.S. government securities or state and local
government securities.
(6) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
------
10
PERFORMANCE
Core Plus
Total Returns as of March 31, 2008
Average Annual
Returns
1 year Since Inception Inception Date
INVESTOR CLASS 9.88% 8.16% 11/30/06
CITIGROUP US BROAD
INVESTMENT-GRADE BOND INDEX 8.41% 6.96% --
Institutional Class 10.10% 8.37% 11/30/06
A Class
No sales charge* 9.61% 7.89%
With sales charge* 4.67% 4.24% 11/30/06
B Class
No sales charge* 8.80% 7.09%
With sales charge* 4.80% 4.15% 11/30/06
C Class 8.80% 7.09% 11/30/06
R Class 9.34% 7.62% 11/30/06
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 4.50% maximum initial
sales charge and may be subject to a maximum CDSC of 1.00%. B Class shares
redeemed within six years of purchase are subject to a CDSC that declines from
5.00% during the first year after purchase to 0.00% the sixth year after
purchase. C Class shares redeemed within 12 months of purchase are subject to
a maximum CDSC of 1.00%. The SEC requires that mutual funds provide
performance information net of maximum sales charges in all cases where
charges could be applied.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
International investing involves special risks, such as political instability
and currency fluctuations. Investing in emerging markets may accentuate these
risks.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
------
11
Core Plus
Growth of $10,000 Over Life of Class
$10,000 investment made November 30, 2006
One-Year Returns Over Life of Class
Periods ended March 31
2007* 2008
Investor Class 1.04% 9.88%
Citigroup US Broad Investment-Grade Bond Index 0.89% 8.41%
*From 11/30/06, the Investor Class's inception date. Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
International investing involves special risks, such as political instability
and currency fluctuations. Investing in emerging markets may accentuate these
risks.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the index do not.
------
12
PORTFOLIO COMMENTARY
Core Plus
Lead Portfolio Managers: Jeff Houston, Hando Aguilar, Brian Howell, John
Walsh, Dan Shiffman, Jim Platz, Seth Plunkett, and Mike Difley
Macro Strategy Team Representatives: Dave MacEwen and Bob Gahagan
PERFORMANCE SUMMARY
Core Plus returned 9.88%* for the 12 months ended March 31, 2008. By
comparison, the Citigroup US Broad Investment-Grade (BIG) Bond Index and
Lipper Intermediate Investment Grade Debt Funds category average returned
8.41% and 3.73%**, respectively.
The portfolio's solid absolute return over the last 12 months reflected
favorable conditions for high-quality bonds (see page 2). The fund also
outperformed its benchmark thanks to contributions from our sector, yield
curve, and currency positions.
SECTOR SELECTION HELPED
Our concern over high valuations and low risk premiums for corporate
securities was a key factor in fund positioning for the period, given the
economic fundamentals and market technical factors that included deleveraging
and re-pricing of risk assets. This view led us to hold an underweight
position in the corporate sector relative to the Citigroup BIG Index. This
trade was a leading contributor to performance, as the 12-month period was the
worst on record for corporate bonds relative to Treasuries. It was also
beneficial that we had an underweight position in the hardest-hit financial
bonds and essentially no exposure to subprime debt. In addition, it helped
performance compared with the Lipper group to be underweight in high-yield and
emerging market debt, which underperformed. Our decision to overweight
Treasury inflation-indexed securities also added value.
By the end of the reporting period, corporate bond valuations were beginning
to look more attractive, so we added incrementally to our corporate position.
Similarly, we bought some very high-quality mortgage-backed and municipal
bonds because their yields were at such historically attractive levels
compared with Treasuries. Indeed, we were able to add some pre-refunded
municipals (backed by Treasury bonds) offering yields higher than Treasuries.
Portfolio at a Glance
As of
As of 3/31/08 3/31/07
Average Duration (effective) 4.6 years 4.6 years
Weighted Average Life 5.6 years 6.7 years
Yields as of March 31, 2008
30-day SEC Yield
Investor Class 4.19%
Institutional Class 4.39%
A Class 3.77%
B Class 3.20%
C Class 3.19%
R Class 3.69%
*All fund returns referenced in this commentary are for Investor Class shares.
**The Lipper Intermediate Investment Grade Debt Funds average return since the
fund's inception was 4.90%.
Data provided by Lipper Inc. - A Reuters Company. © 2008 Reuters. All rights
reserved. Any copying, republication or redistribution of Lipper content,
including by caching, framing or similar means, is expressly prohibited
without the prior written consent of Lipper. Lipper shall not be liable for
any errors or delays in the content, or for any actions taken in reliance
thereon.
Lipper Fund Performance - Performance data is total return, and is
preliminary and subject to revision.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
------
13
Core Plus
CURVE, CURRENCY TRADES CONTRIBUTED
The portfolio benefited significantly from a yield-curve steepening bias we
had in place throughout the year using two- and 10-year Treasury futures. We
put this trade on in 2007 when the yield curve was "inverted" (an unusual
situation where yields on short-term notes exceed those of long-term bonds).
During the period, Fed rate cuts and economic and financial concerns drove
short-term yields down dramatically, while long-term yields didn't fall nearly
as much because of inflation concerns.
Finally, our Japanese yen exposure also contributed to relative performance.
We established this position in early 2007 when the yen reached a 41/2-year
low to the U.S. dollar. This positioning added value in the reporting period,
before we closed it out in the first quarter of 2008 as the economic and
valuation fundamentals underpinning the trade became less compelling.
MANAGEMENT CHANGE
In March 2008, Macro Strategy Team Representative Jim Keegan left American
Century Investments to accept an asset management position in his native New
York. We wish him well. Core Plus continues to be actively managed by the
investment team shown at the top of page 13, demonstrating a key advantage of
our team approach to managing portfolios.
OUTLOOK
"We think the probability of recession is very high," says Macro Strategy Team
Representative Bob Gahagan. "So we expect the Fed to continue cutting interest
rates as the economy slows and the unemployment rate rises. But inflation
pressures are a growing longer-term concern; as a result, we believe
'stagflation' is a real risk. In that sort of environment, we think it's
reasonable to expect short-term rates to decline from current levels, while
yields on longer-term notes and bonds remain volatile, particularly as
deleveraging continues, risk is re-priced, and inflation fears rise."
"We're likely to overweight short- and intermediate-term bonds," Gahagan
continues. "In terms of our sector allocations, we think mortgages represent
good value, and expect to maintain our overweight position in
inflation-indexed bonds. Finally, we're looking carefully at the relative
values between government and corporate bonds for an entry point into select,
high-quality corporates that we believe represent compelling values."
Types of Investments in Portfolio
% of fund % of fund
investments investments
as of 3/31/08 as of 9/30/07
Collateralized Mortgage Obligations 27.4% 31.5%
Mortgage-Backed Securities 21.8% 29.6%
Corporate Bonds 14.6% 13.5%
U.S. Treasury Securities 7.2% 5.1%
U.S. Government Agency Securities 6.9% 5.4%
Municipal Securities 4.0% --
Asset-Backed Securities 1.5% 1.9%
Sovereign Governments & Agencies -- 3.4%
Temporary Cash Investments 5.7% 1.5%
Temporary Cash Investments - Securities
Lending Collateral 10.9% 8.1%
Portfolio Composition by Credit Rating
% of fund % of fund
investments investments
as of 3/31/08 as of 9/30/07
AAA 82% 85%
AA 3% 4%
A 8% 4%
BBB 6% 6%
BB 1% 1%
Ratings provided by independent research companies. These ratings are listed
in Standard & Poor's format even if they were provided by other sources.
