SEMIANNUAL REPORT
NOVEMBER 30, 1996
[american century logo]
American
Century(sm)
BENHAM
GROUP
Arizona Intermediate-Term Municipal
[front cover]
TABLE OF CONTENTS
Report Highlights ..................................1
Our Message to You .................................2
Period Overview ....................................3
Arizona Municipal Credit Overview ..................4
Performance Information ............................5
Management Q & A ...................................6
Schedule of Investments ............................8
Statement of Assets and Liabilities ...............10
Statement of Operations ...........................11
Statements of Changes in Net Assets ...............12
Notes to Financial Statements .....................13
Financial Highlights ..............................16
Background Information
Investment Objectives & Policies .............20
Comparative Indices ..........................20
Lipper Rankings ..............................20
Glossary ..........................................21
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, American Century funds have
been divided 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 GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Arizona
Intermediate-Term Municipal
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 modest, non-inflationary pace during the
six-month period ended November 30, 1996. As a result, the U.S. Federal
Reserve held short-term interest rates steady.
o Overall, municipal securities (munis) performed favorably during the period.
Historically low issuance of new munis helped dampen market gyrations,
keeping prices relatively stable.
o Looking forward, despite some uncertainty about the strength of the U.S.
economy, munis have many factors working in their favor. Some of these
factors include the reduced likelihood of major tax reform and the
possibility for further reductions to the U.S. budget deficit.
Credit Overview
o Arizona's economy continued to expand during the second half of 1996, though
at a slower pace than in recent years.
o As the state's population continued to rise, its overall unemployment rate
edged higher to 5.5% during September (slightly above the 5.2% national
average).
o Arizona's growing economy and demonstrated fiscal soundness continued to
contribute to an improvement in the state's credit quality.
o Based upon Arizona's history of conservative fiscal management and our
expectation that the state's strong fundamentals will continue, our outlook
for Arizona is optimistic.
Intermediate-Term Municipal
o The fund posted a 4.79% total return for the six-month period ended November
30, 1996 (slightly higher than the fund's peer group average).
o We kept the fund's duration within a narrow range of 5.2-5.4 years during the
period to help limit unwanted volatility in the fund's returns.
o Barring a significant change in the economic outlook, we will likely maintain
the fund's neutral stance going forward, making selective adjustments as
conditions warrant.
Arizona Intermediate-Term Municipal
Total Returns:AS OF 11/30/96
6 Months 4.79%*
1 Year 4.91%
Net Assets:$27.4 million
(AS OF 11/30/96)
Inception Date: 4/11/94
Ticker Symbol: BEAMX
* Not annualized.
Semiannual Report Report Highlights 1
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
The six months ended November 30, 1996, were eventful, both in the U.S. bond
market and at our company. After a rocky period in the first half of 1996, bonds
stabilized during the summer and enjoyed a rebound in October and November. In
the following pages, our investment management team provides further details
about the market and how your fund was managed during the period.
Changing market conditions underscore the importance of quality investments.
Our commitment to quality securities is exemplified by our municipal credit
research team. The three members of the team carry out in-depth analysis on all
securities considered for purchase by American Century municipal money market
and bond funds. The team recently established a new credit management system
that defines investment limits to cap our funds' exposure to individual issuers,
sectors or regions.
On the corporate front, we completed the operational integration of Twentieth
Century and The Benham Group in September. 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 as 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 Arizona
Intermediate-Term Municipal fund will remain in the Benham Group, reflecting its
continued adherence to the fixed-income investment approach that we have
employed for years.
This report is the first in 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
James E. Stowers III
President and Chief Executive Officer
American Century Companies
/s/James M. Benham
James M. Benham
Vice Chairman
American Century Companies
2 Our Message to You American Century Investments
PERIOD OVERVIEW
U.S. Economy
During the six months ended November 30, 1996, the U.S. economy continued to
rebound from slow growth during 1995 and early 1996. An improving retail sector,
surging auto sales and a resilient housing market helped the economy expand at
an impressive 4.7% annual rate in the second quarter of 1996. The economy
remained strong throughout the summer as healthy employment growth sent the
national unemployment rate to a six-year low of 5.1% by August. However, this
trend appeared to reverse itself late in the period-- third-quarter economic
growth slowed to a more sedate 2.1% annual pace.
In spite of the second-quarter surge in growth, inflation remained tame. From
the start of 1996 through November, inflation (as measured by the consumer price
index) grew at an annual rate of 3.3%. In light of this lack of inflationary
pressure, the Fed held short-term interest rates steady throughout the six-month
period.
[line graph - data described below]
U.S. Municipal Bond Market
Overall, the six-month period ended November 30, 1996, was a favorable one
for municipal bonds (munis). The accompanying muni yield curve graph depicts how
the muni yield curve shifted lower throughout the period. Although munis traded
listlessly throughout the summer, reflecting the market's uncertainty about the
strength of the U.S. economy, munis outperformed Treasury securities (Treasurys)
between mid-June and late August. By late September, the outlook for munis began
to change. Continued signs of low inflation, stable monetary policy, and
expectations of a status quo election year ignited a substantial market rebound,
which continued through October and November. As is often the case when interest
rates are falling rapidly, munis underperformed Treasurys.
Muni yields declined significantly during the six-month period. Yields on
shorter-term munis fell more than 30 basis points, while yields on longer-term
munis dropped by about 50 basis points.
Historically low issuance of new munis, especially among shorter-maturity
securities, continued to support muni prices. While 1996 muni issuance through
November was slightly higher than 1995 levels, the limited supply helped dampen
market volatility and keep prices relatively stable. Although some muni
refunding activity occurred when interest rates fell late in the period, the
refundings had little impact on bond prices.
Looking forward, more recent data has provided enough conflicting evidence to
cause considerable uncertainty about the rate of U.S. economic growth. Despite
this concern, there are many positive factors working in munis' favor. One is
muni issuance, which should remain at historically low levels in the near term.
Barring a significant decrease in interest rates, muni refundings should also
remain tame. In addition, the reduced likelihood of major tax reform and the
possibility for further reductions to the budget deficit improve the outlook for
munis.
[line graph data]
Municipal Yield Curve
Years 11/29/96 8/26/96 6/14/96
1 3.46% 3.8% 3.76%
2 3.76 4.05 4.25
3 3.96 4.25 4.47
4 4.08 4.4 4.62
5 4.18 4.5 4.74
6 4.28 4.6 4.84
7 4.38 4.7 4.94
8 4.48 4.8 5.04
9 4.58 4.9 5.14
10 4.68 5 5.24
11 4.768 5.082 5.33
12 4.856 5.164 5.42
13 4.944 5.246 5.51
14 5.032 5.328 5.6
15 5.12 5.41 5.69
16 5.148 5.444 5.724
17 5.176 5.478 5.758
18 5.204 5.512 5.792
19 5.232 5.546 5.826
20 5.26 5.58 5.86
21 5.268 5.588 5.868
22 5.276 5.596 5.876
23 5.284 5.604 5.884
24 5.292 5.612 5.892
25 5.3 5.62 5.9
26 5.304 5.624 5.904
27 5.308 5.628 5.908
28 5.312 5.632 5.912
29 5.316 5.636 5.916
30 5.32 5.64 5.92
Investment terms are defined in the Glossary on page 21.
Semiannual Report Period Overview 3
ARIZONA MUNICIPAL CREDIT OVERVIEW
Arizona's economy continued to expand during the second half of 1996, though
at a slower pace than in recent years. Overall, the state's unemployment rate
edged higher to 5.5% during September, slightly above the 5.2% national average.
However, labor markets remain tight in the Phoenix and Tucson areas, where the
unemployment rate as of August was 3.7% and 3.6%, respectively.
The state continued to experience significant population growth in 1996
following a 1995 increase of 3.5%, the second-largest increase in percentage
terms in the nation. Arizona's metropolitan areas posted population and per
capita personal income growth second only to Las Vegas. Arizona residents saw
their personal incomes expand at a 7.3% annual rate between 1990 and 1995,
behind only Utah and Nevada.
The combination of strong economic activity and population growth is buoying
the state's construction sector. Total building permit issuance continued to
climb during 1996. Though permit issuance remains at a high annual level,
residential building permits have actually tapered off (see the accompanying
graph for trends in residential building permit issuance). Commercial
construction is forging ahead, however, and should support the state's
construction sector for the near future.
[line graph - data described below]
International trade and tourism also proved to be strong components of the
economy. The state attracted roughly 20 million visitors through September 1996,
consistent with 1995's total of 25 million. Arizona also benefited from an
increase in cross-border trade with Mexico as a result of the North American
Free Trade Agreement (NAFTA).
Arizona's positive economic environment translated into a 7% increase in
aggregate retail sales in 1996 over 1995 levels. The steady rise in taxable
sales indicated by the accompanying graph has been good for the state's
budget--general fund revenues are also up almost 5% on a year-over-year basis in
fiscal 1996.
The state's growing economy and demonstrated fiscal soundness continue to
contribute to an improvement in Arizona credit quality. Credit trends have shown
improvement in the metropolitan areas of Phoenix and Tucson. We continue to
anticipate an improvement in credit ratings for Maricopa County, a primary
component of the state's economy that appears to have worked through the
problems of the early 1990s.
Looking forward, we have a positive view of Arizona municipal credit quality
based on the state's history of conservative fiscal management and our
expectation that the state's strong economic fundamentals will continue.
However, Arizona's rapid economic and population growth will likely result in
the need for large capital outlays. The state's burgeoning population is
straining infrastructure, particularly affecting Arizona's schools. Future
credit quality will depend to a large extent on the state's and localities'
ability to manage capital plans and debt issuance.
[line graph data]
Arizona Retail Sales and Residential Building Permits
Retail Sales (left scale, in billions of $)
1986 87.47
1987 93.06
1988 98.35
1989 97.18
1990 102.26
1991 101.85
1992 110.69
1993 115.61
1994 128.79
1995 130.07
Residential building permits (right scale, in thousands of units)
1986 60.43
1987 39.64
1988 32.53
1989 23.32
1990 22.88
1991 23.42
1992 31.37
1993 38.38
1994 51.02
1995 52.65
Source: DRI/McGraw Hill
4 Arizona Municipal Credit Review American Century Investments
<TABLE>
<CAPTION>
ARIZONA INTERMEDIATE-TERM MUNICIPAL
30-DAY 30-DAY TAX-EQUIVALENT YIELDS
SEC 31.02% 33.90% 34.59% 39.33%
YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
CURRENT YIELD (as of November 30, 1996)
<S> <C> <C> <C> <C> <C>
Arizona Intermediate-Term Municipal 3.97% 5.76% 6.01% 6.07% 6.54%
6 MONTHS(2) 1 YEAR LIFE OF FUND(3)
AVERAGE ANNUAL RETURNS (as of November 30, 1996)(1)
Arizona Intermediate-Term Municipal ................................ 4.79% 4.91% 6.95%
Lehman 5-Year General Obligation Index(4) .......................... 4.74% 5.37% 6.57%
Average Other States Intermediate Municipal Fund(5) ................ 4.76% 4.29% 6.18%
Fund's Ranking Among Other States Intermediate Municipal Funds(6) .. -- 10 out of 67 1 out of 52
(1) Returns are defined in the Glossary on page 21.
(2) Not annualized.
(3) From 4/30/94 to 11/30/96. (Inception date was April 11, 1994.)
(4) See page 20 for more information about this comparative index.
(5) According to Lipper Analytical Services. See page 20 for more information about Lipper and the fund's category.
(6) Rankings determined by Lipper based on average annual returns for the periods indicated.
</TABLE>
[line graph - data below]
Growth of $10,000 Over the Life of the Fund
Arizona Intermediate-Term Leman 5-Year GO
4/30/94 $10000 $10000
5/31/94 10092 10056
6/30/94 10064 10033
7/31/94 10234 10142
8/31/94 10280 10191
9/30/94 10202 10114
10/31/94 10083 10058
11/30/94 9973 9993
12/31/94 10098 10081
1/31/95 10268 10178
2/28/95 10443 10326
3/31/95 10562 10490
4/30/95 10625 10518
5/31/95 10852 10749
6/30/95 10855 10757
7/31/95 10985 10908
8/31/95 11085 11018
9/30/95 11130 11051
10/31/95 11233 11097
11/30/95 11343 11192
12/31/95 11426 11253
1/31/96 11574 11387
2/29/96 11541 11349
3/31/96 11365 11288
4/30/96 11378 11271
5/31/96 11357 11258
6/30/96 11428 11338
7/31/96 11540 11413
8/31/96 11539 11436
9/30/96 11614 11522
10/31/96 11724 11629
11/30/96 11899 11791
Value on 11/30/96
Arizona Intermediate-Term $11,899
Lehman 5-Year GO $11,791
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 chart begins on 4/30/94 because it is the date closest to the
fund's 4/11/94 inception date for which index return data is available. 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
11/30/96 5/31/96
Number of Issues 35 34
Average Duration 5.42 years 5.42 years
Weighted Average Maturity 7.53 years 7.12 years
Expense Ratio 0.66%* 0.50%
* Annualized.
See the Glossary on page 21.
Semiannual Report Arizona Intermediate-Term Municipal 5
ARIZONA INTERMEDIATE-TERM MUNICIPAL
Management Q & A
An interview with Colleen Denzler, Senior Municipal Portfolio Manager.
How did the Fund perform?
The fund performed slightly above average compared with its peers. For the
six-month period ended November 30, 1996, the fund's total return was 4.79%,
compared with the 4.76% average return of the 67 "Other States Intermediate
Municipal Debt Funds" tracked by Lipper Analytical Services. From a one-year
perspective, the fund's performance was even stronger, allowing it to place in
the top 15% of its peers. However, please keep in mind that a portion of the
fund's expenses were absorbed by Benham Management Corporation during the period
and that the rankings listed would have been lower if the fund's returns had
been reduced by those expenses.+
How did you position the fund during the period?
With the possibility of a short-term interest rate hike by the Federal
Reserve a palpable concern during much of the period, we kept the fund's
duration within a narrow range of 5.2-5.4 years, roughly neutral compared to the
fund's peers. In addition to this neutral stance, we maintained a bias toward a
ladder portfolio structure, thereby spreading the securities in the fund across
the bond-maturity spectrum.
Was this neutral positioning the main reason why the fund's six-month
performance was about average?
Yes. We tend to avoid making interest rate bets that can cause unwanted
volatility in the fund's returns. Rather than looking to add incremental return
through aggressive duration management as some of our competitors choose to do,
we look to add value to the fund's returns by searching for what we believe are
undervalued securities with the potential to appreciate.
