[BOOK ONE]
SEMIANNUAL REPORT
[american century logo]
American
Century(sm)
February 28, 1997
BENHAM
GROUP
California Tax-Free Money Market
California Municipal Money Market
California High-Yield Municipal
California Insured Tax-Free
[front cover]
TABLE OF CONTENTS
Our Message to You...........................................1
Report Highlights............................................2
Period Overview..............................................4
Municipal Credit Review......................................5
California Tax-Free Money Market
Performance & Portfolio Information.......................6
Management Q & A..........................................7
Schedule of Investments...................................9
Financial Highlights.....................................45
California Municipal Money Market
Performance & Portfolio Information......................14
Management Q & A.........................................15
Schedule of Investments..................................17
Financial Highlights.....................................46
California High-Yield Municipal
Performance & Portfolio Information......................21
Management Q & A.........................................22
Schedule of Investments..................................25
Financial Highlights.....................................47
California Insured Tax-Free
Performance & Portfolio Information......................30
Management Q & A.........................................31
Schedule of Investments..................................34
Financial Highlights.....................................48
Statements of Assets and Liabilities........................38
Statements of Operations....................................39
Statements of Changes in Net Assets.........................40
Notes to Financial Statements...............................42
Background Information......................................52
Glossary....................................................53
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your needs, we have divided American Century funds
into three groups based on investment style and objectives. These groups, which
appear below, are designed to help simplify your fund decisions.
American Century Investments--Family of Funds
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY GROUP
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS U.S. GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
California Tax-Free
Money Market
California Municipal
Money Market
California High-Yield
Municipal
California Insured Tax-Free
We welcome your comments or questions about this report.
See the back cover for ways to contact us by mail, phone or e-mail.
Twentieth Century and the Benham Group are registered marks of American Century
Services Corporation and Benham Management Corporation, respectively. American
Century is a service mark of American Century Services Corporation.
American Century Investments
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
The six months ended February 28, 1997, were eventful, both for the municipal
bond market and our company. Municipal bonds performed favorably overall during
the period, despite some volatility in January as U.S. economic growth appeared
to accelerate. In the following pages, our investment management team provides
further details about the municipal market and how your fund was managed during
the period.
Changing market conditions underscore the importance of quality investments. Our
commitment to high-quality securities is exemplified by the expansion of our
municipal credit research team. The five members of the team perform an in-depth
analysis on all securities considered for purchase by American Century municipal
money market and bond funds. The team has established a credit management system
that defines investment limits to cap our funds' exposure to individual issuers,
market sectors and geographical regions. The team plays an important role in the
management of the California Tax-Free and Municipal funds.
On the corporate front, we completed the operational integration of Twentieth
Century and The Benham Group in September 1996. As a result, you now have direct
access to a broader spectrum of funds and services.
We also changed the name of our company. On January 1, 1997, we began serving
you under the name American Century Investments, which reflects our expanded
identity and the independent thinking common to Twentieth Century and Benham.
American Century's fund family is divided into three groups--the Benham Group,
the American Century Group and the Twentieth Century Group. The California
Tax-Free and Municipal funds will remain in the Benham Group because their
investment goal--current tax-free income--matches a key attribute of that group.
This report incorporates a new format designed using your input. We hope you
find it more informative and easier to read. Another informative resource is the
American Century Web site. If you use a personal computer and have Internet
access, we've made it easier for you to download information about American
Century funds and access your fund accounts. With a personal access code, you
can view account balances, exchange money between existing accounts and make
additional investments. The Web site address is: www.americancentury.com. We are
one of the first fund companies to offer direct on-line transactions via the
Internet.
These are examples of how we continue to work to provide information and
services that are useful and convenient to investors in our funds. Thank you
for investing with us.
Sincerely,
/s/James E. Stowers III /s/James M. Benham
James E. Stowers III James M. Benham
President and Chief Executive Officer Vice Chairman
American Century Companies American Century Companies
Semiannual Report Our Message to You 1
REPORT HIGHLIGHTS
PERIOD OVERVIEW
o The U.S. economy grew more rapidly than expected during the six months
ended February 28, 1997.
o Despite rapid economic expansion, inflation remained tame. Consumer prices
rose at a modest 3.1% annual rate for the six-month period.
o The seemingly contradictory combination of strong growth and low inflation
was responsible for much of the market's uncertainty about possible changes
in the Federal Reserve's interest rate policy.
o Overall, municipal bond investors enjoyed favorable returns for the
six-month period.
o Low levels of new municipal issuance helped support the prices of municipal
securities.
o Shorter-maturity municipals--more sensitive to shifting interest rate
policy expectations--underperformed longer-maturity municipals.
MUNICIPAL CREDIT REVIEW
o California's strong economic growth led to upgrades in the state's credit
rating.
o Specific challenges, such as Proposition 218 and federal welfare reform,
could affect ratings of locally issued municipal bonds.
o Overall, our outlook for the state's credit rating is very positive.
Continuing economic strength should lead to further upgrades during the
coming year.
TAX-FREE MONEY MARKET
o The fund outperformed its Lipper peer group average for the six months
ended February 28, 1997.
o Going forward, we will likely extend the fund's average maturity, but we
will probably wait until one-year municipal yields become more attractive.
o June and July, when many California municipalities issue one-year notes,
should provide our best opportunity to lengthen the fund's average
maturity.
MUNICIPAL MONEY MARKET
o The fund outperformed its Lipper peer group average for the six months
ended February 28, 1997.
o Because of changing economic conditions and low supply among longer-term
municipal money market securities, we shortened the fund's average maturity
from 42 days to 23 days during the six-month period.
o Going forward, we will likely extend the fund's average maturity, but we
will probably wait until one-year municipal yields become more attractive.
o June and July, when many California municipalities issue one-year notes,
should provide the best opportunity to lengthen the fund's average
maturity.
TAX-FREE
MONEY MARKET
Total Returns: AS OF 2/28/97
6 Months 1.54%*
1 Year 3.03%
Net Assets: $431.6 million
(AS OF 2/28/97)
Inception Date: 11/9/83
Ticker Symbol: BCTXX
MUNICIPAL
MONEY MARKET
Total Returns: AS OF 2/28/97
6 Months 1.51%*
1 Year 3.04%
Net Assets: $189.1 million
(AS OF 2/28/97)
Inception Date: 12/31/90
Ticker Symbol: BNCXX
* Not annualized.
Many of the investment terms in this report are defined in the Glossary on page
53.
2 Report Highlights American Century Investments
REPORT HIGHLIGHTS
HIGH-YIELD MUNICIPAL
o The fund outperformed its Lipper peer group average for the six months
ended February 28, 1997.
o High-yield municipals performed well as credit quality spreads continued to
narrow during the period.
o At the end of the period the fund's duration was 7.6 years--neutral
compared with the average duration of its peers. We chose this neutral
stance in response to the market's uncertainty about the interest rate
outlook.
o We anticipate that continuing strong economic growth will keep California
municipal credit quality spreads very narrow, and that limited issuance of
lower-quality securities could result in more competition and higher prices
for high-yield bonds.
o With the possibility of higher interest rates going forward, we will likely
maintain the fund's neutral duration. We will also look to increase the
fund's holdings in unrated bonds to about 35% of the portfolio, provided
that we can find securities that meet our strict credit criteria and
represent good value.
TAX-FREE INSURED
o The fund outperformed its Lipper peer group average for the six months
ended February 28, 1997.
o Because of the market's uncertainty about the interest rate outlook, we
kept the fund's duration at around eight years. This conservative
positioning was an important factor in the fund's favorable performance.
o The fund's returns were enhanced by the purchase of undervalued
tax-allocation bonds, which appreciated in value as California property
values rose.
o With the possibility of higher interest rates going forward, we will likely
maintain the fund's neutral duration.
HIGH-YIELD
MUNICIPAL
Total Returns: AS OF 2/28/97
6 Months 5.04%*
1 Year 6.97%
Net Assets: $168.9 million
(AS OF 2/28/97)
Inception Date: 12/30/86
Ticker Symbol: BCHYX
INSURED
TAX-FREE
Total Returns: AS OF 2/28/97
6 Months 4.89%*
1 Year 4.78%
Net Assets: $189.9 million
(AS OF 2/28/97)
Inception Date: 12/30/86
Ticker Symbol: BCINX
* Not annualized.
Semiannual Report Report Highlights 3
PERIOD OVERVIEW
U.S. Economy
The U.S. economy expanded at a healthy clip during the six-month period ended
February 28, 1997. Fueling growth was low unemployment, high employment growth
and a robust housing market that defied expectations of a slowdown. As a result,
the economy expanded at a 2.1% annual rate during the third quarter of 1996 and
a 3.8% annual rate during the fourth quarter. The strength of the economy in
1997 has continued to surprise analysts, many of whom are predicting that the
U.S. economy will grow by more than 3% during the first quarter.
While the economy continued its impressive growth rate, inflation remained
relatively subdued. Overall consumer prices--as measured by the government's
consumer price index--rose at a modest 3.1% annual rate during the six months
ended February 28, 1997. This unusual combination of healthy economic growth and
low inflation sent mixed signals to U.S. bond investors.
California Municipal Bond Market
Municipal bond investors enjoyed favorable returns for the six-month period.
Nevertheless, shifting expectations of an interest-rate increase by the Federal
Reserve (the Fed) kept investors guessing about the possible direction of bond
prices.
As demonstrated by the accompanying graph, municipal yields peaked at the start
of the period amid strong expectations for higher interest rates. Investors were
concerned that the U.S. economy was ready to overheat and spark inflation.
However, inflation remained subdued, and signs of a moderating economy convinced
many that a Fed rate hike was unlikely, allowing municipal bonds to rally. By
early December, prices crested with the yield on 30-year municipal bonds at
5.29%, nearly half a percent lower than the 5.78% seen in early September.
However, aided by strong consumer spending activity, the economy strengthened
again in early 1997. With growing expectations that the strains of robust
economic growth would finally force the Fed to stage a pre-emptive strike
against inflation, investors pushed municipal prices lower. By the end of
February, the yield on 30-year municipal bonds had risen to 5.44%.
Helping to support municipal prices during the volatile period were low levels
of new municipal issuance, which only in recent months has reached historically
normal levels. An upsurge of demand from retail investors also buoyed short- and
intermediate-maturity municipals during much of the period, but that beneficial
effect was largely countered by shifting expectations for higher rates. More
sensitive to anticipated Fed activities, shorter-maturity municipals
underperformed their longer-maturity counterparts for the period. Meanwhile,
strong demand from insurance companies helped buoy long-term municipal prices
late in 1996 as many of these companies made "crossover" buys--that is, they
purchased municipal bonds instead of comparable-maturity Treasury bonds due to
the relatively attractive yield offered by municipals.
[line graph - data below]
Shifting Municipal Yield Curve
Years 9/5/96 12/3/96 2/28/97
0.25 3.51% 3.03% 3.22%
0.5 3.71 3.23 3.42
1 3.91 3.43 3.65
2 4.16 3.73 3.92
3 4.36 3.93 4.1
4 4.51 4.05 4.24
5 4.61 4.15 4.34
6 4.71 4.25 4.44
7 4.81 4.35 4.54
8 4.91 4.45 4.64
9 5.01 4.55 4.74
10 5.11 4.65 4.84
11 5.198 4.738 4.916
12 5.286 4.826 4.992
13 5.374 4.914 5.068
14 5.462 5.002 5.144
15 5.55 5.09 5.22
16 5.584 5.118 5.252
17 5.618 5.146 5.284
18 5.652 5.174 5.316
19 5.686 5.202 5.348
20 5.72 5.23 5.38
21 5.728 5.238 5.388
22 5.736 5.246 5.396
23 5.744 5.254 5.404
24 5.752 5.262 5.412
25 5.76 5.27 5.42
26 5.764 5.274 5.424
27 5.768 5.278 5.428
28 5.772 5.282 5.432
29 5.776 5.286 5.436
30 5.78 5.29 5.44
Source: Bloomberg Financial Markets
4 Period Overview American Century Investments
MUNICIPAL CREDIT REVIEW
As we anticipated early in 1996, the state of California's credit rating was
upgraded by several rating agencies within the last year. The key to the state's
improving credit quality has been its ability to generate strong job growth in
various sectors of the economy. The six months ended February 28, 1997, showed
an acceleration of the economic growth that California has enjoyed for the past
three years. With income gains and employment growth exceeding the national
average, California's unemployment rate fell to 6.5% for the first time since
1990 (see the accompanying graph). The state has more than recovered all the
jobs lost in the last recession, largely due to strong growth in the
high-technology industries.
California is also the nation's leading exporter, with exports nearly equaling
those of the other 49 states combined. Its gross product is projected to surpass
$1 trillion in 1997, a milestone that the U.S. as a whole passed less than 30
years ago.
The state's finances continue to improve--its revenue is projected to be more
than $700 million over budget for the 1996-1997 fiscal year, and the general
fund is expected to show a reserve for the first time in a number of years.
The state's strongest growth has been centered in the San Francisco Bay Area,
led by Santa Clara County, the hub of the state's thriving high-technology
industry. Southern California's economy also continued to expand, though at a
slower pace.
There has also been statewide improvement in the real estate sector. The San
Francisco Bay Area has seen property values rise appreciably, while the Southern
California real estate market has bottomed out and begun to trend upward. Real
estate prices in some regions have surpassed their 1989 highs, underscoring the
regional vitality of California's real estate market.
In spite of the state's rosy economic outlook, specific challenges continue to
affect the credit picture for locally issued municipal bonds. For example,
California's Proposition 218 requires voter approval for the levying of fees and
other charges by local governments. This could have a negative impact on the
credit quality of securities issued by local governments within the state. In
addition, federal welfare reform could place additional credit pressure on
already-burdened county budgets. This possibility has led us to position our
California municipal funds with very low exposure to county debt.
With these issues in mind, we have continued to expand our municipal credit
research team. The five members of the team keep a close watch on economic and
legislative trends within the state and thoroughly research all municipal
securities considered for purchase by the Benham California Tax-Free and
Municipal funds.
We will continue to monitor legislative developments on welfare reform and state
budgetary issues in the months ahead. Overall, our outlook for the state's
credit rating remains very positive, and we feel that continuing economic
strength will lead to further credit upgrades within the next 12 months.
[line graph - data below]
California Unemployment
1/31/90 5.0%
2/28/90 5.1
3/31/90 5.2
4/30/90 5.4
5/31/90 5.4
6/30/90 5.5
7/31/90 5.6
8/31/90 5.8
9/30/90 6.1
10/31/90 6.4
11/30/90 6.8
12/31/90 6.9
1/31/91 7.0
2/28/91 7.4
3/31/91 7.7
4/30/91 7.8
5/31/91 7.7
6/30/91 7.7
7/31/91 7.8
8/31/91 7.7
9/30/91 7.8
10/31/91 7.9
11/30/91 8.0
12/31/91 8.2
1/31/92 8.4
2/29/92 9.0
3/31/92 8.9
4/30/92 9.0
5/31/92 9.1
6/30/92 9.3
7/31/92 9.4
8/31/92 9.6
9/30/92 9.7
10/31/92 9.7
11/30/92 9.7
12/31/92 9.7
1/31/93 9.7
2/28/93 9.6
3/31/93 9.5
4/30/93 9.3
5/31/93 9.4
6/30/93 9.4
7/31/93 9.3
8/31/93 9.3
9/30/93 9.3
10/31/93 9.3
11/30/93 9.3
12/31/93 9.2
1/31/94 9.2
2/28/94 9.3
3/31/94 9.0
4/30/94 8.8
5/31/94 8.9
6/30/94 8.7
7/31/94 8.6
8/31/94 8.5
9/30/94 8.3
10/31/94 8.1
11/30/94 7.9
12/31/94 7.8
1/31/95 8.1
2/28/95 7.8
3/31/95 7.8
4/30/95 7.9
5/31/95 7.9
6/30/95 7.8
7/31/95 7.8
8/31/95 7.8
9/30/95 7.8
10/31/95 7.8
11/30/95 7.9
12/31/95 7.8
1/31/96 7.6
2/29/96 7.6
3/31/96 7.5
4/30/96 7.4
5/31/96 7.3
6/30/96 7.2
7/31/96 7.1
8/31/96 7.1
9/30/96 7.1
10/31/96 7.0
11/30/96 6.9
12/31/96 6.8
1/31/97 6.9
2/28/97 6.5
Source: DRI/McGraw Hill
Semiannual Report Municipal Credit Review 5
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY MARKET
7-DAY 7-DAY 7-DAY TAX-EQUIVALENT YIELDS
CURRENT EFFECTIVE 34.70% 37.42% 41.95% 45.22%
YIELD YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
----- ----- ----------- ----------- ----------- -----------
CURRENT YIELD (as of February 28, 1997)
California Tax-Free
<S> <C> <C> <C> <C> <C> <C>
Money Market 2.93% 2.98% 4.49% 4.68% 5.05% 5.35%
Yields are defined in the Glossary on page 53.
</TABLE>
<TABLE>
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
TOTAL RETURNS (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California Tax-Free Money Market .......................... 1.54% 3.03% 3.03% 2.69% 3.67%
Average California Tax-Exempt
Money Market Fund(1) ...................................... 1.43% 2.86% 2.93% 2.63% 3.71%
Fund's Ranking Among California
Tax-Exempt Money Market Funds(1) .......................... -- 14 out of 54 13 out of 47 14 out of 43 6 out of 9
(1) According to Lipper Analytical Services.
See pages 52-53 for more information about returns and Lipper fund rankings.
</TABLE>
PORTFOLIO AT A GLANCE
2/28/97 8/31/96
Number of Securities 88 91
Weighted Average Maturity 28 days 39 days
Expense Ratio 0.48%* 0.49%
* Annualized.
Money market funds are neither insured nor guaranteed by the U.S. government.
Yields will fluctuate, and there can be no assurance that the fund will be able
to maintain a stable $1.00 share price.
6 California Tax-Free Money Market American Century Investments
CALIFORNIA TAX-FREE MONEY MARKET
MANAGEMENT Q&A
An interview with Todd Pardula, a portfolio manager on the California Tax-Free
and Municipal funds management team.
How did the fund perform?
The fund continued to outperform its peer group average while meeting its
investment objective of providing tax-exempt income. For the six months ended
February 28, 1997, the fund had a total return of 1.54%, compared with the 1.43%
average return of the 56 "California Tax-Exempt Money Market Funds" tracked by
Lipper Analytical Services. (See the Total Returns table on the previous page
for other fund performance comparisons.)
The fund's average maturity shortened over the past six months. Why?
We shortened the fund's average maturity because of prevailing economic
conditions. The U.S. economy has experienced strong employment growth, but
inflation has remained low. These conditions rarely co-exist for long;
eventually, something has to give. We expect to see wage pressures lead to
rising inflation, which in turn would likely lead to a short-term interest rate
increase by the Federal Reserve.
Despite these expectations, we planned to extend the fund's maturity slightly in
December by taking advantage of the usual year-end rise in the yields of
short-term municipal securities (a result of selling by corporations that wish
to "dress up" their balance sheets with Treasury securities at year-end).
However, this seasonal effect was less dramatic than in past years. So, rather
than buy securities with unattractive yields, we allowed the fund's average
maturity to shorten further. By the end of the six-month period, the fund's
average maturity of 28 days was about two weeks shorter than that of the average
California tax-exempt money market fund.
Has the supply of California municipal money market securities had any effect on
your management of the fund?
Yes, and that's another reason why the fund's maturity has been shorter than
normal. We typically invest a majority of the fund's assets in variable-rate
demand notes (VRDNs) that reset their rates on a daily or weekly basis. We
balance these short-term investments with longer-term municipal securities,
which generally have maturities of 8-13 months.
However, a shortage of credit-approved one-year California municipal securities
has made yields in this maturity sector unattractive compared to Treasurys and
other short-term tax-exempt securities. As a result, we've been focusing the
fund's investments in municipal commercial paper, VRDNs and other short-term
securities. This situation has contributed to the fund's shorter average
maturity.
[pie charts - data described below]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 2/28/97)
o VRDNs 75%
o Bonds less than 1 Year 11%
o Municipal Notes 7%
o Commerical Paper 7%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 8/31/96)
o VRDNs 76%
o Municipal Notes 9%
o Bonds less than 1 Year 7%
o Commercial Paper 4%
o Put Bonds 4%
Semiannual Report California Tax-Free Money Market 7
CALIFORNIA TAX-FREE MONEY MARKET
Looking ahead, what are your plans for the fund over the next six months?
We will likely extend the fund's average maturity at some point, but we're
willing to wait until one-year municipal yields become more attractive. The
Federal Reserve has given us another reason to wait--in March, it made a
pre-emptive strike against inflation by raising short-term interest rates. Many
Fed watchers suspect this may be the first in a series of rate hikes.
But our decision to extend the fund's maturity will also be based on the
relative values between VRDNs and longer-term municipal money market securities.
To make this determination, we project VRDN rates over the coming year and
compare our results to current rates on one-year municipal securities. We then
invest in whichever offers the higher yield. Lately, VRDNs have been the better
buy, but we expect seasonal supply factors to favor one-year securities in the
coming months.
Can you describe some of these seasonal factors?
The next seasonal opportunity for us to extend the fund's maturity is late in
April, when many tax-exempt money market funds sell securities to meet cash
outflows as investors pay their tax bills. But the best opportunity will occur
in June and July, when many California municipalities issue a substantial amount
of one-year notes. We'll definitely look to extend the fund's average maturity
at that time; how far we extend will depend on economic conditions and relative
values. If economic growth is projected to slow, we may extend the fund's
maturity out to 60 days or more, but we would be less enthusiastic if the
economy continued to strengthen.
How does credit research affect your management of the fund?
When it comes to security selection, our municipal credit research team plays a
vital role. The team has set stringent guidelines and is proactive about keeping
the management team apprised of changing credit conditions. Our relationship
represents a good balance between yield and credit quality--the fund management
team seeks out the most attractive yields within the rigorous credit standards
established by our credit research group.
[pie charts - data described below]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 2/28/97)
SP1+ 70%
SP1 30%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 8/31/96)
SP1+ 77%
SP1 23%
8 California Tax-Free Money Market American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA TAX-FREE MONEY MARKET
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
MUNICIPAL SECURITIES
$ 4,445,540 Agoura Hills Multifamily Housing
Rev., (Oakridge Apartments),
VRDN, 3.45%, 3-5-97 (LOC:
Continental Casualty Co.) $4,445,540
4,000,000 Anaheim Electric Rev., 4.25%,
10-1-97 (AMBAC) 4,009,044
4,800,000 Anaheim Housing Auth. Rev.,
Series A, (Heritage Village
Apartments), VRDN, 3.35%,
3-6-97 (LOC: Barclays
Bank PLC) 4,800,000
10,480,000 Association of Bay Area
Governments Financing Auth., VRDN,
3.30%, 3-6-97 (LOC:
Union Bank of Switzerland) 10,480,000
100,000 Association of Bay Area
Governments Lease Rev.
Certificates of Participation,
(Pooled Projects), VRDN, 3.15%,
3-6-97 (LOC: National
Westminster Bank PLC) 100,000
8,100,000 Auburn Unified School District
Certificates of Participation,
Series 1993, (Capital Improvement
Financing Project), VRDN, 3.40%,
3-6-97 (LOC:Union Bank of California) 8,100,000
7,800,000 Azusa Multifamily Housing Rev.,
(Pacific Glen Apartments), VRDN,
3.50%, 3-6-97 (LOC:
Continental Casualty Co.) 7,800,000
2,000,000 California GO Commercial Paper,
3.40%, 3-3-97 (LOC:
Landbank Hessen-Thuringen
Girozentrale, Westdeutsche
Landesbank Girozentrale) 2,000,000
1,015,000 California Health Facilities
Financing Auth. Rev.,
Series A, (Pooled Loan Program),
VRDN, 3.30%, 3-6-97 (LOC:
Rabobank Nederland) 1,015,000
6,000,000 California Health Facilities
Financing Auth. Rev., Series
1985 B, (Scripps Memorial
Hospital), VRDN, 3.30%, 3-6-97
(MBIA) (SBBPA: Morgan
Guaranty Trust Co.-New York) 6,000,000
Principal Amount Value
- -------------------------------------------------------------------------------
$2,500,000 California Health Facilities
Financing Auth. Rev., Series
1990 A, (Pooled Project), VRDN,
3.30%, 3-5-97 (LOC: Rabobank
Nederland) $ 2,500,000
1,500,000 California Pollution Control
Financing Auth. Rev., Series B,
(Southern California Edison),
VRDN, 3.15%, 3-3-97 1,500,000
10,500,000 California Pollution Control
Financing Auth. Rev., (Chevron
USA, Inc. Project), 3.70%,
5-15-97 (Guaranteed: Chevron
Corporation) 10,500,000
1,000,000 California Pollution Control
Financing Auth. Rev., (Chevron
USA, Inc. Project), 3.90%,
11-15-97 (Guaranteed: Chevron
Corporation) 1,000,000
3,000,000 California Pollution Control Rev.
Commercial Paper, (Pacific Gas
& Electric), 3.45%, 3-3-97
(LOC: Morgan Guaranty
Trust Co.-New York) 3,000,000
4,000,000 California Pollution Control Rev.
Commercial Paper, (Pacific Gas
& Electric), 3.40%, 3-20-97
(LOC: Morgan Guaranty
Trust Co.-New York) 4,000,000
7,500,000 California Pollution Control Rev.
Commercial Paper, (Pacific Gas
& Electric), 3.45%, 5-1-97
(LOC: Morgan Guaranty
Trust Co.-New York) 7,500,000
5,000,000 California Public Capital
Improvements Financing Auth.
Rev., Series C, 3.65%, 3-15-97
(LOC: National Westminster
Bank PLC) 5,000,000
18,500,000 California Rev. Anticipation Notes,
4.50%, 6-30-97 18,531,471
10,000,000 California School Cash Reserve
Program Auth. Notes, Series A,
4.75%, 7-2-97 (MBIA) 10,026,235
8,000,000 California Statewide Certificates of
Participation, (Covenant
Retirement Community), VRDN,
3.25%, 3-6-97 (LOC: LaSalle
National Bank) 8,000,000
See Notes to Financial Statements
Semiannual Report California Tax-Free Money Market 9
SCHEDULE OF INVESTMENTS
CALIFORNIA TAX-FREE MONEY MARKET
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$ 3,000,000 California Statewide Communities
Apartment Development Auth.
Rev., Series A-1, VRDN, 3.15%,
3-5-97 (FNMA Collateral
Agreement) $ 3,000,000
3,000,000 California Statewide Communities
Apartment Development Auth.
Rev., (Whispering Winds
Apartments), VRDN, 3.45%,
3-5-97 (LOC: Continental
Casualty Co.) 3,000,000
2,445,000 Central Unified School District
Certificates of Participation, VRDN,
3.50%, 3-5-97 (LOC:
Union Bank of California) 2,445,000
1,000,000 Countywide Public Financing Auth.
Rev. Certificates of Participation,
4.10%, 8-1-97 (MBIA) 1,000,810
2,700,000 Covina Redevelopment Agency
Multifamily Housing Rev.,
(Shadowhills Apartments), VRDN,
3.50%, 3-6-97 (LOC: Continental
Casualty Co.) 2,700,000
2,155,000 Dinuba Financing Auth. Lease Rev.
Certificates of Participation,
Series A, (Wastewater Treatment
Plant), VRDN, 3.50%, 3-5-97
(LOC: Union Bank of California) 2,155,000
4,450,000 Gardena Financing Agency Rev.,
(Public Parking Project), VRDN,
3.55%, 3-6-97 (LOC: Industrial
Bank of Japan) 4,450,000
1,000,000 Glendale Industrial Development
Auth., (Reliance Development),
VRDN, 3.35%, 3-14-97 (LOC:
Barclays Bank PLC) 1,000,000
6,355,000 Hanford Public Improvement
Project, VRDN, 3.45%, 3-6-97
(LOC: Union Bank of California) 6,355,000
12,100,000 Hayward Multifamily Housing Rev.,
(Shorewood Apartments), VRDN,
3.15%, 3-6-97 (LOC: FGIC) 12,100,000
5,400,000 Irvine Improvement Board
Assessment, Series A, (District
95-12), VRDN, 3.35%, 3-3-97
(LOC: Kredietbank N.V.) 5,400,000
Principal Amount Value
- -------------------------------------------------------------------------------
$ 4,530,000 Irvine Industrial Development
Authority Rev., (Shimano Amer
Corporation), VRDN, 3.70%,
3-5-97 (LOC: Bank of Tokyo-
Mitsubishi) $ 4,530,000
8,000,000 Kern County Superintendent of
Schools Certificates of
Participation, VRDN, 3.40%,
3-6-97 (LOC: Anchor National
Life Ins.) 8,000,000
2,900,000 Lancaster Redevelopment Agency,
(Woodacre Garden Apartments),
VRDN, 3.40%, 3-4-97 (LOC:
Bank of Tokyo-Mitsubishi) 2,900,000
3,250,000 Lancaster Redevelopment Agency,
(20th Street), VRDN, 3.20%,
3-6-97 (LOC: FHLB) 3,250,000
2,100,000 Lemore Certificates of Participation,
Series 1995, (Golf Course
Project), VRDN, 3.50%, 3-6-97
(LOC: Union Bank of California) 2,100,000
5,200,000 Livermore Certificates of
Participation, (Reverse Osmosis
Project), VRDN, 3.25%, 3-6-97
(LOC: National Westminster
Bank PLC) 5,200,000
3,000,000 Loma Linda Water Rev., VRDN,
3.50%, 3-5-97 (LOC: Union
Bank of California) 3,000,000
5,000,000 Long Beach Multifamily Housing
Rev., (Channel Point Apartments),
VRDN, 3.30%, 3-5-97 (LOC:
Union Bank of California) 5,000,000
5,000,000 Los Angeles Community
Redevelopment Agency, VRDN,
3.25%, 3-6-97 (LOC: Barclays
Bank PLC) 5,000,000
5,000,000 Los Angeles County Tax and Rev.
Anticipation Notes, Series A,
4.50%, 6-30-97 (LOC: Bank of
America, Credit Suisse, Morgan
Guaranty Trust Co.-New York,
Union Bank of Switzerland,
Westdeutsche Landesbank
Girozentrale) 5,010,372
See Notes to Financial Statements
10 California Tax-Free Money Market American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA TAX-FREE MONEY MARKET
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$ 2,750,000 Los Angeles Public Works
Financing Auth. Lease Rev.
Certificates of Participation,
Series A, 4.50%, 9-1-97 (MBIA) $ 2,758,752
3,300,000 Los Angeles Public Works
Financing Auth. Lease Rev.
Certificates of Participation,
Series B, 4.50%, 9-1-97 (MBIA) 3,309,859
1,355,000 Los Angeles Unified School
District Certificates of
Participation, 3.80%, 10-1-97
(FSA) 1,354,586
9,500,000 Los Angeles Wastewater
Commercial Paper, 3.45%,
5-9-97 (LOC: Morgan Guaranty
Trust Co.-New York, Union
Bank of Switzerland) 9,500,000
8,500,000 Oceanside Multifamily Housing Rev.
Refunding, (Lakeridge
Apartments Project), VRDN,
3.50%, 3-5-97 (LOC: Continental
Casualty Co.) 8,500,000
18,500,000 Orange County Apartment
Development Rev., (Bear Brand
Apartments), VRDN, 3.25%,
3-6-97 (LOC: Credit Suisse) 18,500,000
4,000,000 Orange County Apartment
Development Rev., (Seaside
Meadows), VRDN, 3.25%,
3-6-97 (LOC: Credit Suisse) 4,000,000
6,500,000 Orange County Apartment
Development, Series 1991 A,
(The Lakes Project), VRDN,
3.20%, 3-6-97 (LOC: Citibank) 6,500,000
3,000,000 Orange County Housing Auth.