------
14
SCHEDULE OF INVESTMENTS
Core Plus
MARCH 31, 2008
Principal Amount Value
Collateralized Mortgage Obligations(1) -- 33.3%
$ 231,075 Banc of America Alternative Loan Trust, Series
2007-2, Class 2A4, 5.75%, 6/25/37(2) $ 220,839
750,000 Banc of America Commercial Mortgage Inc., Series
2000-2, Class B, 7.38%, 9/15/32(2) 781,298
150,000 Banc of America Commercial Mortgage Inc., Series
2002 PB2, Class A3 SEQ, 6.09%, 6/11/35(2) 151,176
750,000 Banc of America Commercial Mortgage Inc., Series
2002 PB2, Class B SEQ, 6.31%, 6/11/35(2) 781,782
1,025,000 Banc of America Commercial Mortgage Inc., Series
2004-2, Class A3 SEQ, 4.05%, 11/10/38(2) 999,761
200,000 Banc of America Mortgage Securities, Inc., Series
2004 G, Class 2A6, 4.66%, 8/25/34(2) 203,428
1,294,297 Bear Stearns Commercial Mortgage Securities Trust
STRIPS - COUPON, Series 2004 T16, Class X2, VRN,
0.91%, 4/1/08 30,926
425,000 Chase Commercial Mortgage Securities Corp., Series
2000-2, Class C, 7.93%, 7/15/32(2) 447,495
677,937 Commercial Mortgage Acceptance Corp. STRIPS -
COUPON, Series 1998 C2, Class X, VRN, 1.09%, 4/1/08 17,986
684,350 Countrywide Home Loan Mortgage Pass-Through Trust,
Series 2003-37, Class 2A2, 4.25%, 9/25/33(2) 684,520
469,287 Countrywide Home Loan Mortgage Pass-Through Trust,
Series 2007-16, Class A1, 6.50%, 10/25/37(2) 463,295
500,000 Credit Suisse First Boston Mortgage Securities
Corp., Series 2000 C1, Class B, VRN, 7.80%,
4/11/08(2) 525,520
267,221 Credit Suisse First Boston Mortgage Securities
Corp., Series 2003 AR28, Class 2A1, 4.41%,
12/25/33(2) 268,302
369,664 FHLMC, Series 2522, Class XA SEQ, 5.00%, 8/15/16(2) 375,719
94,290 FHLMC, Series 2613, Class HB SEQ, 4.50%, 10/15/13(2) 94,532
Principal Amount Value
$ 200,699 FHLMC, Series 2632, Class TE, 2.50%, 6/15/22(2) $ 200,357
200,000 FHLMC, Series 3203, Class VN SEQ, 5.00%, 6/15/22(2) 192,928
101,525 FNMA, Series 2003-52, Class KF SEQ, VRN, 3.01%,
4/25/08, resets monthly off the 1-month LIBOR plus
0.40% with a cap of 7.50%(2) 100,883
250,000 FNMA, Series 2003-54, Class TC, 4.50%, 5/25/15(2) 252,390
123,183 FNMA, Series 2004-9, Class YJ, 4.00%, 10/25/13(2) 123,410
434,605 FNMA, Series 2005-47, Class AN SEQ, 5.00%,
12/25/16(2) 443,836
144,055 FNMA, Series 2005-63, Class HA SEQ, 5.00%,
4/25/23(2) 147,937
164,698 Greenwich Capital Commercial Funding Corp., Series
2006 FL4A, Class A1, VRN, 3.18%, 4/7/08, resets
monthly off the 1-month LIBOR plus 0.09% with no
caps (Acquired 12/14/06, Cost $164,698)(2)(3) 154,206
265,986 J.P. Morgan Mortgage Trust, Series 2004 A2, Class
1A1, 3.81%, 5/25/34(2) 270,849
467,870 LB-UBS Commercial Mortgage Trust, Series 2003 C5,
Class A2 SEQ, 3.48%, 7/15/27(2) 465,550
500,000 LB-UBS Commercial Mortgage Trust, Series 2005 C3,
Class A3 SEQ, 4.65%, 7/30/30(2) 485,759
94,486 Lehman Brothers Commercial Conduit Mortgage Trust,
Series 1998 C1, Class C, 6.68%, 2/18/30 94,239
211,000 Lehman Brothers Commercial Conduit Mortgage Trust,
Series 1999 C1, Class B, 6.93%, 6/15/31(2) 214,472
300,000 Wachovia Bank Commercial Mortgage Trust, Series
2006 C23, Class A4, 5.42%, 1/15/45(2) 296,989
300,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2004 AR4, Class A6, 3.81%,
6/25/34(2) 299,715
450,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2005 AR4, Class A3, 4.59%,
4/25/35(2) 451,613
------
15
Core Plus
Principal Amount Value
$ 250,000 Washington Mutual Mortgage Pass-Through
Certificates, Series 2005 AR4, Class A4B, 4.68%,
4/25/35(2) $ 251,181
234,854 Wells Fargo Mortgage Backed Securities Trust,
Series 2007-11, Class A19 SEQ, 6.00%, 8/25/37(2) 232,874
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $10,651,315) 10,725,767
------------
U.S. Government Agency
Mortgage-Backed Securities(1) -- 26.5%
863,426 FHLMC, 5.00%, 10/1/10(2) 887,712
394,872 FHLMC, 4.50%, 6/1/21(2) 393,398
27,327 FHLMC, 6.50%, 7/1/47 28,092
2,115,000 FNMA, 6.00%, settlement date 4/14/08(4) 2,166,884
657,000 FNMA, 6.50%, settlement date 4/14/08(4) 680,508
804,214 FNMA, 5.00%, 7/1/20(2) 813,715
439,529 FNMA, 5.00%, 11/1/33(2) 436,313
868,181 FNMA, 5.00%, 8/1/34(2) 861,319
464,592 FNMA, 5.00%, 8/1/35(2) 460,581
501,483 FNMA, 4.50%, 9/1/35(2) 484,123
623,000 FNMA, 5.50%, 7/1/36 629,763
351,693 FNMA, 6.50%, 8/1/37(2) 361,388
13,295 FNMA, 6.50%, 6/1/47 13,595
35,016 FNMA, 6.50%, 8/1/47 35,804
47,366 FNMA, 6.50%, 8/1/47 48,520
43,638 FNMA, 6.50%, 9/1/47 44,620
5,791 FNMA, 6.50%, 9/1/47 5,921
55,137 FNMA, 6.50%, 9/1/47 56,378
42,509 FNMA, 6.50%, 9/1/47 43,465
76,795 FNMA, 6.50%, 9/1/47(2) 78,523
------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Cost $8,372,189) 8,530,622
------------
Corporate Bonds -- 17.7%
AEROSPACE & DEFENSE -- 0.6%
30,000 Honeywell International Inc., 5.30%, 3/15/17 30,937
30,000 Honeywell International Inc., 5.30%, 3/1/18 30,825
30,000 Lockheed Martin Corp., 6.15%, 9/1/36 31,089
95,000 United Technologies Corp., 6.05%, 6/1/36(2) 98,469
------------
191,320
------------
Principal Amount Value
AUTOMOBILES -- 0.1%
$ 30,000 DaimlerChrysler N.A. Holding Corp., 6.50%, 11/15/13 $ 31,665
------------
BEVERAGES -- 0.6%
60,000 Coca-Cola Co. (The), 5.35%, 11/15/17(2) 62,773
85,000 Miller Brewing Co., 4.25%, 8/15/08 (Acquired
12/4/06, Cost $83,900)(3) 85,351
30,000 PepsiCo, Inc., 4.65%, 2/15/13 31,098
------------
179,222
------------
CAPITAL MARKETS -- 0.8%
130,000 Goldman Sachs Group, Inc. (The), 6.15%, 4/1/18 130,143
125,000 Merrill Lynch & Co., Inc., 4.79%, 8/4/10(2) 124,745
------------
254,888
------------
CHEMICALS -- 0.4%
40,000 Air Products and Chemicals, Inc., 4.15%, 2/1/13 40,111
50,000 du Pont (E.I.) de Nemours & Co., 5.00%, 1/15/13 52,140
20,000 Rohm and Haas Co., 5.60%, 3/15/13 20,648
------------
112,899
------------
COMMERCIAL BANKS -- 0.4%
90,000 PNC Bank N.A., 4.875%, 9/21/17 80,959
30,000 PNC Bank N.A., 6.00%, 12/7/17 28,969
30,000 Wells Fargo & Co., 4.375%, 1/31/13 29,891
------------
139,819
------------
COMMERCIAL SERVICES & SUPPLIES -- 0.1%
20,000 Pitney Bowes, Inc., 5.75%, 9/15/17 20,401
------------
COMPUTERS & PERIPHERALS -- 0.2%
60,000 Hewlett-Packard Co., 4.50%, 3/1/13 60,963
------------
DIVERSIFIED FINANCIAL SERVICES -- 1.7%
170,000 Bank of America Corp., 4.375%, 12/1/10(2) 173,197
60,000 Bank of America N.A., 5.30%, 3/15/17 59,742
75,000 Bank of America N.A., 6.00%, 10/15/36(2) 71,987
100,000 Citigroup Inc., 5.00%, 9/15/14(2) 94,394
50,000 General Electric Capital Corp., 5.625%, 9/15/17 51,294
------
16
Core Plus
Principal Amount Value
$ 20,000 John Deere Capital Corp., 4.50%, 4/3/13 $ 19,967
60,000 John Deere Capital Corp., 5.50%, 4/13/17 61,729
50,000 Pricoa Global Funding I, 5.40%, 10/18/12 (Acquired
10/11/07, Cost $49,901)(3) 52,900
------------
585,210
------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.9%
70,000 AT&T Inc., 6.80%, 5/15/36(2) 72,174
20,000 Qwest Corp., 7.875%, 9/1/11 20,050
80,000 Qwest Corp., 7.50%, 10/1/14 78,400
30,000 Telefonica Emisiones SAU, 7.05%, 6/20/36 31,473
30,000 Verizon Communications Inc., 5.55%, 2/15/16 29,903
30,000 Verizon Communications Inc., 5.50%, 2/15/18 29,285
40,000 Verizon Communications Inc., 6.40%, 2/15/38 39,080
------------
300,365
------------
ELECTRIC UTILITIES -- 0.5%
60,000 Cleveland Electric Illuminating Co. (The), 5.70%,
4/1/17 58,357
20,000 Florida Power Corp., 6.35%, 9/15/37 20,859
70,000 Southern California Edison Co., 5.625%, 2/1/36 67,322
------------
146,538
------------
ELECTRICAL EQUIPMENT -- 0.2%
50,000 Rockwell Automation, Inc., 6.25%, 12/1/37 51,471
------------
FOOD & STAPLES RETAILING -- 0.9%
30,000 CVS Caremark Corp., 5.75%, 6/1/17 30,542
70,000 Kroger Co. (The), 5.00%, 4/15/13(5) 70,496
50,000 SYSCO Corp., 4.20%, 2/12/13 50,800
95,000 Wal-Mart Stores, Inc., 5.875%, 4/5/27(5) 94,678
30,000 Wal-Mart Stores, Inc., 6.50%, 8/15/37 31,606
------------
278,122
------------
FOOD PRODUCTS -- 0.6%
30,000 Cargill Inc., 5.20%, 1/22/13 (Acquired 1/16/08,
Cost $29,975)(3) 30,308
60,000 General Mills, Inc., 5.65%, 9/10/12 62,489
20,000 Kellogg Co., 6.60%, 4/1/11 21,591
Principal Amount Value
$ 50,000 Kellogg Co., 5.125%, 12/3/12 $ 51,778
40,000 Kraft Foods Inc., 6.00%, 2/11/13 41,415
------------
207,581
------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.2%
50,000 Baxter International Inc., 5.90%, 9/1/16 52,899
20,000 Baxter International Inc., 6.25%, 12/1/37 20,532
------------
73,431
------------
HOTELS, RESTAURANTS & LEISURE -- 0.4%
60,000 McDonald's Corp., 5.35%, 3/1/18 60,895
20,000 McDonald's Corp., 6.30%, 10/15/37 20,614
50,000 Yum! Brands, Inc., 6.875%, 11/15/37 47,984
------------
129,493
------------
HOUSEHOLD PRODUCTS -- 0.2%
20,000 Kimberly-Clark Corp., 6.125%, 8/1/17 21,667
30,000 Procter & Gamble Co. (The), 5.55%, 3/5/37 30,063
------------
51,730
------------
INDUSTRIAL CONGLOMERATES -- 0.9%