Was the municipal credit research team instrumental in locating these
undervalued securities?
That's correct. Our strong credit research staff continued to make many
accurate assessments of specific credit situations in Arizona. The credit team's
diligent efforts led to the purchase of many undervalued securities that
subsequently appreciated in value.
[bar graph - data below]
ARIZONA INTERMEDIATE-TERM MUNICIPAL
FISCAL YEAR-BY-YEAR RETURNS (Years ended May 31)
Arizona Intermediate-Term Municipal Lehman 5-Year GO
1994* 0.92% 0.56%
1995 7.52% 6.89%
1996 4.65% 4.74%
*From 4/29/94 to 5/31/94.
This chart illustrates the historical year-by-year volatility of the fund's
return. The fund's total returns for the 1996 fiscal year include operating
expenses, while the comparative index's returns do not. See page 20 for a
definition of the fund's comparative index.
+ Benham Management Corporation absorbed the fund's expenses through December
31, 1995. As of January 1, 1996, the fund began absorbing expenses at a rate
of an additional .10% of average daily net assets each month and continued
until the fund reached its contractual expense cap of .67% in July 1996.
6 Arizona Intermediate-Term Municipal American Century Investments
ARIZONA INTERMEDIATE-TERM MUNICIPAL
Each January, the fund receives a notable jump in cash inflows. Is there any
particular reason why this occurs?
Many of the Arizona munis in the fund's portfolio make their semiannual
interest payments in January and July, thereby increasing the cash coming into
the fund during these months. Although Arizona in particular issues more munis
that pay coupons on a January/July cycle than many states, nearly 30% of all
outstanding munis pay coupons on this cycle.
What steps do you usually take to prepare for this event?
One of our main goals prior to January of every year is to significantly
reduce the fund's cash holdings. In January, as the coupon payments begin
flowing into the fund, our cash supplies have been replenished. Since many
Arizona muni investors reinvest their interest payments in the muni market,
demand for Arizona munis increases during January, often driving prices higher
for a brief period of time. Therefore, instead of immediately using the money to
buy munis at inflated prices, we wait until some of the seasonal demand
subsides, putting the cash inflows to better use.
What are your plans for the fund going forward?
Recently, economic evidence concerning the state of the U.S. economy has been
mixed, and concern over rising interest rates is again evident in the
marketplace. As a result, we will likely maintain the fund's neutral stance,
lengthening or shortening the fund's average maturity and duration in a narrow
range around this position when appropriate. If the economic outlook does change
significantly, we believe the fund is positioned to respond quickly. In
addition, we will continue to utilize our strong credit research team to search
for securities with undervalued credit ratings that we believe have the
potential to appreciate in value.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/96)
Revenue 41%
GO 34%
COP 12%
Prerefunded 11%
Other 2%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/96)
GO 42%
Revenue 34%
Prerefunded 7%
Other 17%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/96)
AAA 65%
AA 24%
A 5%
BBB 6%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/96)
AAA 59%
AA 31%
A 4%
BBB 6%
Investment terms are defined in the Glossary on page 21.
Semiannual Report Arizona Intermediate-Term Municipal 7
SCHEDULE OF INVESTMENTS
ARIZONA INTERMEDIATE-TERM MUNICIPAL
NOVEMBER 30, 1996 (UNAUDITED)
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS
ARIZONA--89.1%
$ 1,000 Arizona State Transportation Board
Highway Rev., 5.25%, 7-1-09 $1,032
1,000 Arizona Transportation Board
Excise Tax Rev., 7.00%, 7-1-99,
Prerefunded at 102% of Par (MBIA)(1) 1,090
500 City of Mesa Utility Systems Rev., 6.25%,
7-1-04 (FGIC) 555
900 Coconino-Yavapai County's Sedona
Unified School District No. 9 GO,
5.60%, 7-1-06 (FGIC) 947
545 Gilbert County GO, Series 1994 C,
6.00%, 7-1-02 (MBIA) 590
500 Maricopa County GO, 6.25%, 7-1-03
(FGIC) 552
500 Maricopa County Industrial Development
Auth. Hospital Facility Rev., (Samaritan
Health Services), 7.15%, 12-1-04
(FGIC) 581
1,000 Maricopa County Public Financing
Corporation COP, Series 1994,
5.625%, 6-1-00 1,028
500 Maricopa County Unified School District
No. 4 Mesa GO, 5.20%, 7-1-06
(FGIC) 520
500 Maricopa County Unified School District
No. 6 Washington Elementary,
Series A, 6.75%, 7-1-03 (AMBAC) 566
500 Maricopa County Unified School District
No. 40 Glendale, 5.70%, 7-1-04 (FSA) 537
1,000 Maricopa County Unified School District
No. 41 Gilbert GO, Series 1988 F,
6.20%, 7-1-02, Prerefunded at Par
(FGIC)(1) 1,089
600 Maricopa County Unified School District
No. 48 Scottsdale GO, 5.00%, 7-1-09 601
1,000 Maricopa County Unified School District
No. 97 Deer Valley GO, Series A,
6.25%, 7-1-06 (MBIA) 1,109
300 Phoenix Airport Rev., Series 1994 C,
5.50%, 7-1-01 (MBIA) 313
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
635 Phoenix Civic Improvement Corp.
Wastewater Rev., 6.125%, 7-1-03,
Prerefunded at 102% of Par(1) $ 704
1,000 Phoenix Civic Improvement Corp.
Wastewater Rev., 4.85%,
7-1-07 (MBIA) 997
500 Phoenix Civic Improvement Corp.
Water Systems Rev., 6.00%,
7-1-02 538
550 Phoenix GO, Series 1992, 6.00%,
7-1-01 591
350 Phoenix Street and Highway Rev.,
Series 1992, 6.25%, 7-1-06 381
500 Phoenix Street and Highway Rev.,
Series 1992, 5.95%, 7-1-00 529
1,000 Pima County Sewer Rev., Series 1991,
6.20%, 7-1-00 (FGIC) 1,068
1,000 Pima County Unified School District
No. 10, Amphitheater GO, 7.00%,
7-1-05 (MBIA) 1,167
915 Pinal County Unified School District
No. 43 Apache Junction GO,
Series A, 6.80%, 7-1-08 (FGIC) 1,068
1,000 Salt River Project Agricultural
Improvement and Power District,
Series B, 6.50%, 1-1-04 1,118
800 Salt River Project Agricultural
Improvement and Power District,
Series A, 5.75%, 1-1-07 862
480 Scottsdale GO, Series 1994,
7.50%, 7-1-02 555
1,275 Tempe GO, 6.25%, 7-1-05 1,426
200 Tucson Street and Highway Rev.,
4.50%, 7-1-98 202
1,000 Tucson Street and Highway Rev.,
Series 1992, 5.70%, 7-1-01 1,056
500 Yavapai County Camp Verde Unified
School District No. 28 GO,
Series 1995, 6.10%, 7-1-04 (FGIC) 551
------
23,923
------
GUAM--1.9%
500 Guam Power Auth. Rev., Series 1994 A,
5.20%, 10-1-97 506
------
See Notes to Financial Statements
8 Arizona Intermediate-Term Municipal American Century Investments
SCHEDULE OF INVESTMENTS
ARIZONA INTERMEDIATE-TERM MUNICIPAL
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
PUERTO RICO--9.0%
1,000 Puerto Rico Electric Power Auth.,
Series 1995 W Rev.,
6.00%, 7-1-03 (MBIA) $ 1,094
1,000 Puerto Rico Public Building Auth. Rev.,
Series A, 6.25%, 7-1-08 (AMBAC) 1,127
200 Puerto Rico Public Education and Health
Rev., 7.60%, 7-1-97, Prerefunded at
102% of Par (FGIC)(1) 209
-----
2,430
-----
TOTAL INVESTMENT SECURITIES--100.0% $26,859(2)
(Cost $25,918) =========
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
COP = Certificate of Participation
FGIC = Financial Guaranty Insurance Company
FSA = Financial Security Association
GO = General Obligation
MBIA = Municipal Bond Insurance Association
(1) Escrowed in U.S. Government Securities.
(2) The Fund had 1.2% invested in private activity municipal securities. The
interest from these securities is treated as a tax preference item in
calculating federal alternative minimum tax liability.
See Notes to Financial Statements
Semiannual Report Arizona Intermediate-Term Municipal 9
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 (UNAUDITED)
ASSETS $ In Thousands
Investment securities, at value (identified cost of $25,918) ..... $ 26,859
Interest receivable .............................................. 683
Prepaid expenses and other assets ................................ 3
-----------
27,545
-----------
LIABILITIES
Disbursements in excess of demand deposit cash ................... 83
Payable for shares redeemed ...................................... 19
Dividends payable ................................................ 3
Payable to affiliates (Note 2) ................................... 15
-----------
120
-----------
Net Assets Applicable to Outstanding Shares ...................... $ 27,425
===========
CAPITAL SHARES, $10.00 PAR VALUE
Outstanding (Unlimited number of shares authorized)
(in thousands) ................................................. 2,595
=====
Net Asset Value Per Share ........................................ $ 10.57
===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .......................... $ 26,490
Accumulated net realized (loss) on investment transactions ....... (6)
Net unrealized appreciation on investments (Note 3) .............. 941
-----------
$ 27,425
===========
See Notes to Financial Statements
10 Statement of Assets and Liabilities American Century Investments
STATEMENT OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED)
INVESTMENT INCOME $ In Thousands
Income:
Interest ..................................................... $ 668
-----------
Expenses (Note 2):
Investment advisory fees ..................................... 57
Administrative fees .......................................... 13
Transfer agency fees ......................................... 10
Printing and postage ......................................... 7
Auditing and legal fees ...................................... 5
Custodian fees ............................................... 4
Registration and filing fees ................................. 4
Directors' fees and expenses ................................. 1
Other operating expenses ..................................... 6
--
Total expenses ............................................. 107
Amount waived (Note 2) ....................................... (20)
Custodian earnings credits (Note 4) .......................... (1)
--
Net expenses ............................................... 86
--
Net investment income ........................................ 582
---
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (Note 3)
Net realized gain on investments ............................. 7
Change in net unrealized appreciation on investments ......... 635
---
Net realized and unrealized
gain on investments .......................................... 642
---
Net Increase in Net Assets
Resulting from Operations .................................... $ 1,224
===========
See Notes to Financial Statements
Semiannual Report Statement of Operations 11
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED) AND
YEAR ENDED MAY 31, 1996
November 30, May 31,
Increase in Net Assets 1996 1996
OPERATIONS $ In Thousands
<S> <C> <C>
Net investment income ............................................................ $ 582 $ 1,131
Net realized gain on investment transactions ..................................... 7 88
Change in net unrealized appreciation (depreciation) on investments .............. 635 (277)
--- ----
Net increase in net assets resulting from operations ............................. 1,224 942
----- ---
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ....................................................... (582) (1,130)
From net realized gains from investment transactions ............................. -- (13)
---- ------
Decrease in net assets from distributions ........................................ (582) (1,143)
---- ------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................................ 4,414 11,716
Proceeds from reinvestment of distributions ...................................... 446 885
Payments for shares redeemed ..................................................... (3,866) (6,389)
------ ------
Net increase in net assets from capital share transactions ....................... 994 6,212
--- -----
Net increase in net assets ....................................................... 1,636 6,011
NET ASSETS
Beginning of period .............................................................. 25,789 19,778
------ ------
End of period .................................................................... $ 27,425 $ 25,789
============ ===========
TRANSACTIONS IN SHARES OF THE FUND: (In thousands)
Sold ............................................................................. 425 1,117
Issued in reinvestment of distributions .......................................... 43 85
Redeemed ......................................................................... (373) (612)
---- ----
Net increase ..................................................................... 95 590
============ ===========
</TABLE>
See Notes to Financial Statements
12 Statements of Changes in Net Assets American Century Investments
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization--American Century Municipal Trust (the Trust) is registered
under the Investment Company Act of 1940 as an open-end management investment
company. American Century--Benham Arizona Intermediate-Term Municipal Fund (the
Fund) is one of the eight Funds composing the Trust. The Fund is non-diversified
under the 1940 Act. The objective of the Fund is to seek as high a level of
current income exempt from federal income taxes as is consistent with prudent
investment management and conservation of shareholders' capital. The fund
invests primarily in intermediate-term municipal obligations and maintains a
weighted average maturity from five to ten years. The Fund concentrates its
investments in a single state and therefore may have more exposure to credit
risk related to the state of Arizona than a fund with a broader geographical
diversification. The following significant accounting policies related to the
Fund 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.
Security 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 Fund's 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. Distributions from net realized gains
are declared and paid annually.
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 due to differences in the recognition of income and
expense items for financial reporting and tax purposes.
Supplementary Information--Certain officers and directors 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).
Futures Contracts--The Fund may buy and sell interest rate futures contracts
relating to debt securities and write and buy put and call options relating to
interest rate futures contracts. The Fund may use futures and option
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.
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 13
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (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 the 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.
.50% of the first $100 million
.45% of the next $100 million
.40% of the next $100 million
.35% of the next $100 million
.30% of the next $100 million
.25% of the next $1 billion
.24% of the next $1 billion
.23% of the next $1 billion
.22% of the next $1 billion
.21% of the next $1 billion
.20% of the next $1 billion
.19% of 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 Fund. Fees for these services
are based on transaction volume, number of accounts and the average daily
closing net assets of all 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
expenses such as brokerage commissions, taxes, interest, custodian earnings
credits, and extraordinary expenses) to .67% 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. BMC voluntarily
agreed to absorb all expenses for the Fund through December 31, 1995. Beginning
January 1, 1996, the Fund added expenses at a rate of .10% of average daily
closing net assets per month until the Fund reached the contractual expense rate
of .67%.
The payable to affiliates as of November 30, 1996, based on the above
agreements, was as follows:
Investment Advisor ......................... $10,116
Administrative Services .................... 3,729
Transfer Agent ............................. 737
-------
$14,582
========
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 purchased and proceeds from
sales (excluding short-term investments) for the six months ended November 30,
1996, for the Fund totaled $10,306,297 and $8,903,542, respectively.
As of November 30, 1996, accumulated net unrealized appreciation was
$940,919, consisting of unrealized appreciation of $940,919, and unrealized
depreciation of $0. The aggregate cost of investments for federal income tax
purposes was the same as the cost for financial reporting purposes.