Apartment Development Rev.,
VRDN, 3.35%, 3-5-97 (LOC:
Bank of America) 3,000,000
2,000,000 Orange County Water Commercial
Paper, 3.40%, 3-3-97 (LOC:
Union Bank of Switzerland) 2,000,000
8,700,000 Orange County Water Commercial
Paper, 3.40%, 4-10-97 (LOC:
Union Bank of Switzerland) 8,700,000
800,000 Palm Springs Redevelopment
Agency Certificates of
Participation, VRDN, 3.30%,
3-5-97 (LOC: Citibank) 800,000
Principal Amount Value
- -------------------------------------------------------------------------------
$ 6,100,000 Pico Rivera Certificates of
Participation, (Redevelopment
Agency Project), VRDN, 3.20%,
3-4-97 (LOC: Wachovia Bank of
Georgia) $ 6,100,000
6,000,000 Redlands Certificates of
Participation, (Sewer Treatment
Facilities Project), VRDN, 3.25%,
3-5-97 (LOC: FGIC) 6,000,000
6,860,000 Redlands Certificates of
Participation, (Water Facilities
Project), VRDN, 3.25%, 3-5-97
(LOC: FGIC) 6,860,000
6,040,000 Riverside County Multifamily
Housing Rev., (Ambergate
Apartments), VRDN, 3.40%,
3-6-97 (LOC: Union Bank of
California) 6,040,000
1,715,000 Rohnert Park Multifamily Housing
Rev., (Crossbrook Apartments),
VRDN, 3.15%, 3-5-97 (FNMA
Collateral Agreement) 1,715,000
1,330,000 Sacramento County Certificates of
Participation, 4.00%, 2-1-98
(MBIA) 1,334,180
5,000,000 Sacramento County Housing Auth.,
VRDN, 3.35%, 3-5-97 (LOC:
Dai-Ichi Kangyo Bank) 5,000,000
8,200,000 Sacramento County Multifamily
Housing Rev., (River Oaks),
VRDN, 3.40%, 3-6-97 (LOC:
Dai-Ichi Kangyo Bank) 8,200,000
3,400,000 Sacramento County Multifamily
Housing Rev., Series A, VRDN,
3.20%, 3-5-97 (LOC: California
State Teachers Retirement
System) 3,400,000
1,500,000 Sacramento County Multifamily
Housing Rev., Series 1985 C,
VRDN, 3.40%, 3-6-97 (LOC:
Dai-Ichi Kangyo Bank) 1,500,000
3,200,000 San Bernardino County Certificates
of Participation, VRDN, 3.45%,
3-6-97 (LOC: Sumitomo Bank
Ltd.) 3,200,000
10,000,000 San Bernardino County Certificates
of Participation, VRDN, 3.55%,
3-6-97 (SBBPA: Merrill Lynch
& Co., Inc.) (MBIA) 10,000,000
See Notes to Financial Statements
Semiannual Report California Tax-Free Money Market 11
SCHEDULE OF INVESTMENTS
CALIFORNIA TAX-FREE MONEY MARKET
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$12,300,000 San Bernardino Multifamily Housing
Rev., Series A, (Castle Park
Apartments), VRDN, 3.55%,
3-5-97 (LOC: Bank of Tokyo-
Mitsubishi) $12,300,000
1,370,000 San Diego County Multifamily
Housing Rev., (Country Hills),
VRDN, 3.20%, 3-5-97 (FNMA
Collateral Agreement) 1,370,000
2,110,000 San Diego Multifamily Housing
Rev., (Nobel Court
Apartments), VRDN, 3.20%,
3-6-97 (LOC: Credit Suisse) 2,110,000
4,300,000 San Diego Multifamily Housing
Rev., Series A, (Coral Point
Apartments), VRDN, 3.50%,
3-6-97 (LOC: Continental
Casualty Co.) 4,300,000
2,510,000 San Diego Regional Transportation
Commission Sales Tax Rev.,
Series A, 4.00%, 4-1-97 (FGIC) 2,511,031
4,900,000 San Francisco City and County
Redevelopment Financing Auth.
Rev., (Yerba Buena Garden),
VRDN, 3.20%, 3-5-97
(LOC: National Westminster
Bank PLC) 4,900,000
1,400,000 San Jose Financing Auth. Rev.,
Series B, (Hayes Mansion
Project), VRDN, 3.35%, 3-5-97
(LOC: Sumitomo Bank Ltd.) 1,400,000
3,900,000 San Leandro Multifamily Housing
Rev., (Parkside Project), VRDN,
3.20%, 3-5-97 (FNMA Collateral
Agreement) 3,900,000
4,200,000 Santa Clara Multifamily Housing
Rev., VRDN, 3.25%, 3-5-97
(LOC: National Westminster
Bank PLC) 4,200,000
4,200,000 Santa Clara Multifamily Housing
Rev., (Foxchase Apartments), VRDN,
3.15%, 3-6-97 (LOC:FGIC) 4,200,000
7,300,000 Santa Paula Public Financing Auth.
Rev. Certificates of Participation,
Series 1996, VRDN, 3.50%,
3-5-97 (LOC: Sumitomo Bank
Ltd., Union Bank of California) 7,300,000
Principal Amount Value
- -------------------------------------------------------------------------------
$ 300,000 South San Francisco Certificates
of Participation, (Quality Control
Plant Project), VRDN, 3.25%,
3-6-97 (LOC: National
Westminster Bank PLC) $ 300,000
18,800,000 Southern California Public Power
Auth. Rev., VRDN, 3.10%,
3-5-97 (FSA) (SBBPA: Morgan
Guaranty Trust Co.-NewYork) 18,800,000
2,745,000 Southern California Public Power
Auth. Rev., Series B,
(Transmission Project), 4.00%,
7-1-97 (MBIA) 2,745,389
2,000,000 State of California GO, VRDN,
3.35%, 3-6-97 (FGIC) (SBBPA:
Merrill Lynch & Co., Inc.) 2,000,000
5,400,000 Three Valleys Municipal Water
District Certificates of
Participation, (Miramar Water
Treatment), VRDN, 3.40%,
3-5-97 (LOC: Barclays Bank PLC) 5,400,000
1,600,000 Triunfo Sanitation District Refunding
Rev., VRDN, 3.50%, 3-5-97
(LOC: Banque National de Paris) 1,600,000
825,000 Upland Community Redevelopment
Agency Multifamily Housing Rev.,
(Northwoods Project), VRDN,
3.80%, 3-5-97 (LOC: Sanwa
Bank) 825,000
6,300,000 Victor Valley Community College
Certificates of Participation,
VRDN, 3.40%, 3-6-97 (LOC:
Banque National de Paris,
Dai-Ichi Kangyo Bank) 6,300,000
1,000,000 Visalia Public Financing Auth.
Certificates of Participation,
VRDN, 3.20%, 3-6-97 (LOC:
California State Teachers
Retirement System) 1,000,000
2,600,000 West Sacramento Financing Auth.
Special Tax Rev., Series C, VRDN, 3.30%, 3-6-97 (LOC:
Wells Fargo & Co.) 2,600,000
---------
TOTAL INVESTMENT SECURITIES--100.0% $426,237,269
===========
See Notes to Financial Statements
12 California Tax-Free Money Market American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA TAX-FREE MONEY MARKET
FEBRUARY 28, 1997 (UNAUDITED)
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
FGIC = Financial Guaranty Insurance Company
FHLB = Federal Home Loan Banks
FNMA = Federal National Mortgage Association
FSA = Financial Security Association
GO = General Obligation
LOC = Letter of Credit
MBIA = Municipal Bond Insurance Association
SBBPA = Standby Bond Purchase Agreement
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
February 28, 1997.
See Notes to Financial Statements
Semiannual Report California Tax-Free Money Market 13
<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL MONEY MARKET
7-DAY 7-DAY 7-DAY TAX-EQUIVALENT YIELDS
CURRENT EFFECTIVE 34.70% 37.42% 41.95% 45.22%
YIELD YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
----- ----- ----------- ----------- ----------- -----------
CURRENT YIELD (as of February 28, 1997)
California Municipal
<S> <C> <C> <C> <C> <C> <C>
Money Market 2.95% 2.99% 4.52% 4.71% 5.08% 5.39%
Yields are defined in the Glossary on page 53.
</TABLE>
<TABLE>
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARSLIFE OF FUND(1)
-------- ------ ------- ----------------------
TOTAL RETURNS (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California Municipal Money Market 1.51% 3.04% 3.08% 2.81% 3.11%
Average California Tax-Exempt
Money Market Fund(2) 1.43% 2.86% 2.93% 2.63% 2.88%
Fund's Ranking Among California
Tax-Exempt Money Market Funds(2) -- 13 out of 54 11 out of 47 8 out of 43 9 out of 37
(1) Inception date was December 31, 1990.
(2) According to Lipper Analytical Services.
See pages 52-53 for more information about returns and Lipper fund rankings.
</TABLE>
PORTFOLIO AT A GLANCE
2/28/97 8/31/96
Number of Securities 62 61
Weighted Average Maturity 23 days 42 days
Expense Ratio 0.51%* 0.53%
* Annualized.
Money market funds are neither insured nor guaranteed by the U.S. government.
Yields will fluctuate, and there can be no assurance that the fund will be able
to maintain a stable $1.00 share price.
14 California Municipal Money Market American Century Investments
CALIFORNIA MUNICIPAL MONEY MARKET
Management Q & A
An interview with Todd Pardula, a portfolio manager on the California Tax-Free
and Municipal funds management team.
How did the fund perform?
The fund continued to outperform its peer group average while meeting its
investment objective of providing tax-exempt income. For the six months ended
February 28, 1997, the fund had a total return of 1.51%, compared with the 1.43%
average return of the 56 "California Tax-Exempt Money Market Funds" tracked by
Lipper Analytical Services. (See the Total Returns table on the previous page
for other fund performance comparisons.)
The fund's average maturity shortened significantly over the past six months.
Why?
We shortened the fund's average maturity because of prevailing economic
conditions. The U.S. economy has experienced strong employment growth, but
inflation has remained low. These conditions rarely co-exist for long;
eventually, something has to give. We expected to see wage pressures lead to
rising inflation, which in turn would likely lead to a short-term interest rate
increase by the Federal Reserve.
Despite these expectations, we planned to extend the fund's maturity in December
by taking advantage of the usual year-end rise in the yields of short-term
municipal securities (a result of selling by corporations that wish to "dress
up" their balance sheets with Treasury securities at year-end). However, this
seasonal effect was less dramatic than in past years. So, rather than buy
securities with unattractive yields, we allowed the fund's average maturity to
shorten further. By the end of the six-month period, the fund's average maturity
of 23 days was nearly three weeks shorter than that of the average California
tax-exempt money market fund.
Has the supply of California municipal money market securities had any effect on
your management of the fund?
Yes, and that's another reason why the fund's maturity has been shorter than
normal. We typically invest a majority of the fund's assets in variable-rate
demand notes (VRDNs) that reset their rates on a daily or weekly basis. We
balance these short-term investments with longer-term municipal securities,
which generally have maturities of 8-13 months.
However, a shortage of one-year California municipal securities has made yields
in this maturity sector unattractive compared to Treasurys and other short-term
tax-exempt securities. As a result, we've been concentrating the fund's
investments in VRDNs, which now make up nearly 85% of the fund's portfolio. This
situation has contributed to the fund's shorter average maturity.
[pie charts - data described below]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 2/28/97)
VRDNs 83%
Bonds less than 1 Year 9%
Municipal Notes 5%
Commerical Paper 3%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 8/31/96)
VRDNs 76%
Put Bonds 13%
Municipal Notes 7%
Bonds less than Year 3%
Commercial Paper 1%
Semiannual Report California Municipal Money Market 15
CALIFORNIA MUNICIPAL MONEY MARKET
The fund typically invests a majority of its assets in AMT paper. Did this
change over the past six months?
The fund is holding more AMT paper than usual--about 70% of fund assets,
compared to around 60% normally. This is a direct result of the fund's shorter
average maturity, since the majority of AMT paper is issued in the form of
weekly VRDNs.
Looking ahead, what are your plans for the fund over the next six months?
We will likely extend the fund's average maturity at some point, but we're
willing to wait until one-year municipal yields become more attractive. The
Federal Reserve has given us another reason to wait--in March, it made a
pre-emptive strike against inflation by raising short-term interest rates. Many
Fed watchers suspect this may be the first in a series of rate hikes.
But our decision to extend the fund's maturity will be based primarily on the
relative values between VRDNs and longer-term municipal money market securities.
To make this determination, we project VRDN rates over the coming year and
compare our results to current rates on one-year municipal securities. We then
invest in whichever offers the higher yield. Lately, VRDNs have been the better
buy, but we expect seasonal supply factors to favor one-year securities in the
coming months.
Can you describe some of these seasonal factors?
The next seasonal opportunity for us to extend the fund's maturity is in April,
when many tax-exempt money market funds sell securities to meet cash outflows as
investors pay their tax bills. But the best opportunity will occur in June and
July, when many California municipalities issue a substantial amount of one-year
notes. We'll definitely look to extend the fund's average maturity at that time;
how far we extend will depend on economic conditions. If economic growth slows
down, we may extend the fund's maturity out to 60 days or more, but we would be
less enthusiastic if the economy continued to strengthen.
How does credit research affect your management of the fund?
When it comes to security selection, our municipal credit research team plays a
vital role. The team has set stringent guidelines and is proactive about keeping
the management team apprised of changing credit conditions. Our relationship
represents a good balance between yield and credit quality--the fund management
team seeks out the most attractive yields within the rigorous credit standards
established by our credit research group.
[pie charts - data described below]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 2/28/97)
SP1+ 67%
SP1 33%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 8/31/96)
SP1+ 81%
SP1 19%
16 California Municipal Money Market American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA MUNICIPAL MONEY MARKET
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
MUNICIPAL SECURITIES
$ 2,000,000 Agoura Hills Multifamily Housing
Rev., (Oakridge Apartments
Project), VRDN, 3.45%, 3-5-97
(LOC: Continental Casualty Co.) $2,000,000
2,000,000 Alameda County Industrial
Development Auth. Rev., Series
1994 A, (Scientific Technology
Project), VRDN, 3.35%, 3-5-97
(LOC: Banque National de Paris) 2,000,000
2,000,000 Anaheim Electrical Rev., 4.25%,
10-1-97 (AMBAC) 2,004,523
2,100,000 Auburn Industrial Development
Auth. Rev., (Coherent Income
Project), VRDN, 3.40%, 3-5-97
(LOC: Bank of Tokyo-Mitsubishi) 2,100,000
2,815,000 Azusa Multifamily Housing Rev.,
(Pacific Glen Apartments Project),
VRDN, 3.50%, 3-6-97 (LOC:
Continental Casualty Co.) 2,815,000
4,600,000 Big Bear Lake Industrial Rev.,
Series 1993 A, (Southwest Gas
Project), VRDN, 3.25%, 3-5-97
( LOC: Union Bank of Switzerland) 4,600,000
1,175,000 California Counties Industrial
Development Auth. Rev., (S&P
Investments Project), VRDN,
3.30%, 3-5-97 (LOC: California
State Teachers Retirement
System) 1,175,000
3,515,000 California Housing Financing
Agency Rev., VRDN, 3.45%,
3-6-97 (MBIA) (SBBPA: Credit
Suisse) 3,515,000
4,100,000 California Housing Financing
Agency Mortgage Rev., Series
1996 J, Mandatory Put, 4.00%,
7-24-97 4,101,535
2,500,000 California Pollution Control
Financing Auth. Rev., Commercial
Paper, 3.45%, 5-1-97 (LOC:
Morgan (J.P.) & Co. Inc.) 2,500,000
7,300,000 California Pollution Control
Financing Auth. Rev., Series
1990 B, (Colmac Energy
Project), VRDN, 3.25%, 3-5-97
(LOC: Swiss Bank, NY) 7,300,000
Principal Amount Value
- -------------------------------------------------------------------------------
$13,000,000 California Pollution Control
Financing Auth. Rev., Series
1996 A, (Pacific Gas and
Electric), VRDN, 3.30%, 3-5-97
(LOC: Swiss Bank, NY) $13,000,000
12,000,000 California Pollution Control
Financing Auth. Rev., Series
1996 B, (Pacific Gas and
Electric), VRDN, 3.25%, 3-5-97
(LOC: Rabobank Nederland, NY) 12,000,000
1,300,000 California Pollution Control
Financing Auth. Rev., Series
1996 F, (Pacific Gas and
Electric), VRDN, 3.35%, 3-3-97
(LOC: Banque National de Paris) 1,300,000
2,700,000 California Pollution Control
Financing Auth. Rev., Series
1990 A, (Sanger Project), VRDN,
3.25%, 3-5-97 (LOC: Credit
Suisse) 2,700,000
2,000,000 California Pollution Control
Financing Auth. Rev., Series
1986 C, (Southern California
Edison), VRDN, 3.45%, 3-3-97 2,000,000
1,200,000 California Pollution Control
Financing Auth. Rev., Series
1994 B, (Taormina Industries),
VRDN, 3.50%, 3-5-97 (LOC:
Sanwa Bank, Ltd.) 1,200,000
2,500,000 California Pollution Control
Financing Auth. Rev., Series
1996 A, (Taormina Industries),
VRDN, 3.50%, 3-5-97 (LOC:
Sanwa Bank, Ltd.) 2,500,000
2,300,000 California Public Capital
Improvements Project, Series
1988 C, Quarterly Put Bond,
3.65%, 3-15-97 (LOC: National
Westminster Bank PLC) 2,300,000
2,000,000 California School Cash Reserve
Program Auth. Rev., Series 1996
A, 4.75%, 7-2-97 (MBIA) 2,005,840
7,000,000 California State Rev. Anticipation
Notes, Series 1996, 4.50%,
6-30-97 7,011,440
See Notes to Financial Statements
Semiannual Report California Municipal Money Market 17
SCHEDULE OF INVESTMENTS
CALIFORNIA MUNICIPAL MONEY MARKET
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$ 4,800,000 California State Rev. Anticipation
Notes, Series 1996 C-2, VRDN,
3.25%, 3-5-97 (SBBPA: Bank
of America, Bank of Nova
Scotia-NY, Commerzbank
Aktiengesel-NY, National
Westminster Bank PLC) $4,800,000
2,000,000 California Statewide Community
Development Auth. Rev., (Howard
S. Leight & Assoc.), VRDN,
3.40%, 3-5-97 (LOC: Sanwa
Bank Ltd.) 2,000,000
1,500,000 California Statewide Communities
Development Auth. Rev., Series
1996 G, (Lansmont Property),
VRDN, 3.40%, 3-5-97 (LOC:
Wells Fargo & Co.) 1,500,000
3,700,000 California Statewide Communities
Development Auth. Rev.,
(Levecke Project), VRDN,
3.40%, 3-5-97 (LOC: Bank of
Tokyo-Mitsubishi) 3,700,000
1,035,000 California Statewide Communities
Development Auth. Rev., Series
1989, (Sunclipse Inc.), VRDN,
3.30%, 3-5-97 (LOC: California
State Teachers Retirement
System) 1,035,000
2,000,000 California Statewide Communities
Development Auth. Rev., Series
1995 D, (Whispering Winds
Apartments), VRDN, 3.45%,
3-5-97 (LOC: Continental
Casualty Co.) 2,000,000
3,800,000 Chula Vista Industrial Development
Rev., (San Diego Gas and
Electric), VRDN, 3.60%, 3-3-97 3,800,000
3,755,000 Contra Costa County Certificates of
Participation, (Concord
Healthcare Center), VRDN,
3.35%, 3-5-97 (LOC: Boatman's
First National Bank) 3,755,000
4,000,000 Contra Costa County Multifamily
Housing Rev., Series 1994 A,
(Del Norte Apartments), VRDN,
3.40%, 3-4-97 (LOC: Sumitomo
Bank) 4,000,000
Principal Amount Value
- -------------------------------------------------------------------------------
$ 2,000,000 Fowler Industrial Development Auth.
Rev., (Bee Sweet Citrus Inc.),
VRDN, 3.40%, 3-6-97 (LOC:
Bank of America) $2,000,000
1,000,000 Glenn Industrial Development Auth.
Rev., (Land O'Lakes Income Project),
3.70%, 3-7-97 (LOC:Sanwa Bank Ltd.) 1,000,000
800,000 Irvine Ranch Water District, Series
1985, VRDN, 3.35%, 3-3-97
(LOC: Landbank
Hessen-Thuringen Girozentrale) 800,000
1,000,000 Irvine Ranch Water District, Series
1993, VRDN, 3.35%, 3-3-97
(LOC: Bank of America) 1,000,000
4,000,000 Kern County Certificates of
Participation, Series 1996 A,
VRDN, 3.40%, 3-6-97 (LOC:
Anchor National Life Insurance
Company) 4,000,000
2,500,000 Lassen Municipal Utility District
Rev., VRDN, 3.40%, 3-6-97
(FSA) (SBBPA: Credit Local
De France) 2,500,000
1,000,000 Livermore Multifamily Rev., Series
1989 A, (Portola Meadows
Apartments), VRDN, 3.30%,
3-6-97 (LOC: Bank of America) 1,000,000
2,000,000 Long Beach Harbor Commercial
Paper, 3.50%, 5-1-97 (Line of
Credit: Industrial Bank of Japan,
Ltd., Canadian Imperial Bank of
Commerce, National Westminster
Bank PLC, California State
Teachers Retirement System,
Banque National De Paris) 2,000,000
500,000 Long Beach Harbor Rev., Series
1989 A, 6.80%, 5-15-97 502,843
2,900,000 Los Angeles County Industrial Development
Auth., (Tulip Corporation, Project 1989 A),
VRDN, 3.40%, 3-5-97 (LOC:
La Salle National Bank) 2,900,000
1,250,000 Los Angeles County Public Works
Financing Auth. Lease Rev.,
Series 1996 A, 4.50%, 9-1-97
(MBIA) 1,253,978
See Notes to Financial Statements
18 California Municipal Money Market American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA MUNICIPAL MONEY MARKET
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$ 1,570,000 Los Angeles County Public Works
Financing Auth. Lease Rev.,
Series 1996, 4.50%, 9-1-97
(MBIA) $1,574,690
2,500,000 Los Angeles County Tax and Rev.
Anticipation Notes, 4.50%,
6-30-97 (LOC: Bank of America,
Credit Suisse-NY, Morgan
Guaranty Trust Co.-New York,
Union Bank of Switzerland,
Wesdeutsche Landesbank
Girozentrale) 2,505,186
3,000,000 Los Angeles Multifamily Housing
Rev., Series 1991 D, (Lucas
Studios Project), VRDN, 3.30%,
3-6-97 (LOC: Bank of America) 3,000,000
4,950,000 Los Angeles Multifamily Housing
Rev., Series 1994, (Oakwood
Apartments), VRDN, 3.40%,
3-4-97 (LOC: Sumitomo Bank,
Ltd.) 4,950,000
3,900,000 Los Angeles Multifamily Housing
Rev., Series 1989 C, (Vermont
Knoll Apartments), VRDN,
3.65%, 3-5-97 (LOC: Wells
Fargo & Co.) 3,900,000
4,500,000 Los Angeles Wastewater System
Commercial Paper, 3.45%,
5-9-97 (LOC: Union Bank of
Switzerland) 4,500,000
2,000,000 Modesto Multifamily Housing Rev.,
(Live Oak Apartments), VRDN,
3.40%, 3-6-97 (FNMA) 2,000,000
5,500,000 Oceanside Multifamily Housing
Rev., (Lakeridge Apartments
Project), VRDN, 3.50%, 3-5-97
(LOC: Continental Casualty) 5,500,000
2,400,000 Ontario Industrial Development
Auth. Rev., Series 1988,
(Winsford Partners), VRDN,
3.40%, 3-5-97 (LOC: Bank
of America) 2,400,000
2,660,000 Pleasant Hill Redevelopment
Agency, Series 1996 A, VRDN,
3.40%, 3-6-97 (LOC:
Commerzbank Aktiengesel-
New York) 2,660,000
Principal Amount Value
- -------------------------------------------------------------------------------
$ 500,000 Rancho Mirage Redevelopment
Agency Certificates of
Participation, VRDN, 3.30%,
3-6-97 (LOC: Bank of America) $ 500,000
1,500,000 Riverside County Industrial Auth.
Rev., Series 1987, (Rocklin
Corp.), VRDN, 3.40%, 3-5-97
(LOC: Royal Bank of Canada) 1,500,000
1,015,000 Riverside County Multifamily
Housing Rev., Series 1986 A,
(Tyler Village Project), VRDN,
3.35%, 3-5-97 (LOC: Chase
Manhatten Bank) 1,015,000
9,500,000 Sacramento County Housing Auth.
Rev., Issue 1992 A, (Shadowood
Apartments Projects), VRDN,
3.40%, 3-5-97 (LOC: GE
Capital Corp.) 9,500,000
900,000 San Diego Industrial Development
Rev., Series 1987 A, (Kaiser
Aerospace and Electricity, VRDN,
3.45%, 3-6-97 (LOC: ABN
Amro Bank) 900,000
1,300,000 San Joaquin County Industrial
Development Auth. Rev.,
(Modtech Inc.), VRDN, 3.30%,
3-5-97 (LOC: Bank of
Tokyo-Mitsubishi) 1,300,000
3,500,000 San Jose Multifamily Housing Rev.,
Series 1996 A, (Siena at
Renaissance), VRDN, 3.30%,
3-5-97 (LOC: Bank One) 3,500,000
3,850,000 Santa Ana Multifamily Housing
Auth. Rev., VRDN, 3.30%,
3-6-97 (LOC: Bank of America) 3,850,000
2,000,000 Santa Paula Public Financing Auth.
Rev., VRDN, 3.50%, 3-5-97
(LOC: Bank of Tokyo-Mitsubishi) 2,000,000
700,000 South San Francisco Multifamily
Housing Rev., Series 1987 A,
(Magnolia Plaza Apartments),
VRDN, 3.30%, 3-5-97 (LOC:
Wells Fargo & Co.) 700,000
4,200,000 Vallejo Industrial Development
Auth. Rev., Series 1993 A,
(Meyer Cookware Industries
Project), VRDN, 3.50%, 3-5-97
(LOC: Bank of Tokyo-Mitsubishi) 4,200,000
---------
TOTAL INVESTMENT SECURITIES--100.0% $187,630,035
===========
See Notes to Financial Statements
Semiannual Report California Municipal Money Market 19
SCHEDULE OF INVESTMENTS
CALIFORNIA MUNICIPAL MONEY MARKET
FEBRUARY 28, 1997 (UNAUDITED)
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
FNMA = Federal National Mortgage Association
FSA = Financial Security Association
LOC = Letter of Credit
MBIA = Municipal Bond Insurance Association
SBBPA = Standby Bond Purchase Agreement
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
February 28, 1997.
See Notes to Financial Statements
20 California Municipal Money Market American Century Investments
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD MUNICIPAL
30-DAY 30-DAY TAX-EQUIVALENT YIELDS
SEC 34.70% 37.42% 41.95% 45.22%
YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
----- ----------- ----------- ----------- -----------
CURRENT YIELD (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California High-Yield Municipal 5.36% 8.21% 8.57% 9.23% 9.78%
Yields are defined in the Glossary on page 53.
</TABLE>
<TABLE>
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
TOTAL RETURNS (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California High-Yield Municipal ...................... 5.04% 6.97% 6.32% 7.93% 6.36%
Lehman Long-Term Municipal Bond Index ................ 5.99% 6.18% 6.46% 8.33% 8.34%
Average California Municipal Debt Fund(1) ............ 4.76% 4.81% 5.10% 6.94% 6.67%
Fund's Ranking Among California
Municipal Debt Funds(1) .............................. -- 2 out of 98 4 out of 68 3 out of 50 21 out of 30
(1)According to Lipper Analytical Services.
</TABLE>
See pages 52-53 for more information about returns, the comparative index and
Lipper fund rankings.
[line graph - data below]
GROWTH OF $10,000 OVER TEN YEARS
$10,000 investment made 2/28/87
Lehman Long-Term Municipal Index High-Yield Municipal
2/28/87 $10,000 $10,000
3/31/87 $9,853 $10,030
4/30/87 $9,300 $8,809
5/31/87 $9,197 $8,624
6/30/87 $8,904 $8,858
7/31/87 $8,987 $8,913
8/31/87 $9,027 $8,930
9/30/87 $8,658 $8,465
10/31/87 $8,658 $8,285
11/30/87 $8,934 $8,529
12/31/87 $9,051 $8,692
1/31/88 $9,412 $9,000
2/29/88 $9,523 $9,111
3/31/88 $9,386 $9,011
4/30/88 $9,461 $9,075
5/31/88 $9,470 $9,114
6/30/88 $9,655 $9,225
7/31/88 $9,720 $9,293
8/31/88 $9,758 $9,392
9/30/88 $9,979 $9,541
10/31/88 $10,206 $9,682
11/30/88 $10,097 $9,677
12/31/88 $10,272 $9,774
1/31/89 $10,514 $9,932
2/28/89 $10,367 $9,954
3/31/89 $10,375 $9,950
4/30/89 $10,680 $10,079
5/31/89 $10,927 $10,277
6/30/89 $11,093 $10,388
7/31/89 $11,240 $10,501
8/31/89 $11,069 $10,412
9/30/89 $11,035 $10,425
10/31/89 $11,181 $10,506
11/30/89 $11,419 $10,680
12/31/89 $11,503 $10,718
1/31/90 $11,387 $10,680
2/28/90 $11,515 $10,827
3/31/90 $11,527 $10,831
4/30/90 $11,386 $10,695
5/31/90 $11,708 $10,999
6/30/90 $11,823 $11,111
7/31/90 $12,032 $11,318
8/31/90 $11,745 $11,012
9/30/90 $11,727 $10,969
10/31/90 $11,975 $11,076
11/30/90 $12,279 $11,270
12/31/90 $12,333 $11,324
1/31/91 $12,498 $11,509
2/28/91 $12,586 $11,555
3/31/91 $12,616 $11,587
4/30/91 $12,812 $11,780
5/31/91 $12,962 $11,914
6/30/91 $12,938 $11,907
7/31/91 $13,138 $12,074
8/31/91 $13,327 $12,196
9/30/91 $13,520 $12,362
10/31/91 $13,661 $12,461
11/30/91 $13,678 $12,457
12/31/91 $14,004 $12,560
1/31/92 $13,996 $12,547
2/29/92 $14,018 $12,653
3/31/92 $14,053 $12,739
4/30/92 $14,187 $12,835
5/31/92 $14,394 $12,987
6/30/92 $14,673 $13,189
7/31/92 $15,211 $13,593
8/31/92 $15,007 $13,429
9/30/92 $15,073 $13,512
10/31/92 $14,822 $13,242
11/30/92 $15,239 $13,566
12/31/92 $15,437 $13,712
1/31/93 $15,582 $13,810
2/28/93 $16,307 $14,267
3/31/93 $16,110 $14,180
4/30/93 $16,331 $14,376
5/31/93 $16,466 $14,519
6/30/93 $16,775 $14,781
7/30/93 $16,792 $14,791
8/31/93 $17,222 $15,122
9/30/93 $17,446 $15,320
10/31/93 $17,479 $15,407
11/30/93 $17,268 $15,281
12/31/93 $17,713 $15,519
1/31/94 $17,922 $15,724
2/28/94 $17,329 $15,421
3/31/94 $16,294 $14,815
4/29/94 $16,420 $14,759
5/31/94 $16,612 $14,955
6/30/94 $16,413 $14,930
7/29/94 $16,834 $15,236
8/31/94 $16,870 $15,254
9/30/94 $16,478 $15,077
10/31/94 $15,972 $14,852
11/30/94 $15,551 $14,472
12/30/94 $16,103 $14,687
1/31/95 $16,811 $15,099
2/28/95 $17,496 $15,467
3/31/95 $17,706 $15,742
4/28/95 $17,697 $15,748
5/31/95 $18,451 $16,221
6/30/95 $18,111 $16,056
7/31/95 $18,203 $16,122
8/31/95 $18,460 $16,335
9/30/95 $18,604 $16,450
10/31/95 $19,054 $16,702
11/30/95 $19,546 $17,074
12/31/95 $19,851 $17,374
1/31/96 $19,936 $17,392
2/29/96 $19,693 $17,325
3/31/96 $19,333 $17,111
4/30/96 $19,255 $17,071
5/31/96 $19,265 $17,159
6/30/96 $19,562 $17,425
7/31/96 $19,755 $17,594
8/31/96 $19,730 $17,641
9/30/96 $20,168 $17,938
10/31/96 $20,414 $18,105
11/30/96 $20,853 $18,499
12/31/96 $20,727 $18,397
1/31/97 $20,686 $18,353
2/28/97 $22,288 $18,536
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost. The line representing the fund's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return line of the index does not.