250,000 General Electric Co., 5.00%, 2/1/13(2) 259,343
20,000 General Electric Co., 5.25%, 12/6/17 20,025
------------
279,368
------------
INSURANCE -- 0.6%
60,000 Hartford Financial Services Group Inc. (The),
5.375%, 3/15/17 58,286
30,000 Hartford Financial Services Group Inc. (The),
6.30%, 3/15/18(5) 30,134
40,000 Lincoln National Corp., 6.30%, 10/9/37 36,272
50,000 Prudential Financial, Inc., 6.00%, 12/1/17 50,524
20,000 Travelers Companies, Inc. (The), 6.25%, 6/15/37 18,597
------------
193,813
------------
IT SERVICES -- 0.4%
60,000 Computer Sciences Corp., 5.50%, 3/15/13 (Acquired
2/27/08, Cost $59,702)(3) 60,292
60,000 International Business Machines Corp., 5.70%,
9/14/17 63,014
------------
123,306
------------
------
17
Core Plus
Principal Amount Value
MACHINERY -- 0.7%
$ 20,000 Atlas Copco AB, 5.60%, 5/22/17 (Acquired 5/15/07,
Cost $19,991)(3) $ 19,998
20,000 Caterpillar Financial Services Corp., 4.85%, 12/7/12 20,484
130,000 Caterpillar Financial Services Corp., 5.45%,
4/15/18(2) 132,607
50,000 SPX Corp., 7.625%, 12/15/14 (Acquired 12/10/07,
Cost $50,000)(3)(5) 51,563
------------
224,652
------------
MEDIA -- 0.9%
100,000 Comcast Corp., 5.90%, 3/15/16(2) 99,371
70,000 Rogers Cable Inc., 6.25%, 6/15/13 73,198
60,000 Time Warner Cable Inc., 5.40%, 7/2/12 59,029
50,000 Time Warner Inc., 5.50%, 11/15/11 49,701
------------
281,299
------------
METALS & MINING -- 0.3%
50,000 Freeport-McMoRan Copper & Gold, Inc., 8.25%, 4/1/15 52,875
50,000 Freeport-McMoRan Copper & Gold, Inc., 8.375%, 4/1/17 53,188
------------
106,063
------------
MULTI-UTILITIES -- 0.8%
20,000 CenterPoint Energy Resources Corp., 6.125%, 11/1/17 20,471
40,000 CenterPoint Energy Resources Corp., 6.25%, 2/1/37 37,441
90,000 Consolidated Edison Co. of New York, Inc., Series
2006 C, 5.50%, 9/15/16(2) 92,754
50,000 NSTAR Electric Co., 5.625%, 11/15/17 52,555
20,000 Pacific Gas and Electric Co., 5.80%, 3/1/37 18,991
20,000 Pacific Gas and Electric Co., 6.35%, 2/15/38 20,333
------------
242,545
------------
MULTILINE RETAIL -- 0.3%
20,000 Federated Retail Holdings, Inc., 5.35%, 3/15/12 19,080
20,000 Kohl's Corp., 6.875%, 12/15/37 17,750
60,000 Macy's Retail Holdings, Inc., 5.875%, 1/15/13 57,794
------------
94,624
------------
Principal Amount Value
OIL, GAS & CONSUMABLE FUELS -- 1.6%
$ 20,000 Canadian Natural Resources Ltd., 5.70%, 5/15/17 $ 20,268
20,000 Canadian Natural Resources Ltd., 6.75%, 2/1/39(5) 20,482
50,000 Enbridge Energy Partners, L.P., 6.50%, 4/15/18
(Acquired 3/31/08, Cost $49,733)(3) 49,733
160,000 Enterprise Products Operating L.P., 4.95%, 6/1/10(2) 163,403
30,000 Enterprise Products Operating L.P., 6.30%, 9/15/17 30,221
40,000 Nexen Inc., 6.40%, 5/15/37 38,438
150,000 Premcor Refining Group Inc. (The), 6.125%, 5/1/11(2) 158,910
30,000 Tesoro Corp., 6.25%, 11/1/12 28,425
30,000 Tesoro Corp., 6.50%, 6/1/17 27,000
10,000 TransCanada PipeLines Ltd., 6.20%, 10/15/37 9,677
------------
546,557
------------
PHARMACEUTICALS -- 0.9%
90,000 Abbott Laboratories, 5.875%, 5/15/16(2) 96,154
20,000 Abbott Laboratories, 6.15%, 11/30/37 20,737
100,000 AstraZeneca plc, 5.40%, 9/15/12(2) 105,640
40,000 AstraZeneca plc, 5.90%, 9/15/17 42,375
60,000 Wyeth, 5.95%, 4/1/37 58,823
------------
323,729
------------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.3%
90,000 ProLogis, 5.625%, 11/15/16 82,030
------------
ROAD & RAIL -- 0.1%
30,000 Union Pacific Corp., 5.75%, 11/15/17 30,452
------------
SOFTWARE -- 0.1%
40,000 Intuit Inc., 5.75%, 3/15/17 38,843
------------
SPECIALTY RETAIL -- 0.8%
250,000 Home Depot, Inc. (The), 4.625%, 8/15/10(2) 250,584
20,000 Lowe's Companies, Inc., 5.60%, 9/15/12 20,980
------------
271,564
------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.2%
50,000 Vodafone Group plc, 5.625%, 2/27/17 48,718
------------
TOTAL CORPORATE BONDS
(Cost $5,670,793) 5,702,681
------------
------
18
Core Plus
Principal Amount Value
U.S. Treasury Securities -- 8.8%
$ 27,000 U.S. Treasury Bonds, 8.125%, 8/15/21(5) $ 38,334
1,281,987 U.S. Treasury Inflation Indexed Bonds, 2.375%,
1/15/27(2)(5) 1,398,268
100,740 U.S. Treasury Inflation Indexed Bonds, 1.75%,
1/15/28(2)(5) 99,804
539,939 U.S. Treasury Inflation Indexed Notes, 3.00%,
7/15/12(2)(5) 605,069
342,657 U.S. Treasury Inflation Indexed Notes, 2.00%,
1/15/14(2)(5) 370,873
302,220 U.S. Treasury Inflation Indexed Notes, 1.625%,
1/15/18(2)(5) 316,977
------------
TOTAL U.S. TREASURY SECURITIES
(Cost $2,780,799) 2,829,325
------------
U.S. Government Agency Securities -- 8.4%
700,000 FHLMC, 2.875%, 4/30/10(2)(5) 708,485
900,000 FHLMC, 5.625%, 3/15/11(2)(5) 973,554
1,000,000 FNMA, 2.50%, 4/9/10(2)(5) 1,004,868
------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES
(Cost $2,664,965) 2,686,907
------------
Municipal Securities -- 4.8%
300,000 California Department of Water Resources Power
Supply Rev., Series 2002 A, 5.125%, 5/1/12,
Prerefunded at 101% of Par(2)(6) 329,553
400,000 Clark County School District GO, Series 2004 D,
(Building Bonds), 5.00%, 12/15/14, Prerefunded at
100% of Par (MBIA)(2)(6) 442,004
400,000 Clark County School District GO, Series 2005 C,
(Building Bonds), 5.00%, 12/15/15, Prerefunded at
100% of Par (FSA)(2)(6) 445,512
300,000 Massachusetts GO, Series 2005 C, 5.00%, 9/1/15,
Prerefunded at 100% of Par(2)(6) 333,342
------------
TOTAL MUNICIPAL SECURITIES
(Cost $1,515,955) 1,550,411
------------
Asset-Backed Securities(1) -- 1.9%
100,000 CNH Equipment Trust, Series 2007 C, Class A3A SEQ,
5.21%, 12/15/11(2) 101,640
353,092 FHLMC, Series T7, Class A5 SEQ, 7.27%, 8/25/28 357,645
Principal Amount Value
$ 99,449 SLM Student Loan Trust, Series 2007-8, Class A1,
VRN, 3.56%, 4/25/08, resets quarterly off the
3-month LIBOR plus 0.23% with no caps $ 98,101
41,169 Soundview Home Equity Loan Trust, Series 2006-3,
Class A1, VRN, 2.64%, 4/25/08, resets monthly off
the 1-month LIBOR plus 0.04% with no caps 40,916
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $592,802) 598,302
------------
Temporary Cash Investments -- 6.9%
2,234,000 FNMA Discount Notes, 1.35%, 4/1/08(2)(7)
(Cost $2,234,000) 2,234,000
------------
Temporary Cash Investments - Securities Lending Collateral(8) -- 13.3%
150,004 Bancaja US Debt, SAu, VRN, 4.55%, 4/10/08, resets
quarterly off the 3-month LIBOR plus 0.05% with no
caps 149,959
149,993 BASF AG, VRN, 3.89%, 4/21/08, resets quarterly off
the 3-month LIBOR minus 0.01% with no caps 149,887
99,963 K2 (USA) LLC, VRN, 2.37%, 4/1/08, resets quarterly
off the Federal Reserve Prime Loan Rate minus 2.91%
with no caps 98,124
149,944 Links Finance LLC, VRN, 2.37%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps 146,394
150,000 Merrill Lynch & Co., Inc., VRN, 2.42%, 4/1/08,
resets quarterly off the Federal Reserve Prime Loan
Rate minus 2.83% with no caps 146,818
150,165 Nationwide Building Society, VRN, 3.00%, 6/9/08,
resets quarterly off the 3-month LIBOR plus 0.13%
with no caps 149,885
149,932 Tango Finance Corp., VRN, 2.38%, 4/1/08, resets
quarterly off the Federal Reserve Prime Loan Rate
minus 2.91% with no caps 147,728
------
19
Core Plus Value
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery
value $851,054) $ 851,000
Repurchase Agreement, BNP Paribas, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value
$825,207) 825,154
Repurchase Agreement, Deutsche Bank AG, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.25%, dated 3/31/08, due 4/1/08 (Delivery
value $800,050) 800,000
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in
a pooled account at the lending agent), 2.15%, dated 3/31/08, due
4/1/08 (Delivery value $805,343) 805,295
------------
TOTAL TEMPORARY CASH INVESTMENTS - SECURITIES
LENDING COLLATERAL
(Cost $4,281,460) 4,270,244
------------
TOTAL INVESTMENT SECURITIES -- 121.6%
(Cost $38,764,278) 39,128,259
------------
OTHER ASSETS AND LIABILITIES -- (21.6)% (6,961,865)
------------
TOTAL NET ASSETS -- 100.0% $ 32,166,394
============
Futures Contracts
Underlying Face Unrealized
Contracts Purchased Expiration Date Amount at Value Gain (Loss)
2 U.S. Long Bond June 2008 $ 237,594 $ 5,777
49 U.S. Treasury
2-Year Notes June 2008 10,518,156 77,289
49 U.S. Treasury
5-Year Notes June 2008 5,597,485 60,659
------------ ------------
$16,353,235 $143,725
============ ============
Underlying Face Unrealized
Contracts Sold Expiration Date Amount at Value Gain (Loss)
27 U.S. Treasury
10-Year Notes June 2008 $3,211,734 $(79,825)
============= ============
------
20
Core Plus
Swap Agreements
Notional Expiration Date Unrealized
Amount Description of Agreement Gain (Loss)
CREDIT DEFAULT
$ 600,000 Pay quarterly a fixed rate equal June 2012 $ 29,033
to 0.35% multiplied by the
notional amount and receive from
Barclays Bank plc upon each
default event of one of the
issues of Dow Jones CDX N.A.