14 Notes to Financial Statements American Century Investments
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
4. Expense Offset Arrangements
The Fund's Statement of Operations reflects custodian earnings credits. This
amount is used to offset the custody fees payable by the Fund to the custodian
bank. The credits are earned when the Fund maintains a balance of uninvested
cash at the custodian bank. Beginning with the year ended May 31, 1996, the
ratio of operating expenses to average net assets shown in the Financial
Highlights is calculated as if these credits had not been earned.
- --------------------------------------------------------------------------------
5. Subsequent Events
The following name changes became effective January 1, 1997:
<TABLE>
NEW NAMES FORMER NAMES
<S> <C> <C>
Fund's Issuer: American Century Municipal Trust Benham Municipal Trust
Fund: American Century - Benham Arizona Benham Arizona Municipal Intermediate-Term Fund
Intermediate-Term Municipal 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 15
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARIZONA INTERMEDIATE-TERM MUNICIPAL
For a Share Outstanding Throughout the Years ended May 31 (except as noted)
1996(1) 1996 1995 1994(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C>
Beginning of Period ........................................... $ 10.31 $ 10.35 $ 10.13 $ 10.00
Income from Investment Operations
Net Investment Income ....................................... .23 .51 .51 .07
Net Realized and Unrealized Gain (Loss) on Investments ...... .26 (.03) .22 .13
--- ---- --- ---
Total from Investment Operations ............................ .49 .48 .73 .20
--- --- --- ---
Distributions
From Net Investment Income .................................. (.23) (.51) (.51) (.07)
From Net Realized Gains on Investment Transactions .......... -- (.01) -- --
---- ---- ---- ----
Total Distributions ......................................... (.23) (.52) (.51) (.07)
---- ---- ---- ----
Net Asset Value, End of Period ................................ $ 10.57 $ 10.31 $ 10.35 $ 10.13
============= ============= ============= ============
Total Return(3) ............................................. 4.79% 4.65% 7.52% 1.99%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(4) ........ .66%(5) .14% -- --
Ratio of Operating Expenses to Average
Net Assets (Before Reimbursement)(4) ..................... .81%(5) .82% 1.01% 2.33%(5)
Ratio of Net Investment Income
to Average Net Assets(4) ................................. 4.38%(5) 4.85% 5.16% 5.08%(5)
Ratio of Net Investment Income to Average
Net Assets (Before Reimbursement)(4) ..................... 4.23%(5) 4.17% 4.15% 2.75%(5)
Portfolio Turnover Rate ..................................... 34.58% 35.78% 33.22% 18.14%
Net Assets, End of Period (in thousands) .................... $ 27,425 $ 25,789 $ 19,778 $ 7,187
(1) Six months ended November 30, 1996.
(2) From April 11, 1994 (commencement of operations) through May 31, 1994.
(3) Total return assumes reinvestment of dividends and capital gain distributions, if any. Total returns for periods less than one
year are not annualized.
(4) The ratios for the periods subsequent to May 31, 1995, include expenses paid through expense offset arrangements.
(5) Annualized.
</TABLE>
See Notes to Financial Statements
16 Financial Highlights American Century Investments
NOTES
Semiannual Report Notes 17
NOTES
18 Notes American Century Investments
NOTES
Semiannual Report Notes 19
BACKGROUND INFORMATION
Investment Objectives & Policies
American Century Investments offers 41 fixed-income funds, ranging from money
market funds to long-term bond funds and including both taxable and tax-exempt
funds.
Arizona Intermediate-Term Municipal
Arizona Intermediate-Term Municipal, which was established on April 11, 1994,
seeks to obtain as high a level of current income exempt from Arizona and
regular federal income tax as is consistent with prudent investment management
and conservation of shareholders' capital. The fund invests primarily in
intermediate-term Arizona municipal obligations with maturities of four or more
years and maintains a weighted average portfolio maturity of five to ten years.
The fund will invest at least 65% of its net assets in Arizona municipal
obligations. The remaining 35% of net assets may be invested in (1) obligations
issued by other states and their political subdivisions, (2) obligations issued
by U.S. territories or possessions such as Puerto Rico, and (3) U.S. government
securities.
Comparative Indices
The index listed below is used in the report to serve as a comparison for the
performance of a fund. It is not an investment product available for purchase.
The Lehman 5-Year Municipal General Obligation Index is a municipal bond
index composed of more than 11,000 bonds with maturities of four to six years.
The bonds are rated BBB or higher by Standard & Poor's, with an average rating
of AA. The average maturity of the index is five years.
Lipper Rankings
Lipper Analytical Services, Inc. is an independent mutual fund ranking
service. Rankings are based on average annual total returns for each fund in a
given category for the periods indicated. Rankings are not included for periods
less than one year.
The Lipper Other States Intermediate Municipal Debt Funds Index invests in
municipal debt issues with dollar-weighted average maturities of 5 to 10 years
and which are exempt from taxation on a specified city or state basis.
PORTFOLIO MANAGEMENT TEAM
Senior Municipal Portfolio Manager Colleen Denzler
Municipal Credit Research Manager Steven Permut
Credit Analysts Scott Lord, Bill McClintock
20 Background Information American Century Investments
GLOSSARY
Returns
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.
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.
Bond Portfolio Structures
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 the yield curve is moving from steep to
flat (short-term rates are rising faster than long-term rates, or long-term
rates are falling faster than short-term rates.)
Bullet Structure--a structure that clusters a portfolio's bond maturities
around a single maturity (usually an intermediate-term maturity). This structure
tends to perform best when the yield curve is moving from flat to steep
(long-term rates are rising faster than short-term rates, or short-term rates
are falling faster than long-term rates).
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, and it provides a regular schedule of maturing
securities.
Investment Terms
Basis Point--a basis point equals one one-hundredth of a percentage point (or
0.01%). Therefore, 100 basis points equals one percentage point (or 1%).
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.
Most "normal" yield curves start in the lower left corner of the graph and rise
to the upper right corner, indicating that yields rise as maturities lengthen.
This upward sloping yield curve illustrates a normal risk/return
relationship--more return (yield) for more risk (a longer maturity). Conversely,
a "flat" yield curve provides little or no extra return for taking on more risk.
Statistical Terminology
Market Value--the market value of a fund's investments on a given date.
Number of Issues--the number of different securities issuances held by a fund
on a given date.
Weighted Average Maturity--measures the average amount of time until the
securities in a bond portfolio mature, weighted by dollar amount.
Average Duration--measures the interest rate sensitivity of a bond portfolio.
Average duration, measured in years, represents the approximate percentage
change in the value of a bond portfolio if interest rates move up or down by one
percentage point. Therefore, longer portfolio durations typically mean greater
sensitivity to changes in interest rates.
Types of Municipal Securities
Certificates of Participation (COP)--securities issued to finance public
property improvements (such as city halls and police stations).
General Obligation (GO) Bonds--securities backed by the taxing power of the
issuer.
Municipal Notes--securities with maturities of two years or less.
Prerefunded Bonds--securities refinanced 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.
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).
Yields
30-Day SEC Yield represents net investment income earned by the fund over a
30-day period, expressed as an annualized 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 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.
Semiannual Report Glossary 21
[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 Municipal Trust
Investment Manager
Benham Management Corporation
Mountain View, California
This report and the financial statements contained herein 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.
9701 [recycle logo]
SH-BKT-6150 Recycled
[Book Two]
SEMIANNUAL REPORT
NOVEMBER 30, 1996
[american century logo]
American
Century(sm)
BENHAM
GROUP
Florida Municipal Money Market
Florida Intermediate-Term Municipal
[front cover]
TABLE OF CONTENTS
Report Highlights ..................................1
Our Message to You .................................2
Period Overview ....................................3
Florida Municipal Credit Overview ..................4
Florida Municipal Money Market
Performance Information .......................5
Management Q & A ..............................6
Schedule of Investments .......................8
Financial Highlights .........................22
Florida Intermediate-Term Municipal
Performance Information ......................11
Management Q & A .............................12
Schedule of Investments ......................14
Financial Highlights .........................23
Statements of Assets and Liabilities ..............16
Statements of Operations ..........................17
Statements of Changes in Net Assets ...............18
Notes to Financial Statements .....................19
Background Information
Investment Objectives & Policies .............24
Comparative Indices ..........................24
Lipper Rankings ..............................24
Glossary ..........................................25
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, American Century funds have
been divided 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 GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Florida Municipal
Money Market
Florida Intermediate-Term
Municipal
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 modest, non-inflationary pace during the
twelve months ended November 30, 1996. As a result, the U.S. Federal Reserve
has held short-term interest rates steady since February 1996.
o Municipal securities (munis) performed favorably during the six months ended
November 30, 1996. Low issuance supported munis by damping market volatility
and keeping bond prices relatively stable.
Credit Review
o Florida's economy saw steady expansion through 1996. Population growth
continued at a rapid pace.
o Unemployment in the state fell to 5.1% in October (lower than the national
rate of 5.2%).
o A rapidly growing population has increased the need for infrastructure
improvements. Large capital outlays will be needed to expand the state's
overcrowded school system.
o Our outlook for Florida's credit quality is optimistic. We expect to see
stable credit quality for the state over the next two to three years.
Municipal Money Market
o The fund outperformed its Lipper peer group average for the six months ended
November 30, 1996.
o Beginning January 1, 1997, management fees will be phased in at a rate of 10
basis points each month until the 61-basis-point expense cap is reached.
Intermediate-Term Municipal
o The fund slightly outperformed its Lipper peer group average for the six
months ended November 30, 1996.
o We extended the fund's duration near the end of the period to prepare for
heavier cash inflows typically seen in December.
o Going forward, barring a significant change in economic conditions, we will
likely maintain the fund's current neutral posture, adjusting its average
maturity as conditions warrant.
Municipal
Money Market
Total Returns:AS OF 11/30/96
6 Months 1.79%*
1 Year 3.69%
Net Assets:$142.7 million
(AS OF 11/30/96)
Inception Date: 4/11/94
Ticker Symbol: BEFXX
Intermediate-Term Municipal
Total Returns:AS OF 11/30/96
6 Months 4.59%*
1 Year 4.61%
Net Assets:$10.9 million
(AS OF 11/30/96)
Inception Date: 4/11/94
* Not annualized.
Semiannual Report Report Highlights 1
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
The six months ended November 30, 1996, were eventful, both in the U.S. bond
market and at our company. After a rocky period in the first half of 1996, bonds
stabilized during the summer and enjoyed a rebound in October and November. In
the following pages, our investment management team provides further details
about the market and how your fund was managed during the period.
Changing market conditions underscore the importance of quality investments.
Our commitment to quality securities is exemplified by our municipal credit
research team. The three members of the team carry out in-depth analysis on all
securities considered for purchase by American Century municipal money market
and bond funds. The team recently established a new credit management system
that defines investment limits to cap our funds' exposure to individual issuers,
sectors and regions.
On the corporate front, we completed the operational integration of Twentieth
Century and The Benham Group in September. 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 as 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 Florida Municipal
funds will remain in the Benham Group, reflecting their continued adherence to
the fixed-income investment approach that we have employed for years.
This report is the first in 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
James E. Stowers III
President and Chief Executive Officer
American Century Companies
/s/James M. Benham
James M. Benham
Vice Chairman
American Century Companies
2 Our Message To You American Century Investments
PERIOD OVERVIEW
U.S. Economy
During the six months ended November 30, 1996, the U.S. economy continued to
rebound from slow growth during 1995 and early 1996. An improving retail sector,
surging auto sales and a resilient housing market helped the economy expand at
an impressive 4.7% annual rate in the second quarter of 1996. The economy
remained strong throughout the summer as healthy employment growth sent the
national unemployment rate to a six-year low of 5.1% by August. However, this
trend appeared to reverse itself late in the period-- third-quarter economic
growth slowed to a more sedate 2.1% annual pace.
In spite of the second-quarter surge in growth, inflation remained tame. From
the start of 1996 through November, inflation (as measured by the consumer price
index) grew at an annual rate of 3.3%. In light of this lack of inflationary
pressure, the Fed held short-term interest rates steady throughout the six-month
period.
[line graph - data described below]
U.S. Municipal Bond Market
Overall, the six-month period ended November 30, 1996, was a favorable one
for municipal bonds (munis). The accompanying muni yield curve graph depicts how
the muni yield curve shifted lower throughout the period. Although munis traded
listlessly throughout the summer, reflecting the market's uncertainty about the
strength of the U.S. economy, munis outperformed Treasury securities (Treasurys)
between mid-June and late August. By late September, the outlook for munis began
to change. Continued signs of low inflation, stable monetary policy, and
expectations of a status quo election year ignited a substantial market rebound,
which continued through October and November. As is often the case when interest
rates are falling rapidly, munis underperformed Treasurys.
Muni yields declined significantly during the six-month period. Yields on
shorter-term munis fell more than 30 basis points, while yields on longer-term
munis dropped by about 50 basis points.
Historically low issuance of new munis, especially among shorter-maturity
securities, continued to support muni prices. While 1996 muni issuance through
November was slightly higher than 1995 levels, the limited supply helped dampen
market volatility and keep prices relatively stable. Although some muni
refunding activity occurred when interest rates fell late in the period, the
refundings had little impact on bond prices.
Looking forward, more recent data have provided enough conflicting evidence
to cause considerable uncertainty about the rate of U.S. economic growth.
Despite this concern, there are many positive factors working in munis' favor.
One is muni issuance, which should remain at historically low levels in the near
term. Barring a significant decrease in interest rates, muni refundings should
also remain tame. In addition, the reduced likelihood of major tax reform and
the possibility for further reductions to the budget deficit improve the outlook
for munis.
Investment terms are defined in the Glossary on page 25.
[line graph data]
Municipal Yield Curve
Years 11/29/96 8/26/96 6/14/96
1 3.46% 3.8% 3.76%
2 3.76 4.05 4.25
3 3.96 4.25 4.47
4 4.08 4.4 4.62
5 4.18 4.5 4.74
6 4.28 4.6 4.84
7 4.38 4.7 4.94
8 4.48 4.8 5.04
9 4.58 4.9 5.14
10 4.68 5 5.24
11 4.768 5.082 5.33
12 4.856 5.164 5.42
13 4.944 5.246 5.51
14 5.032 5.328 5.6
15 5.12 5.41 5.69
16 5.148 5.444 5.724
17 5.176 5.478 5.758
18 5.204 5.512 5.792
19 5.232 5.546 5.826
20 5.26 5.58 5.86
21 5.268 5.588 5.868
22 5.276 5.596 5.876
23 5.284 5.604 5.884
24 5.292 5.612 5.892
25 5.3 5.62 5.9
26 5.304 5.624 5.904
27 5.308 5.628 5.908
28 5.312 5.632 5.912
29 5.316 5.636 5.916
30 5.32 5.64 5.92
Semiannual Report Period Overview 3
FLORIDA MUNICIPAL CREDIT OVERVIEW
Florida's economy saw steady expansion as 1996 drew to a close. Population
growth continued at a rapid pace as migration into the state remained strong.