PORTFOLIO AT A GLANCE
2/28/97 8/31/96
Number of Securities 98 90
Weighted Average Maturity 21.5 years 20.7 years
Average Duration 7.6 years 7.5 years
Expense Ratio 0.50%* 0.51%
* Annualized.
Semiannual Report California High-Yield Municipal 21
CALIFORNIA HIGH-YIELD MUNICIPAL
Management Q & A
An interview with Steven Permut, a senior portfolio manager on the California
Tax-Free and Municipal funds management team.
How did the fund perform?
The fund performed well. For the six-month period ended February 28, 1997, the
fund's total return of 5.04% was significantly higher than the 4.76% average
return of the 100 "California Municipal Debt Funds" tracked by Lipper Analytical
Services. From a one-year perspective, the fund's performance was even stronger;
its 6.97% average annual return ranked it #2 among its Lipper peers. (See the
Total Returns table on the previous page for other fund performance
comparisons.)
How did the fund's yield stack up against the competition?
The fund continued to provide shareholders with a high level of current income.
As of February 28, the fund's 30-day SEC yield was 5.36%, compared to the 4.52%
average yield of its peers.+
+ Although the fund's yield may be significantly higher than the yields of other
fixed-income funds that purchase higher-rated securities, this higher yield is
generally based upon the greater credit risk of the securities in the fund's
portfolio.
[bar graph - data below]
CALIFORNIA HIGH-YIELD MUNICIPAL FISCAL YEAR-BY-YEAR RETURNS (Periods ended
August 31)
High-Yield Municipal Lehman Long-Term Municipal Index
1987* -10.19% -0.28%
1988 5.17 8.10
1989 10.88 13.44
1990 5.77 6.11
1991 10.75 13.47
1992 10.11 12.60
1993 12.61 14.76
1994 0.87 -2.05
1995 7.09 9.43
1996 8.02 6.88
This chart illustrates the historical year-by-year volatility of the fund's
returns since its inception and compares them with the index's returns. The
fund's total returns include operating expenses, while the index's do not. See
page 52 for a definition of the index.
* Return from the fund's 12/30/86 inception date to 8/31/87.
22 California High-Yield Municipal American Century Investments
CALIFORNIA HIGH-YIELD MUNICIPAL
What's behind the fund's continued strong performance?
In general, California high-yield municipal securities performed very well
during the period as credit quality spreads--the differences between the yields
of high-rated securities and those of lower-rated securities--continued to
narrow. This compression of credit quality spreads in the California municipal
market is a direct result of the state's improving economic outlook and real
estate market. In addition, municipal bond insurers have insured more
lower-quality California issues, adding strength to the narrowing trend. The
fund, which holds a relatively high position in lower-rated securities, greatly
benefited from this trend. A number of issues held by the fund were prerefunded
and experienced credit improvement during the six-month period, boosting the
fund's returns.
Have all lower-rated California municipal bonds been good buys?
No. That's where our professional management team adds value. We have to be very
selective when looking at BBB and unrated issues. We recently increased the size
of our municipal credit research team and now have five analysts carefully
evaluating all securities considered for purchase by the fund. Using a
disciplined bottom-up, value-oriented approach, the credit team looks for
securities that may be undervalued by virtue of their credit rating or market
valuation. The credit research team's work has been a vital factor in improving
the fund's returns while minimizing its credit risk.
How was the fund positioned during the period?
We lengthened the fund's duration in the third and fourth quarters of 1996 as
bonds rallied, but shortened it up when the bond market began to sell off in
December and January. As of February 28, the fund's duration was 7.6
years--nearly the same as it was at the end of August. Pulling the fund's
duration back brought the fund to a roughly neutral position relative to its
peers and reduced the fund's vulnerability to interest rate fluctuations.
What is your outlook for the municipal market going forward?
In general, we expect to see slightly higher interest rates in the coming months
as the Federal Reserve moves to keep a lid on inflation. But in the municipal
market, we expect continuing strong growth in California's economy to further
boost the performance of high-yield municipal securities, which should keep
credit quality
[pie charts - data below]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 2/28/97)
Revenue 37%
Land-Secured 35%
COPs/Leases 19%
Prerefunded/ETM 5%
GO 2%
Other 2%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 8/31/96)
Revenue 42%
Land-Secured 37%
COPs/Leases 13%
Prerefunded/ETM 3%
GO 3%
Other 2%
Semiannual Report California High-Yield Municipal 23
CALIFORNIA HIGH-YIELD MUNICIPAL
spreads for California issues very narrow. We also anticipate limited issuance
of lower-quality securities. This situation will likely result in more
competition and higher prices for high-yield securities.
What are your plans for the fund over the next six months?
Given the likelihood of higher rates, we will probably maintain the fund's
neutral duration. In addition, we will continue to utilize our strong credit
research team to search for securities with undervalued credit ratings and
market valuations that we believe have the potential to appreciate in the near
term. We will look to increase the fund's holdings in unrated bonds to about 35%
of the portfolio, but this plan is dependent on whether we can find issues that
meet our credit criteria and represent good value.
[pie charts - data below]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 2/28/97)
AAA 26%
AA 4%
A 23%
BBB 15%
Unrated 32%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 8/31/96)
AAA 23%
AA 2%
A 27%
BBB 16%
Unrated 32%
24 California High-Yield Municipal American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA HIGH-YIELD MUNICIPAL
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
MUNICIPAL SECURITIES
$ 2,000,000 Alameda Public Financing Auth.
Local Agency Rev., Series 1996
A, (Community Facility District
Number 1), 7.00%, 8-1-19 $2,081,760
1,000,000 Albany Unified School District GO,
Series 1995 C, 5.00%, 8-1-19
(FSA) 905,520
700,000 Bishop, Escalon & Lemoore Cities
Certificates of Participation,
Series 1991 A, 7.70%, 5-1-11 747,236
3,000,000 Brawley Certificates of Participation,
(Water System Improvement
Project), 6.40%, 12-1-26 2,912,370
1,540,000 Brisbane Certificates of
Participation, (Capital
Improvement Refinancing
Project), 6.00%, 4-1-18 1,537,151
500,000 California Educational Facilities
Auth. Rev., (California Lutheran
University), 7.375%, 12-1-16 537,680
1,000,000 California Educational Facilities
Auth. Rev., (Mills College),
6.875%, 9-1-22 1,078,170
1,000,000 California Educational Facilities
Auth. Rev., Series 1993 B,
(Pooled College and University
Financing), 6.125%, 6-1-09 1,020,650
5,350,000 California Educational Facilities
Auth. Rev., (St. Mary's College),
4.75%, 10-1-20 (MBIA) 4,635,668
4,000,000 California Health Facilities
Financing Auth. Rev., Series
1989 A, (Kaiser Permanente),
5.59%, 10-1-12 (AMBAC)(1) 1,693,280
2,015,000 California Health Facilities
Financing Auth. Rev., Series
1986 A, (Pomona Valley
Community Hospital), 7.00%,
1-1-17 2,038,515
170,000 California Housing Finance Agency
Home Mortgage Rev. Bonds,
Series 1988 B, 8.60%, 8-1-19 177,495
Principal Amount Value
- -------------------------------------------------------------------------------
$ 610,000 California Housing Finance Agency
Home Mortgage Rev. Bonds,
Series 1989, 8.00%, 8-1-29 $ 637,438
480,000 California Housing Finance Agency
Home Mortgage Rev. Bonds,
Series 1990 C, 7.60%, 8-1-30 506,380
1,955,000 California Housing Finance Agency
Home Mortgage Rev. Bonds,
Series 1997 B, 6.10%, 2-1-28
(MBIA) 1,983,015
3,455,000 California Housing Finance Agency
Multifamily Mortgage Rev. Bonds,
Series 1997 A, 5.95%, 8-1-28
(MBIA) 3,463,603
3,500,000 California Housing Finance Agency
Multi-Unit Mortgage Rev. Bonds,
Series 1992 C, 6.875%, 8-1-24 3,636,570
1,500,000 California Maritime Infrastructure
Auth. Airport Rev., (San Diego
Unified Port District Airport),
5.00%, 11-1-20 (AMBAC) 1,356,240
400,000 California Public Capital
Improvements Financing Auth.
Rev., Series 1988 A, (Pooled
Project), 8.50%, 3-1-18 420,824
500,000 California State Department of
Veterans Affairs Home Purchase
Rev., Series 1988 A, 8.30%,
8-1-19 520,180
4,000,000 California State Department of
Water Resources Rev., Series
1993 M, 5.00%, 12-1-19 3,633,280
3,665,000 California State GO, 5.35%,
9-1-09(1) 1,893,486
2,000,000 California State Public Works
Board Lease Rev., Series 1993
D, (Department of Corrections),
5.25%, 6-1-15 (FSA) 1,961,860
1,000,000 California State Public Works
Board Lease Rev., Series 1993
A, (Various State University
Projects), 5.50%, 12-1-18 953,000
5,000,000 California State Public Works
Board Lease Rev., Series 1993
B, (Various State University
Projects), 5.50%, 6-1-19 4,762,350
See Notes to Financial Statements
Semiannual Report California High-Yield Municipal 25
SCHEDULE OF INVESTMENTS
CALIFORNIA HIGH-YIELD MUNICIPAL
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$ 1,000,000 California Statewide Communities
Development Auth. Rev.
Certificates of Participation,
Series 1996 A, (Insurance
Health Facility, San Gabriel
Valley), 5.50%, 9-1-14 (California
Mortgage Insurance) $ 980,730
580,000 Clayton Improvement Bond Act
1915 Special Assessment,
(Oakhurst Assessment District),
8.00%, 9-2-14 600,886
130,000 Clayton Improvement Bond Act
1915 Special Assessment,
Series 1988 A, (Oakhurst
Assessment District ), 8.40%,
9-2-10 134,679
4,500,000 Colton Public Financing Auth. Rev.,
Series 1995, (Electric System),
7.50%, 10-1-20 4,709,745
3,185,000 Contra Costa County Certificates
of Participation, (Merrithew
Memorial Hospital Project),
5.375%, 11-1-17 (MBIA) 3,046,898
750,000 Contra Costa County Public
Financing Auth. Tax Allocation
Rev., Series 1992 A, 7.10%,
8-1-22 800,535
695,000 Corcoran Certificates of
Participation, 8.75%, 6-1-16(2) 717,865
500,000 Cucamonga School District
Certificates of Participation,
Series 1990, 7.60%, 12-1-99,
Prerefunded at 102% of Par(3) 556,755
1,000,000 Davis Community Facility District
Number 1991-2, Series 1992
B, 7.80%, 9-1-22 1,080,230
1,500,000 Del Mar Race Track Auth. Rev.,
6.20%, 8-15-11 1,537,695
1,000,000 El Dorado County Board Auth.
Lease Rev., (Capital Facility
Project), 7.40%, 11-1-09 1,098,190
350,000 Folsom Redevelopment Agency
Tax Allocation Rev., Series 1987
A, 8.60%, 2-1-13 364,018
Principal Amount Value
- -------------------------------------------------------------------------------
$ 1,500,000 Folsom Special Tax, (Community
Facility District Number 7),
7.25%, 9-1-21 $1,527,270
2,350,000 Fontana Community Facility District
Number 2 Special Assessment,
Series 1988 B, 8.50%, 9-1-17 2,470,062
2,000,000 Fontana Public Financing Auth. Tax
Allocation Rev., Series 1993 A,
5.00%, 9-1-20 (MBIA) 1,823,520
1,000,000 Fontana Redevelopment Agency
Tax Allocation, (Jurupa Hills
Project), 8.00%, 1-1-98 1,016,720
2,500,000 Fontana Redevelopment Agency
Tax Allocation, Series 1994 B,
(Jurupa Hills Project), 7.70%,
1-1-19 2,660,125
1,040,000 Foothill-De Anza Community
College District Certificates of
Participation, Series 1992,
(Campus Center Project), 7.35%,
3-1-07 1,151,758
2,500,000 Foster City Redevelopment Agency
Tax Allocation, (Metro Center),
6.75%, 9-1-20 2,651,575
1,185,000 Gateway Improvement Auth. Rev.,
Series 1995 A, (Marin City
Community Facility), 7.75%,
9-1-25 1,274,539
1,250,000 Hollister Redevelopment Agency
Tax Allocation, Series 1989,
(Hollister Community
Development Project), 7.55%,
10-1-13 1,326,350
2,000,000 Industry Urban Redevelopment
Agency Tax Allocation,
(Project 3), 6.90%, 11-1-16 2,139,700
985,000 Irvine Improvement Bond 1915
Special Assessment, Series
1992 A, (District Number 89-9),
7.40%, 9-2-17 1,012,777
1,000,000 Lake Elsinore Unified School
District Community Facilities
District Special Tax, Series 1991,
(Number 88-1), 8.25%, 9-1-16 1,068,330
See Notes to Financial Statements
26 California High-Yield Municipal American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA HIGH-YIELD MUNICIPAL
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$ 120,000 Los Angeles County Single Family
Mortgage Rev., (GNMA
Mortgage, Issue B), 9.00%,
12-1-20, (GNMA Collateral) $ 126,523
1,000,000 Los Angeles County Transportation
Commission Sales Tax Rev.,
Series 1991 B, 6.50%, 7-1-13 1,060,440
30,000 Los Angeles Home Mortgage Rev.
Bonds, 9.00%, 6-15-18 30,525
1,750,000 Los Angeles State Building Auth.
Lease Rev., Series 1993 A,
5.625%, 5-1-11 1,790,250
5,075,000 Los Angeles Wastewater System
Rev., Series 1993 D, 5.20%,
11-1-21 (FGIC) 4,699,552
3,000,000 Milpitas Improvement Bond Act
1915, Series 1996 A, (District
Number 18), 6.75%, 9-2-16 3,020,820
4,925,000 Northern California Power Agency
Rev., Series E, (Hydroelectric
Project Number 1), 7.15%,
7-1-24 5,169,625
2,000,000 Norwalk Community Facilities
Financing Auth. Tax Allocation,
Series 1995 B, 7.40%, 9-15-25 2,133,700
2,000,000 Novato Community Facility District
Number 1 Special Tax, (Vintage
Oaks Project), 7.20%, 8-1-15 2,083,780
1,000,000 Orange County Community
Facilities District Special Tax,
Series 1993 A, (Number 87-5E),
7.30%, 8-15-18 1,048,550
1,500,000 Orange Cove Irrigation District
Certificates of Participation,
Series 1992, 7.00%, 2-1-15 1,672,755
1,000,000 Pioneer Union Elementary School
District GO, Series 1990, 7.50%,
8-1-14 1,070,270
1,500,000 Pittsburg Assessment District 92-1
Special Assessment, (Village at
New York Landing), 8.00%,
9-2-22 1,554,480
880,000 Pittsburg Assessment District 90-1
Special Assessment, (Oak Hills),
7.75%, 9-2-20 913,220
Principal Amount Value
- -------------------------------------------------------------------------------
$ 2,240,000 Pittsburg Redevelopment Agency
Tax Allocation, Series 1993 A,
(Los Medanos Project), 5.00%,
8-1-17 (AMBAC) $2,045,792
3,500,000 Pittsburg Redevelopment Agency
Tax Allocation, (Los Medanos
Project), 6.25%, 8-1-26 3,529,575
1,500,000 Pomona Public Financing Auth.
Rev., Series 1993 L, (Southwest
Pomona Redevelopment), 5.70%,
2-1-13 1,466,940
5,000,000 Pomona Improvement Bond Act
1915, (Rio Rancho Assessment
District), 7.50%, 9-2-21 5,175,600
2,250,000 Rancho Mirage Joint Powers
Financing Auth. Certificates of
Participation, (Eisenhower
Memorial Hospital), 7.00%,
3-1-22 2,539,508
2,000,000 Redding Joint Powers Financing
Auth. Electric Systems Rev.,
Series 1996 A, 5.25%,
6-1-15 (MBIA) 1,943,800
1,285,000 Redding Redevelopment Agency
Tax Allocation, 5.00%, 9-1-23
(FSA) 1,153,879
1,815,000 Redondo Beach Public Financing
Auth. Rev., (South Bay Center
Redevelopment Project), 7.125%,
7-1-26 1,911,522
1,000,000 Richmond Joint Powers Financing
Auth. Rev., Series 1995 A,
5.25%, 5-15-13 947,640
1,000,000 Rocklin Stanford Ranch Community
Facilities District Special Tax,
8.10%, 11-1-00, Prerefunded at
102% of Par(3) 1,144,660
500,000 Roseville Community Facilities
District Number 2 Special Tax,
8.25%, 9-1-21 535,450
2,500,000 Sacramento County Certificates of
Participation, 5.375%, 2-1-19
(MBIA) 2,400,425
2,490,000 Sacramento School Insurance Auth.
Rev., Series 1993 C, (Workers
Compensation Program), 5.75%,
6-1-03(3) 2,650,680
See Notes to Financial Statements
Semiannual Report California High-Yield Municipal 27
SCHEDULE OF INVESTMENTS
CALIFORNIA HIGH-YIELD MUNICIPAL
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$ 1,965,000 Salinas Assessment District 94-1,
Harden Ranch), 6.875%, 9-2-11 $2,036,349
1,000,000 San Diego Community Facilities
District Number 1 Special Tax,
Series 1995 B, 7.10%, 9-1-20 1,038,610
1,780,000 San Jose Finance Auth. Rev.,
Series 1993 C, (Convention
Center), 6.30%, 9-1-09 1,882,012
3,250,000 Sierra Sands Unified School
District Certificates of
Participation, Series 1993,
(Capital Improvement Refinancing
Project), 5.75%, 2-1-23 3,166,572
3,000,000 South Orange County Public
Financing Auth. Special Tax,
Series 1994 B, (Jr. Lien), 7.25%,
9-1-13 3,177,150
1,615,000 South San Francisco
Redevelopment Agency, 7.60%,
9-1-18 1,718,473
480,000 Southern California Housing
Finance Auth. Single Family
Mortgage Rev., Series A, (GNMA
& FNMA Mortgage-Backed
Securities), 7.35%, 9-1-24 506,491
500,000 Southern California Public Power
Auth. Rev., (Pooled Project),
6.75%, 7-1-10 (FSA) 578,835
2,000,000 Southern California Public Power
Auth. Rev., Series 1993 A,
5.00%, 7-1-15 (AMBAC) 1,872,080
2,400,000 Southern California Public Power
Auth. Rev., (Transmission Project),
5.69%, 7-1-14 (MBIA)(1) 907,104
2,000,000 Southern California Public Power
Auth. Rev., (Transmission Project),
5.73%, 7-1-15 (MBIA)(1) 709,600
500,000 St. Helena Certificates of
Participation, Series 1991 C,
7.875%, 6-1-00, Prerefunded at
102% of Par(3) 561,810
1,000,000 Standard Elementary School
District Certificates of
Participation, Series 1991,
7.375%, 6-1-11 1,069,620
Principal Amount Value
- -------------------------------------------------------------------------------
$ 1,770,000 Tehama Community Certificates of
Participation, (Social Services
Building Project), 7.00%,
10-1-20 $ 1,944,416
1,740,000 Torrance Hospital Rev., (Little
County of Mary Hospital),
6.875%, 7-1-15 1,859,869
1,565,000 Twentynine Palms Water District
Certificates of Participation,
7.10%, 8-1-22 1,651,028
950,000 Vista Joint Powers Financing Auth.
Rev., Series 1990 A, 7.50%,
1-1-16 998,146
3,500,000 University of California Rev., Series
1993 C, (Multiple Purpose
Projects), 5.00%, 9-1-23
(AMBAC) 3,142,860
2,000,000 West Contra Costa Unified School
District Certificates of
Participation, 7.125%, 1-1-24 2,127,280
1,520,000 Windsor Redevelopment Agency
Tax Allocation, 6.875%, 9-1-15 1,613,601
1,000,000 Yosemite Community College
District Certificates of
Participation, Series 1991,
7.75%, 7-1-01, Prerefunded at
102% of Par(3) 1,161,730
----------
TOTAL MUNICIPAL SECURITIES-99.4% 168,388,270
(Cost $161,268,197) ===========
SHORT-TERM MUNICIPAL SECURITIES-0.6%
1,000,000 California Pollution Control
Financing Auth. Rev., (Pacific
Gas & Electric), VRDN, 3.35%,
3-3-97 1,000,000
(Cost $1,000,000) ----------
TOTAL INVESTMENT SECURITIES-100.0% $169,388,270
(Cost $162,268,197) ===========
See Notes to Financial Statements
28 California High-Yield Municipal American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA HIGH-YIELD MUNICIPAL
FEBRUARY 28, 1997 (UNAUDITED)
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
FGIC = Financial Guaranty Insurance Company
FNMA = Federal National Mortgage Association
FSA = Financial Security Association
GNMA = Government National Mortgage Association
GO = General Obligation
MBIA = Municipal Bond Insurance Association
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
February 28, 1997.
(1) This security is a zero-coupon municipal bond. The yield to maturity at
current market value is shown instead of a stated coupon rate. Zero-coupon
securities are purchased at a substantial discount from their value at maturity.
(2) Private placement security which cannot be offered for public sale without
first being registered under the Securities Act of 1933. The value of the
security was $717,865, which represents 0.4% of the net assets of the Fund.
(3) Escrowed in U.S. Government Securities.
See Notes to Financial Statements
Semiannual Report California High-Yield Municipal 29
<TABLE>
<CAPTION>
CALIFORNIA INSURED TAX-FREE
30-DAY 30-DAY TAX-EQUIVALENT YIELDS
SEC 34.70% 37.42% 41.95% 45.22%
YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
----- ----------- ----------- ----------- -----------
CURRENT YIELD (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California Insured Tax-Free 4.75% 7.27% 7.59% 8.18% 8.67%
Yields are defined in the Glossary on page 53.
</TABLE>
<TABLE>
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- ------ ------- ------- --------
TOTAL RETURNS (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California Insured Tax-Free ...................... 4.89% 4.78% 5.71% 7.58% 6.48%
Lehman Long-Term Municipal Bond Index ............ 5.99% 6.18% 6.46% 8.33% 8.34%
Average California Insured
Municipal Debt Fund(1) ........................... 4.77% 4.36% 4.97% 7.34% 6.80%
Fund's Ranking Among California
Insured Municipal Debt Funds(1) .................. -- 11 out of 28 4 out of 20 3 out of 8 8 out of 8
(1) According to Lipper Analytical Services.
</TABLE>
See pages 52-53 for more information about returns, the comparative index and
Lipper fund rankings.
[line graph - data below]
GROWTH OF $10,000 OVER TEN YEARS
$10,000 investment made 2/28/97
Insured Tax-Free Lehman Long-Term Municipal Index
2/28/87 $10,000 $10,000
3/31/87 $9,913 $9,853
4/30/87 $8,884 $9,300
5/31/87 $8,768 $9,197
6/30/87 $9,011 $8,904
7/31/87 $9,055 $8,987
8/31/87 $9,121 $9,027
9/30/87 $8,463 $8,658
10/31/87 $8,557 $8,658
11/30/87 $8,857 $8,934
12/31/87 $9,036 $9,051
1/31/88 $9,399 $9,412
2/29/88 $9,519 $9,523
3/31/88 $9,243 $9,386
4/30/88 $9,316 $9,461
5/31/88 $9,270 $9,470
6/30/88 $9,475 $9,655
7/31/88 $9,497 $9,720
8/31/88 $9,539 $9,758
9/30/88 $9,733 $9,979
10/31/88 $9,942 $10,206
11/30/88 $9,823 $10,097
12/31/88 $9,955 $10,272
1/31/89 $10,201 $10,514
2/28/89 $10,097 $10,367
3/31/89 $10,088 $10,375
4/30/89 $10,344 $10,680
5/31/89 $10,587 $10,927
6/30/89 $10,734 $11,093
7/31/89 $10,906 $11,240
8/31/89 $10,688 $11,069
9/30/89 $10,614 $11,035
10/31/89 $10,711 $11,181
11/30/89 $10,928 $11,419
12/31/89 $10,982 $11,503
1/31/90 $10,808 $11,387
2/28/90 $10,979 $11,515
3/31/90 $10,966 $11,527
4/30/90 $10,741 $11,386
5/31/90 $11,127 $11,708
6/30/90 $11,220 $11,823
7/31/90 $11,453 $12,032
8/31/90 $11,111 $11,745
9/30/90 $11,069 $11,727
10/31/90 $11,369 $11,975
11/30/90 $11,676 $12,279
12/31/90 $11,725 $12,333
1/31/91 $11,861 $12,498
2/28/91 $11,903 $12,586
3/31/91 $11,869 $12,616
4/30/91 $12,037 $12,812
5/31/91 $12,150 $12,962
6/30/91 $12,103 $12,938
7/31/91 $12,263 $13,138
8/31/91 $12,430 $13,327
9/30/91 $12,627 $13,520
10/31/91 $12,771 $13,661
11/30/91 $12,712 $13,678
12/31/91 $13,045 $14,004
1/31/92 $12,991 $13,996
2/29/92 $13,023 $14,018
3/31/92 $13,010 $14,053
4/30/92 $13,128 $14,187
5/31/92 $13,312 $14,394
6/30/92 $13,599 $14,673
7/31/92 $14,121 $15,211
8/31/92 $13,881 $15,007
9/30/92 $13,917 $15,073
10/31/92 $13,605 $14,822
11/30/92 $14,093 $15,239
12/31/92 $14,244 $15,437
1/31/93 $14,422 $15,582
2/28/93 $15,129 $16,307
3/31/93 $14,869 $16,110
4/30/93 $15,037 $16,331
5/31/93 $15,113 $16,466
6/30/93 $15,389 $16,775
7/30/93 $15,336 $16,792
8/31/93 $15,789 $17,222
9/30/93 $16,003 $17,446
10/31/93 $15,976 $17,479
11/30/93 $15,807 $17,268
12/31/93 $16,160 $17,713
1/31/94 $16,368 $17,922
2/28/94 $15,885 $17,329
3/31/94 $15,080 $16,294
4/29/94 $15,162 $16,420
5/31/94 $15,266 $16,612
6/30/94 $15,192 $16,413
7/29/94 $15,513 $16,834
8/31/94 $15,524 $16,870
9/30/94 $15,289 $16,478
10/31/94 $14,990 $15,972
11/30/94 $14,738 $15,551
12/30/94 $15,102 $16,103
1/31/95 $15,571 $16,811
2/28/95 $16,050 $17,496
3/31/95 $16,159 $17,706
4/28/95 $16,177 $17,697
5/31/95 $16,773 $18,451
6/30/95 $16,475 $18,111
7/31/95 $16,584 $18,203
8/31/95 $16,781 $18,460
9/30/95 $16,937 $18,604
10/31/95 $17,292 $19,054
11/30/95 $17,711 $19,546
12/31/95 $17,975 $19,851
1/31/96 $18,042 $19,936
2/29/96 $17,906 $19,693
3/31/96 $17,474 $19,333
4/30/96 $17,362 $19,255
5/31/96 $17,388 $19,265
6/30/96 $17,600 $19,562
7/31/96 $17,844 $19,755
8/31/96 $17,885 $19,730
9/30/96 $18,143 $20,168
10/31/96 $18,386 $20,414
11/30/96 $18,753 $20,853
12/31/96 $18,637 $20,727
1/31/97 $18,574 $20,686
2/28/97 $18,743 $22,288
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost. The line representing the fund's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return line of the index does not.
PORTFOLIO AT A GLANCE
2/28/97 8/31/96
Number of Securities 67 69
Weighted Average Maturity 18.1 years 17.0 years
Average Duration 8.0 years 7.8 years
Expense Ratio 0.48%* 0.49%
* Annualized.
30 California Insured Tax-Free American Century Investments
CALIFORNIA INSURED TAX-FREE
Management Q & A
An interview with Dave MacEwen, vice president and senior portfolio manager on
the California Tax-Free and Municipal funds management team.
How did the fund perform?
The fund posted slightly higher returns than its peers, but underperformed its
benchmark index. For the six-month period ended February 28, 1997, the fund's
total return was 4.89%, compared with the 4.77% average return of the 28
"California Insured Municipal Debt Funds" tracked by Lipper Analytical Services,
and the 5.99% return of the Lehman Long-Term Municipal Bond Index. (See the
Total Returns table on the previous page for other fund performance
comparisons.)
Why did the fund perform well against its peers?
One contributing factor was the fund's relatively conservative positioning
during the period compared with some of the funds in its Lipper category. This
conservative approach allowed the fund to perform fairly well despite the
market's shifting expectations about the direction of interest rates (see page
4).
[bar graph - data below]
CALIFORNIA INSURED TAX-FREE FISCAL YEAR-BY-YEAR RETURNS (Periods ended August
31)
Insured Tax-Free Lehman Long-Term Municipal Index
1987* -8.51% -0.28%
1988 4.58% 8.10%
1989 12.04% 13.44%
1990 3.96% 6.11%
1991 11.87% 13.47%
1992 11.67% 12.60%
1993 13.74% 14.76%
1994 -1.68% -2.05%
1995 8.09% 9.43%
1996 6.60% 6.88%
This chart illustrates the historical year-by-year volatility of the fund's
returns since its inception and compares them with the index's returns. The
fund's total returns include operating expenses, while the index's do not. See
page 52 for a definition of the index. * Return from the fund's 12/30/86
inception date to 8/31/87.
Semiannual Report California Insured Tax-Free 31
CALIFORNIA INSURED TAX-FREE
Did you change the fund's positioning much over the last six months?
We made only slight adjustments to the fund's positioning during the period.
Choosing a more conservative approach, we maintained the fund's duration in a
relatively narrow range around 8 years. The lack of new municipal securities
made it difficult to significantly alter the fund's structure.
Were there any particular securities that you favored?
We purchased some tax-allocation bonds for the fund because many of these types
of securities were recently available at attractive prices. Tax-allocation
bonds--securities issued to finance improvements in redevelopment areas such as
urban neighborhoods --fell out of favor in the early 1990s after declining
property values forced their prices notably lower. However, as property values
have risen in recent years, so has the value of the securities. Our municipal
credit research team found a number of these bonds that we felt were undervalued
and that have subsequently appreciated. Of course, all these securities carry
bond insurance and are rated AAA. By selling some of these bonds at a profit, we
successfully enhanced the fund's returns.
Are there any securities that you avoided purchasing for the fund?
Although we selectively added some health-care revenue bonds to the fund's
portfolio, in general we have avoided these types of securities. Many hospitals
have come under renewed pressure to make their rates more competitive because of
the recent surge in the popularity of managed health-care arrangements.
Hospitals outside of these arrangements have been particularly hard hit, making
their bonds potentially more risky due to their increased chances for
bankruptcy.
We also avoided most short-call bonds--securities that can be paid off at a
specified date before maturity. Instead, we conservatively opted for securities
that were of better quality and could be more easily traded.
What is the outlook for the municipal market going forward?
As in the past, the general outlook for interest rates is uncertain. The economy
continues to show solid growth, but inflation has remained relatively low. The
question is, are these conditions sustainable? The Federal Reserve doesn't seem
to think so--in March, it made a pre-emptive strike against inflation,
ratcheting short-term interest rates up by a quarter of
[pie charts - data below]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 2/28/97)
Revenue 42%
COPs/Leases 32%
Land-Secured 12%
GO 9%
Prerefunded/ETM 4%
Other 1%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 8/31/96)
Revenue 45%
COPs/Leases 28%
Land-Secured 10%
GO 9%
Prerefunded/ETM 7%
Other 1%
32 California Insured Tax-Free American Century Investments
CALIFORNIA INSURED TAX-FREE
a percent. Many Fed watchers suspect this may be the first in a series of rate
hikes.
If U.S. economic growth slows, the municipal market could rally. But with wage
pressures increasing the threat of inflation, any signs of an overheating
economy could cause increased anxiety among municipal investors, pushing bond
prices lower. We expect municipal issuance to remain light in the coming months,
which may provide some support for municipal prices.