Investment Grade 8, par value of
the proportional notional amount.
1,800,000 Pay semiannually a fixed rate June 2012 62,872
equal to 1.25% multiplied by the
notional amount and receive from
Barclays Bank plc upon each
default event of one of the
issues of Dow Jones CDX Emerging
Markets 7, par value of the
proportional notional amount.
120,000 Pay quarterly a fixed rate equal December 2012 483
to 0.40% multiplied by the
notional amount and receive from
Bank of America N.A. upon each
default event of FHLMC, par
value of the proportional
notional amount of FHLMC, VRN,
5.08%, 2/7/11.
200,000 Pay quarterly a fixed rate equal December 2012 8,394
to 0.70% multiplied by the
notional amount and receive from
Morgan Stanley Capital Services,
Inc. upon each default event of
Citigroup Inc., par value of the
proportional notional amount of
Citigroup Inc., 6.50%, 1/18/11.
60,000 Pay quarterly a fixed rate equal December 2012 1,337
to 2.45% multiplied by the
notional amount and receive from
Bank of America N.A. upon each
default event of Toll Brothers,
Inc., par value of the
proportional notional amount of
Toll Brothers Finance Corp.,
6.875%, 11/15/12.
60,000 Pay quarterly a fixed rate equal December 2012 407
to 2.85% multiplied by the
notional amount and receive from
Barclays Bank plc upon each
default event of Toll Brothers,
Inc., par value of the
proportional notional amount of
Toll Brothers Finance Corp.,
6.875%, 11/15/12.
20,000 Pay quarterly a fixed rate equal March 2013 248
to 0.70% multiplied by the
notional amount and receive from
Barclays Bank plc upon each
default event of Rohm & Haas
Company, par value of the
proportional notional amount of
Rohm & Haas Company, 7.85%,
7/15/29.
250,000 Pay quarterly a fixed rate equal March 2017 8,168
to 0.12% multiplied by the
notional amount and receive from
Barclays Bank plc upon each
default event of Pfizer Inc.,
par value of the proportional
notional amount of Pfizer Inc.,
4.65%, 3/1/18.
400,000 Pay quarterly a fixed rate equal September 2017 27,452
to 0.69% multiplied by the
notional amount and receive from
Barclays Bank plc upon each
default event of JPMorgan Chase
& Co., par value of the
proportional notional amount of
JPMorgan Chase & Co., 6.75%,
2/1/11.
------------
$138,394
============
------
21
Core Plus
Notes to Schedule of Investments
CDX = Credit Derivative Indexes
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance, Inc.
GO = General Obligation
LB-UBS = Lehman Brothers Inc. -- UBS AG
LIBOR = London Interbank Offered Rate
MBIA = MBIA Insurance Corporation
resets = The frequency with which a security's coupon changes, based on
current market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon will
vary significantly from current market rates.
SEQ = Sequential Payer
STRIPS = Separate Trading of Registered Interest and Principal of Securities
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective March 31, 2008.
(1) Final maturity indicated, unless otherwise noted.
(2) Security, or a portion thereof, has been segregated for forward
commitments, futures contracts and/or swap agreements.
(3) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at March 31, 2008 was $504,351, which
represented 1.6% of total net assets.
(4) Forward commitment.
(5) Security, or a portion thereof, was on loan as of March 31, 2008.
(6) Escrowed to maturity in U.S. government securities or state and local
government securities.
(7) The rate indicated is the yield to maturity at purchase.
(8) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
------
22
SHAREHOLDER FEE EXAMPLES (UNAUDITED)
Fund shareholders may incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments and redemption/exchange
fees; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in your fund
and to compare these costs with the ongoing cost of investing in other mutual
funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2007 to March 31, 2008.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or
Institutional Class shares of the American Century Diversified Bond Fund, in
an American Century account (i.e., not a financial intermediary or retirement
plan account), American Century may charge you a $12.50 semiannual account
maintenance fee if the value of those shares is less than $10,000. We will
redeem shares automatically in one of your accounts to pay the $12.50 fee. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. PERSONAL ACCOUNTS
include individual accounts, joint accounts, UGMA/UTMA accounts, personal
trusts, Coverdell Education Savings Accounts and IRAs (including traditional,
Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement
accounts. If you have only business, business retirement, employer-sponsored
or American Century Brokerage accounts, you are currently not subject to this
fee. We will not charge the fee as long as you choose to manage your accounts
exclusively online. If you are subject to the Account Maintenance Fee, your
account value could be reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is
not the actual return of a fund's share class. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
------
23
Beginning Ending
Account Account Expenses Paid
Value Value During Period* Annualized
10/1/07 3/31/08 10/1/07 - 3/31/08 Expense Ratio*
Short Duration
ACTUAL
Investor Class $1,000 $1,044.60 $3.17 0.62%
Institutional
Class $1,000 $1,045.70 $2.15 0.42%
A Class $1,000 $1,043.30 $4.44 0.87%
B Class $1,000 $1,039.40 $8.26 1.62%
C Class $1,000 $1,039.40 $8.26 1.62%
R Class $1,000 $1,042.00 $5.72 1.12%
HYPOTHETICAL
Investor Class $1,000 $1,021.90 $3.13 0.62%
Institutional
Class $1,000 $1,022.90 $2.12 0.42%
A Class $1,000 $1,020.65 $4.39 0.87%
B Class $1,000 $1,016.90 $8.17 1.62%
C Class $1,000 $1,016.90 $8.17 1.62%
R Class $1,000 $1,019.40 $5.65 1.12%
Core Plus
ACTUAL
Investor Class $1,000 $1,072.60 $3.47 0.67%
Institutional
Class $1,000 $1,073.70 $2.44 0.47%
A Class $1,000 $1,071.30 $4.76 0.92%
B Class $1,000 $1,067.30 $8.63 1.67%
C Class $1,000 $1,067.30 $8.63 1.67%
R Class $1,000 $1,069.90 $6.05 1.17%
HYPOTHETICAL
Investor Class $1,000 $1,021.65 $3.39 0.67%
Institutional
Class $1,000 $1,022.65 $2.38 0.47%
A Class $1,000 $1,020.40 $4.65 0.92%
B Class $1,000 $1,016.65 $8.42 1.67%
C Class $1,000 $1,016.65 $8.42 1.67%
R Class $1,000 $1,019.15 $5.91 1.17%
*Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
------
24
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
Short Duration Core Plus
ASSETS
Investment securities, at value (cost of
$15,407,418 and $34,482,818,
respectively) -- including $1,928,666
and $4,191,970 of securities
on loan, respectively $15,566,565 $34,858,015
Investments made with cash collateral received
for securities on loan,
at value (cost of $1,965,156 and
$4,281,460, respectively) 1,965,156 4,270,244
------------- ------------
Total investment securities, at value
(cost of $17,372,574 and $38,764,278,
respectively) 17,531,721 39,128,259
Cash 3,763 10,092
Receivable for investments sold -- 9,865
Receivable for capital shares sold 9,771 637,420
Receivable for variation margin
on futures contracts -- 10,620
Unrealized appreciation on swap agreements 37,745 138,394
Interest receivable 70,957 191,545
------------- ------------
17,653,957 40,126,195
------------- ------------
LIABILITIES
Payable for collateral received
for securities on loan 1,965,156 4,281,460
Payable for investments purchased 350,891 3,646,509
Payable for variation margin
on futures contracts 1,661 --
Accrued management fees 7,365 16,485
Distribution fees payable 3,014 6,582
Service fees (and distribution fees --
A Class and R Class) payable 2,666 5,298
Dividends payable 3,969 3,467
------------- ------------
2,334,722 7,959,801
------------- ------------
NET ASSETS $15,319,235 $32,166,394
============= ============
See Notes to Financial Statements.
------
25
MARCH 31, 2008
Short Duration Core Plus
NET ASSETS CONSIST OF:
Capital paid in $14,974,660 $30,871,905
Undistributed net investment income 23,226 234,098
Undistributed net realized gain
on investment transactions 124,605 482,073
Net unrealized appreciation on investments 196,744 578,318
------------- ------------
$15,319,235 $32,166,394
============= ============
INVESTOR CLASS
Net assets $2,301,097 $5,830,465
Shares outstanding 224,207 556,565
Net asset value per share $10.26 $10.48
INSTITUTIONAL CLASS
Net assets $1,818,024 $4,637,684
Shares outstanding 177,139 442,705
Net asset value per share $10.26 $10.48
A CLASS
Net assets $4,558,686 $6,415,144
Shares outstanding 444,175 612,377
Net asset value per share $10.26 $10.48
Maximum offering price (net asset value
divided by 0.9775 and 0.9550, respectively) $10.50 $10.97
B CLASS
Net assets $1,833,978 $4,613,868
Shares outstanding 178,694 440,431
Net asset value per share $10.26 $10.48
C CLASS
Net assets $3,006,241 $6,074,050
Shares outstanding 292,913 579,817
Net asset value per share $10.26 $10.48
R CLASS
Net assets $1,801,209 $4,595,183
Shares outstanding 175,501 438,647
Net asset value per share $10.26 $10.48
See Notes to Financial Statements.