International trade and tourism continued to play pivotal roles in the state's
economic health. On the international trade side, the state is geographically
well-positioned to benefit from the growth of the emerging markets of the
Caribbean and Central and South America. The state's location also makes it a
popular tourist destination-- nearly 42.3 million tourists visited the state in
1996, a 1.3% increase over 1995. It is estimated that that figure will jump to
nearly 44 million in 1997.
Along with Georgia, Florida leads the southeastern United States in job
growth. In spite of a 30% increase in its prime working-age population over the
past 10 years, Florida's unemployment rate continues to trend downward (see the
accompanying graph). Between October 1995 and October 1996, the state's
unemployment rate fell from 5.6% to 5.1%--lower than the national rate of 5.2%.
In addition, per capita income in the state has risen almost 20% faster than in
the nation as a whole.
[line graph - data described below]
Though these factors have increased the state's tax revenues, Florida's
booming population has brought other problems, including the need for
significant infrastructure improvements. Overcrowding in Florida's public school
system--already one of the largest in the nation--is another issue that will
have to be addressed. Large capital outlays will be needed to prevent the system
from falling farther behind the needs of its approximately two million
school-aged children.
Running counter to these needs is a growing anti-tax sentiment, demonstrated
over the past few years by Florida voters' reluctance to approve new government
spending. As a result, many schools have had to revise their capital planning,
putting pressure on school districts' operating budgets.
Another problem facing the state is a budget crisis in Miami that could
potentially impact some of the city's $423 million in outstanding municipal bond
issues. However, since action is being taken at the city and state levels, we do
not anticipate that there will be any significant impact on Florida's overall
credit quality in the near term. The Benham Florida municipal funds have no
exposure to bonds issued by the city of Miami.
In spite of these negative factors, our outlook for the state's credit
quality is optimistic. The state and its municipalities follow generally
conservative fiscal practices, and we expect to see stable credit quality for
the state over the next two to three years.
[line graph data]
FLORIDA UNEMPLOYMENT RATE
3/31/93 7.1%
6/30/93 7%
9/30/93 6.9%
12/31/93 7%
3/31/94 6.9%
6/30/94 6.7%
9/30/94 6.4%
12/31/94 .9%
3/31/95 5.4%
6/30/95 5.5%
9/30/95 5.5%
12/31/95 5.4%
3/31/96 5.4%
6/30/96 5%
4 Florida Municipal Credit Overview American Century Investments
<TABLE>
<CAPTION>
FLORIDA MUNICIPAL MONEY MARKET
7-DAY 7-DAY 7-DAY TAX-EQUIVALENT YIELDS
CURRENT EFFECTIVE 28% 31% 36% 39.6%
YIELD YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
CURRENT YIELD (as of November 30, 1996)
<S> <C> <C> <C> <C> <C> <C>
Municipal Money Market 3.60% 3.67% 5.00% 5.22% 5.63% 5.96%
6 MONTHS(2) 1 YEAR LIFE OF FUND(3)
AVERAGE ANNUAL RETURNS (as of November 30, 1996)(1)
Municipal Money Market ............................................ 1.79% 3.69% 3.73%
Average States Tax-Exempt Money Market Fund(4) .................... 1.53% 3.15% 3.23%
Fund's Ranking Among States Tax-Exempt Money Market Funds(5) ...... -- 1 out of 29 1 out of 17
(1) Returns are defined in the Glossary on page 25.
(2) Not annualized.
(3) Data shown is for the period from 4/30/94 to 11/30/96. The fund's inception date was April 11, 1994.
(4) According to Lipper Analytical Services. See page 24 for more information about Lipper and the fund's category.
(5) Rankings determined by Lipper based on average annual returns for the periods indicated.
</TABLE>
PORTFOLIO AT A GLANCE
11/30/96 5/31/96
Number of Issues 63 55
Weighted Average Maturity 40 days 50 days
Expense Ratio 0%* 0%*
* Until December 31, 1996, the fund's management fees were waived by Benham
Management Corporation (BMC). Beginning January 1, 1997, management fees will be
phased in at a rate of 10 basis points each month until the 61-basis-point
expense cap is reached.
See the Glossary on page 25.
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.
Semiannual Report Florida Municipal Money Market 5
FLORIDA MUNICIPAL MONEY MARKET
Management Q & A
An interview with Bryan Karcher, municipal portfolio manager.
How did the fund perform?
The fund continued to outperform its peers, returning 1.79% for the six
months ended November 30, 1996, compared to the 1.53% average return for the 32
"States Tax-Exempt Money Market Funds" tracked by Lipper Analytical Services.
For the fiscal year ended November 30, 1996, the fund ranked #1 in its Lipper
category.
Shareholders benefited from the fact that the fund's operating expenses were
absorbed and its management fees waived by Benham Management Corporation (BMC).
The absence of these fees helped the fund achieve its #1 Lipper ranking. If you
subtract the fund's expense cap of 61 basis points from its November 30 one-year
return of 3.69%, the resulting 3.08% return remains competitive, though slightly
lower than the 3.15% average return reported for its Lipper category.
How much longer will BMC continue to absorb the fund's expenses?
Until December 31, 1996 (not January 31, 1997, as stated in the fund's May
31, 1996 Annual Report). On January 1, 1997 the fund will begin to absorb
expenses at a rate of an additional 10 basis points each month. This will
continue until the fund reaches its contractual expense cap of 61 basis points.
How was the fund positioned during the six-month period?
Because there was so much uncertainty in the markets about the outlook for
short-term interest rates, we positioned the fund more defensively in comparison
to its peers. For most of the period, we kept the fund's average maturity at
around 35 days (about 15 days shorter than its peer-group average). During the
period, yields on one-year municipal securities fluctuated within a range of
about 3.55% to 3.95% as the interest rate outlook shifted in response to
changing economic data. We watched for opportunities to add yield to the fund by
buying one-year paper whenever rates moved toward the higher end of this range.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/96)
VRDNs 72%
Commercial Paper 15%
Bonds less than 1 Year 13%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/96)
VRDNs 58%
Commercial Paper 21%
Bonds less than 1 Year 18%
Other 3%
6 Florida Municipal Money Market American Century Investments
FLORIDA MUNICIPAL MONEY MARKET
Each December the fund typically sees a notable jump in cash inflows. Why?
Florida's intangibles tax is the driving force behind the sudden influx of
cash. Each December, investors look for Florida state-issued investments that
are not subject to the tax in order to shelter some of their money. Because the
tax is assessed on assets as of December 31, investors often wait until late
December to invest in sheltered securities.
How do you manage the sudden influx of cash?
We typically put the new money into daily and weekly variable-rate demand
notes (VRDNs). These are highly liquid short-term securities that can be quickly
sold to meet redemptions that we normally see in January, when some of the
December inflows move back out of the fund.
Looking further ahead, are there any other seasonal factors to be taken into
account?
Yes. In June and July, many municipal money market issues mature, resulting
in large amounts of cash that need to be reinvested. The resulting surge in
demand drives muni prices up and yields down. To prepare for this period, we
typically buy significant amounts of commercial paper in May, to lock in more
attractive yields and tide the fund over this "technical period." As year's end
approaches, we allow the fund's weighting of commercial paper to decrease as we
invest more of its assets in VRDNs, whose yields typically move higher at that
time.
Is there any chance that the fund could be affected by the budget crisis
unfolding in Miami? The city has over $400 million in outstanding municipal
bonds.
There is no need for concern. Thanks to the thorough research carried out by
our Municipal Credit Research Team, none of the Benham municipal funds own bonds
issued by the city of Miami.
What are your plans for the fund going forward?
We don't expect to make any significant strategy shifts in the near term.
Throughout December, we will likely invest any incoming cash in VRDNs as their
yields become more attractive. This will shorten the fund's average maturity by
several days. In January, the seasonal rise in rates should reverse itself, and
we will sell off our daily VRDNs first to cover fund redemptions, extending the
fund's average maturity slightly in the process.
[pie charts]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/96)
SP1+ 76%
SP1 22%
SP2 2%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/96)
SP1+ 76%
SP1 21%
SP2 3%
Investment terms are defined in the Glossary on page 25.
Semiannual Report Florida Municipal Money Market 7
SCHEDULE OF INVESTMENTS
FLORIDA MUNICIPAL MONEY MARKET
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS
$ 1,700 Brevard County Housing Finance Auth.
Palm Place, VRDN, 3.60%, 12-4-96
(LOC: Chemical Bank) $1,700
1,000 Broward County Housing Finance
Auth. Multi-Family Housing Rev.,
(Margate Project), VRDN, 3.60%,
12-4-96 (LOC: Chemical Bank) 1,000
3,500 Broward County Housing Finance
Auth. Multi-Family Housing Rev.,
Series A, (Palmaire Oxford), VRDN,
3.80%, 12-4-96 (SBBPA: Continental
Casualty Co.) 3,500
1,400 Broward County Housing Finance Auth.
Multi-Family Housing Rev.,
(Welleby Apartments), VRDN,
3.65%, 12-4-96 (LOC: Bank of
America) 1,400
1,200 Broward County Industrial Development
Rev., (MDR Fitness Project), VRDN,
3.65%, 12-4-96 (LOC: Suntrust Bank
South Florida) 1,200
2,500 Broward County Industrial Development
Rev., (HEICO), VRDN, 3.65%,
12-4-96 (LOC: Suntrust Bank
South Florida) 2,500
1,535 City of Jacksonville, 4.00%,
10-1-97 (FGIC) 1,537
2,000 City of Naples Hospital Rev., (Naples
Community Hospital), VRDN, 3.65%,
12-5-96 (LOC: Mellon Bank N.A.) 2,000
1,745 Collier County Housing Finance Auth.
Multi-Family Housing Rev., VRDN,
3.70%, 12-4-96 (LOC: PNC Bank
Kentucky, Inc.) 1,745
1,910 Coral Springs Industrial Development
Rev., (Royal Plastics Group Project),
VRDN, 3.65%, 12-4-96 (LOC:
Suntrust Bank South Florida, N.A.) 1,910
3,200 Dade County Aviation Rev., Series A,
VRDN, 3.80%, 12-4-96
(LOC: Fuji Bank) 3,200
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
$ 2,000 Dade County Housing Finance Agency
Single-Family, 4.00%, 10-1-97 (FGIC)$2,000
2,000 Dade County Industrial Development
Auth., (Dolphins Stadium Project
Series C), VRDN, 3.60%, 12-4-96
(LOC: Societe Generale) 2,000
5,200 Dade County Industrial Development
Auth., (Dolphins Stadium Project
Series B), VRDN, 3.60%, 12-4-96
(LOC: Societe Generale) 5,200
705 Dade County Industrial Development
Auth. Rev., (DNS Mfg, #237), VRDN,
3.75%, 12-4-96 ( LOC: Barnett
Bank of South Florida N.A.) 705
4,495 Dade County Industrial Development
Auth. Rev., (IVAX Labs), VRDN, 3.80%,
12-4-96 (LOC: Bank of Tokyo -
Mitsubishi, Ltd.) 4,495
1,000 Dade County Industrial Development
Auth. Rev., (Stephen M. Greene),
VRDN, 3.65%, 12-4-96 (LOC: Sun
Bank Miami N.A.) 1,000
1,795 Dade County Metro GO, (Dade Fire and
Rescue Service), 3.60%, 4-1-97
(FGIC) 1,797
2,200 Dade County Resource Recovery Rev.,
4.00%, 10-1-97 (AMBAC) 2,200
4,050 Dade County Special Obligation Capital
Asset Acquisition Rev., VRDN, 3.85%,
12-4-96 (LOC: Sanwa Bank Ltd.) 4,050
3,900 Escambia County Industrial Development
Auth. Rev., (Gelman Sciences), VRDN,
3.60%,12-4-96 (LOC: NBD Bank) 3,900
4,500 Florida Housing Finance Agency
Carribean Key, VRDN, 3.70%, 12-4-96
(LOC: Key Bank) 4,500
4,200 Florida Housing Finance Agency
Multi-Family Housing Rev., Series EEE,
(Carlton Arms Project), VRDN, 3.55%,
12-4-96 (LOC: Kredietbank N.V.) 4,200
2,025 Florida Housing Finance Agency
Multi-Family Housing Rev., 1989
Series E, (Fairmont Oaks Project),
VRDN, 3.70%, 12-4-96 (LOC:
Comerica Bank) 2,025
See Notes to Financial Statements
8 Florida Municipal Money Market American Century Investments
SCHEDULE OF INVESTMENTS
FLORIDA MUNICIPAL MONEY MARKET
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
$ 1,500 Florida Housing Finance Agency Rev.,
(Oaks at Mill Creek Project), VRDN,
3.60%, 12-4-96 (LOC: Chemical Bank) $1,500
5,650 Florida Housing Finance Agency Rev.,
(Ashley Lakes Project), VRDN, 3.60%,
12-4-96 (LOC: Barclay's Bank) 5,650
2,800 Florida Housing Finance Agency Rev.,
(Beville-Oxford), VRDN, 3.80%,
12-4-96 (SBBPA: Continental
Casualty Co.) 2,800
2,000 Florida Housing Finance Agency Rev.,
(Tiffany Club), VDRN, 3.75%, 12-4-96
(LOC: NationsBank N.A.) 2,000
2,500 Florida Housing Finance Agency Rev.,
(Lee County Forestwood Apartments),
VRDN, 3.60%, 12-4-96 (FNMA
Collateral Agreement) 2,500
4,800 Florida Housing Finance Agency Rev.,
(Country Club Apartments), VRDN,
4.15%, 12-2-96 (LOC: Northern
Trust Corp.) 4,800
1,650 Florida Housing Finance Agency Rev.,
(South Pointe Project), VRDN, 3.60%,
12-4-96 (LOC: Chemical Bank) 1,650
3,500 Florida Finance Housing Agency Rev.,
(Sun Pointe Cove Apartments Project),
VRDN, 3.60%, 12-4-96 (FNMA
Collateral Agreement) 3,500
5,000 Highlands County Health Facility
Auth., VRDN, 3.55%, 12-5-96
(SBBPA: Canadian Imperial Bank N.Y.) 5,000
2,500 Hillsborough Aviation Auth. Rev.