With this outlook in mind, what are your plans for the fund going forward?
With the possibility of higher rates looming, we will likely maintain the fund's
neutral stance, lengthening or shortening the fund's duration as conditions
warrant. If the economic outlook does change dramatically, we believe that the
fund is positioned with the flexibility to respond appropriately.
[pie charts - data below]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 2/28/97)
AAA 100%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 8/31/96)
AAA 100%
Semiannual Report California Insured Tax-Free 33
SCHEDULE OF INVESTMENTS
CALIFORNIA INSURED TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
MUNICIPAL SECURITIES
$ 5,750,000 Anaheim Public Financing Auth.
Lease Rev., Series 1997 A,
( Public Improvements Projects),
5.00%, 3-1-37 (FSA) $5,106,058
1,000,000 Banning Certificates of
Participation, (Wastewater
System, Refunding and
Improvement Project), 8.00%,
1-1-19 (AMBAC) 1,314,690
1,000,000 Berkeley Certificates of
Participation, Series 1989,
7.50%, 6-1-19 (AMBAC) 1,058,100
900,000 Brea Redevelopment Agency
Tax Allocation, (Project AB),
6.125%, 8-1-13 (MBIA) 948,015
5,000,000 California Educational Facilities
Auth. Rev., Series 1997 M,
(Stanford University), 5.25%,
12-1-26 4,750,900
2,500,000 California Educational Facilities
Auth. Rev., (University of San
Francisco), 6.00%, 10-1-26
(MBIA) 2,585,350
1,250,000 California Health Facilities
Financing Auth. Rev., Series
1991 A, (Adventist Health),
7.00%, 3-1-13 (MBIA) 1,376,363
1,660,000 California Health Facilities
Financing Auth. Rev., Series
1996 A, (Insured Health Facility),
6.00%, 7-1-25 (MBIA) 1,696,155
2,500,000 California Health Facilities
Financing Auth. Rev., Series
1989 A, (Sutter Hospital),
6.70%, 1-1-13 (AMBAC) 2,621,500
1,560,000 California Public Capital
Improvements Financing Auth.
Rev., (Pooled Project 1988 B),
8.10%, 3-1-18 (BIGI) 1,645,769
6,500,000 California State GO, 6.00%,
10-1-10 (MBIA) 7,044,895
Principal Amount Value
- -------------------------------------------------------------------------------
$ 2,000,000 California State Public Works
Board Lease Rev., Series 1993
A, (Department of Corrections
State Prisons), 5.00%, 12-1-19
(AMBAC) $1,852,560
6,000,000 California State Public Works
Board Lease Rev., (Department
of Corrections), 5.25%, 6-1-15
(FSA) 5,885,580
4,500,000 California State Public Works
Board Lease Rev., (Department
of Corrections), 5.25%, 1-1-21
(AMBAC) 4,273,920
3,925,000 California Statewide Communities
Development Auth. Rev.
Certificates of Participation,
(Gemological Institute), 6.75%,
5-1-10 (Connie Lee) 4,479,485
1,520,000 Castaic Lake Water Agency
Certificates of Participation,
Series 1994 A, (Water System
Improvement Project), 7.00%,
8-1-12 (MBIA) 1,790,773
1,000,000 Contra Costa County Certificates
of Participation, 7.80%, 6-1-07
(BIGI) 1,087,980
3,000,000 Contra Costa County Certificates
of Participation, (Merrithew
Memorial Hospital Project),
5.50%, 11-1-22 (MBIA) 2,905,590
1,200,000 Contra Costa Water District Rev.,
Series 1992 E, 6.25%, 10-1-12
(AMBAC) 1,334,088
1,000,000 East Valley Water District
Certificates of Participation,
(Treatment Plant Project), 6.60%,
12-1-14 (AMBAC) 1,106,080
5,750,000 Encina Joint Power Financing
Auth. Wastewater Rev., Series
1989 A, (Phase IV Expansion
Project), 6.875%, 8-1-99,
Prerefunded at 102%
of Par (AMBAC)(1) 6,248,065
2,000,000 Escondido Joint Powers Financing
Auth. Rev., 6.125%, 9-1-11
(AMBAC) 2,097,660
See Notes to Financial Statements
34 California Insured Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA INSURED TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$ 4,100,000 Foothill-De Anza Community
College District Certificates of
Pariticipation, 6.25%, 9-1-13
(Connie Lee) $4,318,079
1,725,000 Fresno Sewer Rev., Series 1993
A-1, 6.25%, 9-1-14 (AMBAC) 1,909,402
1,240,000 Fresno Sewer Rev., Series 1993
A-1, 4.75%, 9-1-21 (AMBAC) 1,093,630
5,000,000 Glendale Hospital Rev., Series
1 991 A, (Adventist Hospital),
6.75%, 3-1-13 (MBIA) 5,431,500
4,830,000 Glendale Unified School District
Certificates of Participation,
Series 1994 A, 6.50%, 3-1-12
(AMBAC) 5,323,722
1,340,000 Kern High School District GO,
Series 1993 C, 6.25%, 8-1-13
(MBIA) 1,493,283
3,630,000 Kern High School District GO,
Series 1993 D, 7.00%, 8-1-17 4,355,782
790,000 Lake Elsinore Public Financing
Auth. Tax Allocation Rev., Series
1992 C, (Redevelopment
Projects), 6.625%, 2-1-17
(FGIC) 850,158
1,500,000 Lakewood Redevelopment Agency
Tax Allocation Rev., Series 1992
A, (Project No. 1), 6.50%, 9-1-17
(FSA) 1,649,460
2,000,000 La Quinta Financing Auth. Lease
Rev., (La Quinta City Hall
Project), 5.55%, 10-1-18 (MBIA) 1,998,640
1,000,000 Los Angeles Community College
District Certificate of Participation,
6.90%, 8-15-00 (FSA) 1,107,090
1,405,000 Los Angeles Community
Redevelopment Agency Housing
Rev., Series 1994 C, 7.00%,
1-1-14 (AMBAC) 1,522,964
3,500,000 Los Angeles Community
Redevelopment Agency Tax
Allocation Rev., Series 1993 H,
(Bunker Hill), 6.50%, 12-1-14
(FSA) 3,891,510
Principal Amount Value
- -------------------------------------------------------------------------------
$ 4,000,000 Los Angeles Community
Redevelopment Agency Tax
Allocation Rev., Series 1993 H,
(Bunker Hill), 6.50%, 12-1-15
(FSA) $4,384,120
1,000,000 Los Angeles County Transportation
Commission Sales Tax Rev.,
6.50%, 7-1-13 (AMBAC) 1,090,550
1,100,000 Los Angeles Wastewater System
Rev., Series 1991 C, 7.00%,
6-1-11 (AMBAC) 1,178,837
1,915,000 Midpeninsula Regional Open
Space District Financing Auth.
Rev., 5.90%, 9-1-14 (AMBAC) 1,985,434
5,000,000 Modesto, Stockton, Redding Public
Power Agency Rev., Series 1989
D, (San Juan Project), 6.75%,
7-1-20 (MBIA) 5,754,150
1,200,000 National City Joint Powers Auth.
Lease Rev., (Police Facilities
Project), 6.75%, 10-1-17
(AMBAC) 1,322,220
2,810,000 Oakland Redevelopment Agency
Tax Allocation Rev., (Central
District), 5.50%, 2-1-14
(AMBAC) 2,848,581
1,925,000 Oakland Refunding Pension
Financing Rev., Series 1988 A,
7.60%, 8-1-21 (FGIC) 2,051,781
2,700,000 Orange County Financing Auth.
Tax Allocation Rev., Series 1992
A, 6.25%, 9-1-14 (MBIA) 2,843,424
1,950,000 Ramona Municipal Water District
Certificates of Participation,
7.20%, 10-1-10 (AMBAC) 2,148,763
1,100,000 Redlands Unified School District
Certificates of Participation,
6.00%, 9-1-12 (FSA) 1,133,187
580,000 Redondo Beach Redevelopment
Agency Tax Allocation Rev.,
(South Bay Center
Redevelopment), 8.625%,
5-1-14 (FGIC) 590,764
1,375,000 Rocklin Unified School District
Community Facilities District
Special Tax, 5.40%, 9-1-12
(MBIA) 1,373,996
See Notes to Financial Statements
Semiannual Report California Insured Tax-Free 35
SCHEDULE OF INVESTMENTS
CALIFORNIA INSURED TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
$ 2,505,000 Sacramento Redevelopment
Agency Tax Allocation Rev.,
(Merged Downtown
Redevelopment Project), 6.50%,
11-1-13 (MBIA) $2,718,426
3,000,000 Saddleback Community College
District Certificates of
Participation, 7.00%, 8-1-19
(BIGI) 3,223,860
1,345,000 San Diego Community College
District Lease Rev., 6.125%,
12-1-16 (MBIA) 1,415,155
7,000,000 San Diego County Certificates of
Participation, 5.625%, 9-1-12
(AMBAC) 7,208,390
5,250,000 San Francisco Bay Area Rapid
Transportation District Sales
Tax Rev., 6.75%, 7-1-09
(AMBAC) 5,691,683
10,000,000 San Francisco City and County
International Airport Rev.
Refunding, (Second Series Issue
2), 6.75%, 5-1-20 (MBIA) 11,159,800
1,000,000 San Mateo County Transportation
District Sales Tax Rev., Series
1993 A, 5.25%, 6-1-18 (MBIA) 962,130
3,535,000 San Mateo County Joint Powers
Financing Auth. Lease Rev.
Refunding, (Capital Projects
Program), 6.50%, 7-1-15 (MBIA) 3,999,322
1,000,000 Santa Clara Electric Rev., Series
1991 A, 6.25%, 7-1-19 (MBIA) 1,054,090
2,000,000 Santa Margarita/Dana Point Auth.
Rev., Series 1994 B, (Improvement
Districts 3, 3A, 4, 4A), 7.25%,
8-1-14 (MBIA) 2,424,520
3,685,000 Simi Valley Unified School District,
GO, 5.00%, 8-1-15 (FGIC) 3,462,979
2,500,000 South Coast Air Quality
Management District Building
Rev., (Installment Sale,
Headquarters), 6.00%, 8-1-11
(AMBAC) 2,715,675
60,000 Thousand Oaks Redevelopment
Agency Rev., (Single Family
Residential Mortgage Rev.),
7.90%, 1-1-16 (AMBAC) 61,639
Principal Amount Value
- -------------------------------------------------------------------------------
$ 2,500,000 Ukiah Electric Rev., 6.25%, 6-1-18
(MBIA) $ 2,744,700
1,445,000 Walnut Valley Unified School
District GO, Series 1992 B,
6.00%, 8-1-10 (AMBAC) 1,570,975
4,525,000 Woodland Certificates of
Participation, (Wastewater
System Reference Project),
5.75%, 3-1-12 (AMBAC) 4,755,549
----------
TOTAL MUNICIPAL SECURITIES--96.4% 182,029,496
(Cost $172,298,838) -----------
MUNICIPAL DERIVATIVES(2)
2,000,000 East Bay Municipal Utility District
Wastewater Treatment System
Rev., Yield Curve Notes, Inverse
Floater, 6.47%, 6-1-13 (AMBAC) 1,915,000
1,000,000 San Diego County Water Auth.
Certificates of Participation, (Reg
Rites), Yield Curve Notes, Inverse
Floater, 7.646%, 5-1-09 (FGIC) 1,080,000
2,750,000 Southern California Public Power
Auth. Rev., Yield Curve Notes,
Inverse Floater, 6.792%, 7-1-17
(FGIC) 2,475,000
---------
TOTAL MUNICIPAL DERIVATIVES--2.9% 5,470,000
(Cost $5,858,366) ---------
SHORT-TERM MUNICIPAL SECURITIES--0.7%
1,400,000 California Statewide Communities
Development Auth. Certificates
of Participation, VRDN, 3.35%,
3-3-97 1,400,000
---------
(Cost $1,400,000)
TOTAL INVESTMENT SECURITIES--100.0% $188,899,496
(Cost $179,557,204) ===========
See Notes to Financial Statements
36 California Insured Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA INSURED TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
BIGI = Bond Investor's Guaranty Inc.
FGIC = Financial Guaranty Insurance Company
FSA = Financial Security Association
GO = Government Obligation
MBIA = Municipal Bond Insurance Association
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
February 28, 1997.
(1) Escrowed in U.S. Government Securities.
(2) These securities are inverse floaters. They bear interest rates that move
inversely to market interest rates. Inverse floaters typically have
durations twice as long as long-term bonds, which may cause their value to
be twice as volatile as long-term bonds when interest rates change. The
Insured Fund is limited to 10% of its net assets in inverse floaters.
See Notes to Financial Statements
Semiannual Report California Insured Tax-Free 37
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (UNAUDITED)
TAX-FREE MUNICIPAL
MONEY MONEY HIGH-YIELD INSURED
MARKET MARKET MUNICIPAL TAX-FREE
ASSETS
<S> <C> <C> <C>
Investment securities, at value (amortized cost for
Tax-Free Money Market and Municipal Money Market;
identified cost of $162,268,197 and $179,557,204,
respectively) (Note 3)...............................$426,237,269 $187,630,035 $169,388,270 $188,899,496
Cash...................................................... 4,630,499 757,964 555,961 --
Receivable for capital shares sold........................ 14,894 -- 5,453 --
Interest receivable....................................... 2,558,351 995,163 3,171,018 2,997,956
Prepaid expenses and other assets......................... 7,746 5,136 4,503 5,087
----- ----- ----- -----
433,448,759 189,388,298 173,125,205 191,902,539
----------- ----------- ----------- -----------
LIABILITIES
Disbursements in excess of demand deposit cash............ 250,036 136,007 288,588 1,843,543
Payable for investments purchased......................... -- -- 3,469,276 --
Payable for capital shares redeemed....................... 1,388,678 58,153 385,666 53,215
Payable to affiliates (Note 2)............................ 154,656 70,277 60,288 67,253
Dividends payable......................................... -- -- 644 2,696
Accrued expenses and other liabilities.................... 15,227 1,452 7,953 4,915
------ ----- ----- -----
1,808,597 265,889 4,212,415 1,971,622
--------- ------- --------- ---------
Net Assets Applicable to Outstanding Shares...............$431,640,162 $189,122,409 $168,912,790 $189,930,917
============ ============ ============ ============
CAPITAL SHARES
Outstanding (Unlimited number of shares authorized)....... 431,681,796 189,165,666 17,850,186 18,579,229
=========== =========== ========== ==========
Net Asset Value Per Share................................. $1.00 $1.00 $9.46 $10.22
===== ===== ===== ======
NET ASSETS CONSIST OF:
Capital paid in...........................................$431,681,796 $189,165,666 $162,363,966 $180,117,300
Undistributed net investment income....................... 356,694 115,351 -- --
Accumulated net realized gain (loss) on
investment transactions................................ (398,328) (158,608) (571,249) 471,325
Net unrealized appreciation on
investments (Note 3)................................... -- -- 7,120,073 9,342,292
--------- ------- --------- ---------
$431,640,162 $189,122,409 $168,912,790 $189,930,917
============ ============ ============ ============
See Notes to Financial Statements
</TABLE>
38 Statements of Assets and Liabilities American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
TAX-FREE MUNICIPAL
MONEY MONEY HIGH-YIELD INSURED
MARKET MARKET MUNICIPAL TAX-FREE
INVESTMENT INCOME
Income:
<S> <C> <C> <C> <C>
Interest.................................................. $7,566,613 $3,372,194 $4,873,585 $5,474,929
Expenses (Note 2):
Investment advisory fees.................................. 622,979 276,307 221,736 274,667
Administrative fees....................................... 205,509 91,213 73,130 90,554
Transfer agency fees...................................... 107,057 64,989 37,996 43,438
Printing and postage...................................... 42,683 22,444 11,299 14,260
Auditing and legal fees................................... 21,523 10,113 8,343 9,880
Custodian fees............................................ 17,207 8,311 6,374 7,486
Telephone expenses........................................ 7,744 3,309 3,298 1,547
Directors' fees and expenses.............................. 5,287 3,846 3,623 3,836
Registration and filing fees.............................. 2,057 1,527 4,256 599
Other operating expenses.................................. 11,564 6,485 13,387 10,339
------ ----- ------ ------
1,043,610 488,544 383,442 456,606
--------- ------- ------- -------
Net investment income..................................... 6,523,003 2,883,650 4,490,143 5,018,323
--------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3)
Net realized gain (loss) on investments................... (77) (2) (211,589) 1,125,667
Change in net unrealized appreciation on investments...... -- -- 3,239,472 3,089,084
--------- --------- --------- ---------
Net realized and unrealized
gain (loss) on investments................................ (77) (2) 3,027,883 4,214,751
--------- --------- --------- ---------
Net Increase in Net Assets
Resulting from Operations................................. $6,522,926 $2,883,648 $7,518,026 $9,233,074
========== ========== ========== ==========
See Notes to Financial Statements
</TABLE>
Semiannual Report Statements of Operations 39
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
AND YEAR ENDED AUGUST 31, 1996
TAX-FREE MUNICIPAL
MONEY MARKET MONEY MARKET
Increase (Decrease) in Net Assets 1997 1996 1997 1996
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income.....................................$ 6,523,003 $ 13,288,453 $ 2,883,650 $ 6,182,773
Net realized gain (loss) on investments................... (77) 5,024 (2) 3,762
Change in net unrealized appreciation
on investments ........................................ -- -- -- --
--------- --------- --------- ---------
Net increase in net assets resulting
from operations........................................ 6,522,926 13,293,477 2,883,648 6,186,535
--------- ---------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................................ (6,637,238) (13,076,367) (2,883,397) (6,134,579)
---------- ----------- ---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................................. 229,342,276 417,665,171 87,523,739 221,042,487
Proceeds from reinvestment of distributions............... 6,286,833 12,497,339 2,758,042 5,897,189
Payments for shares redeemed..............................(229,721,041) (418,632,419) (97,679,625) (222,193,970)
------------ ------------ ----------- ------------
Net increase (decrease) in net assets
from capital share transactions........................ 5,908,068 11,530,091 (7,397,844) 4,745,706
--------- ---------- ---------- ---------
Net increase (decrease) in net assets..................... 5,793,756 11,747,201 (7,397,593) 4,797,662
NET ASSETS
Beginning of period....................................... 425,846,406 414,099,205 196,520,002 191,722,340
----------- ----------- ----------- -----------
End of period.............................................$431,640,162 $425,846,406 $189,122,409 $196,520,002
============ ============ ============ ============
TRANSACTIONS IN SHARES OF THE FUNDS
Sold...................................................... 229,342,276 417,665,171 87,523,739 221,042,487
Issued in reinvestment of distributions................... 6,286,833 12,497,339 2,758,042 5,897,189
Redeemed..................................................(229,721,041) (418,632,419) (97,679,625) (222,193,970)
------------ ------------ ----------- ------------
Net increase (decrease)................................... 5,908,068 11,530,091 (7,397,844) 4,745,706
========= ========== ========== =========
See Notes to Financial Statements
</TABLE>
40 Statements of Changes in Net Assets American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
TAX-FREE MUNICIPAL
MONEY MARKET MONEY MARKET
SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
AND YEAR ENDED AUGUST 31, 1996
Increase (Decrease) in Net Assets 1997 1996 1997 1996
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income.....................................$ 4,490,143 $ 7,834,261 $ 5,018,323 $ 9,926,196
Net realized gain (loss) on investments................... (211,589) 1,514,159 1,125,667 576,436
Change in net unrealized appreciation
on investments ........................................... 3,239,472 798,655 3,089,084 1,358,411
--------- ------- --------- ---------
Net increase in net assets resulting
from operations........................................... 7,518,026 10,147,075 9,233,074 11,861,043
--------- ---------- --------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................................ (4,495,549) (7,832,946) (5,022,869) (9,925,479)
---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................................. 79,897,068 69,487,545 29,449,257 65,937,524
Proceeds from reinvestment of distributions............... 3,224,506 5,609,354 3,662,398 6,845,811
Payments for shares redeemed.............................. (61,906,504) (48,901,653) (39,201,909) (61,820,496)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from capital share transactions........................... 21,215,070 26,195,246 (6,090,254) 10,962,839
---------- ---------- ---------- ----------
Net increase (decrease) in net assets..................... 24,237,547 28,509,375 (1,880,049) 12,898,403
NET ASSETS
Beginning of period....................................... 144,675,243 116,165,868 191,810,966 178,912,563
----------- ----------- ----------- -----------
End of period.............................................$168,912,790 $144,675,243 $189,930,917 $191,810,966
============ ============ ============ ============
TRANSACTIONS IN SHARES OF THE FUNDS
Sold...................................................... 8,458,710 7,510,749 2,908,609 6,546,262
Issued in reinvestment of distributions................... 341,168 604,403 339,532 678,581
Redeemed.................................................. (6,554,314) (5,267,312) (3,846,242) (6,132,458)
---------- ---------- ---------- ----------
Net increase (decrease)................................... 2,245,564 2,847,840 (598,101) 1,092,385
========= ========= ======== =========
See Notes to Financial Statements
</TABLE>
Semiannual Report Statements of Changes in Net Assets 41
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization--American Century California Tax-Free and Municipal Funds (the
Trust) is registered under the Investment Company Act of 1940 as an open-end
management investment company. American Century - Benham California Tax-Free
Money Market Fund (Tax-Free Money Market), American Century - Benham California
Municipal Money Market (Municipal Money Market), American Century - Benham
California High-Yield Municipal Fund (High-Yield), and American Century - Benham
California Insured Tax-Free Fund (Insured) (collectively the "Funds") are four
of the seven funds composing the Trust. With the exception of Municipal Money
Market, each Fund is diversified under the 1940 Act. Tax-Free Money Market and
Municipal Money Market (collectively "Money Market Funds") seek to obtain as
high a level of interest income exempt from federal and California income taxes
as is consistent with prudent investment management and conservation of
shareholders' capital. High-Yield seeks to provide as high a level of current
income exempt from federal and California income taxes as is consistent with its
investment policies, which permit investment in lower-rated and unrated
municipal securities. Insured seeks to provide as high a level of current income
exempt from federal and California income taxes as is consistent with safety of
principal through investment in insured California municipal securities. The
Money Market Funds invest primarily in short-term California municipal
obligations and maintain a weighted average maturity of 60 days or less.
High-Yield and Insured invest primarily in long-term California municipal
securities and maintain a weighted average maturity of ten years or more. The
Funds concentrate their investments in a single state and therefore may have
more exposure to credit risk related to the state of California than a fund with
a broader geographical diversification. The following significant accounting
policies, related to the Funds, are in accordance with accounting policies
generally accepted in the investment company industry.
Security Valuations --Securities held by the Money Market Funds are valued at
amortized cost, which approximates current market value. Securities held by
High-Yield and Insured are valued through valuations obtained from a commercial
pricing service or at the mean of the most recent bid and asked prices. When
valuations are not readily available, securities are valued at fair value as
determined in accordance with procedures adopted by the Board of Trustees.
Securities Transactions -- Security transactions are accounted for on the date
purchased or sold. 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
amortization of discounts and premiums. Premium and original issue discount is
amortized daily using the effective interest rate method for High-Yield and
Insured. Market discount is recognized as income upon the sale or maturity of
the security for High-Yield and Insured. Premium and discount are amortized
daily on a straight-line basis for securities held by the Money Market Funds.
Income Tax Status--It is the Funds' policy to distribute all net investment
income and net realized capital gains to shareholders and to otherwise qualify
as a regulated investment company under the provisions of the Internal Revenue
Code. Accordingly, no provision has been made for federal or state taxes.
Distributions to Shareholders--Distributions from net investment income are
declared daily and distributed monthly. The Money Market Funds do not expect to
realize any long-term capital gains, and accordingly, do not expect to pay any
capital gains distributions. Distributions from net realized gains for
High-Yield and Insured are declared and paid annually.
At August 31, 1996, accumulated net realized capital loss carryovers of $298,508
for Tax-Free Money Market, $158,606 for Municipal Money Market, $359,444 for
High-Yield, and $654,341 for Insured (expiring 1998 through 2004) may be used to
offset future taxable gains.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are due to differences in the
recognition of income and expense items for financial statement and tax
purposes.
Futures Contracts--High-Yield and Insured may buy and sell interest rate futures
contracts relating to debt securities. Each Fund may use futures transactions to
maintain cash reserves while remaining fully invested, to facilitate trading, to
reduce transaction costs, or to pursue higher investment returns when a futures
contract is priced more attractively than its underlying security or index. One
of the risks of entering into futures may include 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
42 Notes to Financial Statements American Century Investments
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
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.
Supplementary Information--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,
Benham Management Corporation (BMC), the Trust's distributor, American Century
Investment Services, Inc. (ACIS), and the Trust's transfer agent, American
Century Services Corporation (ACSC).
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the period. Actual results could differ from these
estimates.
- --------------------------------------------------------------------------------
2. Transactions with Related Parties
The Trust has entered into an Investment Advisory Agreement with BMC that
provides the Trust with investment advisory services in exchange for an
investment advisory fee. ACSC pays all compensation of Trust officers and
trustees who are officers or directors of ACC or any of its subsidiaries. In
addition, promotion and distribution expenses are paid by BMC. The investment
advisory fee is paid monthly by each Fund based on its pro rata share of the
dollar amount derived from applying the Trust's average daily closing net assets
to the following annualized investment advisory fee schedule:
0.50% of the first $100 million
0.45% of the next $100 million
0.40% of the next $100 million
0.35% of the next $100 million
0.30% of the next $100 million
0.25% of the next $1 billion
0.24% of the next $1 billion
0.23% of the next $1 billion
0.22% of the next $1 billion
0.21% of the next $1 billion
0.20% of the next $1 billion
0.19% of the average daily net assets over $6.5 billion
The Trust has an Administrative Services and Transfer Agency Agreement with
ACSC. Under the Agreement, ACSC provides substantially all administrative and
transfer agency services necessary to operate the Funds. Fees for these services
are based on transaction volume, number of accounts and average daily closing
net assets for funds advised by BMC. The Agreement was formerly with Benham
Financial Services, Inc.
The Trust has an additional agreement with BMC pursuant to which BMC established
a contractual expense guarantee that limits Fund expenses (excluding items such
as brokerage commissions, taxes, interest, custodian earnings credits, and
extraordinary expenses) to 0.53% of average daily closing net assets for the
Tax-Free Money Market, 0.60% for the Municipal Money Market, and 0.59% for
High-Yield and Insured. The agreement provides that BMC may recover amounts
(representing expenses in excess of the Fund's expense guarantee rate) absorbed
during the preceding 11 months, if, and to the extent that, for any given month,
the Fund's expenses are less than the expense guarantee rate in effect at that
time. The expense guarantee rate is subject to renewal in June 1997.
The payables to affiliates as of February 28, 1997, based on the above
agreements were as follows:
Tax-Free Municipal High-Yield Insured
Money Money
Market Market
Investment
Advisor ..........$95,638 $42,198 $36,830 $42,319
Administrative
Services and
Transfer Agent ... 59,018 28,079 23,458 24,934
-------- ------- ------- -------
$154,656 $70,277 $60,288 $67,253
======== ======= ======= =======
The Trust has a Distribution Agreement with ACIS, which is responsible for
promoting sales of and distributing the Trust's shares. This Agreement was
formerly with Benham Distributors, Inc.
Semiannual Report Notes to Financial Statements 43
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
3.Investment Transactions
The aggregate cost of municipal debt obligations (excluding short-term
investments) purchased for the six months ended February 28, 1997, in High-Yield
and Insured totaled $54,087,652 and $31,830,125, respectively. Proceeds from
municipal debt obligations (excluding short-term investments) sold in High-Yield
and Insured totaled $28,219,655 and $34,603,296, respectively.
As of February 28, 1997, accumulated net unrealized appreciation of High-Yield
and Insured were $7,120,073 and $9,342,292, consisting of unrealized
appreciation of $7,298,207 and $9,807,705, and unrealized depreciation of
$178,134 and $465,413, respectively. The aggregate cost of investments for
federal income tax purposes was the same as the cost for financial reporting
purposes.
- --------------------------------------------------------------------------------
4. Corporate Events
<TABLE>
The following name changes became effective January 1, 1997:
NEW NAMES FORMER NAMES
<S> <C> <C>
Funds' Issuer: American Century California Benham California Tax-Free
Tax-Free and Municipal Funds and Municipal Trust
Funds: American Century - Benham Benham California Tax-Free
California Tax-Free Money Money Market Fund
Market Fund
American Century - Benham Benham California Municipal
California Municipal Money Money Market Fund
Market Fund
American Century - Benham Benham California Municipal
California High-Yield Municipal Fund High-Yield Fund
American Century - Benham Benham California Tax-Free
California Insured Tax-Free Fund Insured Fund
Parent Company: American Century Companies, Inc. Twentieth Century Companies, Inc.
Distributor: American Century Investment Twentieth Century Securities, Inc.
Services, Inc.
Transfer Agent: American Century Services Corporation Twentieth Century Services, Inc.
</TABLE>
44 Notes to Financial Statements American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CALIFORNIA TAX-FREE MONEY MARKET
For a Share Outstanding Throughout the Years Ended August 31 (except as noted)
1997(1) 1996 1995 1994 1993 1992
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period.............................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Income from Investment Operations
Net Investment Income ...................... 0.02 0.03 0.03 0.02 0.02 0.03
---- ---- ---- ---- ---- ----
Distributions
From Net Investment Income.................. (0.02) (0.03) (0.03) (0.02) (0.02) (0.03)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total Return (2)............................ 1.54% 3.12% 3.31% 2.09% 2.13% 3.00%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................... 0.48%(3) 0.49% 0.52% 0.50% 0.51% 0.54%
Ratio of Net Investment Income
to Average Net Assets....................... 3.03%(3) 3.12% 3.28% 2.07% 2.09% 2.98%
Net Assets, End
of Period (in thousands).................... $431,640 $425,846 $414,099 $371,074 $338,731 $321,307
(1) Six months ended February 28, 1997 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements
</TABLE>
Semiannual Report Financial Highlights 45
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CALIFORNIA MUNICIPAL MONEY MARKET
For a Share Outstanding Throughout the Years Ended August 31 (except as noted)
1997(1) 1996 1995 1994 1993 1992
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period.............................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Income from Investment Operations
Net Investment Income ...................... 0.01 0.03 0.03 0.02 0.02 0.03
---- ---- ---- ---- ---- ----
Distributions
From Net Investment Income.................. (0.01) (0.03) (0.03) (0.02) (0.02) (0.03)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total Return (2)............................ 1.51% 3.23% 3.35% 2.15% 2.25% 3.63%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................... 0.51% (3) 0.53% 0.53% 0.51% 0.46% 0.07%
Ratio of Net Investment Income
to Average Net Assets....................... 3.01% (3) 3.20% 3.31% 2.13% 2.21% 3.44%
Net Assets, End
of Period (in thousands).................... $189,122 $196,520 $191,722 $243,701 $247,621 $254,823
(1) Six months ended February 28, 1997 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one are not
annualized.
(3) Annualized.