------
26
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
Short Duration Core Plus
INVESTMENT INCOME (LOSS)
INCOME:
Interest $598,520 $1,353,615
Securities lending, net 8,099 12,390
------------ ------------
606,619 1,366,005
------------ ------------
EXPENSES:
Management fees 70,629 168,663
Distribution fees:
B Class 13,090 32,378
C Class 17,653 34,018
Service fees:
B Class 4,363 10,793
C Class 5,884 11,339
Distribution and service fees:
A Class 6,539 11,485
R Class 8,668 21,645
Trustees' fees and expenses 453 1,034
Other expenses 90 602
------------ ------------
127,369 291,957
------------ ------------
NET INVESTMENT INCOME (LOSS) 479,250 1,074,048
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
Investment transactions 161,666 321,822
Futures and swaps transactions 12,324 522,717
------------ ------------
173,990 844,539
------------ ------------
CHANGE IN NET UNREALIZED APPRECIATION
(DEPRECIATION) ON:
Investments 124,434 323,404
Futures and swaps 37,681 199,826
------------ ------------
162,115 523,230
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 336,105 1,367,769
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $815,355 $2,441,817
============ ============
See Notes to Financial Statements.
------
27
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MARCH 31, 2008 AND PERIOD ENDED MARCH 31, 2007
Short Duration Core Plus
Increase (Decrease)
in Net Assets 2008 2007(1) 2008 2007(1)
OPERATIONS
Net investment
income (loss) $ 479,250 $ 134,977 $ 1,074,048 $ 332,633
Net realized
gain (loss) 173,990 (34,486) 844,539 (154,327)
Change in net unrealized
appreciation
(depreciation) 162,115 32,981 523,230 48,430
----------- ----------- ----------- -----------
Net increase (decrease)
in net assets resulting
from operations 815,355 133,472 2,441,817 226,736
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net
investment income:
Investor Class (80,865) (24,692) (197,085) (60,762)
Institutional Class (79,397) (25,741) (197,892) (63,536)
A Class (106,515) (23,233) (187,899) (57,289)
B Class (58,582) (19,059) (144,565) (46,893)
C Class (78,432) (19,059) (151,375) (46,893)
R Class (66,859) (21,841) (166,575) (53,822)
----------- ----------- ----------- -----------
Decrease in net assets
from distributions (470,650) (133,625) (1,045,391) (329,195)
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease)
in net assets from
capital share transactions 4,831,179 10,143,504 5,539,497 25,332,930
----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN
NET ASSETS 5,175,884 10,143,351 6,935,923 25,230,471
NET ASSETS
Beginning of period 10,143,351 -- 25,230,471 --
----------- ----------- ----------- -----------
End of period $15,319,235 $10,143,351 $32,166,394 $25,230,471
=========== =========== =========== ===========
Undistributed net
investment income $23,226 -- $234,098 --
=========== =========== =========== ===========
(1) November 30, 2006 (fund inception) through March 31, 2007.
See Notes to Financial Statements.
------
28
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. Short Duration Fund (Short Duration) and Core
Plus Fund (Core Plus) (the funds) are two funds in a series issued by the
trust. The funds are diversified under the 1940 Act. The funds' investment
objective is to seek to maximize total return by investing in non-money market
debt securities. As a secondary objective, the funds seek a high level of
income. The following is a summary of the funds' significant accounting
policies.
MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the
Institutional Class, the A Class, the B Class, the C Class and the R Class.
The A Class may incur an initial sales charge. The A Class, B Class and C
Class may be subject to a contingent deferred sales charge. The share classes
differ principally in their respective sales charges and distribution and
shareholder servicing expenses and arrangements. All shares of the funds
represent an equal pro rata interest in the net assets of the class to which
such shares belong, and have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except for class specific expenses
and exclusive rights to vote on matters affecting only individual classes.
Income, non-class specific expenses, and realized and unrealized capital gains
and losses of the funds are allocated to each class of shares based on their
relative net assets. All classes of the funds commenced sale on November 30,
2006, the funds' inception date.
SECURITY VALUATIONS -- Debt securities maturing in greater than 60 days are
valued at current market value as provided by a commercial pricing service or
at the mean of the most recent bid and asked prices. Debt securities maturing
within 60 days may be valued at cost, plus or minus any amortized discount or
premium. Discount notes may be valued through a commercial pricing service or
at amortized cost, which approximates fair value. Securities traded on foreign
securities exchanges and over-the-counter markets are normally completed
before the close of business on days that the New York Stock Exchange (the
Exchange) is open and may also take place on days when the Exchange is not
open. If an event occurs after the value of a security was established but
before the net asset value per share was determined that was likely to
materially change the net asset value, that security would be valued as
determined in accordance with procedures adopted by the Board of Trustees. If
the funds determine that the market price of a portfolio security is not
readily available, or that the valuation methods mentioned above do not
reflect the security's fair value, such security is valued as determined by
the Board of Trustees or its designee, in accordance with procedures adopted
by the Board of Trustees, if such determination would materially impact a
fund's net asset value. Certain other circumstances may cause the funds to use
alternative procedures to value a security such as: a security has been
declared in default; trading in a security has been halted during the trading
day; or there is a foreign market holiday and no trading will commence.
SECURITY TRANSACTIONS -- For financial reporting purposes, security
transactions are accounted for as of the trade date. Net realized gains and
losses are determined on the identified cost basis, which is also used for
federal income tax purposes.
INVESTMENT INCOME -- Interest income less foreign taxes withheld, if any, is
recorded on the accrual basis and includes paydown gain (loss) and accretion
of discounts and amortization of premiums.
SECURITIES ON LOAN -- The funds may lend portfolio securities through their
lending agent to certain approved borrowers in order to earn additional
income. The income earned, net of any rebates or fees, is included in the
Statement of Operations. The funds continue to recognize any gain or loss in
the market price of the securities loaned and record any interest earned or
dividends declared.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially
expressed in foreign currencies are translated into U.S. dollars at prevailing
exchange rates at period end. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are translated at the rates
of exchange prevailing on the respective dates of such transactions. For
assets and liabilities, other than investments in securities, net realized and
unrealized gains and losses from foreign currency translations arise from
changes in currency exchange rates.
------
29
Net realized and unrealized foreign currency exchange gains or losses
occurring during the holding period of investment securities are a component
of realized gain (loss) on investment transactions and unrealized appreciation
(depreciation) on investments, respectively. Certain countries may impose
taxes on the contract amount of purchases and sales of foreign currency
contracts in their currency. The funds record the foreign tax expense, if any,
as a reduction to the net realized gain (loss) on foreign currency
transactions.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The funds may engage in securities
transactions on a when-issued or forward commitment basis. In these
transactions, the securities' prices and yields are fixed on the date of the
commitment. In a when-issued transaction, the payment and delivery are
scheduled for a future date and during this period, securities are subject to
market fluctuations. In a forward commitment transaction, the funds may sell a
security and at the same time make a commitment to purchase the same security
at a future date at a specified price. Conversely, the funds may purchase a
security and at the same time make a commitment to sell the same security at a
future date at a specified price. These types of transactions are executed
simultaneously in what are known as "roll" transactions. The funds will
segregate cash, cash equivalents or other appropriate liquid securities on
their records in amounts sufficient to meet the purchase price. The funds
account for "roll" transactions as purchases and sales; as such these
transactions may increase portfolio turnover.
FUTURES CONTRACTS -- The funds may enter into futures contracts in order to
manage the funds' exposure to changes in market conditions. One of the risks
of entering into futures contracts is the possibility that the change in value
of the contract may not correlate with the changes in value of the underlying
securities. Upon entering into a futures contract, the funds are required to
deposit either cash or securities in an amount equal to a certain percentage
of the contract value (initial margin). Subsequent payments (variation margin)
are made or received daily, in cash, by the funds. The variation margin is
equal to the daily change in the contract value and is recorded as unrealized
gains and losses. The funds recognize a realized gain or loss when the
contract is closed or expires. Net realized and unrealized gains or losses
occurring during the holding period of futures contracts are a component of
realized gain (loss) on futures and swaps transactions and unrealized
appreciation (depreciation) on futures and swaps, respectively.
SWAP AGREEMENTS -- The funds may enter into swap agreements in order to
attempt to obtain or preserve a particular return or spread at a lower cost
than obtaining a return or spread through purchases and/or sales of
instruments in other markets; protect against currency fluctuations; attempt
to manage duration to protect against any increase in the price of securities
the funds anticipate purchasing at a later date; or gain exposure to certain
markets in the most economical way possible. A basic swap agreement is a
contract in which two parties agree to exchange the returns earned or realized
on predetermined investments or instruments. Credit default swaps enable an
investor to buy/sell protection against a credit event of a specific issuer.
The seller of credit protection against a security or basket of securities
receives an up-front or periodic payment to compensate against potential
default events. The funds may enhance returns by selling protection or attempt
to mitigate credit risk by buying protection. The funds will segregate cash,
cash equivalents or other appropriate liquid securities on their records in
amounts sufficient to meet requirements. Unrealized gains are reported as an
asset and unrealized losses are reported as a liability on the Statement of
Assets and Liabilities. Swap agreements are valued daily and changes in value,
including the periodic amounts of interest to be paid or received on swaps,
are recorded as unrealized appreciation (depreciation) on futures and swaps.
Realized gain or loss is recorded upon receipt or payment of a periodic
settlement or termination of swap agreements. The risks of entering into swap
agreements include the possible lack of liquidity, failure of the counterparty
to meet its obligations, and that there may be unfavorable changes in the
underlying investments and instruments.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at
cost. Each fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a
manner sufficient to enable each fund to obtain those securities in the event
of a default under the repurchase agreement. ACIM monitors, on a daily basis,
the securities transferred to ensure the value, including accrued interest, of
the securities under each repurchase agreement is equal to or greater than
amounts owed to each fund under each repurchase agreement.