Commercial Paper, 3.60%, 1-14-97 2,500
1,465 Hillsborough County Port District Rev.,
(Tampa Port Auth.), 4.50%, 6-1-97
(FSA) 1,471
3,500 Indian River County Hospital District
Rev., 3.55%, 1-14-97 (LOC:
Kredietbank N.V.) 3,500
1,000 Indian River County Industrial
Development Rev., (Florida Convales),
VRDN, 3.65%, 12-2-96 (LOC: Toronto
Dominion Bank) 1,000
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
$ 2,000 Jacksonville Electric Commercial Paper,
3.65%, 1-10-97 (Credit Suisse
Liquidity) $2,000
1,000 Jacksonville Electric Commercial Paper,
3.55%, 1-14-97 (Credit Suisse
Liquidity) 1,000
2,000 Jacksonville Electric Rev. Commercial
Paper, 3.50%, 1-24-97 (SBBPA:
Morgan Guaranty Trust) 2,000
1,300 Jacksonville Hospital Rev., (Methodist
Hospital Project), 10.50%, 10-1-97,
Prerefunded at 102% of Par(1) 1,396
940 Martin County Industrial Development
Auth., (R.F. Labs, Inc.), VRDN, 3.65%,
12-4-96 (LOC: Suntrust Bank Central
Florida, N.A.) 940
300 Martin County Industrial Development
Auth. Rev., (Tampa Farm Service, Inc.),
VRDN, 3.65%, 12-4-96 (LOC:
Suntrust Bank Central Florida, N.A.) 300
1,700 Martin County Solid Waste Disposal
Rev., (Florida Power and Light Comp.
Project), VRDN, 4.25%, 12-2-96 1,700
1,210 Monroe County School Board COP,
3.70%, 8-1-97 (AMBAC) 1,210
200 Ocean Highway and Port Auth. Rev.,
VRDN, 3.60%, 12-4-96 (LOC: ABN
Amro Bank, N.A.) 200
2,000 Ocean Highway and Port Auth. Rev.,
Series 1990, VRDN, 3.60%, 12-4-96
(LOC: ABN Amro Bank, N.A.) 2,000
1,000 Orange County Health Facility Auth.
Adventist Health System, VRDN,
3.45%, 12-5-96 (LOC: Rabobank) 1,000
915 Pinellas County Second GTD Entitlement
Rev., 3.60%, 2-1-97 (FSA) 916
5,000 Pinellas County Housing Finance
Auth. Multi-Family Housing Rev.,
VRDN, 3.60%, 12-4-96 (FNMA
Collateral Agreement) 5,000
2,000 Putnam County Development Auth.
Rev., (PCR Seminole Electric), 3.80%,
3-15-97 (Guaranteed: National
Rural Utilities Cooperative
Finance Corp.) 2,000
See Notes to Financial Statements
Semiannual Report Florida Municipal Money Market 9
SCHEDULE OF INVESTMENTS
FLORIDA MUNICIPAL MONEY MARKET
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
$ 2,525 Putnam County Development Auth.
Rev., (Seminole Electric), VRDN,
3.55%, 12-4-96 (Guaranteed:
National Rural Utilities Cooperative
Finance Corp.) $2,525
3,000 Sarasota County Utility System Rev.,
7.50%, 6-1-97, Prerefunded at 102%
of Par(1) 3,113
1,100 Saint Lucie County Solid Waste Disposal
Rev., (Florida Power & Light Comp.
Proj.), VRDN, 4.25%, 12-2-96 1,100
1,250 St. Johns County Housing Finance
Auth. Rev., VRDN, 3.60%, 12-4-96,
(LOC: Barnett Bank of Jacksonville) 1,250
3,300 Sunshine State Government Finance
Commercial Paper, 3.65%, 1-10-97
(LOC: Union Bank of Switzerland,
National Westminster Bank, Morgan
Guaranty Trust) 3,300
2,000 Sunshine State Government Finance
Commercial Paper, 3.50%, 1-14-97
(LOC: Union Bank of Switzerland,
National Westminster Bank, Morgan
Guaranty Trust) 2,000
4,000 Tampa Occupational, VRDN, 3.35%,
12-4-96 (FGIC) (SBBPA: General
Electric Credit Corp.) 4,000
1,500 Tampa Solid Waste Systems Rev.,
4.00%, 10-1-97 (FGIC) 1,503
2,000 University Athletic Association, Inc.
Capital Improvement Rev., (University
of Florida Stadium Project), VRDN,
4.00%, 12-2-96 (LOC: Suntrust Bank
Central Florida, N.A.) 2,000
1,000 Volusia County Industrial Development
Auth., (Daytona Plastix Inc.), VRDN,
3.65%, 12-4-96 (LOC: Suntrust Bank
Central Florida, N.A.) 1,000
2,000 West Orange Memorial Commercial
Paper Series A-1, 3.625%, 1-8-97
(LOC: Rabobank) 2,000
SCHEDULE OF INVESTMENTS
FLORIDA MUNICIPAL MONEY MARKET
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
$ 2,000 West Orange Memorial Commercial
Paper Series A-2, 3.625%, 1-8-97
(LOC: Rabobank) $ 2,000
----------
TOTAL INVESTMENT SECURITIES--100.0% $145,088(2)
==========
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
FGIC = Financial Guaranty Insurance Company
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 November 30, 1996.
(1) Escrowed in U.S. Government Securities.
(2) The Florida Municipal Money Market Fund has 18.8% invested in private
activity municipal securities. The interest from these securities is
treated as a tax-preference item in calculating the federal alternative
minimum tax.
See Notes to Financial Statements
10 Florida Municipal Money Market American Century Investments
<TABLE>
<CAPTION>
FLORIDA INTERMEDIATE-TERM MUNICIPAL
30-DAY 30-DAY TAX-EQUIVALENT YIELDS
SEC 28% 31% 36% 39.6%
YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
CURRENT YIELD (as of November 30, 1996)
<S> <C> <C> <C> <C> <C>
Florida Intermediate-Term Municipal 4.04% 5.61% 5.86% 6.31% 6.69%
6 MONTHS(2) 1 YEAR LIFE OF FUND(3)
AVERAGE ANNUAL RETURNS (as of November 30, 1996)(1)
Florida Intermediate-Term Municipal ................................ 4.59% 4.61% 6.66%
Lehman 5-Year General Obligation Index(4) .......................... 4.74% 5.37% 6.57%
Average Florida Intermediate Municipal Fund(5) ..................... 4.45% 4.05% 6.35%
Fund's Ranking Among Florida Intermediate Municipal Funds(6) ....... -- 4 out of 20 5 out of 15
(1) Returns are defined in the Glossary on page 25.
(2) Not annualized.
(3) Data shown is for period from 4/30/94 to 11/30/96. The fund's inception date was April 11, 1994.
(4) See page 24 for more information about the fund's comparative index.
(5) According to Lipper Analytical Services. See page 24 for more information about Lipper and the fund's category.
(6) Rankings determined by Lipper based on average annual total returns for the periods indicated.
</TABLE>
[mountain graph - data below]
GROWTH OF $10,000 OVER THE LIFE OF THE FUND
$10,000
investment
made 4/30/94
Florida Intermediate-Term Lehman 5-Year GO
4/30/94 $10000 $10000
5/31/94 10093 10056
6/30/94 10054 10033
7/31/94 10195 10142
8/31/94 10252 10191
9/30/94 10173 10114
10/31/94 10045 10058
11/30/94 9876 9993
12/31/94 10032 10081
1/31/95 10212 10178
2/28/95 10471 10326
3/31/95 10539 10490
4/30/95 10592 10518
5/31/95 10830 10749
6/30/95 10811 10757
7/31/95 10930 10908
8/31/95 11021 11018
9/30/95 11069 11051
10/31/95 11195 11097
11/30/95 11297 11192
12/31/95 11386 11253
1/31/96 11513 11387
2/29/96 11481 11349
3/31/96 11328 11288
4/30/96 11310 11271
5/31/96 11300 11258
6/30/96 11351 11338
7/31/96 11477 11413
8/31/96 11476 11436
9/30/96 11552 11522
10/31/96 11663 11629
11/30/96 11818 11791
Value on 11/30/96
Florida
Intermediate-
Term
$11,818
Lehman
5-Year GO
$11,791
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 Lehman index's total return line does not.
PORTFOLIO AT A GLANCE
11/30/96 5/31/96
Number of Issues 27 26
Weighted Average Maturity 7.64 years 7.89 years
Average Duration 4.97 years 5.47 years
Expense Ratio 0.66%* 0.13%
*Annualized.
See the Glossary on page 25.
Semiannual Report Florida Intermediate-Term Municipal 11
FLORIDA INTERMEDIATE-TERM MUNICIPAL
Management Q & A
An interview with Dave MacEwen, vice president and senior municipal portfolio
manager.
How did the fund perform?
The fund performed slightly above average compared with its peers. For the
six-month period ended November 30, 1996, the Fund's total return was 4.59%,
compared with the 4.45% return of the 20 "Florida Intermediate Municipal Funds"
tracked by Lipper Analytical Services. However, from a one-year perspective, the
fund's performance was even stronger, allowing it to place in the top 20% of its
peers. Please keep in mind that a portion of the fund's expenses were absorbed
by Benham Management Corporation during the period and that the rankings listed
would have been lower if the fund's returns had been reduced by those expenses.+
How did you position the fund during the period?
As the possibility of a short-term interest rate hike by the Federal Reserve
increased, we began moving the fund into a more defensive position. To
accomplish this, we allowed the fund's duration to shorten, moving it from 5.5
years at the start of the period, to around 5.0 years by the period's end. This
change brought the fund to a roughly neutral position relative to its peers. In
addition to this neutral stance, we maintained a bias toward a ladder portfolio
structure, spreading the fund's securities across the maturity spectrum.
Was this neutral positioning the main reason for the fund's middle-of-the-road
performance?
Yes. We tend to avoid making interest rate bets that can cause unwanted
volatility in the fund's returns. Rather than looking to add incremental return
through aggressive duration management as some of our competitors do, we look to
add value to the fund by searching for what we believe are undervalued
securities with the potential to appreciate.
Each December the fund typically sees a notable jump in cash inflows. Can you
explain this?
Yes. Florida's intangibles tax is the driving force behind the sudden influx
of cash as investors look for qualifying Florida state-issued investments to
shelter some of their money before December 31. Because the tax is assessed on
assets as of December 31, investors often wait until late December to invest in
sheltered securities.
[bar graph - data below]
FLORIDA INTERMEDIATE-TERM MUNICIPAL
FISCAL YEAR-BY-YEAR RETURNS (Years ended May 31)
Florida Intermediate-Term Municipal Lehman 5-Year GO
1994 0.93% 0.56%
1995 7.31% 6.89%
1996 4.33% 4.74%
* From 4/29/94 to 5/31/94.
This chart illustrates the historical year-by-year volatility of the fund's
return. The fund's total returns for the 1996 fiscal year include operating
expenses, while the Lehman index's returns do not. See page 24 for a
definition of the fund's comparative index.
+Benham Management Corporation absorbed all of the fund's expenses through
December 31, 1995. Beginning January 1, 1996, the fund began absorbing expenses
at a rate of an additional .10% of average daily net assets each month and
continued until the fund reached its contractual expense cap of .67% on July 1,
1996.
12 Florida Intermediate-Term Municipal American Century Investments
FLORIDA INTERMEDIATE-TERM MUNICIPAL
What steps do you usually take to prepare for this event?
One of our main priorities prior to December is to make the fund as fully
invested in munis as possible, temporarily decreasing our cash position. We also
lengthen the fund's duration slightly at this time because the cash inflows
provide a shortening effect. Demand for Florida munis increases around this time
period, often driving prices higher. By taking steps prior to December we are
able to avoid inflated muni prices, putting cash inflows to better use.
Is there any chance that the fund could be affected by the budget crisis
unfolding in Miami? The city has over $400 million in outstanding municipal
bonds.
There is no need for concern. Thanks to the thorough research carried out by
our Municipal Credit Research Team, none of the Benham municipal funds own bonds
issued by the city of Miami.
What are your plans for the fund going forward?
Recent economic data has been mixed, and concern over the possibility of
higher interest rates is again evident in the marketplace. As a result, we will
likely maintain the fund's neutral stance, lengthening or shortening its average
maturity and duration in a narrow range around this position when appropriate.
If the economic outlook does change significantly, we believe the fund is
positioned to respond quickly. In addition, we will continue to utilize our
strong credit research team to search for securities with undervalued credit
ratings that we believe have the potential to appreciate in value.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/96)
Revenue Bonds 74%
GO 13%
Tax Allocation 6%
Prerefunded 5%
Other 2%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/96)
Revenue Bonds 45%
GO 14%
Tax Allocation 12%
Prerefunded 6%
Other 23%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/96)
AAA 70%
AA 30%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/96)
AAA 72%
AA 28%
Investment terms are defined in the Glossary on page 25.