See Notes to Financial Statements
</TABLE>
46 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CALIFORNIA HIGH-YIELD MUNICIPAL
For a Share Outstanding Throughout the Years Ended August 31 (except as noted)
1997(1) 1996 1995 1994 1993 1992
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period.............................. $9.27 $9.11 $9.06 $9.66 $9.12 $8.84
----- ----- ----- ----- ----- -----
Income from Investment Operations
Net Investment Income ...................... 0.27 0.56 0.56 0.56 0.57 0.58
Net Realized and Unrealized Gain (Loss)
on Investment Transactions.................. 0.19 0.16 0.05 (0.48) 0.54 0.28
---- ---- ---- ----- ---- ----
Total From
Investment Operations....................... 0.46 0.72 0.61 0.08 1.11 0.86
---- ---- ---- ---- ---- ----
Distributions
From Net Investment Income.................. (0.27) (0.56) (0.56) (0.56) (0.57) (0.58)
From Net Realized Gains
on Investment Transactions.................. -- -- -- (0.12) -- --
---- ---- ---- ---- ---- ----
Total Distributions......................... (0.27) (0.56) (0.56) (0.68) (0.57) (0.58)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period................... $9.46 $9.27 $9.11 $9.06 $9.66 $9.12
===== ===== ===== ===== ===== =====
Total Return (2)............................ 5.04% 8.02% 7.09% 0.87% 12.61% 10.11%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................... 0.50% (3) 0.51% 0.51% 0.51% 0.55% 0.56%
Ratio of Net Investment Income
to Average Net Assets....................... 5.86% (3) 5.99% 6.30% 6.02% 6.14% 6.54%
Portfolio Turnover Rate..................... 19% 36% 40% 43% 27% 33%
Net Assets, End
of Period (in thousands).................... $168,913 $144,675 $116,166 $116,000 $114,564 $79,949
(1) Six months ended February 28,1997 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements
</TABLE>
Semiannual Report Financial Highlights 47
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CALIFORNIA INSURED TAX-FREE
For a Share Outstanding Throughout the Years Ended August 31 (except as noted)
1997(1) 1996 1995 1994 1993 1992
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period.............................. $10.00 $9.89 $9.67 $10.64 $9.97 $9.47
------ ----- ----- ------ ----- -----
Income from Investment Operations
Net Investment Income ...................... 0.27 0.53 0.53 0.53 0.55 0.57
Net Realized and Unrealized Gain (Loss)
on Investment Transactions.................. 0.22 0.11 0.22 (0.69) 0.76 0.50
---- ---- ---- ----- ---- ----
Total From
Investment Operations....................... 0.49 0.64 0.75 (0.16) 1.31 1.07
---- ---- ---- ----- ---- ----
Distributions
From Net Investment Income.................. (0.27) (0.53) (0.53) (0.53) (0.55) (0.57)
From Net Realized Gains
on Investment Transactions.................. -- -- -- (0.21) (0.09) --
In Excess of Net Realized Gains............. -- -- -- (0.07) -- --
---- ---- ---- ----- ---- ----
Total Distributions......................... (0.27) (0.53) (0.53) (0.81) (0.64) (0.57)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period................... $10.22 $10.00 $9.89 $9.67 $10.64 $9.97
====== ====== ===== ===== ====== =====
Total Return (2)............................ 4.89% 6.60% 8.09% (1.68)% 13.74% 11.67%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets....................... 0.48%(3) 0.49% 0.50% 0.49% 0.52% 0.55%
Ratio of Net Investment Income
to Average Net Assets....................... 5.27%(3) 5.30% 5.54% 5.20% 5.37% 5.90%
Portfolio Turnover Rate..................... 17% 43% 40% 47% 61% 54%
Net Assets, End.............................
of Period (in thousands).................... $189,931 $191,811 $178,913 $189,439 $223,440 $145,965
(1) Six months ended February 28,1997 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements
</TABLE>
48 Financial Highlights American Century Investments
NOTES
Semiannual Report Notes 49
NOTES
50 Notes American Century Investments
NOTES
Semiannual Report Notes 51
BACKGROUND INFORMATION
Investment Objectives and Philosophy
American Century Investments offers 42 fixed-income funds, ranging from money
market funds to long-term bond funds and including both taxable and tax-exempt
funds.
California Tax-Free Money Market Fund and California Municipal Money Market
Fund seek to obtain as high a level of interest income exempt from federal and
California income taxes as is consistent with prudent investment management and
conservation of shareholders' capital. There can be no assurance that these
funds will be able to maintain a stable net asset value per share.
California High-Yield Municipal Fund is a variable-price bond fund that seeks
to provide as high a level of interest income exempt from federal and California
income taxes as is consistent with its investment policies, which permit
investment in lower-rated and unrated municipal securities.
California Insured Tax-Free Fund is a variable-price bond fund that seeks to
provide as high a level of current income exempt from federal and California
income taxes as is consistent with safety of principal through investment in
insured California municipal securities.
Comparative Indices
The following index is used in the report for fund performance comparisons. It
is not an investment product available for purchase.
The Lehman Brothers Long-Term Municipal Bond Index is composed of more than
2,700 municipal bonds with maturities greater than 22 years. The average credit
rating of the securities in the index is AA2/AA3. The average maturity of the
index is approximately 27 years.
Lipper Rankings
Lipper Analytical Services, Inc. is an independent mutual fund ranking service
that groups funds according to their investment objectives. Rankings are based
on average annual returns for each fund in a given category for the periods
indicated. Rankings are not included for periods less than one year.
The Lipper categories for the California Tax-Free and Municipal funds are:
California Tax-Exempt Money Market Funds (Tax-Free Money Market and Municipal
Money Market)--funds that invest in high-quality California municipal
obligations with dollar-weighted average maturities of less than 90 days.
California Municipal Debt Funds (High-Yield Municipal)--funds that invest at
least 65% of assets in securities that are exempt from taxation in California.
California Insured Municipal Debt Funds (Insured Tax-Free)--funds that invest
at least 65% of assets in securities that are exempt from taxation in California
and insured as to timely payment of interest and repayment of principal.
PORTFOLIO MANAGEMENT TEAM
Vice President and
Senior Portfolio Manager Dave MacEwen
Senior Portfolio Manager and
Manager of Municipal Credit Analysis Steven Permut
Senior Municipal Portfolio Manager Colleen Denzler
Municipal Portfolio Manager Todd Pardula
Credit Analysts Scott Lord, Bill McClintock,
David Moore, Tim Benham
52 Background Information American Century Investments
GLOSSARY
Returns
o Total Return figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
o Average Annual Returns illustrate the annually compounded returns that
would have produced the fund's cumulative total returns if the fund's
performance had been constant over the entire period. Average annual
returns smooth out variations in a fund's return; they are not the same as
fiscal year-by-year results. For fiscal year-by-year returns, please refer
to the "Financial Highlights" on pages 45, 46, 47 and 48.
Yields
o 7-day Current Yield is calculated based on the income generated by an
investment in the fund over a seven-day period and is expressed as an
annual percentage rate.
o 7-day Effective Yield is calculated similarly, although this figure is
slightly higher than the fund's 7-Day Current Yield because of the effects
of compounding. The 7-Day Effective Yield assumes that income earned from
the fund's investments is reinvested and generating additional income.
o 30-day SEC Yield represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's
share price at the end of the 30-day period. The SEC yield should be
regarded as an estimate of the fund's rate of investment income, and it may
not equal the fund's actual income distribution rate, the income paid to a
shareholder's account, or the income reported in the fund's financial
statements.
o Tax-Equivalent Yields show the taxable yields that investors in a combined
California and federal income tax bracket would have to earn before taxes
to equal the fund's tax-free yield.
Investment Terms
o Basis Point--one one-hundredth of a percentage point (or 0.01%). 100 basis
points equal one percentage point (or 1%).
o Coupon--the stated interest rate of a security.
o Yield Curve--a graphic representation of the relationship between maturity
and yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical
axis.
Statistical Terminology
o Number of Issues--the number of different securities held by a fund on a
given date.
o Weighted Average Maturity (WAM)--a measurement of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average
time until the securities in the portfolio mature, weighted by dollar
amount.
o Average Duration-- a time-weighted average of the interest and principal
payments of the securities in a portfolio. As the duration of a portfolio
increases, so does the impact of a change in interest rates on the value of
the portfolio.
o Expense Ratio--the operating expenses of the fund, expressed as a
percentage of net assets.
Types of Municipal Securities
o AMT Paper--instruments with income subject to the federal alternative
minimum tax.
o Commercial Paper (CP)--high-grade short-term securities backed by a line of
credit from a bank.
o COPs (Certificates of Participation)/Leases--securities issued to finance
public property improvements (such as city halls and police stations) and
equipment purchases. Certificates of participation represent long-term debt
obligations, but leases have a higher risk profile because they require
annual appropriation.
o GO Bonds--general obligation securities backed by the taxing power of the
issuer.
o Land-Secured Bonds--securities such as Mello-Roos bonds and 1915 Act bonds
that are issued to finance real estate development projects.
o Municipal Notes--securities with maturities of two years or less.
o Prerefunded /ETM Bonds--securities refinanced or escrowed to maturity by
the issuer because of their premium coupons (higher-than-market interest
rates). These bonds tend to have higher credit ratings because they are
backed by Treasury securities.
o Revenue Bonds--securities backed by revenues from sales taxes or from a
specific project, system or facility (such as a hospital, electric utility
or water system).
o Tax-Allocation Bonds--securities issued to finance improvements in
redevelopment areas (such as urban neighborhoods).
o VRDNs--variable rate demand notes that track market interest rates and
stabilize their market values using periodic (daily or weekly) interest
rate adjustments.
Semiannual Report Glossary 53
[american century logo]
American
Century(sm)
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-Person Assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
American Century California Tax-Free & Municipal Funds
Investment Manager
Benham Management Corporation
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.
9704 [recycled logo]
SH-BKT-8347 Recycled
<PAGE>
[BOOK TWO]
SEMIANNUAL REPORT
[american century logo]
American
Century(sm)
February 28, 1997
BENHAM
GROUP
California Limited-Term Tax-Free
California Intermediate-Term Tax-Free
California Long-Term Tax-Free
[front cover]
TABLE OF CONTENTS
Report Highlights............................................. 1
Our Message to You............................................ 2
Period Overview............................................... 3
Municipal Credit Review....................................... 4
California Limited-Term Tax-Free
Performance & Portfolio Information........................... 5
Management Q & A.............................................. 6
Schedule of Investments....................................... 9
Financial Highlights.......................................... 36
California Intermediate-Term Tax-Free
Performance & Portfolio Information........................... 12
Management Q & A.............................................. 13
Schedule of Investments....................................... 16
Financial Highlights.......................................... 37
California Long-Term Tax-Free
Performance & Portfolio Information........................... 22
Management Q & A.............................................. 23
Schedule of Investments....................................... 26
Financial Highlights.......................................... 38
Statements of Assets and Liabilities.......................... 30
Statements of Operations...................................... 31
Statements of Changes in Net Assets........................... 32
Notes to Financial Statements................................. 33
Background Information
Investment Philosophy & Policies.............................. 40
Comparative Indices........................................... 40
Lipper Rankings............................................... 40
Portfolio Management Team..................................... 40
Glossary...................................................... 41
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your needs, we have divided American Century funds
into three groups based on investment style and objectives. These groups, which
appear below, are designed to help simplify your fund decisions.
American Century Investments--Family of Funds
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY GROUP
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS U.S. GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
California Limited-Term
Tax-Free
California Intermediate-Term
Tax Free
California Long-Term
Tax Free
We welcome your comments or questions about this report.
See the back cover for ways to contact us by mail, phone or e-mail.
Twentieth Century and the Benham Group are registered marks of American Century
Services Corporation and Benham Management Corporation, respectively. American
Century is a service mark of American Century Services Corporation.
American Century Investments
REPORT HIGHLIGHTS
Period Overview
o The U.S. economy expanded at a healthy pace during the six-month period
ended February 28, 1997, but inflation remained largely subdued.
o Municipal securities performed favorably during the period despite some
interim volatility caused by shifting expectations of a short-term interest
rate hike by the Federal Reserve.
o Shorter-maturity municipals--more sensitive to shifting interest rate
policy expectations--underperformed longer-maturity securities.
o Historically low issuance of new municipals during much of the period
helped dampen market gyrations, keeping prices relatively stable.
Municipal Credit Review
o California's strong economic growth led several ratings agencies to upgrade
the state's credit rating.
o Specific challenges, such as Proposition 218 and federal welfare reform,
could affect ratings of locally issued municipal bonds.
o Continuing economic strength should lead to further upgrades during the
coming year.
California Limited-Term
o The fund outperformed its peer group average but lagged its benchmark index
for the six months ended February 28, 1997.
o We changed the fund's portfolio to a "barbell" structure to take advantage
of the steep yield curve among short-term California municipal bonds.
o Going forward, we will likely shorten the fund's average maturity and
duration as a seasonal supply increase puts downward pressure on municipal
prices, but we'll be looking to extend back out later this summer.
California Intermediate-Term
o The fund slightly underperformed its peer group average and its benchmark
index for the six months ended February 28, 1997.
o Due to the market's gyrations during the period, we kept the fund's
duration conservatively positioned at 5.4 years--a neutral position in
comparison with the fund's peers.
California Long-Term
o The fund outperformed its peer group average but lagged its benchmark index
for the six months ended February 28, 1997.
o Due to the market's gyrations, we kept the fund's duration in a
conservative range around 8 years during the period--a neutral position in
comparison with the fund's peers.
o For now, we'll keep the fund conservatively positioned and look to add
value to its returns by purchasing attractively valued municipals that we
believe have the chance to appreciate.
California Limited-Term
Total Returns: AS OF 2/28/97
6 Months 2.82%*
1 Year 3.90%
Net Assets: $109.6 million
(AS of 2/28/97)
Inception Date: 6/1/92
Ticker Symbol: BCSTX
California Inter.-Term
Total Returns: AS OF 2/28/97
6 Months 3.81%*
1 Year 4.21%
Net Assets: $436.8 million
(AS of 2/28/97)
Inception Date: 11/9/83
Ticker Symbol: BCITX
California Long-Term
Total Returns: AS OF 2/28/97
6 Months 5.19%*
1 Year 5.01%
Net Assets: $301.1 million
(AS of 2/28/97)
Inception Date: 11/9/83
Ticker Symbol: BCLTX
* Not annualized.
Many of the investment terms in this report are defined in the Glossary on page
41.
Semiannual Report Report Highlights 1
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
The six months ended February 28, 1997, were eventful, both for the municipal
bond market and our company. Municipal bonds performed favorably overall during
the period, despite some volatility in January as U.S. economic growth appeared
to accelerate. In the following pages, our investment management team provides
further details about the municipal market and how your fund was managed during
the period.
Changing market conditions underscore the importance of quality investments. Our
commitment to high-quality securities is exemplified by the expansion of our
municipal credit research team. The five members of the team perform an in-depth
analysis on all securities considered for purchase by American Century municipal
money market and bond funds. The team has established a credit management system
that defines investment limits to cap our funds' exposure to individual issuers,
market sectors and geographical regions. The team plays an important role in the
management of the California Tax-Free and Municipal funds.
On the corporate front, we completed the operational integration of Twentieth
Century and The Benham Group in September 1996. As a result, you now have direct
access to a broader spectrum of funds and services.
We also changed the name of our company. On January 1, 1997, we began serving
you under the name American Century Investments, which reflects our expanded
identity and the independent thinking common to Twentieth Century and Benham.
American Century's fund family is divided into three groups--the Benham Group,
the American Century Group and the Twentieth Century Group. The California
Tax-Free and Municipal funds will remain in the Benham Group because their
investment goal--current tax-free income--matches a key attribute of that group.
This report incorporates a new format designed using your input. We hope you
find it more informative and easier to read. Another informative resource is the
American Century Web site. If you use a personal computer and have Internet
access, we've made it easier for you to download information about American
Century funds and access your fund accounts. With a personal access code, you
can view account balances, exchange money between existing accounts and make
additional investments. The Web site address is: www.americancentury.com. We are
one of the first fund companies to offer direct on-line transactions via the
Internet.
These are examples of how we continue to work to provide information and
services that are useful and convenient to investors in our funds. Thank you for
investing with us.
Sincerely,
/s/James E. Stowers III /s/James M. Benham
James E. Stowers III James M. Benham
President and Chief Executive Officer Vice Chairman
American Century Companies American Century Companies
2 Our Message to You American Century Investments
PERIOD OVERVIEW
U.S. Economy
The U.S. economy expanded at a healthy clip during the six-month period ended
February 28, 1997. Fueling growth was low unemployment, high employment growth
and a robust housing market that defied expectations of a slowdown. As a result,
the economy expanded at a 2.1% annual rate during the third quarter of 1996 and
a 3.8% annual rate during the fourth quarter. The strength of the economy in
1997 has continued to surprise analysts, many of whom are predicting that the
U.S. economy will grow by more than 3% during the first quarter.
While the economy continued its impressive growth rate, inflation remained
relatively subdued. Overall consumer prices--as measured by the government's
consumer price index--rose at a modest 3.1% annual rate during the six months
ended February 28, 1997. This unusual combination of healthy economic growth and
low inflation sent mixed signals to U.S. bond investors.
California Municipal Bond Market
Municipal bond investors enjoyed favorable returns for the six-month period.
Nevertheless, shifting expectations of an interest-rate increase by the Federal
Reserve (the Fed) kept investors guessing about the possible direction of bond
prices.
As demonstrated by the accompanying graph, municipal yields peaked at the start
of the period amid strong expectations for higher interest rates. In general,
investors were concerned that the U.S. economy was ready to overheat and spark
inflation. However, inflation remained subdued, and signs of a moderating
economy convinced many that a Fed rate hike was unlikely, allowing municipal
bonds to rally. By early December, prices crested with the yield on 30-year
municipal bonds at 5.29%, nearly half a percent lower than the 5.78% seen in
early September.
However, aided by strong consumer spending activity, the economy strengthened
again in early 1997. With growing expectations that the strains of robust
economic growth would finally force the Fed to stage a pre-emptive strike
against inflation, investors pushed municipal prices lower. By the end of
February, the yield on 30-year municipal bonds had risen to 5.44%.
Helping to support municipal prices during the volatile period were low levels
of new municipal issuance, which only in recent months has reached historically
normal levels. An upsurge of demand from retail investors also buoyed short- and
intermediate-maturity municipals during much of the period, but that beneficial
effect was largely countered by shifting expectations for higher rates. More
sensitive to anticipated Fed activities, shorter-maturity municipals
underperformed their longer-maturity counterparts for the period. Meanwhile,
strong demand from insurance companies helped buoy long-term municipal prices
late in 1996 as many of these companies made "crossover" buys--that is, they
purchased municipal bonds instead of comparable-maturity Treasury bonds due to
the relatively attractive yield offered by municipals.
[line graph - data below]
Shifting Municipal Yield Curve
Years 9/5/96 12/3/96 2/28/97
0.25 3.51% 3.03% 3.22%
0.5 3.71 3.23 3.42
1 3.91 3.43 3.65
2 4.16 3.73 3.92
3 4.36 3.93 4.1
4 4.51 4.05 4.24
5 4.61 4.15 4.34
6 4.71 4.25 4.44
7 4.81 4.35 4.54
8 4.91 4.45 4.64
9 5.01 4.55 4.74
10 5.11 4.65 4.84
11 5.198 4.738 4.916
12 5.286 4.826 4.992
13 5.374 4.914 5.068
14 5.462 5.002 5.144
15 5.55 5.09 5.22
16 5.584 5.118 5.252
17 5.618 5.146 5.284
18 5.652 5.174 5.316
19 5.686 5.202 5.348
20 5.72 5.23 5.38
21 5.728 5.238 5.388
22 5.736 5.246 5.396
23 5.744 5.254 5.404
24 5.752 5.262 5.412
25 5.76 5.27 5.42
26 5.764 5.274 5.424
27 5.768 5.278 5.428
28 5.772 5.282 5.432
29 5.776 5.286 5.436
30 5.78 5.29 5.44
Source: Bloomberg Financial Markets
Semiannual Report Period Overview 3
MUNICIPAL CREDIT REVIEW
As we anticipated early in 1996, the state of California's credit rating was
upgraded by several rating agencies within the last year. The key to the state's
improving credit quality has been its ability to generate strong job growth in
various sectors of the economy. The six months ended February 28, 1997, showed
an acceleration of the economic growth that California has enjoyed for the past
three years. With income gains and employment growth exceeding the national
average, California's unemployment rate fell to 6.5% for the first time since
1990 (see the accompanying graph). The state has more than recovered all the
jobs lost in the last recession, largely due to strong growth in the
high-technology industries.
California is also the nation's leading exporter, with exports nearly equaling
those of the other 49 states combined. Its gross product is projected to surpass
$1 trillion in 1997, a milestone that the U.S. as a whole passed less than 30
years ago.
The state's finances continue to improve--its revenue is projected to be more
than $700 million over budget for the 1996-1997 fiscal year, and the general
fund is expected to show a reserve for the first time in a number of years.
The state's strongest growth has been centered in the San Francisco Bay Area,
led by Santa Clara County, the hub of the state's thriving high-technology
industry. Southern California's economy also continued to expand, though at a
slower pace.
There has also been statewide improvement in the real estate sector. The San
Francisco Bay Area has seen property values rise appreciably, while the Southern
California real estate market has bottomed out and begun to trend upward. Real
estate prices in some regions have surpassed their 1989 highs, underscoring the
regional vitality of California's real estate market.
In spite of the state's rosy economic outlook, specific challenges continue to
affect the credit picture for locally issued municipal bonds. For example,
California's Proposition 218 requires voter approval for the levying of fees and
other charges by local governments. This could have a negative impact on the
credit quality of securities issued by local governments within the state. In
addition, federal welfare reform could place additional credit pressure on
already-burdened county budgets. This possibility has led us to position our
California municipal funds with very low exposure to county debt.
With these issues in mind, we have continued to expand our municipal credit
research team. The five members of the team keep a close watch on economic and
legislative trends within the state and thoroughly research all municipal
securities considered for purchase by the Benham California Tax-Free and
Municipal funds.
We will continue to monitor legislative developments on welfare reform and state
budgetary issues in the months ahead. Overall, our outlook for the state's
credit rating remains very positive, and we feel that continuing economic
strength will lead to further credit upgrades within the next 12 months.
[line graph - data below]
California Unemployment
1/31/90 5.0%
2/28/90 5.1
3/31/90 5.2
4/30/90 5.4
5/31/90 5.4
6/30/90 5.5
7/31/90 5.6
8/31/90 5.8
9/30/90 6.1
10/31/90 6.4
11/30/90 6.8
12/31/90 6.9
1/31/91 7.0
2/28/91 7.4
3/31/91 7.7
4/30/91 7.8
5/31/91 7.7
6/30/91 7.7
7/31/91 7.8
8/31/91 7.7
9/30/91 7.8
10/31/91 7.9
11/30/91 8.0
12/31/91 8.2
1/31/92 8.4
2/29/92 9.0
3/31/92 8.9
4/30/92 9.0
5/31/92 9.1
6/30/92 9.3
7/31/92 9.4
8/31/92 9.6
9/30/92 9.7
10/31/92 9.7
11/30/92 9.7
12/31/92 9.7
1/31/93 9.7
2/28/93 9.6
3/31/93 9.5
4/30/93 9.3
5/31/93 9.4
6/30/93 9.4
7/31/93 9.3
8/31/93 9.3
9/30/93 9.3
10/31/93 9.3
11/30/93 9.3
12/31/93 9.2
1/31/94 9.2
2/28/94 9.3
3/31/94 9.0
4/30/94 8.8
5/31/94 8.9
6/30/94 8.7
7/31/94 8.6
8/31/94 8.5
9/30/94 8.3
10/31/94 8.1
11/30/94 7.9
12/31/94 7.8
1/31/95 8.1
2/28/95 7.8
3/31/95 7.8
4/30/95 7.9
5/31/95 7.9
6/30/95 7.8
7/31/95 7.8
8/31/95 7.8
9/30/95 7.8
10/31/95 7.8
11/30/95 7.9
12/31/95 7.8
1/31/96 7.6
2/29/96 7.6
3/31/96 7.5
4/30/96 7.4
5/31/96 7.3
6/30/96 7.2
7/31/96 7.1
8/31/96 7.1
9/30/96 7.1
10/31/96 7.0
11/30/96 6.9
12/31/96 6.8
1/31/97 6.9
2/28/97 6.5
Source: DRI/McGraw Hill
4 Municipal Credit Review American Century Investments
<TABLE>
<CAPTION>
CALIFORNIA LIMITED-TERM TAX-FREE
30-Day 30-Day Tax-Equivalent Yields
SEC 34.70% 37.42% 41.95% 45.22%
Yield Tax Bracket Tax Bracket Tax Bracket Tax Bracket
----- ----------- ----------- ----------- -----------
CURRENT YIELD (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California Limited-Term Tax-Free ............... 3.61% 5.53% 5.77% 6.22% 6.59%
Yields are defined in the Glossary on page 41.
</TABLE>
<TABLE>
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS LIFE OF FUND
TOTAL RETURNS (as of February 28, 1997)
<S> <C> <C> <C> <C>
California Limited-Term Tax-Free 2.82% 3.90% 4.22% 4.70%
Lehman 3-Year Municipal Bond Index 3.25% 4.56% 4.98% 5.20%(1)
Average California Short-Intermediate Municipal Debt Fund(2) 2.75% 3.60% 4.25% 4.96%(1)
Fund's Ranking Among California
Short-Intermediate Municipal Debt Funds(2) -- 5 out of 11 5 out of 7 2 out of 2
(1) Returns since 6/30/92, the date nearest the fund's inception for which
return data are available. Inception date was June 1, 1992.
(2) According to Lipper Analytical Services.
</TABLE>
See pages 40-41 for more information about returns, the comparative index and
Lipper fund rankings.
[line graph - data below]
GROWTH OF $10,000 OVER THE LIFE OF THE FUND
Value on 2/28/87
$10,000 investment made 6/1/92
Limited-Term Tax-Free Lehman 3-Year Municipal Index
5/31/92 $10,000 $10,000
6/30/92 $10,074 $10,122
7/31/92 $10,249 $10,319
8/31/92 $10,222 $10,273
9/30/92 $10,277 $10,357
10/31/92 $10,251 $10,317
11/30/92 $10,347 $10,389
12/31/92 $10,413 $10,451
1/31/93 $10,497 $10,530
2/28/93 $10,673 $10,695
3/31/93 $10,616 $10,663
4/30/93 $10,679 $10,725
5/31/93 $10,699 $10,754
6/30/93 $10,754 $10,823
7/30/93 $10,733 $10,838
8/31/93 $10,850 $10,897
9/30/93 $10,913 $10,945
10/31/93 $10,923 $10,967
11/30/93 $10,925 $10,953
12/31/93 $11,029 $11,068
1/31/94 $11,095 $11,158
2/28/94 $10,986 $11,054
3/31/94 $10,881 $10,920
4/29/94 $10,903 $10,984
5/31/94 $10,929 $11,036
6/30/94 $10,942 $11,039
7/29/94 $11,029 $11,131
8/31/94 $11,057 $11,171
9/30/94 $11,037 $11,143
10/31/94 $11,008 $11,116
11/30/94 $10,946 $11,096
12/30/94 $10,962 $11,144
1/31/95 $11,059 $11,237
2/28/95 $11,206 $11,356
3/31/95 $11,290 $11,458
4/28/95 $11,337 $11,497
5/31/95 $11,468 $11,673
6/30/95 $11,518 $11,701
7/31/95 $11,581 $11,825
8/31/95 $11,646 $11,917
9/30/95 $11,683 $11,950
10/31/95 $11,749 $12,008
11/30/95 $11,835 $12,085
12/31/95 $11,874 $12,135
1/31/96 $11,977 $12,230
2/29/96 $11,970 $12,233
3/31/96 $11,904 $12,203
4/30/96 $11,925 $12,218
5/31/96 $11,945 $12,229
6/30/96 $11,995 $12,301
7/31/96 $12,077 $12,370
8/31/96 $12,096 $12,388
9/30/96 $12,162 $12,464
10/31/96 $12,242 $12,551
11/30/96 $12,332 $12,669
12/31/96 $12,339 $12,676
1/31/97 $12,371 $12,731
2/28/97 $12,438 $12,825
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost. The line representing the fund's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return line of the index does not.
PORTFOLIO AT A GLANCE
2/28/97 8/31/96
Number of Securities 64 55
Weighted Average Maturity 3.2 years 3.0 years
Average Duration 2.7 years 2.6 years
Expense Ratio 0.49%* 0.49%
* Annualized.
Semiannual Report California Limited-Term Tax-Free 5
CALIFORNIA LIMITED-TERM TAX-FREE
Management Q & A
An interview with Joel Silva, a portfolio manager on the California Tax-Free and
Municipal funds management team.
How did the fund perform?
The fund outperformed its peer group average but lagged its benchmark index. For
the six months ended February 28, 1997, the fund had a total return of 2.82%,
compared with the 3.25% return of the Lehman Brothers 3-Year Municipal Bond
Index and the 2.75% average return of the 11 "California Short-Intermediate
Municipal Debt Funds" tracked by Lipper Analytical Services. (See the Total
Returns table on the previous page for other fund performance comparisons.)
How was the fund positioned during the past six months?
Although we made slight adjustments as market conditions shifted, we kept the
fund's average maturity and duration in a fairly narrow range during the
six-month period. We focused on other tools, such as credit research and yield
curve positioning, to enhance the fund's return.
For example, we structured the fund's portfolio to take advantage of the steep
yield curve environment. During the six-month period, the municipal yield curve
was very steep between one and five years--that is, the gap between one-year
municipal yields and five-year municipal yields was wider than normal.
[bar graph - data below]
CALIFORNIA LIMITED-TERM TAX-FREE FISCAL YEAR-BY-YEAR RETURNS (Periods ended
August 31)
Limited-Term Tax-Free Lehman 3-Year Municipal Index
1992* 1.47% 2.73%
1993 6.15% 6.38%
1994 1.90% 2.51%
1995 5.33% 6.68%
1996 3.87% 3.95%
This chart illustrates the historical year-by-year volatility of the fund's
returns since its inception and compares them with the index's returns. The
fund's total returns include operating expenses, while the index's do not. See
page 40 for a definition of the index.
* Return from the fund's 6/1/92 inception date to 8/31/92.
6 California Limited-Term Tax-Free American Century Investments
CALIFORNIA LIMITED-TERM TAX-FREE
As a result, we expanded the fund's holdings of securities with maturities of
5-8 years. We balanced this position with one-year securities to maintain the
fund's three-year average maturity. This structure--known as a "barbell"--tends
to perform best when the yield curve moves from steep to flat. The one-year
securities also provided some price gains as they became eligible for money
market funds.
Can you elaborate on these money market-eligible securities?
Money market funds can only buy securities with maturities of 13 months or less.
When securities reach this maturity threshold, demand from money market funds
tends to drive their prices up. We've attempted to capitalize on this situation
by purchasing municipal securities with maturities of 14-18 months--which are
also an important part of our barbell strategy--and then selling them after they
become money market-eligible.
Although the fund can now invest in the full range of investment-grade municipal
securities (those rated BBB- or higher), the fund doesn't own any securities
with a rating below A. Why?
There hasn't been any incentive to purchase lower-rated securities. Credit
quality spreads--the differences between the yields of high-rated securities and
those of lower-rated securities--among California municipal securities are
extremely narrow. In our view, we're not being rewarded enough to invest in
lower-rated issues, so we've maintained a high degree of credit quality in the
fund. However, we will continue to look for lower-rated securities that provide
a good balance between risk and return.
The fund currently holds about 7% of its assets in municipal securities from
Puerto Rico. Do these securities provide investors with tax-exempt income?
Yes. The fund is allowed to invest as much as 20% of its assets in Puerto Rico
municipal securities, which have the unique distinction of providing double
tax-free income for investors in all 50 states. Because of this distinction,
there is a great deal of demand for these securities, especially from investors
in high-tax states such as New York. This strong demand gives Puerto Rico bonds
a yield that is typically about 5 basis points lower than comparable California
municipal securities.
In September, however, there was a huge wave of new municipal issuance in New
York that attracted many New York municipal investors away from the Puerto Rico
municipal market. The drop in demand caused Puerto Rico yields to rise
significantly. At the same time, a lack of new supply was depressing municipal
yields in California. As a result, we were able to buy some insured, AAA-rated
Puerto Rico municipal securities with maturities of 8-10 years while picking up
7 basis points in yield over comparable California securities.
[pie charts - data below]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 2/28/97)
Revenue 50%
Prerefunded/ETM 15%
COPs/Leases 15%
GO 13%
Land-Secured 4%
Other 3%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 8/31/96)
Revenue 46%
Prerefunded/ETM 21%
GO 14%
COPs/Leases 12%
Land-Secured 4%
Other 3%
Semiannual Report California Limited-Term Tax-Free 7
CALIFORNIA LIMITED-TERM TAX-FREE
How have these securities performed?
Very well. Over the last six months, the situation has reversed--a shortage of
new supply has caused many New York municipal investors to show renewed interest
in Puerto Rico bonds, and yields have fallen back to normal levels. Falling
yields have translated into price appreciation for the fund's Puerto Rico
securities.