------
30
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, each fund, along with other registered
investment companies having management agreements with ACIM or American
Century Global Investment Management, Inc. (ACGIM) , may transfer uninvested
cash balances into a joint trading account. These balances are invested in one
or more repurchase agreements that are collateralized by U.S. Treasury or
Agency obligations.
INCOME TAX STATUS -- It is each fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. At this time, management has not identified any uncertain tax
positions for which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next twelve months.
Accordingly, no provision has been made for federal or state income taxes.
Interest and penalties associated with any federal or state income tax
obligations, if any, are recorded as interest expense.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income for
the funds are declared daily and paid monthly. Distributions from net realized
gains for the funds, if any, are generally declared and paid annually.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the funds. In addition, in the normal course of
business, the funds enter into contracts that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the
funds. The risk of material loss from such claims is considered by management
to be remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America,
which may require management to make certain estimates and assumptions at the
date of the financial statements. Actual results could differ from these
estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
ACIM, under which ACIM provides the funds with investment advisory and
management services in exchange for a single, unified management fee (the fee)
per class. The Agreement provides that all expenses of the funds, except
brokerage commissions, taxes, interest, fees and expenses of those trustees
who are not considered "interested persons" as defined in the 1940 Act
(including counsel fees) and extraordinary expenses, will be paid by ACIM. The
fee is computed and accrued daily based on the daily net assets of each
specific class of shares of each fund and paid monthly in arrears. The fee
consists of (1) an Investment Category Fee based on the daily net assets of
the funds and certain other accounts managed by the investment advisor that
are in the same broad investment category as each fund and (2) a Complex Fee
based on the assets of all the funds in the American Century family of funds.
The rates for the Investment Category Fee range from 0.2925% to 0.4100% for
Short Duration and from 0.3425% to 0.4600% for Core Plus. The rates for the
Complex Fee (Investor Class, A Class, B Class, C Class and R Class) range from
0.2500% to 0.3100%. The Institutional Class is 0.2000% less at each point
within the Complex Fee range.
The effective annual management fee for each class of each fund for the year
ended March 31, 2008, was as follows:
Investor, A, B, C & R Institutional
Short Duration 0.62% 0.42%
Core Plus 0.67% 0.47%
------
31
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a separate
Master Distribution and Individual Shareholder Services Plan for each of the A
Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule
12b-1 of the 1940 Act. The plans provide that the A Class and the R Class will
pay American Century Investment Services, Inc. (ACIS) an annual distribution
and service fee of 0.25% for the A Class and 0.50% for the R Class. The plans
provide that the B Class and C Class will each pay ACIS an annual distribution
fee of 0.75% and service fee of 0.25%. The fees are computed and accrued daily
based on each class's daily net assets and paid monthly in arrears. The
distribution fee provides compensation for expenses incurred in connection
with distributing shares of the classes including, but not limited to,
payments to brokers, dealers, and financial institutions that have entered
into sales agreements with respect to shares of the funds. The service fee
provides compensation for individual shareholder services rendered by
broker/dealers or other independent financial intermediaries. Fees incurred
under the plans during the year ended March 31, 2008, are detailed in the
Statement of Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also
officers and/or directors, and, as a group, controlling stockholders of
American Century Companies, Inc. (ACC), the parent of the trust's investment
advisor, ACIM, the distributor of the trust, ACIS, and the trust's transfer
agent, American Century Services, LLC. ACIM owns 71% and 86% of the
outstanding shares of Short Duration and Core Plus, respectively.
The funds have a securities lending agreement with JPMorgan Chase Bank
(JPMCB). Prior to December 12, 2007, the funds had a bank line of credit
agreement with JPMCB. JPMCB is a custodian of the funds and a wholly owned
subsidiary of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
March 31, 2008, were as follows:
Short Duration Core Plus
PURCHASES
U.S. Treasury & Government Agency Obligations $12,333,262 $59,416,678
Investment securities other than U.S. Treasury &
Government Agency Obligations $3,639,752 $8,744,692
PROCEEDS FROM SALES
U.S. Treasury & Government Agency Obligations $10,472,347 $61,114,797
Investment securities other than U.S. Treasury &
Government Agency Obligations $1,179,711 $4,343,449
------
32
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows (unlimited number of
shares authorized):
Year ended Period ended
March 31, 2008 March 31, 2007(1)
Shares Amount Shares Amount
Short Duration
INVESTOR CLASS
Sold 57,076 $ 579,351 167,571 $ 1,675,623
Issued in reinvestment of
distributions 7,986 80,459 2,469 24,692
Redeemed (10,895) (110,404) -- --
---------- ----------- ---------- -----------
54,167 549,406 170,040 1,700,315
---------- ----------- ---------- -----------
INSTITUTIONAL CLASS
Sold -- -- 166,694 1,666,883
Issued in reinvestment of
distributions 7,871 79,024 2,574 25,741
---------- ----------- ---------- -----------
7,871 79,024 169,268 1,692,624
---------- ----------- ---------- -----------
A CLASS
Sold 502,134 5,065,479 166,692 1,666,863
Issued in reinvestment of
distributions 8,332 84,054 2,323 23,233
Redeemed (235,306) (2,361,727) -- --
---------- ----------- ---------- -----------
275,160 2,787,806 169,015 1,690,096
---------- ----------- ---------- -----------
B CLASS
Sold 7,497 75,250 166,687 1,666,829
Issued in reinvestment of
distributions 5,800 58,387 1,906 19,059
Redeemed (3,196) (31,990) -- --
---------- ----------- ---------- -----------
10,101 101,647 168,593 1,685,888
---------- ----------- ---------- -----------
C CLASS
Sold 126,956 1,274,567 166,687 1,666,829
Issued in reinvestment of
distributions 7,525 75,874 1,906 19,059
Redeemed (10,161) (103,666) -- --
---------- ----------- ---------- -----------
124,320 1,246,775 168,593 1,685,888
---------- ----------- ---------- -----------
R CLASS
Sold -- -- 166,690 1,666,852
Issued in reinvestment of
distributions 6,627 66,521 2,184 21,841
---------- ----------- ---------- -----------
6,627 66,521 168,874 1,688,693
---------- ----------- ---------- -----------
Net increase (decrease) 478,246 $ 4,831,179 1,014,383 $10,143,504
========== =========== ========== ===========
(1) November 30, 2006 (fund inception) through March 31, 2007.
------
33
Year ended Period ended
March 31, 2008 March 31, 2007(1)
Shares Amount Shares Amount
Core Plus
INVESTOR CLASS
Sold 127,665 $1,326,481 416,804 $ 4,167,838
Issued in reinvestment of
distributions 19,433 196,188 6,101 60,762
Redeemed (13,413) (139,420) (25) (249)
---------- ----------- ---------- -----------
133,685 1,383,249 422,880 4,228,351
---------- ----------- ---------- -----------
INSTITUTIONAL CLASS
Sold -- -- 416,752 4,167,312
Issued in reinvestment of
distributions 19,574 197,274 6,379 63,536
---------- ----------- ---------- -----------
19,574 197,274 423,131 4,230,848
---------- ----------- ---------- -----------
A CLASS
Sold 174,862 1,808,694 416,745 4,167,260
Issued in reinvestment of
distributions 17,912 180,686 5,752 57,289
Redeemed (2,894) (29,506) -- --
---------- ----------- ---------- -----------
189,880 1,959,874 422,497 4,224,549
---------- ----------- ---------- -----------
B CLASS
Sold 4,701 49,118 416,733 4,167,172
Issued in reinvestment of
distributions 14,289 144,020 4,708 46,893
---------- ----------- ---------- -----------
18,990 193,138 421,441 4,214,065
---------- ----------- ---------- -----------
C CLASS
Sold 146,115 1,516,755 416,733 4,167,172
Issued in reinvestment of
distributions 14,464 145,844 4,708 46,893
Redeemed (2,203) (22,995) -- --
---------- ----------- ---------- -----------
158,376 1,639,604 421,441 4,214,065
---------- ----------- ---------- -----------
R CLASS
Sold 32 331 416,740 4,167,230
Issued in reinvestment of
distributions 16,471 166,027 5,404 53,822
---------- ----------- ---------- -----------
16,503 166,358 422,144 4,221,052
---------- ----------- ---------- -----------
Net increase (decrease) 537,008 $5,539,497 2,533,534 $25,332,930
========== =========== ========== ===========
(1) November 30, 2006 (fund inception) through March 31, 2007.
5. SECURITIES LENDING
As of March 31, 2008, securities in Short Duration and Core Plus valued at
$1,928,666 and $4,191,970, respectively, were on loan through the lending
agent, JPMCB, to certain approved borrowers. JPMCB receives and maintains
collateral in the form of cash and/or acceptable securities as approved by
ACIM. Cash collateral is invested in authorized investments by the lending
agent in a pooled account. The value of cash collateral received at period end
is disclosed in the Statement of Assets and Liabilities and investments made
with the cash by the lending agent are listed in the Schedule of Investments.
Any deficiencies or excess of collateral must be delivered or transferred by
the member firms no later than the close of business on the next business day.
The total market value of all collateral received, at this date, was
$1,965,156 and $4,270,244, respectively. The funds' risks in securities
lending are that the borrower may not provide additional collateral when
required or return the securities when due. If the borrower defaults, receipt
of the collateral by the funds may be delayed or limited.
------
34
6. BANK LINE OF CREDIT
Effective December 12, 2007, the funds, along with certain other funds managed
by ACIM or ACGIM, have a $500,000,000 unsecured bank line of credit agreement
with Bank of America, N.A. Prior to December 12, 2007, the funds, along with
certain other funds managed by ACIM or ACGIM, had a $500,000,000 unsecured
bank line of credit agreement with JPMCB. The funds may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement, which is subject to annual renewal, bear interest at the
Federal Funds rate plus 0.40%. The funds did not borrow from the line during
the year ended March 31, 2008.