Semiannual Report Florida Intermediate-Term Municipal 13
SCHEDULE OF INVESTMENTS
FLORIDA INTERMEDIATE-TERM MUNICIPAL
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES
$ 300 Boca Raton Water and Sewer
Rev., 6.40%, 10-1-02 $316
150 Broward County Educational Auth.
Rev., (Nova Southeastern University),
5.40%, 4-1-02 (Connie Lee) 157
300 Broward County School District GO,
6.75%, 2-15-00 321
500 Dade County Seaport Rev., 5.15%,
10-1-08 (MBIA) 509
500 Duval County School District GO,
6.25%, 8-1-05 (AMBAC) 548
500 East County Waste Control District
Rev., Series 1994, 5.375%,
11-1-01 (Asset Guarantee) 520
300 Escambia County Housing Finance
Auth. Single Family Mortgage
Rev., 6.00%, 4-1-02 (GNMA) 311
305 Florida Department of General
Services Rev., 7.75%, 9-1-98,
Prerefunded at 102% of Par(1) 331
350 Florida Housing Finance Agency
Multi-Family Housing Rev., 5.35%,
12-1-05, Put Date 6-1-00 353
450 Florida Housing Finance Agency Rev.,
(Williamsburg Village Apartments),
5.60%, 12-1-07 (AMBAC) 461
500 Florida Housing Finance Agency Rev.,
(Windwood), 5.65%, 12-1-07 (AXA
Reinsurance) 502
250 Gainesville Utilities System Rev.,
Series A, 5.75%, 10-1-09 268
400 Hillsborough County Port District Special
Rev., 6.50%, 6-1-04 (FSA) 446
450 Hillsborough County Aviation Auth.
Rev., (Tampa International Airport
Series A), 6.60%, 10-1-03 (FGIC) 483
400 Indian Trace Community Development
Auth. Rev., (District Water Management),
Series 1995 A, 5.25%, 5-1-03 (MBIA) 417
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
Value
Principal Amount ($ in Thousands)
$ 500 Jacksonville Electric Auth. Special
Obligation, (St. John's River Power
Project), 4th Series, 6.50%, 10-1-01 $544
500 Jacksonville Excise Tax Rev., 5.20%,
10-1-04 (FGIC) 513
300 Lakeland Water and Electric Rev.,
6.00%, 10-1-07 (FGIC) 331
300 Lee County School Board COP,
Series A, 5.40%, 8-1-04 (FSA) 314
450 Orange County Health Facilities
Auth. Rev., Series A, 6.00%,
10-1-04 (MBIA) 491
450 Orlando and Orange County Expressway
Auth. Rev., 6.50%, 7-1-11 (FGIC) 516
500 Orlando Utility Commission Water and
Electric Rev., 5.70%, 10-1-04 539
200 Reedy Creek Improvement District
Utility Rev., Series 1991, 6.25%,
10-1-01, Prerefunded at 101% of
Par (MBIA)(1) 219
400 St. Cloud Utility Rev. Refunding,
6.40%, 8-1-06 (MBIA) 436
175 Tampa Palms Community Development
Special Assessment Refunding,
4.90%, 5-1-99 (MBIA) 178
500 Volusia County School District GO,
6.20%, 8-1-03, (FGIC) 545
------
TOTAL MUNICIPAL SECURITIES--94.6% 10,569
(Cost $10,239) ------
SHORT-TERM MUNICIPAL SECURITIES--5.4%
600 University Athletic Association, Inc.,
Capital Improvement Rev., (University
of Florida Stadium Project), VRDN,
4.00%, 12-2-96, resets daily, final
maturity 2-1-20 (LOC: Suntrust
Bank Central Florida, N.A.) 600
---
(Cost $600)
TOTAL INVESTMENT SECURITIES--100.0% $11,169(2)
(Cost $10,839) =========
See Notes to Financial Statements
14 Florida Intermediate-Term Municipal American Century Investments
SCHEDULE OF INVESTMENTS
FLORIDA INTERMEDIATE-TERM MUNICIPAL
NOVEMBER 30, 1996 (UNAUDITED)
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
COP = Certificate of Participation
FGIC = Financial Guaranty Insurance Company
FSA = Financial Security Association
GNMA = Government National Mortgage Association
GO = General Obligation
MBIA = Municipal Bond Insurance Association
resets = The frequency with which a fixed-income security's coupon changes,
based on current market conditions or an underlying index. The more
frequently a security resets, the less risk the investor is taking that the
coupon will vary significantly from current market rates.
SBBPA = Standby Bond Purchase Agreement
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is
effective November 30, 1996.
(1) Escrowed in U.S. Government Securities.
(2) The Florida Intermediate-Term Municipal Fund has 6.8% invested in private
activity municipal securities. The interest from these securities is
treated as a tax-preference item in calculating the federal alternative
minimum tax.
See Notes to Financial Statements
Semiannual Report Florida Intermediate-Term Municipal 15
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
FLORIDA FLORIDA
MUNICIPAL INTERMEDIATE-TERM
MONEY MARKET MUNICIPAL
NOVEMBER 30, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS $ In Thousands
Investment securities, at value (amortized cost and identified
cost of $10,839, respectively) ............................................. $ 145,088 $11,169
Cash .......................................................................... 2,188 162
Interest receivable ........................................................... 605 142
Receivable from affiliates (Note 2) ........................................... 3 -
Prepaid expenses and other assets ............................................. 4 3
- -
147,888 11,476
------- ------
LIABILITIES
Disbursements in excess of demand deposit cash ................................ 89 14
Payable for investments purchased ............................................. 1,514 501
Payable for shares redeemed ................................................... 3,542 5
Dividends payable ............................................................. 25 1
Payable to affiliates (Note 2) ................................................ - 6
Accrued expenses and other liabilities ........................................ 16 -
-- --
5,186 527
----- ---
Net Assets Applicable to Outstanding Shares ................................... $ 142,702 $ 10,949
============ ===========
CAPITAL SHARES, $1.00 AND $10.00 PAR VALUE, RESPECTIVELY
Outstanding (Unlimited number of shares authorized) (In thousands) ............ 142,702 1,052
======= =====
Net Asset Value Per Share ..................................................... $ 1.00 $ 10.41
============ ===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ....................................... $ 142,702 $ 10,549
Accumulated undistributed net realized gain (loss) on investment transactions . - 70
Net unrealized appreciation on investments (Note 3) ........................... - 330
-- ---
$ 142,702 $ 10,949
============ ===========
</TABLE>
See Notes to Financial Statements
16 Statements of Assets and Liabilities American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FLORIDA FLORIDA
MUNICIPAL INTERMEDIATE-TERM
MONEY MARKET MUNICIPAL
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED)
INVESTMENT INCOME $ in Thousands
Income:
<S> <C> <C>
Interest ...................................................................... $ 2,174 $ 272
------------ -----------
Expenses (Note 2):
Investment advisory fees ...................................................... 263 23
Administrative fees ........................................................... 59 5
Transfer agency fees .......................................................... 20 5
Printing and postage .......................................................... 13 5
Custodian fees ................................................................ 12 3
Auditing and legal fees ....................................................... 15 3
Registration and filing fees .................................................. 16 -
Directors' fees and expenses .................................................. 4 1
Other operating expenses ...................................................... 9 5
------------ -----------
Total expenses .............................................................. 411 50
Amount waived (Note 2) ........................................................ (408) (15)
Custodian earnings credits (Note 4) ........................................... (3) -
------------ -----------
Net expenses ................................................................ - 35
------------ -----------
Net investment income ......................................................... 2,174 237
------------ -----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 3)
Net realized gain on investments .............................................. - 31
Change in net unrealized appreciation on investments .......................... - 200
------------ -----------
Net realized and unrealized
gain on investments ........................................................... - 231
------------ -----------
Net Increase in Net Assets
Resulting from Operations ..................................................... $ 2,174 $ 468
============ ===========
</TABLE>
See Notes to Financial Statements
Semiannual Report Statements of Operations 17
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FLORIDA FLORIDA
MUNICIPAL INTERMEDIATE-TERM
MONEY MARKET MUNICIPAL
SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED)
AND YEAR ENDED MAY 31, 1996
November 30, May 31, November 30, May 31,
Increase in Net Assets 1996 1996 1996 1996
$ in Thousands $ in Thousands
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income .............................................. $ 2,174 $ 2,956 $ 237 $ 533
Net realized gain on investment transactions ....................... -- -- 31 60
Change in net unrealized appreciation
(depreciation) on investments .................................... -- -- 200 (155)
----- ----- --- ---
Net increase in net assets resulting from operations ............... 2,174 2,956 468 438
----- ----- --- ---
DISTRIBUTION TO SHAREHOLDERS
From net investment income ......................................... (2,174) (2,956) (237) (533)
From net realized gains from investment transactions ............... -- -- -- (44)
----- ----- --- ---
Decrease in net assets from distributions .......................... (2,174) (2,956) (237) (577)
------ ------ ---- ----
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .......................................... 91,257 196,163 1,734 7,317
Proceeds from reinvestment of distributions ........................ 1,231 2,887 175 403
Payments for shares redeemed ....................................... (49,779) (144,204) (1,510) (6,794)
------- -------- ------ ------
Net increase in net assets from capital share transactions ......... 42,709 54,846 399 926
------ ------ --- ---
Net increase in net assets ......................................... 42,709 54,846 630 787
NET ASSETS
Beginning of period ................................................ 99,993 45,147 10,319 9,532
------ ------ ------ -----
End of period ...................................................... $ 142,702 $ 99,993 $ 10,949 $ 10,319
========= ========= ========= =========
TRANSACTIONS IN SHARES OF THE FUNDS (IN THOUSANDS)
Sold ............................................................... 91,257 196,163 169 703
Issued in reinvestment of distributions ............................ 1,231 2,887 17 39
Redeemed ........................................................... (49,779) (144,204) (147) (654)
------- -------- ---- ----
Net increase ....................................................... 42,709 54,846 39 88
====== ====== == ==
</TABLE>
See Notes to Financial Statements
18 Statements of Changes in Net Assets American Century Investments
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization--American Century Municipal Trust (the Trust) is registered
under the Investment Company Act of 1940 as an open-end management investment
company. American Century--Benham Florida Municipal Money Market Fund (Money
Market Fund) and American Century--Benham Florida Intermediate-Term Municipal
Fund (Intermediate-Term Fund) (the Funds) are two of the eight Funds composing
the Trust. The Funds are non-diversified under the 1940 Act. Their investment
objective is to seek as high a level of current income exempt from federal
income taxes as is consistent with prudent investment management and
conservation of shareholders' capital. The Money Market Fund invests primarily
in short-term Florida municipal obligations and maintains a weighted average
maturity of 90 days or less. The Intermediate-Term Fund invests primarily in
intermediate-term Florida municipal obligations and maintains a weighted average
maturity from five to ten years. The Funds concentrate their investments in a
single state and therefore may have more exposure to credit risk related to the
state of Florida than a fund with a broader geographical diversification. The
following significant accounting policies relating to the Funds are in
accordance with accounting policies generally accepted in the investment company
industry.
Security Valuations--Securities held by the Money Market Fund are valued at
amortized cost, which approximates current market value. Securities held by the
Intermediate-Term Fund 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.
Security 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 the
Intermediate-Term Fund. Market discount is recognized as income upon the sale or
maturity of the security for the Intermediate-Term Fund. Premium and discount
are amortized daily on a straight-line basis for securities held by the Money
Market Fund.
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 Intermediate-Term Fund are declared daily and distributed monthly.
Distributions from net realized gains for the Intermediate-Term Fund are
declared and paid annually. The Money Market Fund's distributions from net
investment income are declared and credited daily and distributed monthly. The
Money Market Fund does not expect to realize any long-term capital gains, and
accordingly, does not expect to pay any capital gain distributions.
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 due to differences in the recognition of income and
expense items for financial statement and tax purposes.
Supplementary Information--Certain officers and directors 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).
Futures Contracts--The Intermediate-Term Fund may buy and sell interest rate
futures contracts relating to debt securities and write and buy put and call
options relating to interest rate futures contracts. The Fund may use futures
and option 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.
Semiannual Report Notes to Financial Statements 19
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
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.
.50% of the first $100 million
.45% of the next $100 million
.40% of the next $100 million
.35% of the next $100 million
.30% of the next $100 million
.25% of the next $1 billion
.24% of the next $1 billion
.23% of the next $1 billion
.22% of the next $1 billion
.21% of the next $1 billion
.20% of the next $1 billion
.19% of 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
expenses such as brokerage commissions, taxes, interest, custodian earnings
credits, and extraordinary expenses) to .61% of average daily closing net assets
for the Money Market Fund and .67% for the Intermediate-Term Fund. 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. BMC voluntarily agreed to absorb all expenses
for the Intermediate-Term Fund through December 31, 1995, and all expenses of
the Money Market Fund through December 31, 1997. Beginning January 1, 1996, the
Intermediate-Term Fund added expenses at a rate of .10% of average daily closing
net assets per month until the Fund reached the contractual expense rate of
.67%. Starting in January 1997, the Money Market Fund will begin adding expenses
at a rate of .10% per month until its expense rate of .61% is reached.
The payable (receivable) to affiliates as of November 30, 1996, based on the
above agreements, was as follows:
Florida
Florida Intermediate-
Municipal Term-
Money Market Municipal
Investment Advisor ........ $ (23,102) $ 3,644
Administrative Services ... 14,168 1,658
Transfer Agent ............ 5,465 596
--------- --------
$ (3,469) $ 5,898
========= ========
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.
20 Notes to Financial Statements American Century Investments
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
3. Investment Transactions
The aggregate cost of municipal debt obligations purchased and proceeds from
sales (excluding short-term investments) for the six months ended November 30,
1996, for the Intermediate-Term Fund totaled $3,174,982 and $2,786,152,
respectively.
As of November 30, 1996, accumulated net unrealized appreciation of the
Intermediate-Term Fund was $329,997, consisting of unrealized appreciation of
$331,840, and unrealized depreciation of $1,843. The aggregate cost of
investments for federal income tax purposes was the same as the cost for
financial reporting purposes.
- --------------------------------------------------------------------------------
4. Expense Offset Arrangements
Each Fund's Statement of Operations reflects custodian earnings credits.
These amounts are used to offset the custody fees payable by the Funds to the
custodian bank. The credits are earned when the Fund maintains a balance of
uninvested cash at the custodian bank. Beginning with the year ended May 31,
1996, the ratios of operating expenses to average net assets shown in the
Financial Highlights are calculated as if these credits had not been earned.
- --------------------------------------------------------------------------------
5. Subsequent Events
The following name changes became effective January 1, 1997:
<TABLE>
NEW NAMES FORMER NAMES
<S> <C> <C>
Fund's Issuer: American Century Municipal Trust Benham Municipal Trust
Funds: American Century - Benham Florida Benham Florida Municipal Money Market Fund
Municipal Money Market Fund
American Century - Benham Florida Benham Florida Municipal Intermediate-Term Fund
Intermediate-Term Municipal 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 21
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FLORIDA MUNICIPAL MONEY MARKET
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
1996(1) 1996 1995 1994(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........................ $1.00 $1.00 $1.00 $1.00
Income from Investment Operations
Net Investment Income ..................................... .02 .04 .04 --
--- --- --- -----
Distributions
From Net Investment Income ................................ (.02) (.04) (.04) --
---- ---- ---- -----
Net Asset Value, End of Period .............................. $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
Total Return(3) ........................................... 1.79% 3.86% 3.71% .40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(4) ...... -- .01% -- --
Ratio of Operating Expenses to Average Net Assets
(Before Reimbursement)(4) .............................. .68%(5) .71% .88% 1.58%(5)
Ratio of Net Investment Income to Average Net Assets(4) ... 3.57%(5) 3.75% 3.93% 2.99%(5)
Ratio of Net Investment Income to Average Net Assets
(Before Reimbursement)(4) .............................. 2.89%(5) 3.05% 3.05% 1.41%(5)
Net Assets, End of Period (in thousands) .................. $142,702 $99,993 $45,147 $5,565
(1) Six months ended November 30, 1996.