Why haven't you sold the fund's Puerto Rico bonds?
We're still waiting for the right opportunity. We'd like to gradually sell these
bonds so that fund shareholders won't realize the taxable capital gains all at
once. We're also holding off until we can find some attractive opportunities
among California securities. Low supply is still restraining California yields,
but we expect that to change in the second quarter of this year.
What is your outlook for the California municipal market over the next six
months?
As in the past, the general outlook for interest rates is uncertain. The economy
continues to show solid growth, but inflation has remained relatively low. The
question is, are these conditions sustainable? The Federal Reserve doesn't seem
to think so--in March, it made a pre-emptive strike against inflation by raising
short-term interest rates. Many Fed watchers suspect this may be the first in a
series of rate hikes.
Despite these concerns, we think the municipal market has a more favorable
outlook. The usual seasonal increase in supply as we approach summer should lead
to higher yields and lower prices, but we view this short-term dip as a buying
opportunity. Long-term municipal yields are currently around 5.80%; when they
hit 6.00%, demand from retail buyers--individuals, insurance companies and
mutual funds--tends to increase. Stronger demand would be good news for
municipal bond prices.
With this outlook in mind, what are your plans for the fund over the next six
months?
With uncertainty about future Fed rate increases and the anticipated price
declines from increasing supply in the municipal market, we will likely position
the fund a little more conservatively in the coming months. We'll likely shorten
the fund's average maturity and duration slightly. We'll also look to sell
securities with par coupons--bonds trading at face value, which appeal to
individual investors--and buy premium bonds, which typically suffer less price
depreciation in a rising interest rate environment. However, we think that
market conditions will improve later this year, so we'll also be looking for
opportunities to extend the fund's average maturity and duration back out,
especially if we see long-term municipal yields approach 6%.
[pie charts - data below]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 2/28/97)
AAA 58%
AA 22%
A 20%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 8/31/96)
AAA 65%
AA 14%
A 21%
8 California Limited-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA LIMITED-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES
$ 1,000,000 Alameda County Transit Authority
Sales Tax Rev., 4.50%, 11-1-01
(AMBAC) $1,008,120
3,500,000 Anaheim Redevelopment Agency
Local Government Financing Joint
Power Auth. Rev., Series A, 7.95%,
9-1-98, Prerefunded at
102% of Par (MBIA)(1) 3,786,440
1,695,000 Burbank Redevelopment Agency
West Olive Tax Allocation, Series
1994, 6.00%, 12-1-97 (AMBAC) 1,725,612
1,145,000 California Educational Facility Auth.
Rev., (Pepperdine University),
5.125%, 1-15-02 (AMBAC) 1,183,335
1,080,000 California Educational Facility Auth.
Rev., Series A, (Pooled College &
University Project), 4.95%,
12-1-02 1,096,675
1,710,000 California Educational Facility Auth.
Rev., (University of Southern
California), 5.60%, 10-1-01 1,778,913
1,140,000 California Educational Facility Auth.
Rev., Series A, (University Project),
4.55%, 12-1-99 1,150,226
1,745,000 California Health Facility Financing
Auth. Rev. Certificates of
Participation, (St. Joseph Hospital),
5.50%, 7-1-97 1,755,452
1,400,000 California Health Facility Financing
Auth. Rev., Series 1993 A,
(St. Francis Memorial Hospital),
5.00%, 11-1-98 1,417,178
1,750,000 California Health Facility Financing
Auth. Rev., Series 1993 A,
(St. Francis Memorial Hospital),
5.50%, 11-1-01 1,800,487
1,600,000 California Public Works Board
Lease Rev., Series A,
(Department of Justice Building),
5.50%, 5-1-00 1,652,960
3,175,000 City of Whittier Health Rev.,
(Presbyterian Intercommunity
Hospital), 5.50%, 6-1-02 (MBIA) 3,328,035
1,000,000 Encinitas Unified School District
Certificates of Participation,
5.00%, 9-1-01 1,019,380
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,700,000 Imperial Irrigation District
Certificates of Participation,
5.625%, 5-1-97 $1,705,933
1,000,000 Imperial Irrigation District
Certificates of Participation,
Series 1993, 6.70%, 11-1-98 1,046,480
1,500,000 Industry Urban Development
Agency Tax Allocation, 4.70%,
5-1-04 (MBIA) 1,500,630
1,140,000 Kern High School District GO,
Series A, 6.00%, 2-1-04 (MBIA) 1,231,234
2,000,000 Los Angeles Airport Rev., Series
1989 A, 7.00%, 5-1-97,
Prerefunded at 102% of Par(1) 2,051,960
1,500,000 Los Angeles Building Auth. Lease
Redevelopment Rev., 4.80%,
5-1-02 1,518,405
1,000,000 Los Angeles Building Auth. Lease
Redevelopment Rev., 4.90%,
5-1-03 1,013,760
1,000,000 Los Angeles County Metropolitan
Transit Auth. Sales Tax Rev.,
(Proposition C), 5.90%, 7-1-02
(AMBAC) 1,072,610
1,800,000 Los Angeles Convention and
Exhibition Center Certificates of
Participation, 6.60%, 8-15-99
(AMBAC) 1,907,478
1,000,000 Los Angeles Convention and
Exhibition Center Certificates of
Participation, Series A, 7.30%,
8-15-99, Prerefunded at
101.5% of Par(1) 1,092,880
2,360,000 Los Angeles County Public Works
Financing Auth. Lease Rev.,
Series A, 6.00%, 9-1-04 (MBIA) 2,546,015
1,000,000 Los Angeles County Transportation
Sales Tax Rev., Series A, 6.30%,
7-1-01 1,073,050
1,385,000 Los Angeles Municipal
Improvement Corporation
Certificates of Participation,
4.75%, 12-1-04 (AMBAC) 1,384,903
3,605,000 Los Angeles Municipal Improvement
Corporation Sanitation Rev.,
5.75%, 2-1-98 (MBIA) 3,673,964
See Notes to Financial Statements
Semiannual Report California Limited-Term Tax-Free 9
SCHEDULE OF INVESTMENTS
CALIFORNIA LIMITED-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,000,000 Los Angeles Rev. Certificates of
Participation, 6.50%, 11-1-98 $1,041,690
2,000,000 Los Angeles Unified School District
GO, Series B, 4.50%, 9-30-97 2,011,440
2,000,000 Los Angeles Waste Water
System Rev., 6.80%, 8-1-98,
Prerefunded at 102% of Par(1) 2,126,240
1,000,000 Los Angeles Waste Water System
Rev., 6.70%, 2-1-00 1,061,930
1,000,000 Metropolitan Water District of
Southern California Waterworks
Rev., 6.375%, 7-1-02 1,092,540
2,000,000 Metropolitan Water District of
Southern California Waterworks
Rev., Series 1991, 6.10%,
7-1-99 2,093,560
2,000,000 Modesto, Stockton, Redding Public
Power Agency Rev., Series 1997
G, 5.50%, 7-1-01 (MBIA) 2,093,600
1,365,000 Ontario Redevelopment Financing
Auth. Rev., (Center City Cimarron
Project), 5.70%, 8-1-01 (MBIA) 1,438,123
1,500,000 Orange County Transportation
Sales Tax Rev., 5.50%, 2-15-01
(AMBAC) 1,561,050
1,225,000 Orange County Water District
Certificates of Participation,
4.70%, 8-15-00 1,240,986
3,200,000 Puerto Rico Commonwealth GO,
5.50%, 7-1-01 (MBIA) 3,356,224
2,000,000 Puerto Rico Commonwealth
Highway and Transportation Auth.
Rev., 6.00%, 7-1-01 (MBIA) 2,136,900
1,000,000 Puerto Rico Commonwealth
Highway and Transportation Auth.
Rev., 5.20%, 7-1-03 (MBIA) 1,041,270
1,000,000 Puerto Rico Commonwealth
Highway and Transportation Auth.
Rev., 6.25%, 7-1-04 (MBIA) 1,103,380
2,000,000 Rancho Water District Financing
Auth. Rev., 4.70%, 9-15-01
(LOC: Toronto Dominion) 2,029,380
1,000,000 Redding Joint Powers Financing
Auth. Electrical System Rev.,
Series A, 5.50%, 6-1-01 (MBIA) 1,045,970
Principal Amount Value
- --------------------------------------------------------------------------------
$ 4,485,000 Sacramento Municipal Utility
District Electric Rev., Series D,
4.60%, 11-15-98 $4,534,111
900,000 Sacramento Schools Auth. Rev.,
(Workers Compensation
Progaram C), 5.75%, 6-1-03(1) 958,077
2,000,000 San Bernardino County Certificates
of Participation, Series A,
(Medical Center Project), 5.20%,
8-1-04 (MBIA) 2,064,520
2,625,000 San Diego Regional Transportation
Commission Sales Tax Rev.,
Series 1994 A, 5.00%, 4-1-99
(FGIC) 2,681,569
4,000,000 San Francisco Bay Area Rapid
Transit District Sales Tax Rev.,
4.60%, 7-1-97 (AMBAC) 4,003,520
1,085,000 San Francisco City and County GO,
6.00%, 6-15-98 (FGIC) 1,116,215
2,930,000 San Francisco Port Commission
Rev. Refunding, 5.25%, 7-1-99 2,997,771
1,000,000 San Mateo Transportation Sales
Tax Rev., Series A, 6.50%,
6-1-98 (MBIA) 1,053,910
1,085,000 Santa Barbara County Certificates
of Participation, 4.90%, 3-1-01 1,103,532
1,185,000 South Coast Air Quality
Management District Building
Corporation Rev., 5.50%, 8-1-01
(AMBAC) 1,241,465
1,135,000 Southern California Public Power
Agency Pooled Transmission Auth.
Joint Power Rev., Series 1989,
7.00%, 7-1-00, Prerefunded at
102% of Par(1) 1,256,740
1,000,000 Southern California Public Power
Auth. Electric Rev., Series 1989,
6.75%, 7-1-99 1,057,150
1,510,000 State of California GO, 6.50%,
11-1-97 1,538,962
1,000,000 State of California GO, 6.50%,
4-1-98 (AMBAC) 1,029,160
2,325,000 State of California GO, 6.10%,
2-1-02 (AMBAC) 2,497,585
See Notes to Financial Statements
10 California Limited-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA LIMITED-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,980,000 University of California Rev.,
Series A, 7.00%, 9-1-97,
Prerefunded at 102% of Par
(MBIA)(1) $ 4,130,126
1,040,000 Victor Valley Joint Union High
School District GO, 5.60%,
9-1-04 (MBIA) 1,104,377
2,000,000 West Basin Water District
Certificates of Participation,
Series 1991, 6.10%, 8-1-98
(AMBAC)(1) 2,069,000
-----------
TOTAL MUNICIPAL SECURITIES-95.3% 108,434,188
(Cost $107,140,674) -----------
SHORT-TERM MUNICIPAL SECURITIES
2,500,000 California Pollution Control
Financing Auth. Rev., VRDN,
Series 1991 C, (Shell Oil Project),
3.35%, 3-3-97 2,500,000
1,800,000 California Pollution Control
Financing Auth. Rev., VRDN,
Series 1996 F, (Pacific Gas &
Electricity), 3.35%, 3-3-97
(LOC: Banque National de Paris) 1,800,000
1,000,000 Irvine Ranch Water District, VRDN,
Series 1993 A, 3.25%, 3-3-97
(LOC: Bank of America) 1,000,000
---------
TOTAL SHORT-TERM
MUNICIPAL SECURITIES--4.7% 5,300,000
(Cost $5,300,000) ---------
TOTAL INVESTMENT SECURITIES-100.0% $113,734,188
(Cost $112,440,674) ===========
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
FGIC = Financial Guaranty Insurance Company
GO = General Obligation
LOC = Letter of Credit
MBIA = Municipal Bond Insurance Association
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
February 28, 1997.
(1)Escrowed in U.S. Government Securities.
See Notes to Financial Statements
Semiannual Report California Limited-Term Tax-Free 11
<TABLE>
<CAPTION>
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
30-Day 30-Day Tax-Equivalent Yields
SEC 34.70% 37.42% 41.95% 45.22%
Yield Tax Bracket Tax Bracket Tax Bracket Tax Bracket
----- ----------- ----------- ----------- -----------
CURRENT YIELD (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California Intermediate-Term Tax-Free ...... 4.23% 6.48% 6.76% 7.29% 7.72%
Yields are defined in the Glossary on page 41.
</TABLE>
<TABLE>
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- ------ ------- ------- --------
TOTAL RETURNS (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California Intermediate-Term Tax-Free 3.81% 4.21% 5.20% 6.41% 6.06%
Lehman 5-Year GO Index 3.96% 4.76% 5.50% 6.23% 6.30%
Average California Intermediate
Municipal Debt Fund(1) 3.95% 4.29% 4.97% 6.22% 6.06%
Fund's Ranking Among California
Intermediate Municipal Debt Funds(1) -- 14 out of 29 9 out of 21 3 out of 6 1 out of 1
(1) According to Lipper Analytical Services.
</TABLE>
See pages 40-41 for more information about returns, the comparative index and
Lipper fund rankings.
[line graph - data below]
GROWTH OF $10,000 OVER TEN YEARS
Value on 2/28/97
$10,000 investment made 2/28/87
Intermediate-Term Tax-Free Lehman 5-Year GO Index
2/28/87 $10,000 $10,000
3/31/87 $9,921 $9,944
4/30/87 $9,472 $9,649
5/31/87 $9,489 $9,648
6/30/87 $9,641 $9,852
7/31/87 $9,776 $9,965
8/31/87 $9,769 $9,985
9/30/87 $9,440 $9,649
10/31/87 $9,539 $9,791
11/30/87 $9,704 $9,909
12/31/87 $9,803 $10,018
1/31/88 $10,045 $10,264
2/29/88 $10,136 $10,368
3/31/88 $10,080 $10,329
4/30/88 $10,158 $10,423
5/31/88 $10,084 $10,297
6/30/88 $10,134 $10,372
7/31/88 $10,173 $10,420
8/31/88 $10,150 $10,389
9/30/88 $10,263 $10,490
10/31/88 $10,367 $10,581
11/30/88 $10,298 $10,525
12/31/88 $10,382 $10,554
1/31/89 $10,500 $10,706
2/28/89 $10,406 $10,592
3/31/89 $10,358 $10,525
4/30/89 $10,536 $10,705
5/31/89 $10,691 $10,900
6/30/89 $10,798 $11,019
7/31/89 $10,939 $11,180
8/31/89 $10,889 $11,137
9/30/89 $10,877 $11,142
10/31/89 $10,968 $11,152
11/30/89 $11,120 $11,294
12/31/89 $11,206 $11,385
1/31/90 $11,224 $11,391
2/28/90 $11,298 $11,476
3/31/90 $11,266 $11,440
4/30/90 $11,214 $11,403
5/31/90 $11,419 $11,611
6/30/90 $11,508 $11,696
7/31/90 $11,648 $11,836
8/31/90 $11,560 $11,795
9/30/90 $11,591 $11,820
10/31/90 $11,793 $11,994
11/30/90 $11,965 $12,167
12/31/90 $11,990 $12,212
1/31/91 $12,177 $12,392
2/28/91 $12,266 $12,504
3/31/91 $12,226 $12,475
4/30/91 $12,373 $12,632
5/31/91 $12,446 $12,696
6/30/91 $12,417 $12,694
7/31/91 $12,530 $12,820
8/31/91 $12,686 $12,986
9/30/91 $12,856 $13,145
10/31/91 $12,929 $13,245
11/30/91 $12,937 $13,287
12/31/91 $13,235 $13,585
1/31/92 $13,235 $13,611
2/29/92 $13,205 $13,620
3/31/92 $13,169 $13,575
4/30/92 $13,266 $13,694
5/31/92 $13,412 $13,817
6/30/92 $13,615 $14,016
7/31/92 $14,068 $14,383
8/31/92 $13,850 $14,275
9/30/92 $13,975 $14,365
10/31/92 $13,830 $14,319
11/30/92 $14,047 $14,492
12/31/92 $14,173 $14,593
1/31/93 $14,388 $14,750
2/28/93 $14,876 $15,135
3/31/93 $14,640 $14,963
4/30/93 $14,753 $15,060
5/31/93 $14,795 $15,113
6/30/93 $15,033 $15,317
7/30/93 $14,986 $15,327
8/31/93 $15,294 $15,536
9/30/93 $15,515 $15,648
10/31/93 $15,533 $15,671
11/30/93 $15,407 $15,626
12/31/93 $15,688 $15,840
1/31/94 $15,860 $15,989
2/28/94 $15,473 $15,690
3/31/94 $15,064 $15,340
4/29/94 $15,124 $15,495
5/31/94 $15,232 $15,582
6/30/94 $15,181 $15,546
7/29/94 $15,411 $15,715
8/31/94 $15,464 $15,791
9/30/94 $15,327 $15,672
10/31/94 $15,148 $15,584
11/30/94 $14,939 $15,485
12/30/94 $15,104 $15,621
1/31/95 $15,390 $15,771
2/28/95 $15,682 $16,000
3/31/95 $15,896 $16,254
4/28/95 $15,958 $16,298
5/31/95 $16,310 $16,655
6/30/95 $16,228 $16,668
7/31/95 $16,400 $16,901
8/31/95 $16,560 $17,072
9/30/95 $16,685 $17,123
10/31/95 $16,862 $17,195
11/30/95 $17,036 $17,341
12/31/95 $17,146 $17,437
1/31/96 $17,343 $17,644
2/29/96 $17,286 $17,584
3/31/96 $17,030 $17,491
4/30/96 $17,041 $17,465
5/31/96 $17,049 $17,444
6/30/96 $17,144 $17,568
7/31/96 $17,359 $17,684
8/31/96 $17,351 $17,721
9/30/96 $17,484 $17,854
10/31/96 $17,666 $18,020
11/30/96 $17,942 $18,270
12/31/96 $17,872 $18,243
1/31/97 $17,897 $18,292
2/28/97 $18,015 $18,422
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost. The line representing the fund's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return line of the index does not.
PORTFOLIO AT A GLANCE
2/28/97 8/31/96
Number of Securities 141 142
Weighted Average Maturity 7.6 years 7.7 years
Average Duration 5.4 years 5.4 years
Expense Ratio 0.47%* 0.48%
* Annualized.
12 California Intermediate-Term Tax-Free American Century Investments
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
Management Q & A
An interview with Colleen Denzler, a senior portfolio manager on the California
Tax-Free and Municipal funds management team.
How did the fund perform?
For the six-month period ended February 28, 1997, the fund's total return of
3.81% was slightly lower than the 3.95% average return of the 31 "California
Intermediate Municipal Debt Funds" tracked by Lipper Analytical Services. From a
one-year perspective, the fund tracked its peer group average even more closely,
returning 4.21% compared to the 4.29% average return posted by the funds in its
Lipper category. (See the Total Returns table on the previous page for other
fund performance comparisons.)
The fund's returns typically seem to "hug the average" for the fund's investment
category. Why?
That's the way the fund was designed. Our goal is to minimize price volatility
while offering shareholders a competitive yield. The fund is more conservatively
styled than many of the funds in its Lipper category, which includes funds with
a relatively broad range of investment policies and objectives. Because of the
fund's conservative stance, it will tend to outperform its category average in a
declining market and lag the category average during municipal market rallies.
Since the municipal bond market experienced both a significant rally and a
significant sell-off during the six-month period, the fund's return ended up
tracking its peer group average.
[bar graph - data below]
CALIFORNIA INTERMEDIATE-TERM TAX-FREE FISCAL YEAR-BY-YEAR RETURNS (periods
ended August 31)
Intermediate-Term Tax-Free Lehman 5-Year GO Index
1987* 3.53% 6.76%
1988 3.90% 4.05%
1989 7.28% 7.19%
1990 6.16% 5.91%
1991 9.74% 10.09%
1992 9.18% 9.93%
1993 10.42% 8.83%
1994 1.11% 1.64%
1995 7.09% 8.12%
1996 4.79% 3.80%
This chart illustrates the historical year-by-year volatility of the fund's
returns over the past 10 years and compares them with the index's returns. The
fund's total returns include operating expenses, while the index's do not. See
page 40 for a definition of the index.
Semiannual Report California Intermediate-Term Tax-Free 13
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
How was the fund positioned during the period?
There has been a growing perception in the market that slowly building
inflationary pressures would cause the Federal Reserve to raise short-term
interest rates. (The Fed did in fact raise rates a quarter of a percent on March
25.) This uncertainty in the market caused us to maintain a conservative stance,
keeping the fund's duration at 5.4 years--a neutral position in comparison with
its peers. This neutral stance limited the fund's vulnerability to rising
interest rates.
In the fund's August 31, 1996 annual report, we discussed the fact that the fund
is now allowed to invest in BBB-rated securities. Have you added any of these
lower-rated securities to the fund's portfolio?
Yes. The fund's portfolio now includes a 1% weighting in BBB bonds. We'd like to
add more of these lower-quality securities to the portfolio, but, frankly, with
credit quality spreads (the differences between the yields of high-rated
securities and those of lower-rated securities) as narrow as they are currently,
we don't think it makes sense to take on greater credit risk without adequate
yield compensation for our shareholders. Historically, an investor could get a
significant bump up in yield for taking on the additional credit risk inherent
in a BBB bond. Now an investor may get very little extra yield for the added
risk.
What has caused this narrowing of credit quality spreads?
Several factors have led to the compression of credit quality spreads. In the
nation overall, and in California in particular, strong economic growth has
caused a general improvement in the credit quality of municipal issues.
Municipal bond insurers, trying to gain market share, have insured more
lower-quality issues, adding strength to the narrowing trend.
Municipal fund managers, who have increasingly looked to higher-yielding
securities to boost fund returns, have found themselves competing for a
shrinking number of high-yield issues. Following the simple dynamics of supply
and demand, more buyers competing for fewer bonds means higher prices and lower
yields for lower-quality bonds.
What is your outlook for California municipal securities going forward?
As in the past, the general outlook for interest rates is uncertain. The economy
continues to show solid growth, but inflation has remained relatively low. The
question is, are these conditions sustainable? The Federal Reserve doesn't seem
to think so--in March, it made a pre-emptive strike against inflation,
ratcheting short-term interest rates up by a quarter of a percent. Many Fed
watchers suspect this may be the first in a series of rate hikes.
[pie charts - data below]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 2/28/97)
Revenue 55%
COPs/Leases 22%
Prerefunded/ETM 9%
GO 6%
Land-Secured 6%
Other 2%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 8/31/96)
Revenue 57%
COPs/Leases 22%
Prerefunded/ETM 7%
GO 7%
Land-Secured 5%
Other 2%
14 California Intermediate-Term Tax-Free American Century Investments
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
If U.S. economic growth slows, the municipal market could rally. But with wage
pressures increasing the threat of inflation, any signs of an overheating
economy could cause increased anxiety among municipal investors, pushing bond
prices lower. We expect municipal issuance to remain light in the coming months,
which may provide some support for municipal prices. We also expect the
strengthening California economy to keep credit quality spreads for California
issues very narrow.
What are your plans for the fund over the next six months?
Given the likelihood of higher rates, we will probably maintain the fund's
neutral duration, and we may even shorten its duration slightly. We would like
to increase the fund's holdings in BBB bonds if we can find issues that meet our
credit criteria and represent good value. Toward this end, our municipal credit
research team will be a key resource as they search for undervalued securities
that we believe have the potential to appreciate.
[pie charts - data below]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 2/28/97)
AAA 69%
AA 13%
A 17%
BBB 1%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 8/31/96)
AAA 69%
AA 14%
A 17%
Semiannual Report California Intermediate-Term Tax-Free 15
SCHEDULE OF INVESTMENTS
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES
$ 1,520,000 Alameda County Certificates of
Participation, (Santa Rita Jail
Project), 5.375%, 6-1-09 (MBIA) $1,549,974
4,060,000 Burbank Redevelopment Agency
West Olive Tax Allocation, Series
1994, 6.50%, 12-1-01 (AMBAC) 4,437,580
1,175,000 California Educational Facility Auth.
Rev., (Santa Clara University),
5.25%, 9-1-10 (MBIA) 1,175,494
5,000,000 California Educational Facility Auth.
Rev., (Stanford University), 5.25%,
12-1-99 5,171,300
2,145,000 California Educational Facility Auth.
Rev., Series 1989, (University of
San Diego), 6.75%, 10-1-02
(MBIA) 2,341,890
3,145,000 California Health Facilities
Financing Auth. Rev., Series A,
(Insured Health Facility), 6.00%,
7-1-04 (AMBAC) 3,396,160
1,500,000 California Health Facilities
Financing Auth. Rev., Series A,
(Kaiser Permanente), 6.70%,
10-1-99 1,588,230
1,500,000 California Health Facilities
Financing Auth. Rev., Series A,
(Pomona Valley Hospital Medical
Center), 6.75%, 1-1-07 (MBIA) 1,609,770
1,280,000 California Health Facilities
Financing Auth. Rev., Series A,
(St. Francis Memorial Hospital),
5.25%, 11-1-99 1,304,179
1,660,000 California Health Facilities
Financing Auth. Rev., Series A,
(St. Francis Memorial Hospital),
5.375%, 11-1-00 1,697,300
1,745,000 California Health Facilities
Financing Auth. Rev., Series A,
(St. Francis Memorial Hospital),
5.625%, 11-1-02 1,806,878
1,560,000 California Health Facilities
Financing Auth. Rev., Series A,
(St. Francis Memorial Hospital),
5.75%, 11-1-04 1,623,617
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,250,000 California Public Works Board
Energy-Efficiency Rev. Certificates
of Participation, Series 1991 A,
(Pooled Project), 6.00%, 9-1-99 $3,391,050
2,000,000 California Public Works Board
Lease Rev., Series A, (University
of California), 4.72%, 9-1-00(1) 1,697,880
3,500,000 California Public Works Board
Lease Rev. Certificates of
Participation, Series A, (University
of California), 5.375%, 10-1-17
(AMBAC) 3,385,585
2,500,000 California State Department of
Veteran's Affairs Rev., Series A,
6.20%, 8-1-98 2,570,100
4,795,000 California State Department Water
Resource Central Valley Project
Rev., Series J-2, (Water System),
5.80%, 12-1-04 5,164,215
3,710,000 California State Franchise Tax
Board Certificates of Participation,
6.90%, 10-1-06 3,990,958
3,000,000 California State Public Works Board
Lease Rev., Series 1992 A,
(California State University),
5.70%, 10-1-99 3,111,510
3,500,000 California State Public Works
Board Lease Rev. Certificates of
Participation, Series A,
(Department of Corrections),
5.25%, 12-1-05 (AMBAC) 3,625,195
4,520,000 California State Public Works
Board Lease Rev. Certificates of
Participation, (Secretary of State),
6.20%, 12-1-05 (AMBAC) 4,979,639
1,000,000 California State Public Works
Board Lease Rev., Series A,
(University of California Project),
5.90%, 12-1-03 (AMBAC) 1,077,650
3,000,000 California State Public Works
Board Lease Rev., Series A,
(University of California), 6.15%,
11-1-09 3,209,550
5,000,000 California State Universities and
Colleges Rev., 5.00%, 11-1-04
(FGIC) 5,106,700
See Notes to Financial Statements
16 California Intermediate-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 8,000,000 California Statewide Communities
Development Auth. Certificates of
Participation, (California Lutheran
Homes), 5.375%, 11-15-06 $8,135,600
2,385,000 California Statewide Communities
Development Auth. Certificates of
Participation, (St. Joseph Health
System), 6.50%, 7-1-03 2,606,948
2,545,000 Capistrano Unified Public Financing
Auth. Special Tax Rev., Series A,
(First Lien), 6.00%, 9-1-06
(AMBAC) 2,760,798
2,945,000 Castaic Lake Water Agency
Certificates of Participation,
Series A, 5.75%, 8-1-01 (MBIA) 3,106,791
1,000,000 Castaic Lake Water Agency
Certificates of Participation,
Series A, 7.25%, 8-1-09 (MBIA) 1,193,980
2,075,000 Chabot Las Positas Community
College District Certificates of
Participation, 5.50%, 12-1-10
(FSA) 2,150,966
1,465,000 City of Woodland Waste Water
System Refunding Certificates of
Participation, 6.00%, 3-1-06
(AMBAC) 1,597,377
7,935,000 Contra Costa California
Transportation Auth. Sales
Tax Rev., Series A, 6.00%,
3-1-05 (FGIC) 8,603,048
1,000,000 Contra Costa California
Transportation Auth. Sales
Tax Rev., Series A, 6.00%,
3-1-07 (FGIC) 1,089,090
2,585,000 Contra Costa County Certificates of
Participation (Merrithew Memorial
Hospital), 6.00%, 11-1-07 (MBIA) 2,789,965
2,500,000 Contra Costa County Public Facility
Certificates of Participation,
7.45%, 6-1-00 (BIGI) 2,707,000
1,065,000 Contra Costa County Water District
Rev., Series A, 7.00%, 10-1-00,
Prerefunded at 102% of Par(2) 1,181,564
1,220,000 Coronado Community Development
Agency Tax Allocation, 6.00%,
9-1-08 (FSA) 1,328,568
Principal Amount Value
- --------------------------------------------------------------------------------
$ 2,000,000 East Bay Municipal Utilities District
Wastewater System Rev., 6.00%,
6-1-02 (FGIC) 2,147,740
2,570,000 East Bay Municipal Utilities District
Wastewater System Rev., 6.00%,
6-1-05 2,753,524
2,000,000 East Bay Municipal Utilities District
Wastewater System Rev., 5.00%,
6-1-06 (MBIA) $2,028,720
6,850,000 Imperial Irrigation District
Certificates of Participation,
(Electrical System Project),
6.50%, 11-1-07 (MBIA) 7,761,187
2,770,000 Kern High School District GO,
6.30%, 8-1-11 (MBIA) 3,068,938
1,750,000 Loma Linda Hospital Rev.,
(University Medical Center),
6.95%, 12-1-05 (AMBAC) 1,889,178
2,300,000 Los Angeles Airport Rev., Series A,
6.00%, 5-15-05 (FGIC) 2,487,772
4,000,000 Los Angeles Capital Asset Lease
Rev. Certificates of Participation,
5.875%, 12-1-05 (AMBAC) 4,280,560
1,000,000 Los Angeles Convention Center
Certificates of Participation,
6.75%, 8-15-01 (AMBAC) 1,097,890
1,155,000 Los Angeles Convention and
Exhibition Center Auth. Lease Rev.,
Series A, 6.00%, 8-15-10 (MBIA) 1,255,924
4,000,000 Los Angeles County Correctional
Facility Project Certificates of
Participation, 6.00%, 9-1-99
(MBIA)(2) 4,193,480
1,000,000 Los Angeles County Metropolitan
Transit Auth. Sales Tax Rev.,
5.90%, 7-1-06 (AMBAC) 1,085,800
1,900,000 Los Angeles County Metropolitan
Transportation Auth. Sales Tax Rev.,
Series A, (Proposition A), 5.50%,
7-1-08 (MBIA) 1,970,509
1,000,000 Los Angeles County Public
Properties Certificates of
Participation, 6.25%, 4-1-00
(BIGI) 1,060,150
3,900,000 Los Angeles County Transportation
Commission Certificates of
Participation, Series B, 6.00%,
7-1-01 4,084,275
See Notes to Financial Statements
Semiannual Report California Intermediate-Term Tax-Free 17
SCHEDULE OF INVESTMENTS
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 4,765,000 Los Angeles County Transportation
Commission Certificates of
Participation, Series B, 6.20%,
7-1-03 $5,059,858
2,000,000 Los Angeles County Transportation
Commission Certificates of
Participation, Series B, 6.25%,
7-1-04 2,176,000
4,000,000 Los Angeles County Transportation
Commission Sales Tax Rev.,
5.875%, 7-1-02 (FGIC) 4,275,920
2,500,000 Los Angeles County Transportation
Commission Sales Tax Rev.,
Series A, (Proposition A), 6.40%,
7-1-02 2,719,425
3,515,000 Los Angeles County Transportation
Commission Sales Tax Rev.,
Series A, (Proposition C), 6.20%,
7-1-04 3,819,364
3,765,000 Los Angeles County Transportation
Commission Sales Tax Rev.,
Series A, (Proposition C), 6.40%,
7-1-06 4,175,046
1,000,000 Los Angeles Department of Water
and Power Electric Rev., 5.70%,
1-15-05 (MBIA) 1,061,720
1,000,000 Los Angeles Department of Water
and Power Rev., 6.30%, 4-15-06
(FGIC) 1,078,360
4,685,000 Los Angeles Municipal Improvement
Corporation Rev., 6.00%, 2-1-03
(MBIA) 5,040,451
2,000,000 Los Angeles Rev. Certificates of
Participation, 6.40%, 11-1-97 2,036,380
2,045,000 Los Angeles Wastewater System
Rev., Series A, 6.60%, 2-1-00
(MBIA) 2,172,179
1,000,000 Los Angeles Wastewater System
Rev., Series B, 6.80%, 6-1-02 1,084,610
4,780,000 Los Angeles Wastewater System
Rev., Series B, 6.20%, 6-1-06
(AMBAC) 5,144,427
2,785,000 Metropolitan Water District of
Southern California, 5.00%,
7-1-09 2,760,798
Principal Amount Value
- --------------------------------------------------------------------------------
$ 7,190,000 Metropolitan Water District of
Southern California Rev., 6.50%,
7-1-01, Prerefunded at 102%
of Par(2) $7,943,009
1,000,000 Metropolitan Water District of
Southern California Rev., 6.625%,
7-1-01, Prerefunded at 102% of
Par(2) 1,109,430
4,590,000 Modesto, Stockton, Redding Public
Power Agency Rev., Series G,
(San Juan Project), 5.25%,
7-1-11 (MBIA) 4,578,204
1,100,000 Mojave California Water Agency
Improvement District GO,
(Morongo Basin), 5.40%,
9-1-08 (FGIC) 1,133,187
5,000,000 Northern California Power Agency
Rev., (Geothermal Project 3),
5.50%, 7-1-05 (AMBAC) 5,250,200
1,000,000 Oakland Pension Financing Auth.