7. RISK FACTORS
There are certain risks involved in investing in foreign securities. These
risks include those resulting from future adverse political, social, and
economic developments, fluctuations in currency exchange rates, the possible
imposition of exchange controls, and other foreign laws or restrictions.
Investing in emerging markets may accentuate these risks.
8. FEDERAL TAX INFORMATION
The tax character of distributions paid during the year ended March 31, 2008
and the period November 30, 2006 (fund inception) through March 31, 2007, were
as follows:
Short Duration Core Plus
2008 2007 2008 2007
DISTRIBUTIONS PAID FROM
Ordinary income $470,650 $133,625 $1,045,391 $329,195
Long-term capital gains -- -- -- --
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of paydown losses, certain income items and net
realized gains and losses for financial statement and tax purposes, and may
result in reclassification among certain capital accounts on the financial
statements.
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
Short Duration Core Plus
Federal tax cost of investments $17,372,574 $38,764,278
============ ============
Gross tax appreciation of investments $184,834 $497,548
Gross tax depreciation of investments (25,687) (133,567)
------------ ------------
Net tax appreciation (depreciation)
of investments $159,147 $363,981
============ ============
Net tax appreciation (depreciation) on
derivatives and translation of assets and
liabilities in foreign currencies $40,604 $150,436
------------ ------------
Net tax appreciation (depreciation) $199,751 $514,417
============ ============
Undistributed ordinary income $132,356 $464,900
Accumulated long-term gains $12,468 $315,172
The cost of investments for federal income tax purposes was the same as the
cost for financial statement purposes. The difference between book-basis and
tax-basis unrealized appreciation (depreciation) is attributable primarily to
the realization for tax purposes of unrealized gains on certain futures
contracts.
------
35
9. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is taxable
in a particular jurisdiction), and requires certain expanded tax disclosures.
FIN 48 is effective for fiscal years beginning after December 15, 2006, and is
to be applied to all open tax years as of the date of effectiveness. The
adoption of FIN 48 did not materially impact the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" (FAS 157), in September 2006, which is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands the required
financial statement disclosures about fair value measurements. Management is
currently evaluating the impact that adopting FAS 157 will have on the
financial statement disclosures.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
------
36
FINANCIAL HIGHLIGHTS
Short Duration
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.45 0.15
Net Realized and Unrealized Gain (Loss) 0.25 --(3)
-------- --------
Total From Investment Operations 0.70 0.15
-------- --------
Distributions
From Net Investment Income (0.44) (0.15)
-------- --------
Net Asset Value, End of Period $10.26 $10.00
======== ========
TOTAL RETURN(4) 7.17% 1.46%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.62% 0.62%(5)
Ratio of Net Investment Income (Loss)
to Average Net Assets 4.42% 4.48%(5)
Portfolio Turnover Rate 113% 157%
Net Assets, End of Period (in thousands) $2,301 $1,700
(1) November 30, 2006 (fund inception) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
------
37
Short Duration
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.47 0.15
Net Realized and Unrealized Gain (Loss) 0.25 --(3)
-------- --------
Total From Investment Operations 0.72 0.15
-------- --------
Distributions
From Net Investment Income (0.46) (0.15)
-------- --------
Net Asset Value, End of Period $10.26 $10.00
======== ========
TOTAL RETURN(4) 7.38% 1.52%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.42% 0.42%(5)
Ratio of Net Investment Income (Loss)
to Average Net Assets 4.62% 4.68%(5)
Portfolio Turnover Rate 113% 157%
Net Assets, End of Period (in thousands) $1,818 $1,693
(1) November 30, 2006 (fund inception) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
------
38
Short Duration
A Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.42 0.14
Net Realized and Unrealized Gain (Loss) 0.25 --(3)
-------- --------
Total From Investment Operations 0.67 0.14
-------- --------
Distributions
From Net Investment Income (0.41) (0.14)
-------- --------
Net Asset Value, End of Period $10.26 $10.00
======== ========
TOTAL RETURN(4) 6.91% 1.37%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.87% 0.87%(5)
Ratio of Net Investment Income (Loss)
to Average Net Assets 4.17% 4.23%(5)
Portfolio Turnover Rate 113% 157%
Net Assets, End of Period (in thousands) $4,559 $1,690
(1) November 30, 2006 (fund inception) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) 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.
(5) Annualized.
See Notes to Financial Statements.
------
39
Short Duration
B Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.35 0.11
Net Realized and Unrealized Gain (Loss) 0.25 --(3)
-------- --------
Total From Investment Operations 0.60 0.11
-------- --------
Distributions
From Net Investment Income (0.34) (0.11)
-------- --------
Net Asset Value, End of Period $10.26 $10.00
======== ========
TOTAL RETURN(4) 6.11% 1.13%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.62% 1.62%(5)
Ratio of Net Investment Income (Loss)
to Average Net Assets 3.42% 3.48%(5)
Portfolio Turnover Rate 113% 157%
Net Assets, End of Period (in thousands) $1,834 $1,686
(1) November 30, 2006 (fund inception) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) 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.
(5) Annualized.
See Notes to Financial Statements.
------
40
Short Duration
C Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.34 0.11
Net Realized and Unrealized Gain (Loss) 0.26 --(3)
-------- --------
Total From Investment Operations 0.60 0.11
-------- --------
Distributions
From Net Investment Income (0.34) (0.11)
-------- --------
Net Asset Value, End of Period $10.26 $10.00
======== ========
TOTAL RETURN(4) 6.11% 1.13%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.62% 1.62%(5)
Ratio of Net Investment Income (Loss)
to Average Net Assets 3.42% 3.48%(5)
Portfolio Turnover Rate 113% 157%
Net Assets, End of Period (in thousands) $3,006 $1,686
(1) November 30, 2006 (fund inception) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) 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.
(5) Annualized.
See Notes to Financial Statements.
------
41
Short Duration
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.40 0.13
Net Realized and Unrealized Gain (Loss) 0.25 --(3)
-------- --------
Total From Investment Operations 0.65 0.13
-------- --------
Distributions
From Net Investment Income (0.39) (0.13)
-------- --------
Net Asset Value, End of Period $10.26 $10.00
======== ========
TOTAL RETURN(4) 6.64% 1.29%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.12% 1.12%(5)
Ratio of Net Investment Income (Loss)
to Average Net Assets 3.92% 3.98%(5)
Portfolio Turnover Rate 113% 157%
Net Assets, End of Period (in thousands) $1,801 $1,689
(1) November 30, 2006 (fund inception) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
------
42
Core Plus
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.96 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.45 0.14
Net Realized and Unrealized Gain (Loss) 0.51 (0.03)
-------- --------
Total From Investment Operations 0.96 0.11
-------- --------
Distributions
From Net Investment Income (0.44) (0.15)
-------- --------
Net Asset Value, End of Period $10.48 $9.96
======== ========
TOTAL RETURN(3) 9.88% 1.04%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.67% 0.67%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets 4.46% 4.44%(4)
Portfolio Turnover Rate 232% 133%
Net Assets, End of Period (in thousands) $5,830 $4,211
(1) November 30, 2006 (fund inception) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
43
Core Plus
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.96 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.47 0.15
Net Realized and Unrealized Gain (Loss) 0.51 (0.04)
-------- --------
Total From Investment Operations 0.98 0.11
-------- --------
Distributions
From Net Investment Income (0.46) (0.15)
-------- --------
Net Asset Value, End of Period $10.48 $9.96
======== ========
TOTAL RETURN(3) 10.10% 1.11%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.47% 0.47%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets 4.66% 4.64%(4)
Portfolio Turnover Rate 232% 133%
Net Assets, End of Period (in thousands) $4,638 $4,214
(1) November 30, 2006 (fund inception) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
44
Core Plus
A Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.96 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.42 0.14
Net Realized and Unrealized Gain (Loss) 0.51 (0.04)
-------- --------
Total From Investment Operations 0.93 0.10
-------- --------
Distributions
From Net Investment Income (0.41) (0.14)
-------- --------
Net Asset Value, End of Period $10.48 $9.96
======== ========
TOTAL RETURN(3) 9.61% 0.96%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.92% 0.92%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets 4.21% 4.19%(4)
Portfolio Turnover Rate 232% 133%
Net Assets, End of Period (in thousands) $6,415 $4,207
(1) November 30, 2006 (fund inception) through March 31, 2007.
(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 values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
45
Core Plus
B Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.96 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.35 0.11
Net Realized and Unrealized Gain (Loss) 0.51 (0.04)
-------- --------
Total From Investment Operations 0.86 0.07
-------- --------
Distributions
From Net Investment Income (0.34) (0.11)
-------- --------
Net Asset Value, End of Period $10.48 $9.96
======== ========
TOTAL RETURN(3) 8.80% 0.71%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.67% 1.67%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets 3.46% 3.44%(4)
Portfolio Turnover Rate 232% 133%
Net Assets, End of Period (in thousands) $4,614 $4,197
(1) November 30, 2006 (fund inception) through March 31, 2007.
(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 values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
46
Core Plus
C Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.96 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.35 0.11
Net Realized and Unrealized Gain (Loss) 0.51 (0.04)
-------- --------
Total From Investment Operations 0.86 0.07
-------- --------
Distributions
From Net Investment Income (0.34) (0.11)
-------- --------
Net Asset Value, End of Period $10.48 $9.96
======== ========
TOTAL RETURN(3) 8.80% 0.71%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.67% 1.67%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets 3.46% 3.44%(4)
Portfolio Turnover Rate 232% 133%
Net Assets, End of Period (in thousands) $6,074 $4,197
(1) November 30, 2006 (fund inception) through March 31, 2007.