(2) From April 11, 1994 (commencement of operations) through May 31, 1994.
(3) Total return assumes reinvestment of dividends. Total returns for periods less than one year are not annualized.
(4) The ratios for the periods subsequent to May 31, 1995, include expenses paid through expense offset arrangements.
(5) Annualized
</TABLE>
See Notes to Financial Statements
22 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FLORIDA INTERMEDIATE-TERM MUNICIPAL
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
1996(1) 1996 1995 1994(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........................ $10.18 $10.30 $10.11 $10.00
Income from Investment Operations
Net Investment Income ..................................... .23 .52 .52 .07
Net Realized and Unrealized Gain (Loss) on Investments .... .23 (.08) .19 .11
--- ---- --- ---
Total From Investment Operations .......................... .46 .44 .71 .18
--- --- --- ---
Distributions
From Net Investment Income ................................ (.23) (.52) (.52) (.07)
From Net Realized Gains on Investment Transactions ........ -- (.04) -- --
---- ---- ---- ----
Total Distributions ....................................... (.23) (.56) (.52) (.07)
---- ---- ---- ----
Net Asset Value, End of Period .............................. $10.41 $10.18 $10.30 $10.11
====== ====== ====== ======
Total Return(3) ........................................... 4.59% 4.34% 7.31% 1.79%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(4) ...... .66%(5) .13% -- --
Ratio of Operating Expenses to Average Net Assets
(Before Reimbursement)(4) .............................. .95%(5) .88% 1.09% 1.92%(5)
Ratio of Net Investment Income to Average Net Assets(4) ... 4.51%(5) 5.05% 5.23% 5.02%(5)
Ratio of Net Investment Income to Average Net Assets
(Before Reimbursement)(4) .............................. 4.22%(5) 4.30% 4.14% 3.10%(5)
Portfolio Turnover Rate ................................... 27.14% 66.39% 36.63% 5.71%
Net Assets, End of Period (in thousands) .................. $10,949 $10,319 $9,532 $5,892
(1) Six months ended November 30, 1996.
(2) From April 11, 1994 (commencement of operations) through May 31, 1994.
(3) Total return assumes reinvestment of dividends and capital gain
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) The ratios for the periods subsequent to May 31, 1995, include expenses paid through expense offset arrangements.
(5) Annualized.
</TABLE>
Semiannual Report Financial Highlights 23
BACKGROUND INFORMATION
Investment Objectives & Policies
American Century Investments offers 41 fixed-income funds, ranging from money
market funds to long-term bond funds and including both taxable and tax-exempt
funds.
Florida Municipal Funds
The Florida Funds seek to obtain as high a level of current income exempt
from regular federal income tax as is consistent with prudent investment
management and conservation of shareholders' capital. In addition, fund shares
are intended to be exempt from the Florida intangibles tax. Each Florida fund
will invest at least 65% of its net assets in Florida municipal obligations. The
remaining 35% of net assets may be invested in (1) obligations issued by other
states and their political subdivisions and (2) U.S. government securities.
Florida Municipal Money Market Fund, which was established on April 11, 1994,
may be appropriate for investors seeking share price stability who can accept
the lower yields that short-term obligations typically provide.
The fund invests in high-quality municipal obligations with remaining
maturities of 13 months or less and maintains a dollar-weighted average maturity
of 90 days or less.
Florida Intermediate-Term Municipal Fund, which was established on April 11,
1994, invests primarily in intermediate-term Florida municipal obligations with
maturities of four or more years and maintains a weighted average portfolio
maturity of five to ten years.
Comparative Indices
The index listed below is used in the report to serve as a comparison for the
performance of a fund. It is not an investment product available for purchase.
The Lehman 5-Year Municipal General Obligation Index is a municipal bond
index composed of more than 11,000 bonds with maturities of four to six years.
The bonds are rated BBB or higher by Standard & Poor's, with an average rating
of AA. The average maturity of the index is five years.
Lipper Rankings
Lipper Analytical Services, Inc. is an independent mutual fund ranking
service. 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 funds in Lipper's States Tax-Exempt Money Market Funds category invest in
high-quality municipal obligations with dollar-weighted average maturities of
less than 90 days.
The funds in Lipper's Florida Intermediate Municipal Debt Funds category
invest at least 65% of assets in municipal debt issues which are exempt from
taxation in Florida, with dollar-weighted average maturities of 5 to 10 years.
PORTFOLIO MANAGEMENT TEAM
Vice President & Senior
Municipal Portfolio Manager Dave MacEwen
Municipal Portfolio Manager Bryan Karcher
Municipal Credit Research Manager Steven Permut
Credit Analysts Scott Lord, Bill McClintock
24 Background Information American Century Investments
GLOSSARY
Returns
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.
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.
Bond Portfolio Structures
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 the yield curve is moving from steep to
flat. (Short-term rates are rising faster than long-term rates, or long-term
rates are falling faster than short-term rates.)
Bullet Structure--a structure that clusters a portfolio's bond maturities
around a single maturity (usually an intermediate-term maturity). This structure
tends to perform best when the yield curve is moving from flat to steep.
(Long-term rates are rising faster than short-term rates, or short-term rates
are falling faster than long-term rates.)
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, and it provides a regular schedule of maturing
securities.
Investment Terms
Basis Point--a basis point equals one one-hundredth of a percentage point (or
0.01%). Therefore, 100 basis points equals one percentage point (or 1%).
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.
Most "normal" yield curves start in the lower left corner of the graph and rise
to the upper right corner, indicating that yields rise as maturities lengthen.
This upward sloping yield curve illustrates a normal risk/return
relationship--more return (yield) for more risk (a longer maturity). Conversely,
a "flat" yield curve provides little or no extra return for taking on more risk.
Statistical Terminology
Average Duration--measures the interest rate sensitivity of a bond portfolio.
Specifically, average duration represents the approximate percentage change in
the value of a bond portfolio if interest rates move up or down by one
percentage point. Therefore, longer portfolio durations typically mean greater
sensitivity to changes in interest rates.
Market Value--the market value of a fund's investments on a given date.
Number of Issues--the number of different securities issuances held by a fund on
a given date.
Weighted Average Maturity--measures the average amount of time until the
securities in a bond portfolio mature, weighted by dollar amount.
Types of Municipal Securities
General Obligation (GO) Bonds--securities backed by the taxing power of the
issuer.
Municipal Commercial Paper (CP)--high-grade short-term securities backed by a
line of credit from a bank.
Prerefunded Bonds--securities refinanced 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.
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).
Variable-Rate Demand Notes (VRDNs)--securities that track market interest
rates and stabilize their market values using periodic (daily or weekly)
interest rate adjustments.
Semiannual Report Glossary 25
[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 Municipal Trust
Investment Manager
Benham Management Corporation
Mountain View, California
This report and the financial statements contained herein 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.
9701 [recycled logo]
SH-BKT-6151 Recycled
[Book Three]
SEMIANNUAL REPORT
NOVEMBER 30, 1996
[american century logo]
American
Century(sm)
BENHAM
GROUP
Tax-Free Money Market
Intermediate-Term Tax-Free
Long-Term Tax-Free
[front cover]
TABLE OF CONTENTS
Report Highlights ..................................1
Our Message to You .................................2
Period Overview ....................................3
Municipal Credit Overview ..........................4
Tax-Free Money Market
Performance Information .......................5
Management Q & A ..............................6
Schedule of Investments .......................8
Financial Highlights .........................31
Intermediate-Term Tax-Free
Performance Information ......................11
Management Q & A .............................12
Schedule of Investments ......................15
Financial Highlights .........................32
Long-Term Tax-Free
Performance Information ......................18
Management Q & A .............................19
Schedule of Investments ......................22
Financial Highlights .........................33
Statements of Assets and Liabilities ..............25
Statements of Operations ..........................26
Statements of Changes in Net Assets ...............27
Notes to Financial Statements .....................28
Background Information
Investment Philosophy & Policies .............36
Comparative Indices ..........................36
Lipper Rankings ..............................36
Glossary ..........................................37
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, American Century funds have
been divided 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 GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Tax-Free Money Market
Intermediate-Term Tax-Free
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 modest, non-inflationary pace during the
twelve months ended November 30, 1996. As a result, the U.S. Federal
Reserve has held short-term interest rates steady since February 1996.
o Municipal securities (munis) performed favorably during the six months
ended November 30, 1996. Low issuance supported munis by damping market
volatility and keeping bond prices relatively stable.
Credit Review
o Improving economic conditions helped many municipalities to credit rating
upgrades, which outpaced downgrades by better than a 3-to-1 margin during
1996.
o Regionally, the West, Southwest and Rocky Mountain states are experiencing
the strongest economic growth; the Midwest is steady; while the Northeast
and Great Lakes regions are lagging.
o General obligation bonds are benefiting from this strong economic growth;
however, welfare reform may pose a long-term credit concern for states and
their municipalities.
Tax-Free Money Market
o The fund slightly outperformed its Lipper peer group average for the six
months ended November 30, 1996.
o Beginning January 1, 1997, the fund will be able to invest up to 20% of its
assets in securities subject to the federal alternative minimum tax. The
change should allow greater flexibility in the management of the fund.
o Going forward, depending on the interest rate outlook, we may extend the
fund's average maturity after late January, when muni money market yields
typically rise.
Intermediate-Term Tax-Free
o The fund performed in line with its Lipper peer group average for the six
months ended November 30, 1996.
o Beginning January 1, 1997, the fund will be able to invest in bonds across
the entire investment-grade spectrum. The fund will also be able to invest
up to 20% of its assets in securities subject to the federal alternative
minimum tax.
o Going forward, we will likely maintain the fund's neutral posture,
adjusting the fund's average maturity as conditions warrant.
Long-Term Tax-Free
o The fund outperformed its Lipper peer group for the six months ended
November 30, 1996.
o Beginning January 1, 1997, the fund will be able to invest in bonds across
the entire investment-grade spectrum. The fund will also be able to invest
up to 20% of its assets in securities subject to the federal alternative
minimum tax.
o Going forward, we will likely maintain the fund's neutral posture,
adjusting the fund's average maturity as conditions warrant.
Tax-Free
Money Market
Total Returns:AS OF 11/30/96
6 Months 1.45%*
1 Year 3.00%
Net Assets: $91.1 million
(AS OF 11/30/96)
Inception Date: 7/31/84
Ticker Symbol: BNTXX
Intermediate-Term
Tax-Free
Total Returns:AS OF 11/30/96
6 Months 4.86%*
1 Year 4.93%
Net Assets: $64.6 million
(AS OF 11/30/96)
Inception Date: 7/31/84
Ticker Symbol: BNTIX
Long-Term
Tax-Free
Total Returns:AS OF 11/30/96
6 Months 6.54%*
1 Year 4.62%
Net Assets: $56.9 million
(AS OF 11/30/96)
Inception Date: 7/31/84
Ticker Symbol: BTFLX
* Not annualized.
Semiannual Report Report Highlights 1
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
The six months ended November 30, 1996, were eventful, both in the U.S. bond
market and at our company. After a rocky period in the first half of 1996, bonds
stabilized during the summer and enjoyed a rebound in October and November. In
the following pages, our investment management team provides further details
about the market and how your fund was managed during the period.
Changing market conditions underscore the importance of quality investments.
Our commitment to quality securities is exemplified by our municipal credit
research team. The three members of the team carry out in-depth analysis on all
securities considered for purchase by American Century municipal money market
and bond funds. The team recently established a new credit management system
that defines investment limits to cap our funds' exposure to individual issuers,
sectors or regions.
On the corporate front, we completed the operational integration of Twentieth
Century and The Benham Group in September. 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 as 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 Tax-Free funds
(formerly known as the National Tax-Free funds) will remain in the Benham Group,
reflecting their continued adherence to the fixed-income investment approach
that we have employed for years.
This report is the first in 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
James E. Stowers III
President and Chief Executive Officer
American Century Companies
/s/James M. Benham
James M. Benham
Vice Chairman
American Century Companies
2 Our Message To You American Century Investments
PERIOD OVERVIEW
U.S. Economy
During the six months ended November 30, 1996, the U.S. economy continued to
rebound from slow growth during 1995 and early 1996. An improving retail sector,
surging auto sales and a resilient housing market helped the economy expand at
an impressive 4.7% annual rate in the second quarter of 1996. The economy
remained strong throughout the summer as healthy employment growth sent the
national unemployment rate to a six-year low of 5.1% by August. However, this
trend appeared to reverse itself late in the period-- third-quarter economic
growth slowed to a more sedate 2.1% annual pace.
In spite of the second-quarter surge in growth, inflation remained tame. From
the start of 1996 through November, inflation (as measured by the consumer price
index) grew at an annual rate of 3.3%. In light of this lack of inflationary
pressure, the Fed held short-term interest rates steady throughout the six-month
period.
U.S. Municipal Bond Market
Overall, the six-month period ended November 30, 1996, was a favorable one
for municipal bonds (munis). The accompanying muni yield curve graph depicts how
the muni yield curve shifted lower throughout the period. Although munis traded
listlessly throughout the summer, reflecting the market's uncertainty about the
strength of the U.S. economy, munis outperformed Treasury securities (Treasurys)
between mid-June and late August. By late September, the outlook for munis began
to change. Continued signs of low inflation, stable monetary policy, and
expectations of a status quo election year ignited a substantial rebound in the
market, which continued through October and November. As is often the case when
interest rates are falling rapidly, munis underperformed Treasurys.
Muni yields declined significantly during the six-month period. Yields on
shorter-term munis fell more than 30 basis points, while yields on longer-term
munis dropped by about 50 basis points.
Historically low issuance of new munis, especially among shorter-maturity
securities, continued to support muni prices. While 1996 muni issuance through
November was slightly higher than 1995 levels, the limited supply helped dampen
market volatility and keep prices relatively stable. Although some muni
refunding activity occurred when interest rates fell late in the period, the
refundings had little impact on bond prices.
Looking forward, more recent data has provided enough conflicting evidence to
cause considerable uncertainty about the rate of U.S. economic growth. Despite
this concern, there are many positive factors working in munis' favor. One is
muni issuance, which should remain at historically low levels in the near term.