Rev. Certificates of Participation,
Series 1988, 7.20% , 8-1-00
(FGIC) 1,059,380
1,165,000 Ontario Redevelopment Financing
Auth. Local Agency Rev.,
Series A, 5.80%, 9-2-06 (FSA) 1,240,003
7,500,000 Orange County Transportation Sales
Tax Rev., 5.50%, 2-15-01
(AMBAC) 7,805,250
1,645,000 Orange County Transportation Sales
Tax Rev., 5.75%, 2-15-05 1,731,576
3,000,000 Orange County Transportation Sales
Tax Rev., 6.00%, 2-15-07 (FGIC) 3,249,030
1,250,000 Orange County Water District
Certificates of Participation, Series
1990, 7.00%, 8-15-00,
Prerefunded at 102% of Par(2) 1,387,863
1,330,000 Oxnard Harbor District Rev., Series
A, 7.00%, 8-1-04 (FSA) 1,524,738
1,000,000 Ramona Municipal Water District
Certificates of Participation,
6.90%, 10-1-01 (AMBAC) 1,102,050
1,060,000 Redding Joint Powers Financing
Auth. Electric System Rev., Series
A, 6.25%, 6-1-07 (MBIA) 1,175,561
See Notes to Financial Statements
18 California Intermediate-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,010,000 Richmond Joint Powers Financing
Auth. Rev. Certificates of
Participation, Series A, 5.30%,
5-15-06 $ 1,018,706
2,080,000 Riverside County Public Financing
Auth. Special Tax Rev., Series A,
5.25%, 9-1-04 (MBIA) 2,163,012
4,705,000 Riverside County Transit Sales Tax,
6.00%, 6-1-09 (FGIC) 5,125,157
4,000,000 Riverside County Transit Sales Tax
Rev., Series A, 6.50%, 6-1-01
(AMBAC)(2) 4,337,960
1,225,000 Riverside County Transportation
Commission Sales Tax Rev.,
5.60%, 6-1-05 (AMBAC) 1,298,353
2,000,000 Riverside County Transportation
Commission Sales Tax Rev.,
Series A, 6.625%, 6-1-01,
Prerefunded at 102% of Par(2) 2,219,000
1,025,000 Rocklin Unified School District
Community Facility, 5.20%,
9-1-09 (MBIA) 1,029,756
5,710,000 Sacramento Municipal Utility District
Electric Rev., Series C, 5.75%,
11-15-07 (MBIA) 6,020,053
6,825,000 Sacramento Municipal Utility District
Electric Rev., Series 1991 Z,
6.00%, 7-1-02 (FGIC) 7,335,988
9,965,000 Sacramento Schools Auth. Rev.,
(Workers Compensation
Program C), 5.75%, 6-1-03(2) 10,608,041
1,205,000 Saddleback Valley Unified School
District Public Financing Special
Tax Rev., 6.00%, 9-1-11 (FSA) 1,305,557
5,000,000 San Bernardino County Certificates
of Participation, Series A,
(Medical Center Project), 5.75%,
8-1-07 (MBIA) 5,345,600
1,500,000 San Diego County Regional
Transportation Commission Sales
Tax Rev., Series A, 7.75%,
4-1-99(2) 1,612,500
3,800,000 San Diego County Water Auth.
Certificates of Participation,
Series A, 6.00%, 5-1-02 4,054,828
Principal Amount Value
- --------------------------------------------------------------------------------
$ 7,200,000 San Diego County Water Auth.
Certificates of Participation,
Series A, 6.125%, 5-1-03 $7,714,224
4,400,000 San Diego County Water Auth.
Certificates of Participation,
Series A, 6.40%, 5-1-08 4,710,244
5,090,000 San Diego Public Facility Financing
Auth. Sewer Rev., Series 1995,
4.875%, 5-15-09 (FGIC) 4,975,170
3,505,000 San Diego Regional Transportation
Commission Sales Tax Rev.,
Series 1992, 5.50%, 4-1-04
(FGIC) 3,690,625
1,175,000 San Diego Regional Transportation
Commission Sales Tax Rev.,
Series 1992, 5.50%, 4-1-05
(FGIC) 1,237,204
4,000,000 San Diego Regional Transportation
Commission Sales Tax Rev.,
Series 1994 A, 6.00%, 4-1-04
(FGIC) 4,326,600
2,000,000 San Diego Water Auth. Rev.
Certificates of Participation,
5.681%, 4-23-08 (FGIC) 2,095,920
1,250,000 San Francisco Bay Area Rapid
Transit Sales Tax Rev., 6.40%,
7-1-05 (FGIC) 1,361,938
1,000,000 San Francisco Bay Area Rapid
Transit Sales Tax Rev., 5.35%,
7-1-07 (FGIC) 1,033,720
2,100,000 San Francisco City and County
Airport Commission Rev.
Refunding, 6.35%, 5-1-03 (MBIA) 2,304,309
2,410,000 San Francisco City and County
Airport Commission Rev., Series
Issue 2, 6.35%, 5-1-01 (MBIA) 2,596,317
3,405,000 San Francisco Port Commission
Rev., 5.625%, 7-1-02 3,545,490
2,275,000 San Jose California Redevelopment
Agency Tax Allocation, 6.00%,
8-1-08 (MBIA) 2,478,340
3,300,000 San Jose California Redevelopment
Agency Tax Allocation, 6.00%,
8-1-09 (MBIA) 3,597,726
See Notes to Financial Statements
Semiannual Report California Intermediate-Term Tax-Free 19
SCHEDULE OF INVESTMENTS
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,700,000 San Jose California Redevelopment
Agency Tax Allocation, (Merged
Area Redevelopment Project),
6.00%, 8-1-06 (MBIA) $4,025,970
6,400,000 San Jose California Redevelopment
Agency Tax Allocation, (Merged
Area Redevelopment Project),
6.00%, 8-1-07 (MBIA) 6,977,280
3,875,000 San Jose California Redevelopment
Agency Tax Allocation, Series A,
6.00%, 8-1-02 (MBIA)(2) 4,154,775
3,950,000 San Jose Financing Auth. Rev.
Certificates of Participation,
(Convention Center), 6.00%,
9-1-05 4,186,526
2,000,000 San Jose Financing Auth. Rev.
Certificates of Participation,
Series C, (Convention Center
Project), 6.30%, 9-1-09 2,114,620
4,580,000 San Jose Financing Auth. Rev.
Certificates of Participation,
Series 1993, (Convention Center),
6.10%, 9-1-06 4,814,130
3,910,000 San Mateo County California
Transportation Sales Tax Rev.,
Series A, 5.00%, 6-1-08 (MBIA) 3,928,103
1,015,000 Santa Ana Police Administration
Certificates of Participation, Series
A, 5.50%, 7-1-07 (MBIA) 1,056,666
2,215,000 Santa Clara County Multi-Facilities
Project Certificates of Participation,
6.00%, 5-15-01 (AMBAC) 2,358,111
1,230,000 Santa Clara County Multi-Facilities
Project Certificates of Participation,
6.00%, 5-15-05 (AMBAC) 1,317,366
1,000,000 Signal Hill California Redevelopment
Agency Tax Allocation, Series B,
7.40%, 10-1-15, Prerefunded at
100% of Par(2) 1,107,540
1,785,000 South Sutter Hydroelectric
Refunding Rev., 6.80%, 8-1-01
(FGIC) 1,918,125
2,000,000 Southern California Public Power
Auth. Rev., 6.75%, 7-1-00 2,143,140
1,500,000 Southern California Public Power
Auth. Rev., Series 1988 A, 7.00%,
7-1-00 1,585,740
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,000,000 Southern California Public Power
Auth. Rev., Series 1989, 6.75%,
7-1-01 $ 3,258,750
3,090,000 Southern California Public Power
Auth. Rev., Series 1992, 5.625%,
7-1-03 (MBIA) 3,278,861
4,065,000 Southern California Rapid Transit
District Certificates of Participation,
6.20%, 7-1-02 (MBIA) 4,397,598
1,500,000 Southern California Rapid Transit
District Certificates of Participation,
(Workers Compensation), 6.50%,
7-1-07 (MBIA) 1,633,740
5,000,000 Southern California Rapid Transit
District Certificates of Participation,
(Workers Compensation), 6.40%,
7-1-04 (MBIA) 5,402,550
2,000,000 Stanislaus County Refunding
Certificates of Participation, 5.50%,
5-1-06 (MBIA) 2,094,460
3,000,000 State of California GO, 6.80%,
5-1-01 (AMBAC) 3,280,380
10,000,000 State of California GO, 6.50%,
3-1-02 (AMBAC) 10,931,400
2,400,000 State of California GO, 6.00%,
9-1-03 (MBIA) 2,597,640
1,950,000 State of California GO, 6.75%
2-1-06 2,211,963
1,855,000 State of California GO, 7.00%,
11-1-06 (FGIC) 2,166,937
1,975,000 State of California GO, 5.50%,
4-1-07 (MBIA) 2,069,168
1,150,000 Taft Public Financing Auth. Lease
Rev. Certificates of Participation,
Series A, (Community Correctional
Facility Project), 5.50%, 1-1-06 1,159,522
3,800,000 University of California Multipurpose
Project Rev., Series A, 6.00%,
9-1-02 (MBIA) 4,092,220
1,950,000 University of California Rev.,
(University of California Medical
Center), 5.60%, 7-1-09 (AMBAC) 2,018,250
2,510,000 Watsonville California Hospital
Insured Rev., Series A, (Watsonville
Community Hospital), 5.45%,
7-1-03 2,570,566
See Notes to Financial Statements
20 California Intermediate-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
$ 3,980,000 Whittier California Health Facility
Rev., (Presbyterian Intercommunity),
6.00%, 6-1-06 (MBIA) $ 4,310,061
-----------
Total Municipal Securities--98.8% 430,628,261
(Cost $413,883,049) -----------
SHORT-TERM MUNICIPAL SECURITIES
1,000,000 Irvine Ranch Water District, VRDN,
Series 1991 C, 3.25%, 3-3-97
(LOC: Bank of America) 1,000,000
4,300,000 Orange County Sanitation District
Certificates of Participation, VRDN,
3.40%, 3-3-97 4,300,000
-----------
Total Short-Term
Municipal Securites-1.2% 5,300,000
(Cost $5,300,000) -----------
Total Investment Securites - 100.0% $435,928,261
(Cost $419,183,049) ===========
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
BIGI = Bond Investor's Guaranty Inc.
FGIC = Financial Guaranty Insurance Company
FSA = Financial Security Association
GO = General Obligation
MBIA = Municipal Bond Insurance Association
VRDN = Variable Rate Demand Note. Interest reset dates are indicated and used
in calculating the weighted average portfolio maturity. Rate shown is
effective February 28, 1997.
(1) These securities are zero-coupon municipal bonds. The yield to maturity at
current market value is shown instead of a stated coupon rate. Zero-coupon
securities are purchased at a substantial discount from their value at
maturity.
(2) Escrowed in U.S. Government Securities.
See Notes to Financial Statements
Semiannual Report California Intermediate-Term Tax-Free 21
<TABLE>
<CAPTION>
CALIFORNIA LONG-TERM TAX-FREE
30-Day 30-Day Tax-Equivalent Yields
SEC 34.70% 37.42% 41.95% 45.22%
Yield Tax Bracket Tax Bracket Tax Bracket Tax Bracket
----- ----------- ----------- ----------- -----------
CURRENT YIELD (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California Long-Term Tax-Free .............. 4.90% 7.50% 7.83% 8.44% 8.94%
Yields are defined in the Glossary on page 41.
</TABLE>
<TABLE>
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- ------ ------- ------- --------
TOTAL RETURNS (as of February 28, 1997)
<S> <C> <C> <C> <C> <C>
California Long-Term Tax-Free ............... 5.19% 5.01% 5.70% 7.56% 6.78%
Lehman Long-Term Municipal Bond Index ....... 5.99% 6.18% 6.46% 8.33% 8.34%
Average California Municipal Debt Fund(1) ... 4.76% 4.81% 5.10% 6.94% 6.67%
Fund's Ranking Among California
Municipal Debt Funds(1) ..................... -- 43 out of 98 16 out of 68 6 out of 50 15 out of 30
(1)According to Lipper Analytical Services.
</TABLE>
See pages 40-41 for more information about returns, the comparative index and
Lipper fund rankings.
[line graph - data below]
GROWTH OF $10,000 OVER TEN YEARS
Value on 2/28/97
$10,000 investment made 2/28/87
Lehman Long-Term Municipal Index Long-Term Tax-Free
2/28/87 $10,000 $10,000
3/31/87 $9,853 $9,955
4/30/87 $9,300 $9,127
5/31/87 $9,197 $9,015
6/30/87 $8,904 $9,261
7/31/87 $8,987 $9,325
8/31/87 $9,027 $9,338
9/30/87 $8,658 $8,888
10/31/87 $8,658 $8,810
11/30/87 $8,934 $9,125
12/31/87 $9,051 $9,272
1/31/88 $9,412 $9,672
2/29/88 $9,523 $9,803
3/31/88 $9,386 $9,641
4/30/88 $9,461 $9,665
5/31/88 $9,470 $9,678
6/30/88 $9,655 $9,789
7/31/88 $9,720 $9,835
8/31/88 $9,758 $9,862
9/30/88 $9,979 $9,996
10/31/88 $10,206 $10,190
11/30/88 $10,097 $10,095
12/31/88 $10,272 $10,239
1/31/89 $10,514 $10,449
2/28/89 $10,367 $10,358
3/31/89 $10,375 $10,352
4/30/89 $10,680 $10,569
5/31/89 $10,927 $10,765
6/30/89 $11,093 $10,915
7/31/89 $11,240 $11,068
8/31/89 $11,069 $10,886
9/30/89 $11,035 $10,842
10/31/89 $11,181 $10,967
11/30/89 $11,419 $11,160
12/31/89 $11,503 $11,238
1/31/90 $11,387 $11,087
2/28/90 $11,515 $11,228
3/31/90 $11,527 $11,227
4/30/90 $11,386 $11,048
5/31/90 $11,708 $11,379
6/30/90 $11,823 $11,492
7/31/90 $12,032 $11,687
8/31/90 $11,745 $11,394
9/30/90 $11,727 $11,366
10/31/90 $11,975 $11,654
11/30/90 $12,279 $11,937
12/31/90 $12,333 $11,980
1/31/91 $12,498 $12,146
2/28/91 $12,586 $12,184
3/31/91 $12,616 $12,189
4/30/91 $12,812 $12,408
5/31/91 $12,962 $12,521
6/30/91 $12,938 $12,456
7/31/91 $13,138 $12,633
8/31/91 $13,327 $12,792
9/30/91 $13,520 $13,000
10/31/91 $13,661 $13,115
11/30/91 $13,678 $13,062
12/31/91 $14,004 $13,394
1/31/92 $13,996 $13,346
2/29/92 $14,018 $13,385
3/31/92 $14,053 $13,386
4/30/92 $14,187 $13,501
5/31/92 $14,394 $13,676
6/30/92 $14,673 $13,931
7/31/92 $15,211 $14,393
8/31/92 $15,007 $14,145
9/30/92 $15,073 $14,239
10/31/92 $14,822 $13,887
11/30/92 $15,239 $14,295
12/31/92 $15,437 $14,486
1/31/93 $15,582 $14,632
2/28/93 $16,307 $15,321
3/31/93 $16,110 $15,113
4/30/93 $16,331 $15,343
5/31/93 $16,466 $15,423
6/30/93 $16,775 $15,713
7/30/93 $16,792 $15,705
8/31/93 $17,222 $16,129
9/30/93 $17,446 $16,347
10/31/93 $17,479 $16,349
11/30/93 $17,268 $16,141
12/31/93 $17,713 $16,478
1/31/94 $17,922 $16,707
2/28/94 $17,329 $16,319
3/31/94 $16,294 $15,538
4/29/94 $16,420 $15,509
5/31/94 $16,612 $15,704
6/30/94 $16,413 $15,633
7/29/94 $16,834 $15,966
8/31/94 $16,870 $16,003
9/30/94 $16,478 $15,725
10/31/94 $15,972 $15,432
11/30/94 $15,551 $15,137
12/30/94 $16,103 $15,405
1/31/95 $16,811 $15,896
2/28/95 $17,496 $16,347
3/31/95 $17,706 $16,504
4/28/95 $17,697 $16,517
5/31/95 $18,451 $17,080
6/30/95 $18,111 $16,788
7/31/95 $18,203 $16,900
8/31/95 $18,460 $17,157
9/30/95 $18,604 $17,311
10/31/95 $19,054 $17,680
11/30/95 $19,546 $18,140
12/31/95 $19,851 $18,456
1/31/96 $19,936 $18,496
2/29/96 $19,693 $18,351
3/31/96 $19,333 $17,930
4/30/96 $19,255 $17,822
5/31/96 $19,265 $17,856
6/30/96 $19,562 $18,078
7/31/96 $19,755 $18,299
8/31/96 $19,730 $18,316
9/30/96 $20,168 $18,598
10/31/96 $20,414 $18,817
11/30/96 $20,853 $19,201
12/31/96 $20,727 $19,115
1/31/97 $20,686 $19,101
2/28/97 $20,288 $19,267
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost. The line representing the fund's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return line of the index does not.
PORTFOLIO AT A GLANCE
2/28/97 8/31/96
Number of Securities 90 85
Weighted Average Maturity 19.2 years 18.8 years
Average Duration 7.7 years 8.0 years
Expense Ratio 0.47%* 0.48%
* Annualized.
22 California Long-Term Tax-Free American Century Investments
CALIFORNIA LONG-TERM TAX-FREE
Management Q & A
An interview with Dave MacEwen, vice president and senior portfolio manager on
the California Tax-Free and Municipal funds management team.
How did the fund perform?
The fund managed a strong performance in comparison with its peers, but
underperformed its benchmark index. For the six-month period ended February 28,
1997, the fund's total return was 5.19%, compared with the 4.76% average return
of the 100 "California Municipal Debt Funds" tracked by Lipper Analytical
Services and the 5.99% return of the Lehman Long-Term Municipal Bond Index. (See
the Total Returns table on the previous page for other fund performance
comparisons.)
Why did the fund perform well against its peers?
One contributing factor was the fund's relatively conservative positioning
during the period compared with some of the funds in its Lipper category. This
conservative approach allowed the fund to perform well despite the market's
shifting interest rate expectations (see page 3).
The fund's sizable exposure to A-rated bonds also helped. These bonds were in
fairly high demand from individual investors during much of the period. As a
result, we were able to sell some of these securities at a profit, increasing
the fund's returns.
[bar graph - data below]
CALIFORNIA LONG-TERM TAX-FREE FISCAL YEAR-BY-YEAR RETURNS (Periods ended
August 31)
Long-Term Tax-Free Lehman Long-Term Municipal Index
1987* -0.31% 3.48%
1988 5.61% 8.10%
1989 10.39% 13.44%
1990 4.66% 6.11%
1991 12.26% 13.47%
1992 10.58% 12.60%
1993 14.02% 14.76%
1994 -0.78% -2.05%
1995 7.21% 9.43%
1996 6.77% 6.88%
This chart illustrates the historical year-by-year volatility of the fund's
returns over the past 10 years and compares them with the index's returns. The
fund's total returns include operating expenses, while the index's do not. See
page 40 for a definition of the index.
Semiannual Report California Long-Term Tax-Free 23
CALIFORNIA LONG-TERM TAX-FREE
Did you change the fund's positioning over the past six months?
We made only slight adjustments to the fund's positioning. Choosing a more
conservative approach, we maintained the fund's duration in a relatively narrow
range around eight years during the six-month period. The lack of new municipal
securities made it difficult to significantly alter the fund's structure.
Therefore, the fund remained slightly barbelled, but with some laddered
maturities.
If not by duration management or portfolio structuring, how did you add value to
the fund?
Careful selection of attractively priced securities was the main vehicle we used
to enhance the fund's returns. However, improving credit conditions in
California made this task more difficult. That's because the spread, or interest
rate difference, between comparable-maturity municipal securities with different
credit ratings continued to decrease as investors reached for higher yields.
Thanks to our strong municipal credit research team, we were able to find many
securities that we believed were undervalued and had the potential to
appreciate.
Was the credit team instrumental in locating the lower-rated municipal
securities now held in the fund's portfolio?
Yes. We relied on our credit team to help us evaluate such securities, which we
must carefully screen before adding them to the fund's portfolio. Although
attractively priced lower-rated municipal securities that measured up to our
standards proved relatively few and far between, we did find some in December.
The fund's position in lower-rated securities now totals around 5% of net
assets. We will likely enlarge this position if appropriate securities become
available. Having the ability to purchase the full spectrum of investment grade
securities for the fund, including securities rated BBB, has helped us stay in
stride with our competitors.
What is the outlook for municipal securities going forward?
In March of this year, concerns about rising interest rates were finally
realized when, for the first time since February 1995, short-term interest rates
were ratcheted upward by the Federal Reserve in a preemptive strike against
inflation. The question on the minds of many investors is whether this is only
the
[pie charts - data below]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 2/28/97)
Revenue 44%
COPs/Leases 25%
Land-Secured 14%
Prerefunded/ETM 7%
GO 4%
Other 6%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 8/31/96)
Revenue 46%
COPs/Leases 22%
Land-Secured 15%
Prerefunded/ETM 7%
GO 4%
Other 6%
24 California Long-Term Tax-Free American Century Investments
CALIFORNIA LONG-TERM TAX-FREE
first rate hike in an upward trend. This question is made more unclear because
current economic conditions suggest that inflation can remain tame even as the
economy flourishes. If U.S. economic growth slows, municipal securities could
rally. But, with wage pressures increasing the threat of inflation, any signs of
an overheating economy will likely cause increased anxiety among municipal
investors, pushing bond prices lower.
With this outlook in mind, what are your plans for the fund going forward?
With the possibility of higher rates looming, we will likely maintain the fund's
neutral stance, lengthening or shortening the fund's duration as conditions
warrant. We will also continue to favor a bias toward a barbell portfolio
structure until the market breaks out of its current trading range. If the
economic outlook does change dramatically, we believe that the fund is
positioned with the flexibility to respond appropriately. In addition, we will
continue to utilize our credit research team to look for undervalued securities
that we believe have the potential to appreciate.
[pie charts - data below]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 2/28/97)
AAA 42%
AA 19%
A 34%
BBB 5%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 8/31/96)
AAA 47%
AA 15%
A 38%
Semiannual Report California Long-Term Tax-Free 25
SCHEDULE OF INVESTMENTS
CALIFORNIA LONG-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES
$ 2,300,000 Alameda County Certificates of
Participation, 5.79%, 6-15-17
(MBIA)(1) $ 722,085
2,700,000 Brea Public Financing Auth. Rev.,
Series 1991, (Project Area AB),
7.00%, 8-1-15 (MBIA) 2,993,355
2,920,000 Brea Redevelopment Agency Tax,
6.125%, 8-1-13 (MBIA) 3,075,782
2,000,000 California Educational Facility Auth.
Rev., (Loyola Marymount
University), 5.75%, 10-1-24 1,971,300
2,000,000 California Educational Facility Auth.
Rev., (University of San Francisco),
6.00%, 10-1-26 (MBIA) 2,068,280
1,300,000 California Educational Facility Auth.
Rev., Series I, (Stanford University),
7.125%, 1-1-19 1,387,945
1,500,000 California Educational Facility Auth.
Rev., Series A, (University of
Southern California), 5.70%,
10-1-15 1,484,310
5,000,000 California Health Facilities Financing
Auth. Rev., 6.00%, 7-1-25 (MBIA) 5,108,900
2,500,000 California Health Facilities Financing
Auth. Rev., Series 1985 A,
(Adventist Health), 6.75%,
3-1-14 (MBIA) 2,715,750
2,775,000 California Health Facilities Financing
Auth. Rev., Series A, (Episcopal
Homes), 7.80%, 7-1-15 2,951,546
1,730,000 California Health Facilities Financing
Auth. Rev., Series A,
(Gould Medical), 7.30%, 4-1-20(2) 1,953,084
1,500,000 California Health Facilities Financing
Auth. Rev., Series 1988 A, (H.M.
Newhall Memorial Hospital), 8.00%,
10-1-18 1,612,575
6,420,000 California Health Facilities Financing
Auth. Rev., (Kaiser Permanente),
7.00%, 10-1-18 6,918,449
3,000,000 California Health Facilities Financing
Auth. Rev., Series A, (Kaiser
Permanente), 5.45%, 10-1-09(1) 1,524,330
Principal Amount Value
- --------------------------------------------------------------------------------
$ 4,915,000 California Health Facilities
Financing Auth. Rev., Series A,
(Kaiser Permanente), 6.50%,
12-1-20 $ 5,248,532
2,000,000 California Health Facilities
Financing Auth. Rev., Series A,
6.75%, 3-1-20 2,139,980
5,165,000 California Health Facilities
Financing Auth. Rev., Series C,
(St. Francis Memorial Hospital),
5.875%, 11-1-23 5,312,822
1,150,000 California Housing Finance Agency
Rev., Series C, (Home Mortgage),
6.80%, 8-1-17 1,212,710
5,125,000 California Housing Finance Agency
Rev., Series 1994 G, (Home
Mortgage), 7.25%, 8-1-17 5,511,989
1,400,000 California Housing Finance Agency
Rev., (Multi-Unit), 6.75%, 2-1-09 1,410,878
1,290,000 California Housing Finance Agency
Rev., (Multi-Unit Rental), 6.875%,
2-1-22 1,301,288
1,500,000 California Pollution Control
Financing Auth. Rev., Series D,
(Southern California Edison),
6.85%, 12-1-08 1,594,425
2,755,000 California State Department of
Water, 5.00%, 12-1-19 2,502,422
1,000,000 California State Franchise Tax
Board Certificates of
Participation, 6.90%, 10-1-06 1,075,730
3,000,000 California State GO, 6.125%,
10-1-11 (AMBAC) 3,285,990
1,410,000 California State GO, Series 1984
B, (New Prison Construction),
10.00%, 8-1-03 1,826,105
1,150,000 California State Public Works
Board Lease Rev. Certificates of
Participation, Series A,
(Department of Corrections
State Prisons), 5.25%, 12-1-13
(AMBAC) 1,137,902
17,100,000 California State Public Works
Board Lease Rev. Certificates of
Participation, Series A,
(Department of Corrections
State Prisons), 5.25%, 6-1-15
(FSA) 16,773,903
See Notes to Financial Statements
26 California Long-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA LONG-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,000,000 California State Public Works
Board Lease Rev. Certificates of
Participation, Series B, (Various
University of California Projects),
6.625%, 12-1-19 $1,150,160
4,000,000 California Statewide Community
Development Auth. Certificates of
Participation, (Sisters of Charity
Leavenworth), 5.00%, 12-1-23 3,559,960
4,500,000 California Statewide Community
Development Auth. Certificates of
Participation, (United Medical
Center), 6.75%, 12-1-01,
Prerefunded at 102% of Par(2) 5,044,005
5,695,000 Capistrano California School District
Special Tax, (Refunding Issue
1988-1), 6.50%, 9-1-14 (FSA) 6,321,564
4,475,000 City of Pittsburgh Redevelopment
Agency, 6.20%, 8-1-19 4,492,050
5,000,000 City of Pittsburgh Redevelopment
Agency, 6.25%, 8-1-26 5,042,250
1,000,000 Coachella Valley Water District #71
Certificates of Participation, (Flood
Control Project), 6.75%, 10-1-12 1,071,920
8,000,000 Compton Redevelopment Agency
Tax Allocation, Series 1995 A,
6.50%, 8-1-13 (FSA) 8,768,240
2,580,000 Concord Joint Power Financing
Auth. Lease Rev. Certificates of
Participation, Series 1993, (Police
Facilities Project), 5.25%, 8-1-13 2,501,232
5,000,000 Irvine Ranch Water District Joint
Powers Agency Rev., 7.80%,
2-15-08 (FGIC) 5,167,450
1,900,000 Irvine Ranch Water District Joint
Powers Agency Rev., 7.875%,
2-15-23 1,961,503
1,815,000 Kern County High School District
GO, 7.15%, 8-1-14, (MBIA)(2) 2,197,293
3,555,000 Long Beach California Water Rev.,
6.125%, 5-1-19 3,691,014
1,305,000 Los Altos California Association of
Bay Area Governments
Certificates of Participation,
5.90%, 5-1-27 1,321,926
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,000,000 Los Angeles California Municipal
Improvement Corp. Lease Rev.,
Series A, (Library Project), 7.10%,
6-1-99, Prerefunded at 102% of
Par(2) $1,085,990
3,475,000 Los Angeles Community
Redevelopment Agency Housing
Rev., Series A, 6.45%, 7-1-17
(AMBAC) 3,615,460
3,000,000 Los Angeles County Transportation
Commission Sales Tax Rev.,
Series A, 7.40%, 7-1-15 3,248,970
4,050,000 Los Angeles County Transportation
Commission Sales Tax Rev.,
Series A, (Capital Appreciation),
4.74%, 7-1-02 (MBIA)(1) 3,023,365
1,000,000 Los Angeles Transportation Sales
Tax Rev., 6.50%, 7-1-13 (MBIA) 1,090,550
2,420,000 Los Angeles Waste Water System
Rev., Series C, 6.90%, 6-1-09 2,592,642
3,050,000 Los Angeles Waste Water System
Rev., Series C, 7.10%, 6-1-18 3,265,513
1,865,000 Mendocino Coast Health Care
District Health Care Facility Rev.,
5.875%, 2-1-20 1,866,380
5,250,000 Metropolitan Water District of
Southern California Rev., 5.00%,
7-1-27 4,767,578
2,650,000 Metropolitan Water District of
Southern California Waterworks
Rev., 6.625%, 7-1-01,
Prerefunded at 102% of Par(2) 2,939,990
5,830,000 Modesto, Stockton, Redding Public
Power Agency Rev., Series D,
(San Juan Project), 6.75%,
7-1-20 (MBIA) 6,709,339
1,000,000 Moulton-Niguel California Water
District GO, 5.00%, 9-1-19
(MBIA) 906,560
4,875,000 Northern California Power Agency
Public Power Rev., (Hydroelectric
Project #1), 7.15%, 7-1-24 5,117,141
3,000,000 Oakland California Redevelopment
Agency Tax Allocation, (Central
District Redevelopment Tax),
5.50%, 2-1-14 (AMBAC) 3,041,190
See Notes to Financial Statements
Semiannual Report California Long-Term Tax-Free 27
SCHEDULE OF INVESTMENTS
CALIFORNIA LONG-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 5,150,000 Open Space District Midpeninsula
GO, (Santa Clara, San Mateo
Counties), 7.00%, 9-1-14 $5,645,482
4,750,000 Orange County Certificates of
Participation, (Civic Center
Expansion), 6.70%, 8-1-01,
Prerefunded at 102% of Par
(AMBAC)(2) 5,299,148
3,000,000 Orange County Water District
Certificates of Participation,
Series 1989, 6.50%, 8-15-11
(AMBAC) 3,199,050
1,000,000 Orange County West Valley
Detention Center Certificates of
Participation, 7.625%, 6-1-99,
Prerefunded at 102% of Par(2) 1,095,160
1,855,000 Pacifica Financing Auth. Sewer
Rev., 6.20%, 8-1-26 1,846,189
1,000,000 Pasadena Certificates of
Participation, (Old Pasadena
Parking Facility Project), 6.25%,
1-1-18 1,069,660
2,100,000 Pomona Public Financing Auth. Rev.,
Series A, (Water Treatment Project),
6.10%, 7-1-17 (AMBAC) 2,173,164
1,000,000 Saddleback Valley Unified School
District Public Financing Special
Tax Rev., 6.00%, 9-1-16 (FSA) 1,064,940
6,000,000 San Bernardino Joint Powers
Financing Auth. Lease Rev.