(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 values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
47
Core Plus
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.96 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.40 0.13
Net Realized and Unrealized Gain (Loss) 0.51 (0.04)
-------- --------
Total From Investment Operations 0.91 0.09
-------- --------
Distributions
From Net Investment Income (0.39) (0.13)
-------- --------
Net Asset Value, End of Period $10.48 $9.96
======== ========
TOTAL RETURN(3) 9.34% 0.88%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.17% 1.17%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets 3.96% 3.94%(4)
Portfolio Turnover Rate 232% 133%
Net Assets, End of Period (in thousands) $4,595 $4,204
(1) November 30, 2006 (fund inception) through March 31, 2007.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
48
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the American Century Investment Trust and Shareholders of
the Short Duration Fund and the Core Plus Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Short Duration
Fund and the Core Plus Fund (two of the ten funds comprising the American
Century Investment Trust, hereafter referred to as the "Funds") at March 31,
2008, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period
then ended and the financial highlights for the period November 30, 2006
(commencement of operations) through March 31, 2008, in conformity with
accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2008 by
correspondence with the custodians and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 19, 2008
------
49
MANAGEMENT
The individuals listed below serve as trustees or officers of the funds. Each
trustee serves until his or her successor is duly elected and qualified or
until he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the
remaining independent trustees. Those listed as interested trustees are
"interested" primarily by virtue of their engagement as directors and/or
officers of, or ownership interest in, American Century Companies, Inc. (ACC)
or its wholly owned, direct or indirect, subsidiaries, including the funds'
investment advisor, American Century Investment Management, Inc. (ACIM or the
advisor); the funds' principal underwriter, American Century Investment
Services, Inc. (ACIS); and the funds' transfer agent, American Century
Services, LLC (ACS).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS, and ACS. The trustees serve
in this capacity for eight registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the funds also serve in similar capacities
for the other 14 investment companies in the American Century Investments
family of funds advised by ACIM, or American Century Global Investment
Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise
noted. Only officers with policy-making functions are listed. No officer is
compensated for his or her service as an officer of the funds. The listed
officers are interested persons of the funds 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 FUNDS: 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, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 105
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
------
50
INDEPENDENT TRUSTEES
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUNDS: Trustee (since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, Regis
Management Company, LLC (April 2004 to present); Partner and Founder, Bay
Partners (Venture capital firm, 1976 to 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUNDS: Trustee (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of
Law and Business, Stanford Law School (1979 to present); Marc and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
FREDERICK L.A. GRAUER, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Trustee (since 2008)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Advisor, Barclays Global
Investors (2003 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
PETER F. PERVERE, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUNDS: Trustee (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Vice President
and Chief Financial Officer, Commerce One, Inc. (software and services
provider)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Intraware, Inc.
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUNDS: Trustee (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Platinum Grove Asset
Management, L.P., and a Partner, Oak Hill Capital Management (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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Chicago Mercantile Exchange
(2000 to present)
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUNDS: 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: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present)
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Trustee (since 1984)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
------
51
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUNDS: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUNDS: 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 FUNDS: Tax Officer (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the funds' trustees and is available
without charge, upon request, by calling 1-800-345-2021.
------
52
ADDITIONAL INFORMATION
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain
403(b), 457 and qualified plans [those not eligible for rollover to an IRA or
to another qualified plan] are subject to federal income tax withholding,
unless you elect not to have withholding apply. Tax will be withheld on the
total amount withdrawn even though you may be receiving amounts that are not
subject to withholding, such as nondeductible contributions. In such case,
excess amounts of withholding could occur. You may adjust your withholding
election so that a greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right
to revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
State tax will be withheld if, at the time of your distribution, your address
is within one of the mandatory withholding states and you have federal income
tax withheld. State taxes will be withheld from your distribution in
accordance with the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' investment advisor,
is responsible for exercising the voting rights associated with the securities
purchased and/or held by the funds. A description of the policies and
procedures the advisor uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's website at americancentury.com and on the Securities and
Exchange Commission's website at sec.gov. Information regarding how the
investment advisor voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available on the "About Us" page
at americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The funds file their complete schedule of portfolio holdings with the
Securities and Exchange Commission (SEC) for the first and third quarters of
each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's
website at sec.gov, and may be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330. The funds also make
their complete schedule of portfolio holdings for the most recent quarter of
their fiscal year available on their website at americancentury.com and, upon
request, by calling 1-800-345-2021.
------
53
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The CITIGROUP AGENCY INDEX is a market-capitalization-weighted index that
includes US government sponsored agencies with a remaining maturity of at
least one year.
The CITIGROUP CREDIT INDEX includes US and non-US corporate securities and
non-US sovereign and provincial securities.
The CITIGROUP GOVERNMENT/CORPORATE 1- TO 3-YEAR INDEX is a
market-capitalization- weighted index that includes fixed-rate government and
corporate issues with maturities between one and three years.
The CITIGROUP MORTGAGE INDEX measures the mortgage component of the US BIG
Bond Index, comprising 15- and 30-year GNMA, FNMA, and FHLMC pass-throughs and
FNMA and FHLMC balloon mortgages.
The CITIGROUP TREASURY INDEX is comprised of US Treasury securities with an
amount outstanding of at least $5 billion and a remaining maturity of at least
one year.
The CITIGROUP US BROAD INVESTMENT-GRADE (BIG) BOND INDEX is a market-
capitalization-weighted index that includes fixed-rate Treasury, government-
sponsored, mortgage, asset-backed, and investment-grade issues with a maturity
of one year or longer.
The CITIGROUP US HIGH-YIELD MARKET INDEX captures the performance of
below-investment-grade debt issued by corporations domiciled in the United
States or Canada. This index includes cash-pay and deferred-interest
securities that are publicly placed, have a fixed coupon, and are
nonconvertible.
The CITIGROUP US INFLATION-LINKED SECURITIES INDEX (ILSI)(SM) measures the
return of bonds with fixed-rate coupon payments that adjust for inflation as
measured by the Consumer Price Index (CPI).
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54
NOTES
------
55
NOTES
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56
[back cover]
[american century investments logo and text logo®]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE . . . . . . . . . . . . . . . 1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE . . . . . . . . . . . . 1-800-345-2021 or
816-531-5575
INVESTORS USING ADVISORS . . . . . . . . . . . . . . . . 1-800-378-9878
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . 1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL PROFESSIONALS, INSURANCE COMPANIES . . . . . . 1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF. . . . . . . . . 1-800-634-4113
AMERICAN CENTURY INVESTMENT TRUST
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60032N
ITEM 2. CODE OF ETHICS.
a. The registrant has adopted a Code of Ethics for Senior Financial Officers
that applies to the registrant's principal executive officer, principal
financial officer, principal accounting officer, and persons performing
similar functions.
b. No response required.
c. None.
d. None.
e. Not applicable.
f. The registrant's Code of Ethics for Senior Financial Officers was filed as
Exhibit 12 (a)(1) to American Century Asset Allocation Portfolios, Inc.'s
Annual Certified Shareholder Report on Form N-CSR, File No. 811-21591, on
September 29, 2005, and is incorporated herein by reference.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board has determined that the registrant has at least
one audit committee financial expert serving on its audit committee.
(a)(2) Peter F. Pervere, Jeanne D. Wohlers and Ronald J. Gilson are the
registrant's designated audit committee financial experts. They are
"independent" as defined in Item 3 of Form N-CSR.
(a)(3) Not applicable.
(b) No response required.
(c) No response required.
(d) No response required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years were as follows:
FY 2007: $191,721
FY 2008: $197,237
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2007: $0
FY 2008: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2007: $0
FY 2008: $0
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning were as follows:
For services rendered to the registrant:
FY 2007: $3,000*
FY 2008: $0
* This amount has been restated as certain prior year services
related to review of federal and state income tax forms and federal
excise tax forms that were paid in advance were refunded as
management changed service providers.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2007: $0
FY 2008: $0
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for products and
services provided by the principal accountant, other than the services reported
in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2007: $0
FY 2008: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2007: $0
FY 2008: $0
(e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation
S-X, before the accountant is engaged by the registrant to render audit
or non-audit services, the engagement is approved by the registrant's
audit committee. Pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, the registrant's audit committee also pre-approves its
accountant's engagements for non-audit services with the registrant's
investment adviser, its parent company, and any entity controlled by,
or under common control with the investment adviser that provides
ongoing services to the registrant, if the engagement relates directly
to the operations and financial reporting of the registrant.
(e)(2) All services described in each of paragraphs (b) through (d) of this
Item were pre-approved before the engagement by the registrant's audit
committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation
S-X. Consequently, none of such services were required to be approved
by the audit committee pursuant to paragraph (c)(7)(i)(C).
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant were as follows:
FY 2007: $171,647*
FY 2008: $90,000
* This amount has been restated as certain prior year services
related to review of federal and state income tax forms and federal
excise tax forms that were paid in advance were refunded as
management changed service providers.
(h) The registrant's investment adviser and accountant have notified the
registrant's audit committee of all non-audit services that were
rendered by the registrant's accountant to the registrant's investment
adviser, its parent company, and any entity controlled by, or under
common control with the investment adviser that provides services to
the registrant, which services were not required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The
notification provided to the registrant's audit committee included
sufficient details regarding such services to allow the registrant's
audit committee to consider the continuing independence of its
principal accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) The schedule of investments is included as part of the report to
stockholders filed under Item 1 of this Form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by
which shareholders may recommend nominees to the registrant's board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) are effective based on their evaluation of these controls and
procedures as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Registrant's Code of Ethics for Senior Financial Officers, which is the
subject of the disclosure required by Item 2 of Form N-CSR, was filed
as Exhibit 12(a)(1) to American Century Asset Allocation Portfolios,
Inc.'s Certified Shareholder Report on Form N-CSR, File No. 811-21591,
on September 29, 2005.
(a)(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are filed and attached hereto as Exhibit
99.302CERT.
(a)(3) Not applicable.
(b) A certification by the registrant's chief executive officer and chief
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AMERICAN CENTURY INVESTMENT TRUST
By: /s/ Jonathan S. Thomas
--------------------------------------
Name: Jonathan S. Thomas
Title: President
Date: May 30, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Jonathan S. Thomas
--------------------------------------
Name: Jonathan S. Thomas
Title: President
(principal executive officer)
Date: May 30, 2008
By: /s/ Robert J. Leach
--------------------------------------
Name: Robert J. Leach
Title: Vice President, Treasurer, and
Chief Financial Officer
(principal financial officer)
Date: May 30, 2008