Certificates of Participation,
Series A, 5.50%, 12-1-20 5,742,780
3,400,000 San Diego County Certificates of
Participation, 5.625%, 9-1-12
(AMBAC) 3,501,218
3,500,000 San Diego County Regional
Transportation Sales Tax Rev.,
Series A, 4.75%, 4-1-04(1)(2) 2,508,905
1,000,000 San Francisco City and County
Redevelopment Hotel Tax Rev.,
6.75%, 7-1-15 (FSA) 1,119,280
5,500,000 San Jose California Financing Auth.
Rev. Certificates of Participation,
Series B, (Community Facilities
Project), 5.625%, 11-15-18 5,351,665
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,000,000 San Jose California Financing Auth.
Rev. Certificates of Participation,
Series C, (Convention Center
Project), 6.375%, 9-1-13 $3,136,140
5,000,000 San Jose California Financing Auth.
Rev. Certificates of Participation,
Series D, (Central Service Yard),
5.25%, 10-15-23 4,619,400
9,525,000 San Jose California Redevelopment
Agency Tax Allocation, Series D,
(Merged Area Redevelopment
Project), 5.75%, 8-1-24 9,534,334
3,475,000 San Mateo Joint Power Finance
Auth. Lease Rev. Certificates of
Participation, 6.50%, 7-1-16
(MBIA) 3,909,757
4,000,000 San Mateo Joint Power Finance
Auth. Lease Rev. Certificates of
Participation, (Capital Projects
Program), 6.00%, 7-1-19 (MBIA) 4,252,400
3,500,000 Santa Ana Finance Auth. Lease
Rev. Certificates of Participation,
6.25%, 7-1-15 (MBIA) 3,858,400
3,000,000 Santa Monica Community College
District Certificates of Participation,
Series A, 5.90%, 2-1-27 3,016,440
1,425,000 Southern California Public Power
Auth. Rev., Series 1989,
(Transportation Auth.), 7.00%,
7-1-09 (FGIC) 1,530,036
7,315,000 Southern California Public Power
Auth. Rev., Series 1989, 6.75%,
7-1-12 (FSA) 8,498,567
3,730,000 Southern California Public Power
Auth. Rev., Series 1989,
(Multipurpose Projects), 6.75%,
7-1-13 (FSA) 4,336,200
3,260,000 Southern California Public Power
Auth. Rev., Series 1989, 6.00%,
7-1-18 3,293,512
3,000,000 Southern California Public Power
Auth. Rev., Series A, 4.84%,
7-1-04 (AMBAC)(1) 2,111,730
2,000,000 Southern Orange County Finance
Auth. Special Tax Rev., Series A,
7.00%, 9-1-11 (MBIA) 2,364,700
See Notes to Financial Statements
28 California Long-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
CALIFORNIA LONG-TERM TAX-FREE
FEBRUARY 28, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 2,000,000 Taft California Public Financing
Auth. Lease Rev. Certificates of
Participation, Series A,
(Community Correctional Facility),
6.05%, 1-1-17 $ 2,004,000
3,020,000 Watsonville California Hospital
Insured Rev., Series A, (Watsonville
Community Hospital), 6.20%,
7-1-12 3,188,637
-----------
Total Municipal Securities--93.4% 281,654,496
(Cost $267,477,064) -----------
MUNICIPAL DERIVATIVES(3)
8,000,000 Metropolitan Water District of
Southern California Waterworks
Rev., (Linked), Inverse Floater,
5.75%, 8-10-18 8,159,120
4,000,000 Northern California Transmission
Rev., Inverse Floater, 6.92%,
4-29-24 (MBIA) 3,595,000
-----------
Total Municipal Derivatives--3.9% 11,754,120
(Cost $11,963,920) -----------
SHORT-TERM MUNICIPAL SECURITIES
1,000,000 California Pollution Control
Financing Auth. Rev., Series C,
(Southern California Edison),
VRDN, 3.45%, 3-3-97 1,000,000
2,000,000 California Statewide Communities
Development Auth. Certificates of
Participation, VRDN, 3.35% 2,000,000
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,000,000 Orange County Sanitation Districts
Certificates of Participation,
Series C, VRDN, 3.40%, 3-3-97 $ 3,000,000
2,100,000 Orange County Water District
Certificates of Participation,
Series B, VRDN, 3.25%, 3-3-97 2,100,000
-----------
Total Short-Term
Municipal Securities--2.7% 8,100,000
(Cost $8,100,000) -----------
Total Investment Securities--100.0% $301,508,616
(Cost $287,540,985) ===========
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
FSA = Financial Security Association
GO = General Obligation
MBIA = Municipal Bond Insurance Association
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
February 28, 1997.
(1) These securities are zero-coupon municipal bonds. The yield to maturity at
current market value is shown instead of a stated coupon rate. Zero-coupon
securities are purchased at a substantial discount from their value at
maturity.
(2) Escrowed in U.S. Government Securities.
(3) These securities are inverse floaters. They bear interest rates that move
inversely to market interest rates. Inverse floaters typically have
durations twice as long as long-term bonds, which may cause their value to
be twice as volatile as long-term bonds when interest rates change. The
Long-Term Fund is limited to 10% of its net assets in inverse floaters.
See Notes to Financial Statements
Semiannual Report California Long-Term Tax-Free 29
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (UNADITIED)
LIMITED-TERM INTERMEDIATE-TERM LONG-TERM
TAX-FREE TAX-FREE TAX-FREE
ASSETS
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $112,440,674, $419,183,049,
and $287,540,985, respectively) (Note 3)...... $113,734,188 $435,928,261 $301,508,616
Cash .............................................. -- 470,720 --
Receivable for investments sold.................... 1,030,020 -- --
Interest receivable................................ 1,442,228 6,237,286 3,802,453
Prepaid expenses and other assets.................. 4,051 7,316 6,196
----- ----- -----
116,210,487 442,643,583 305,317,265
----------- ----------- -----------
LIABILITIES
Disbursements in excess of demand deposit cash..... 919,191 878,041 2,526,705
Payable for investments purchased.................. 5,364,305 4,544,991 1,468,272
Payable for capital shares redeemed................ 240,014 210,190 71,086
Payable to affiliates (Note 2)..................... 38,818 153,051 104,315
Dividends payable.................................. 8,496 2,149 6,473
Accrued expenses and other liabilities............. 2,562 10,500 5,454
----- ------ -----
6,573,386 5,798,922 4,182,305
--------- --------- ---------
Net Assets Applicable to Outstanding Shares........ $109,637,101 $436,844,661 $301,134,960
============ ============ ============
CAPITAL SHARES
Outstanding (Unlimited number of shares authorized) 10,684,893 39,144,232 26,617,198
========== ========== ==========
Net Asset Value Per Share.......................... $10.26 $11.16 $11.31
====== ====== ======
NET ASSETS CONSIST OF:
Capital paid in.................................... $109,410,604 $418,837,497 $285,167,542
Accumulated undistributed net realized gain
(loss) on investments.............................. (1,067,017) 1,261,952 1,999,787
Net unrealized appreciation on investments (Note 3) 1,293,514 16,745,212 13,967,631
--------- ---------- ----------
$109,637,101 $436,844,661 $301,134,960
============ ============ ============
</TABLE>
See Notes to Financial Statements
30 Statements of Assets and Liabilities American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
LIMITED-TERM INTERMEDIATE-TERM LONG-TERM
TAX-FREE TAX-FREE TAX-FREE
For the Six Months Ended February 28, 1997 (Unaudited)
INVESTMENT INCOME
Income:
<S> <C> <C> <C>
Interest.................................................... $2,489,375 $11,493,098 $ 8,648,868
---------- ----------- ------------
Expenses (Note 2):
Investment advisory fees.................................... 152,900 626,569 423,804
Administrative fees......................................... 50,436 206,516 139,693
Transfer agency fees........................................ 22,139 92,266 60,492
Printing and postage........................................ 7,727 32,404 21,993
Auditing and legal fees..................................... 6,652 18,919 13,648
Custodian fees.............................................. 5,343 14,598 10,155
Directors' fees and expenses................................ 3,343 5,277 4,450
Telephone expenses.......................................... 1,117 3,768 2,934
Registration and filing fees................................ 1,769 1,470 2,551
Other operating expenses.................................... 8,582 23,698 14,269
----- ------ ------
260,008 1,025,485 693,989
------- --------- -------
Net investment income....................................... 2,229,367 10,467,613 7,954,879
--------- ---------- ---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments............................ 84,323 1,412,424 2,141,773
Change in net unrealized appreciation on investments........ 614,994 4,301,615 5,027,196
------- --------- ---------
Net realized and unrealized
gain on investments ........................................ 699,317 5,714,039 7,168,969
------- --------- ---------
Net Increase in Net Assets
Resulting from Operations................................... $2,928,684 $16,181,652 $15,123,848
========== =========== ===========
</TABLE>
See Notes to Financial Statements
Semiannual Report Statements of Operations 31
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended February 28, 1997 (Unaudited) AND YEAR ENDED AUGUST 31, 1996
LIMITED-TERM INTERMEDIATE-TERM LONG-TERM
TAX-FREE TAX-FREE TAX-FREE
Increase (Decrease) in Net Assets 1997 1996 1997 1996 1997 1996
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income..................... $2,229,367 $4,255,556 $10,467,613 $20,942,789 $7,954,879 $15,704,747
Net realized gain on investments.......... 84,323 268,474 1,412,424 3,000,776 2,141,773 780,713
Change in net unrealized
appreciation (depreciation)
on investments....................... 614,994 (634,911) 4,301,615 (3,916,167) 5,027,196 2,019,723
------- -------- --------- ---------- --------- ---------
Net increase in net assets
resulting from operations............ 2,928,684 3,889,119 16,181,652 20,027,398 15,123,848 18,505,183
--------- --------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................ (2,242,900) (4,248,485) (10,473,972) (20,936,393) (7,961,028) (15,699,168)
From net realized gains
from investment transactions......... -- -- (1,183,599) -- (424,490) --
--------- --------- ---------- ---------- ---------- ----------
Decrease in net assets
from distributions................... (2,242,900) (4,248,485) (11,657,571) (20,936,393) (8,385,518) (15,699,168)
---------- ---------- ----------- ----------- ---------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................. 32,949,599 34,544,488 85,398,588 89,549,209 62,010,610 87,219,622
Proceeds from reinvestment
of distributions..................... 1,647,533 3,349,483 8,752,065 15,976,338 5,765,539 10,632,390
Payments for shares redeemed.............. (29,352,639) (38,551,043) (92,779,753) (91,217,016) (61,401,905) (88,720,686)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets from
capital share transactions........... 5,244,493 (657,072) 1,370,900 14,308,531 6,374,244 9,131,326
--------- -------- --------- ---------- --------- ---------
Net increase (decrease)
in net assets........................ 5,930,277 (1,016,438) 5,894,981 13,399,536 13,112,574 11,937,341
NET ASSETS
Beginning of period....................... 103,706,824 104,723,262 430,949,680 417,550,144 288,022,386 276,085,045
----------- ----------- ----------- ----------- ----------- -----------
End of period............................. $109,637,101 $103,706,824 $436,844,661 $430,949,680 $301,134,960 $288,022,386
============ ============ ============ ============ ============ ============
TRANSACTIONS IN SHARES OF THE FUNDS
Sold ..................................... 3,215,715 3,379,409 7,654,384 8,045,676 5,505,811 7,807,077
Issued in reinvestment
of distributions..................... 160,820 327,171 784,611 1,435,175 510,811 951,174
Redeemed.................................. (2,865,208) (3,766,840) (8,311,990) (8,207,114) (5,449,012) (7,947,182)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)................... 511,327 (60,260) 127,005 1,273,737 567,610 811,069
======= ======= ======= ========= ======= =======
See Notes to Financial Statements
</TABLE>
32 Statements of Changes in Net Assets American Century Investments
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization--American Century California Tax-Free and Municipal Funds (the
Trust) is registered under the Investment Company Act of 1940 as an open-end
management investment company. American Century-Benham California Limited-Term
Tax-Free Fund (Limited-Term), American Century-Benham California
Intermediate-Term Tax-Free Fund (Intermediate-Term), and American Century-Benham
California Long-Term Tax-Free Fund (Long-Term) (collectively the "Funds") are
three of the seven funds composing the Trust. Each Fund is diversified under the
1940 Act. The Funds seek to obtain as high a level of interest income exempt
from federal and California income taxes as is consistent with prudent
investment management and conservation of shareholders' capital. Limited-Term
invests primarily in California municipal securities and maintains a weighted
average maturity of one to five years. Intermediate-Term invests primarily in
California municipal securities and maintains a weighted average maturity of
five to ten years. Long-Term invests primarily in California municipal
securities and maintains a weighted average maturity of ten or more years. The
Funds concentrate their investments in a single state and therefore may have
more exposure to credit risk related to the state of California than a fund with
a broader geographical diversification. The following significant accounting
policies, related to the Funds, are in accordance with accounting policies
generally accepted in the investment company industry.
Security Valuations--Securities are valued through valuations obtained from a
commercial pricing service or at the mean of the most recent bid and asked
prices. When valuations are not readily available, securities are valued at fair
value as determined in accordance with procedures adopted by the Board of
Trustees.
Securities Transactions--Security transactions are accounted for on the date
purchased or sold. 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
amortization of discounts and premiums. Premium and original issue discount is
amortized daily using the effective interest rate method. Market discount is
recognized as income upon the sale or maturity of the security.
Income Tax Status--It is the Funds' policy to distribute all net investment
income and net realized capital gains to shareholders and to otherwise qualify
as a regulated investment company under the provisions of the Internal Revenue
Code. Accordingly, no provision has been made for federal or state taxes.
Distributions to Shareholders--Distributions from net investment income for the
Funds are declared daily and distributed monthly. Distributions from net
realized gains for the Funds are declared and paid annually.
At August 31, 1996, accumulated net realized capital loss carryovers of
$1,151,341 for Limited-Term (expiring 2003 and 2004) may be used to offset
future taxable gains.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are due to differences in the
recognition of income and expense items for financial statement and tax
purposes.
Futures Contracts--Each Fund may buy and sell interest rate futures contracts
relating to debt securities. Each Fund may use futures transactions to maintain
cash reserves while remaining fully invested, to facilitate trading, to reduce
transaction costs, or to pursue higher investment returns when a futures
contract is priced more attractively than its underlying security or index. One
of the risks of entering into futures may include 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.
Supplementary Information--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,
Benham Management Corporation (BMC), the Trust's distributor, American Century
Investment Services, Inc. (ACIS), and the Trust's transfer agent, American
Century Services Corporation (ACSC).
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the period. Actual results could differ from these
estimates.
Semiannual Report Notes to Financial Statements 33
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
2. Transactions with Related Parties
The Trust has entered into an Investment Advisory Agreement with BMC that
provides the Trust with investment advisory services in exchange for an
investment advisory fee. ACSC pays all compensation of Trust officers and
trustees who are officers or directors of ACC or any of its subsidiaries. In
addition, promotion and distribution expenses are paid by BMC. The investment
advisory fee is paid monthly by each Fund based on its pro rata share of the
dollar amount derived from applying the Trust's average daily closing net assets
to the following annualized investment advisory fee schedule:
0.50% of the first $100 million
0.45% of the next $100 million
0.40% of the next $100 million
0.35% of the next $100 million
0.30% of the next $100 million
0.25% of the next $1 billion
0.24% of the next $1 billion
0.23% of the next $1 billion
0.22% of the next $1 billion
0.21% of the next $1 billion
0.20% of the next $1 billion
0.19% of the average daily net assets over $6.5 billion
The Trust has an Administrative Services and Transfer Agency Agreement with
ACSC. Under the Agreement, ACSC provides substantially all administrative and
transfer agency services necessary to operate the Funds. Fees for these services
are based on transaction volume, number of accounts and average daily closing
net assets for funds advised by BMC. The Agreement was formerly with Benham
Financial Services, Inc.
The Trust has an additional agreement with BMC pursuant to which BMC established
a contractual expense guarantee that limits Fund expenses (excluding items such
as brokerage commissions, taxes, interest, custodian earnings credits, and
extraordinary expenses) to 0.59% of average daily closing net assets. The
agreement provides that BMC may recover amounts (representing expenses in excess
of the Fund's expense guarantee rate) absorbed during the preceding 11 months,
if, and to the extent that, for any given month, the Fund's expenses are less
than the expense guarantee rate in effect at that time. The expense guarantee
rate is subject to renewal in June 1997.
The payables to affiliates as of February 28, 1997, based on the above
agreements were as follows:
Limited-Term Intermediate- Long-Term
Term
Investment Advisor ........... $24,080 $ 97,463 $ 66,566
Administrative Services
and Transfer Agent ........... 14,738 55,588 37,749
------- -------- --------
$38,818 $153,051 $104,315
======= ======== ========
The Trust has a Distribution Agreement with ACIS, which is responsible for
promoting sales of and distributing the Trust's shares. This Agreement was
formerly with Benham Distributors, Inc.
- --------------------------------------------------------------------------------
3. Investment Transactions
The aggregate cost of municipal debt obligations (excluding short-term
investments) purchased for the six months ended February 28, 1997, in
Limited-Term, Intermediate-Term, and Long-Term totaled $24,578,777, $68,640,849,
and $77,664,484, respectively. Proceeds from municipal debt obligations
(excluding short-term investments) sold in Limited-Term, Intermediate-Term, and
Long-Term totaled $15,066,589, $67,481,625, and $75,573,941, respectively.
As of February 28, 1997, accumulated net unrealized appreciation of the
Limited-Term, Intermediate-Term and Long-Term Funds were $1,293,514,
$16,745,212, and $13,967,631, consisting of unrealized appreciation of
$1,317,199, $16,801,961, and $14,512,005 and unrealized depreciation of $23,685,
$56,749, and $544,374, respectively. The aggregate cost of investments for
federal income tax purposes was the same as the cost for financial reporting
purposes.
35 Notes to Financial Statements American Century Investments
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
4. Corporate Events
<TABLE>
The following name changes became effective January 1, 1997:
NEW NAMES FORMER NAMES
<S> <C> <C>
Funds' Issuer: American Century California Benham California Tax-Free and Municipal Trust
Tax-Free and Municipal Funds
Funds: American Century-Benham Benham California Tax-Free Limited-Term Fund
California Limited-Term Tax-Free Fund
American Century-Benham Benham California Tax-Free Intermediate-Term Fund
California Intermediate-Term Tax-Free Fund
American Century-Benham Benham California Tax-Free Long-Term Fund
California Long-Term Tax-Free Fund
Parent Company: American Century Companies, Inc. Twentieth Century Companies, Inc.
Distributor: American Century Investment Services, Inc. Twentieth Century Securities, Inc.
Transfer Agent: American Century Services Corporation Twentieth Century Services, Inc.
</TABLE>
Semiannual Report Notes to Financial Statements 35
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CALIFORNIA LIMITED-TERM TAX-FREE
For a Share Outstanding Throughout the Years Ended August 31 (except as noted)
1997(1) 1996 1995 1994 1993 1992(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period................................ $10.19 $10.23 $10.12 $10.34 $10.12 $10.00
------ ------ ------ ------ ------ ------
Income from Investment Operations
Net Investment Income........................... 0.21 0.43 0.41 0.38 0.38 0.10
Net Realized and Unrealized Gain (Loss)
on Investment Transactions.................... 0.07 (0.04) 0.11 (0.18) 0.22 0.12
---- ----- ---- ----- ---- ----
Total From
Investment Operations......................... 0.28 0.39 0.52 0.20 0.60 0.22
---- ---- ---- ---- ---- ----
Distributions
From Net Investment Income...................... (0.21) (0.43) (0.41) (0.38) (0.38) (0.10)
In Excess of Net Realized Gains................. -- -- -- (0.04) -- --
---- ---- ---- ---- ---- ----
Total Distributions............................. (0.21) (0.43) (0.41) (0.42) (0.38) (0.10)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period..................... $10.26 $10.19 $10.23 $10.12 $10.34 $10.12
====== ====== ====== ====== ====== ======
Total Return (3)................................ 2.82% 3.87% 5.33% 1.90% 6.15% 1.47%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........................ 0.49% (4) 0.49% 0.51% 0.51% 0.36% --
Ratio of Net Investment Income
to Average Net Assets......................... 4.21% (4) 4.20% 4.10% 3.68% 3.76% 4.08%(4)
Portfolio Turnover Rate......................... 14% 44% 50% 66% 54% 19%
Net Assets, End
of Period (in thousands)...................... $109,637 $103,707 $104,723 $120,727 $114,019 $52,171
(1) Six months ended February 28,1997 (unaudited).
(2) June 1, 1992 (Inception) through August 31, 1992.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements
</TABLE>
36 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CALIFORNIA INTERMEDIATE-TERM TAX-FREE
For a Share Outstanding Throughout the Years Ended August 31 (except as noted)
1997(1) 1996 1995 1994 1993 1992
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period................................ $11.05 $11.06 $10.86 $11.36 $10.85 $10.49
------ ------ ------ ------ ------ ------
Income from Investment Operations
Net Investment Income .......................... 0.27 0.54 0.54 0.54 0.56 0.59
Net Realized and Unrealized Gain (Loss)
on Investment Transactions.................... 0.14 (0.01) 0.20 (0.41) 0.53 0.36
---- ----- ---- ----- ---- ----
Total From
Investment Operations......................... 0.41 0.53 0.74 0.13 1.09 0.95
---- ---- ---- ---- ---- ----
Distributions
From Net
Investment Income............................. (0.27) (0.54) (0.54) (0.54) (0.56) (0.59)
From Net Realized Gains on
Investment Transactions....................... (0.03) -- -- (0.08) (0.02) --
In Excess of Net Realized Gains................. -- -- -- (0.01) -- --
---- ---- ---- ---- ---- ----
Total Distributions............................. (0.30) (0.54) (0.54) (0.63) (0.58) (0.59)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period..................... $11.16 $11.05 $11.06 $10.86 $11.36 $10.85
====== ====== ====== ====== ====== ======
Total Return (2)................................ 3.81% 4.79% 7.09% 1.11% 10.42% 9.18%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........................ 0.47% (3) 0.48% 0.48% 0.48% 0.50% 0.52%
Ratio of Net Investment Income
to Average Net Assets......................... 4.83% (3) 4.87% 5.02% 4.82% 5.05% 5.50%
Portfolio Turnover Rate......................... 16% 36% 25% 44% 27% 49%
Net Assets, End
of Period (in thousands)...................... $436,845 $430,950 $417,550 $448,293 $444,460 $304,988
(1) Six months ended February 28, 1997 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements
</TABLE>
Semiannual Report Financial Highlights 37
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CALIFORNIA LONG-TERM TAX-FREE
For a Share Outstanding Throughout the Years Ended August 31 (except as noted)
1997(1) 1996 1995 1994 1993 1992
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period................................ $11.06 $10.94 $10.88 $12.02 $11.44 $11.00
------ ------ ------ ------ ------ ------
Income from Investment Operations
Net Investment Income........................... 0.30 0.61 0.62 0.63 0.66 0.69
Net Realized and Unrealized Gain (Loss)
on Investment Transactions.................... 0.27 0.12 0.12 (0.71) 0.85 0.44
---- ---- ---- ----- ---- ----
Total From
Investment Operations......................... 0.57 0.73 0.74 (0.08) 1.51 1.13
---- ---- ---- ----- ---- ----
Distributions
From Net
Investment Income............................. (0.30) (0.61) (0.62) (0.63) (0.66) (0.69)
From Net Realized Gains
on Investment Transactions.................... (0.02) -- (0.06) (0.43) (0.27) --
---- ---- ---- ---- ---- ----
Total Distributions............................. (0.32) (0.61) (0.68) (1.06) (0.93) (0.69)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period..................... $11.31 $11.06 $10.94 $10.88 $12.02 $11.44
====== ====== ====== ====== ====== ======
Total Return (2)................................ 5.19% 6.77% 7.21% (.78)% 14.02% 10.58%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets.............................. 0.47% (3) 0.48% 0.49% 0.48% 0.49% 0.52%
Ratio of Net Investment Income
to Average Net Assets.............................. 5.43% (3) 5.48% 5.84% 5.51% 5.76% 6.14%
Portfolio Turnover Rate............................ 26% 42% 60% 62% 55% 72%
Net Assets, End
of Period (in thousands)........................... $301,135 $288,022 $276,085 $277,477 $338,075 $275,880
(1) Six months ended February 28, 1997 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements
</TABLE>
38 Financial Highlights American Century Investments
NOTES
Semiannual Report Notes 39
BACKGROUND INFORMATION
Investment Philosophy and Policies
American Century Investments offers 42 fixed-income funds, ranging from money
market funds to long-term bond funds and including both taxable and tax-exempt
funds.
California Limited-Term Tax-Free is a variable-priced bond fund that seeks to
obtain as high a level of interest income exempt from federal and California
income taxes as is consistent with prudent investment management and
conservation of shareholders' capital.
California Intermediate-Term Tax-Free is a variable-priced bond fund that seeks
to obtain as high a level of interest income exempt from federal and California
income taxes as is consistent with prudent investment management and
conservation of shareholders' capital.
California Long-Term Tax-Free is a variable-priced bond fund that seeks to
obtain as high a level of interest income exempt from federal and California
income taxes as is consistent with prudent investment management and
conservation of shareholders' capital.
Comparative Indices
The following indices are used in the report for fund performance comparisons.
They are not investment products available for purchase.
The Lehman Brothers 3-Year Municipal Bond Index is composed of more than 4,000
municipal bonds with maturities of 2 to 4 years. The average credit rating of
the securities in the index is AA1/AA2. The average maturity of the index is 3
years.
The Lehman Brothers 5-Year General Obligation Index is composed of more than
5,000 municipal bonds with maturities of 4 to 6 years. The average credit rating
of the securities in the index is AA1/AA2. The average maturity of the index is
approximately 5 years.
The Lehman Brothers Long-Term Municipal Bond Index is composed of more than
2,700 municipal bonds with maturities greater than 22 years. The average credit
rating of the securities in the index is AA2/AA3. The average maturity of the
index is approximately 27 years.
Lipper Rankings
Lipper Analytical Services, Inc. is an independent mutual fund ranking service
that groups funds according to their investment objectives. Rankings are based
on average annual returns for each fund in a given category for the periods
indicated. Rankings are not included for periods less than one year.
The Lipper categories for the California Tax-Free Bond Funds are:
California Short-Intermediate Municipal Debt Funds (Limited-Term
Tax-Free)--funds that invest at least 65% of assets in municipal debt issues
that are exempt from taxation in California with dollar-weighted average
maturities of 1 to 5 years.
California Intermediate Municipal Debt Funds (Intermediate-Term Tax-Free)--funds
that invest at least 65% of assets in municipal debt issues that are exempt from
taxation in California with dollar-weighted average maturities of 5 to 10 years.
California Municipal Debt Funds (Long-Term Tax-Free)--funds that invest at least
65% of assets in municipal debt issues that are exempt from taxation in
California.
PORTFOLIO MANAGEMENT TEAM
Vice President and
Senior Municipal Portfolio Manager Dave MacEwen
Senior Municipal Portfolio Manager Colleen Denzler
Municipal Portfolio Manager Joel Silva
Senior Municipal Portfolio Manager
and Manager of Municipal
Credit Analysis Steven Permut
Credit Analysts Scott Lord, David Moore,
Bill McClintock, Tim Benham
40 Background Information American Century Investments
GLOSSARY
Returns
o Total Return figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
o Average Annual Returns illustrate the annually compounded returns that
would have produced the fund's cumulative total returns if the fund's
performance had been constant over the entire period. Average annual
returns smooth out variations in a fund's return; they are not the same as
fiscal year-by-year results. For fiscal year-by-year returns, please refer
to the "Financial Highlights" on pages 36, 37 and 38.
Yields
o 30-day SEC Yield represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's
share price at the end of the 30-day period. The SEC yield should be
regarded as an estimate of the fund's rate of investment income, and it may
not equal the fund's actual income distribution rate, the income paid to a
shareholder's account, or the income reported in the fund's financial
statements.
o Tax-Equivalent Yields show the taxable yields that investors in a combined
California and federal income tax bracket would have to earn before taxes
to equal the fund's tax-free yield.
Bond Portfolio Structures
o Barbell Structure--a structure that overweights a portfolio in short- and
long-term securities and underweights intermediate-term securities. This
structure tends to perform best when short-term rates are rising faster
than long-term rates, or long-term rates are falling faster than short-term
rates.
o Ladder Structure--a balanced structure that staggers bond maturities so
they occur at regular intervals. This structure tends to perform best when
interest rates are relatively stable.
Investment Terms
o Basis Point--one one-hundredth of a percentage point (or 0.01%).
o Yield Curve--a graphic representation of the relationship between maturity
and yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical
axis.
Statistical Terminology
o Number of Issues--the number of different securities held by a fund on a
given date.
o Weighted Average Maturity (WAM)--a measurement of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average
time until the securities in the portfolio mature, weighted by dollar
amount.
o Average Duration--a time-weighted average of the interest and principal
payments of the securities in a portfolio. As the duration of a portfolio
increases, so does the impact of a change in interest rates on the value of
the portfolio.
o Expense Ratio--the operating expenses of the fund, expressed as a
percentage of net assets. Shareholders pay an annual fee to the investment
advisor for investment advisory and management services. The expenses and
fees are deducted from fund income, not from each shareholder. The annual
fee has a contractual expense limit guarantee based on the terms of the
Investment Advisory Agreement. (See Note 2 in the Notes to Financial
Statements.)
Types of Municipal Securities
o COPs (Certificates of Participation)/Leases--securities issued to finance
public property improvements (such as city halls and police stations) and
equipment purchases. Certificates of participation represent long-term debt
obligations, but leases have a higher risk profile because they require
annual appropriation.
o GO Bonds--general obligation securities backed by the taxing power of the
issuer.
o Land-Secured Bonds--securities such as Mello-Roos bonds and 1915 Act bonds
that are issued to finance real estate development projects.
o Prerefunded/ETM Bonds--securities refinanced or escrowed to maturity by the
issuer because of their premium coupons (higher-than-market interest
rates). These bonds tend to have higher credit ratings because they are
backed by Treasury securities.
o Revenue Bonds--securities backed by revenues from sales taxes or from a
specific project, system or facility (such as a hospital, electric utility
or water system).
Semiannual Report Glossary 41
[american century logo]
American
Century(sm)
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-Person Assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
American Century California Tax-Free &
Municipal Funds
Investment Manager
Benham Management Corporation
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.
9704 [recycled logo]
SH-BKT-8346 Recycled