Barring a significant decrease in interest rates, muni refundings should also
remain tame. In addition, the reduced likelihood of major tax reform and the
possibility for further reductions to the budget deficit improve the outlook for
munis.
[line graph - data below]
Municipal Yield Curve
Years 11/29/96 8/26/96 6/14/96
1 3.46% 3.8% 3.76%
2 3.76 4.05 4.25
3 3.96 4.25 4.47
4 4.08 4.4 4.62
5 4.18 4.5 4.74
6 4.28 4.6 4.84
7 4.38 4.7 4.94
8 4.48 4.8 5.04
9 4.58 4.9 5.14
10 4.68 5 5.24
11 4.768 5.082 5.33
12 4.856 5.164 5.42
13 4.944 5.246 5.51
14 5.032 5.328 5.6
15 5.12 5.41 5.69
16 5.148 5.444 5.724
17 5.176 5.478 5.758
18 5.204 5.512 5.792
19 5.232 5.546 5.826
20 5.26 5.58 5.86
21 5.268 5.588 5.868
22 5.276 5.596 5.876
23 5.284 5.604 5.884
24 5.292 5.612 5.892
25 5.3 5.62 5.9
26 5.304 5.624 5.904
27 5.308 5.628 5.908
28 5.312 5.632 5.912
29 5.316 5.636 5.916
30 5.32 5.64 5.92
Semiannual Report Period Overview 3
MUNICIPAL CREDIT OVERVIEW
U.S. economic growth rebounded in 1996. Retail sales improved steadily, home
sales remained robust and surging employment growth kept the national
unemployment rate at a relatively low 5.3% in December. These favorable economic
trends led to further improvements in municipal credit quality. Credit upgrades
outpaced downgrades by more than 3 to 1 during 1996. This contrasts with 1995,
when downgrades outnumbered upgrades.
Regionally, the Rocky Mountain states and the Southwest continued to display
the strongest economic growth in the nation, and this strength has now extended
to the West Coast (see the accompanying map). California has fully recovered
from the economic downturn it suffered in the early 1990s, and the state's
economy is now growing at a rate faster than the nation as a whole. The
southeastern part of the country also remains strong, while the Midwest is
growing at a relatively steady pace. The only lagging regions are the Northeast,
the Great Lakes areas and Louisiana, but even these regions have seen improved
economic conditions in 1996.
The stronger economic environment has been favorable for general obligation
(GO) bonds and other forms of tax-supported debt, which have benefited from
increased tax revenues. However, pending federal policy decisions related to
health and welfare may pose longer-term concerns for state and local
governments. Among other specific sectors, health care issues have continued to
suffer credit pressures due to a widespread trend toward managed care.
Competition and deregulation have also begun to impact the credit quality of
many public power issues.
It's important to note that this analysis provides only a glimpse of broad
trends within the municipal market. While sector analysis remains an important
element in municipal research, growing market complexity and issue disparities
point to a continuing need for thorough case-by-case credit analysis.
[picture of U. S. map]
CREDIT QUALITY TRENDS
(U.S. map)
Improving:
Arizona
California
Colorado
Georgia
Idaho
Mississippi
Nevada
North Carolina
Oregon
South Carolina
Texas
Tennessee
Utah
Virginia
Washington
Wisconsin
Stable:
(all other states)
4 Municipal Credit Overview American Century Investments
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET
7-DAY 7-DAY 7-DAY TAX-EQUIVALENT YIELDS
CURRENT EFFECTIVE 28% 31% 36% 39.6%
YIELD YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
CURRENT YIELD (as of November 30, 1996)
<S> <C> <C> <C> <C> <C> <C>
Tax-Free Money Market 2.96% 3.01% 4.11% 4.29% 4.63% 4.90%
6 MONTHS(2) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
AVERAGE ANNUAL RETURNS (as of November 30, 1996)(1)
Tax-Free Money Market .................... 1.45% 3.00% 2.85% 2.62% 3.80%
Average Tax-Exempt Money Market Fund(3) .. 1.43% 2.96% 2.83% 2.63% 3.76%
Fund's Ranking Among Tax-Exempt
Money Market Funds(4) .................... -- 60 out of 132 53 out of 111 45 out of 91 20 out of 57
(1) Returns are defined in the Glossary on page 37.
(2) Not annualized.
(3) According to Lipper Analytical Services. See page 36 for more information about Lipper and the fund's category.
(4) Rankings determined by Lipper based on average annual returns for the periods indicated.
</TABLE>
PORTFOLIO AT A GLANCE
11/30/96 5/31/96
Number of Issues 48 58
Weighted Average Maturity 43 days 42 days
Expense Ratio 0.68%* 0.65%
* Annualized.
See the Glossary on page 37.
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.
Semiannual Report Tax-Free Money Market 5
TAX-FREE MONEY MARKET
Management Q & A
An interview with Bryan Karcher, a municipal portfolio manager on the
Tax-Free Money Market management team.
How did the fund perform?
The fund performed slightly above average compared to its peers, returning
1.45% for the six months ended November 30, 1996, compared to the 1.43% average
return for the 134 "Tax-Exempt Money Market Funds" tracked by Lipper Analytical
Services. For the fiscal year ended November 30, 1996, the Fund returned 3.00%
compared to the 2.96% average return of its Lipper peers.
How was the fund positioned during the six-month period?
Due to recurring uncertainty about the outlook for short-term interest rates
over the period, the fund was positioned fairly conservatively in comparison to
its peers. We kept its average maturity steady at around 42 days (about 11 days
short of its peer-group average). During the period, yields on one-year
municipal securities fluctuated within a range of about 3.55% to 3.95% as the
interest rate outlook shifted in response to changing economic data. We watched
for opportunities to add yield to the fund by buying one-year paper whenever
rates moved toward the higher end of this range.
Typically, sometime between May and November, the fund's holdings of commercial
paper drop significantly, while holdings of variable-rate demand notes (VRDNs)
increase. Why?
In June and July, many municipal money market issues mature, resulting in
large amounts of cash that need to be reinvested. The resulting surge in demand
drives muni prices up and yields down. To prepare for this period, we typically
buy significant amounts of commercial paper in May to lock in more attractive
yields and help to tide the fund over this "technical period." As year's end
approaches, we allow the fund's weighting of commercial paper to decrease and
invest more of its assets in highly liquid daily and weekly VRDNs, whose yields
typically move higher at that time.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/96)
VRDNs 73%
Municipal Notes 10%
Commercial Paper 9%
Bonds less than 1 Year 8%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/96)
VRDNs 56%
Commercial Paper 20%
Bonds less than 1 Year 12%
Municipal Notes 9%
Other 3%
Investment terms are defined in the Glossary on page 37.
6 Tax-Free Money Market American Century Investments
TAX-FREE MONEY MARKET
As of January 1, 1997, the fund will be able to invest up to 20% of its assets
in securities that are subject to the federal government's alternative minimum
tax (AMT). What was the motive behind the change?
The ability to buy AMT paper will provide much greater flexibility in
managing the fund, giving us a significantly wider range of securities in which
to invest. Another advantage is that AMT paper offers slightly higher
yields--typically around 10 basis points more than non-AMT paper. This should
help improve the fund's yield slightly--though not significantly, because of the
20% limit.
Looking at things from a geographic standpoint, are there any areas of the
country or any specific states whose bonds you find particularly attractive?
We do tend to buy more from some states than from others. One example is
Texas, whose bonds tend to be more liquid than many other munis due to a large
amount of issuance by the state. There are also certain states that we tend to
underweight in the portfolio, such as the so-called "specialty" states of New
York, New Jersey and California. High state income tax levels in these states
make munis more attractive to investors, resulting in lower yields than those
offered by other states' munis.
What are your plans for the fund going forward?
We plan to keep an eye out for AMT securities that we can add to the fund's
portfolio to boost its yield. Depending on the interest rate outlook, we may
begin looking to extend the fund's average maturity somewhat after the end of
January, when muni yields have rebounded from the "January effect." This is a
seasonal drop in muni money market yields which typically occurs in January when
demand for these securities surges. One catalyst for surging demand is the large
amount of coupon payments that occur in January, most of which are reinvested in
the muni market. Another source of demand is corporations, who buy back munis
that they sold in December for Treasurys in order to dress up their portfolios
for year-end review.
[pie charts]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/96)
SP1+ 79%
SP1 21%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/96)
SP1+ 83%
SP1 17%
Semiannual Report Tax-Free Money Market 7
SCHEDULE OF INVESTMENTS
TAX-FREE MONEY MARKET
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES
Alaska--1.0%
$ 890 Alaska Industrial Development and
Export Auth. Rev., (Anchorage Fueling
Project), VRDN, 3.95%, 12-4-96
(LOC: Industrial Bank of Japan) $ 890
------
ARIZONA--1.1%
1,000 East Valley Institute of Technology
District No. 401, Series 1994 B,
4.00%, 7-1-97 (AMBAC) 1,000
------
CALIFORNIA--5.8%
2,300 California Pollution Control Financing
Auth. Rev., Series A, (Southern
California Edison), VRDN,
4.25%, 12-2-96 (LOC: Credit
Lyonnais) 2,300
1,950 California Rev. Anticipation Notes,
Series A, 4.50%, 6-30-97 1,956
1,000 California Student Loan Program Rev.,
Series A, VRDN, 3.60%, 12-5-96
(LOC: Dresdner Bank, AG) 1,000
-----
5,256
-----
COLORADO--5.0%
1,000 Colorado Tax and Rev. Anticipation
Notes, Series A, 4.50%, 6-27-97 1,003
3,500 Denver Multi-Family Housing Rev.,
Series A, (Cottonwood Creek
Project), VRDN, 3.75%, 12-3-96
(LOC: GE Capital Corp.) 3,500
-----
4,503
-----
DISTRICT OF COLUMBIA--3.3%
2,000 District of Columbia Rev., (Abraham
and Laura Lisner Project), VRDN,
3.60%, 12-4-96 (LOC:
NationsBank of Georgia) 2,000
1,000 District of Columbia Rev., (American
University), VRDN, 3.55%, 12-4-96
(LOC: National Westminster Bank) 1,000
-----
3,000
-----
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
FLORIDA--19.7%
$ 4,000 Alachua County Health Facility, VRDN,
3.50%, 12-4-96 (MBIA) (SBBPA:
Suntrust Bank Central Florida) $ 4,000
1,250 Broward County Housing Finance Auth.
Multi-Family Housing Rev., Series A,
(Palmaire-Oxford), VRDN, 3.80%,
12-4-96 (SBBPA: Continental
Casualty Co.) 1,250
3,000 Florida Housing Finance Agency,
(Village Place Project), VRDN,
3.60%, 12-4-96 (LOC: Chemical
Bank) 3,000
1,500 Florida Housing Finance Agency Rev.,
(Oaks at Mill Creek Project), VRDN,
3.60%, 12-4-96 (LOC: Chemical
Bank) 1,500
2,000 Florida Housing Finance Agency Rev.,
(Country Club Apartments), VRDN,
4.15%, 12-2-96 (LOC: Northern
Trust Corp.) 2,000
4,000 Florida Housing Finance Agency Rev.,
(Beville-Oxford), VRDN, 3.80%,
12-4-96 (SBBPA: Continental
Casualty Co.) 4,000
2,000 Jacksonville Electric Rev. Commercial
Paper, 3.50%, 1-24-97 (SBBPA:
Morgan Guaranty Trust) 2,000
------
17,750
------
GEORGIA--2.0%
1,800 Cobb County Multi-Family Housing
Rev., (Pittco Frey Association), VRDN,
3.65%, 12-4-96 (LOC: GE Capital
Corp.) 1,800
-----
HAWAII--1.5%
1,300 Hawaii State Housing Finance and
Development Corporation Rev.,
(Affordable Rental Housing), VRDN,
3.70%, 12-4-96 (LOC: Barclay's
Bank) 1,300
-----
See Notes to Financial Statements
8 Tax-Free Money Market American Century Investments
SCHEDULE OF INVESTMENTS
TAX-FREE MONEY MARKET
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
ILLINOIS--10.0%
$ 1,625 Bartlett Multi-Family Housing Rev.,
Series A, (Barlett Square Apartments),
VRDN, 3.55%, 12-5-96 (LOC:
LaSalle National Bank) $1,625
1,400 Chicago Rev., Series A, (O'Hare
International Airport), VRDN,
12-2-96 (LOC: Westdeutsche
Bank) 1,400
2,000 Illinois Health Facility Auth. Rev.,
(Franciscan Elder Care), VRDN,
3.60%, 12-4-96 (LOC: LaSalle
National Bank) 2,000
4,000 Illinois Development Finance Auth.,
VRDN, 3.55%, 12-6-96 (LOC:
Northern Trust Corp.) 4,000
-----
9,025
-----
INDIANA--1.7%
1,000 Huntington Economic Development
Rev., (Allied Signal Inc. Project),
VRDN, 3.70%, 12-4-96 (LOC:
Allied Signal, Inc.) 1,000
500 Lawrenceburg Multi-School Building
Corporation Rev., 4.00%, 8-1-97
(FSA) 500
---
1,500
-----
IOWA--1.1%
1,000 Iowa School Corporation Warrant
Certificates, Series B, 4.25%,
1-30-97 (FSA) 1,001
-----
KANSAS--2.2%
2,000 Burlington Pollution Control Rev.,
Series 1985 A, Commercial Paper,
3.65%, 1-14-97 (LOC: Toronto
Dominion Bank) 2,000
-----
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
KENTUCKY--3.8%
$ 1,000 Kentucky State Property and
Buildings Rev., (Project No. 50),
(Escrowed to Maturity), 6.20%,
2-1-97(1) $1,005
2,400 Mayfield Multi-City Lease Rev., VRDN,
3.70%, 12-4-96 (LOC: PNC Bank) 2,400
-----
3,405
-----
LOUISIANA--3.1%
800 Louisiana Public Facility Auth. Rev.,
(Green Briar Hospital), VRDN,
3.60%, 12-4-96 (LOC: Societe
Generale) 800
2,000 Calcasieu Parish Sales Tax District
No. 4-A Sales and Use Tax, VRDN,
3.65%, 12-5-96 (LOC: National
Westminster Bank) 2,000
-----
2,800
-----
MASSACHUSETTS--1.1%
1,000 Massachusetts Bay Transportation
Auth. Rev., 3.625%, 3-1-97 (LOC:
State Street Bank) 1,000
-----
MICHIGAN--4.3%
1,900 Dearborn Economic Development
Corporation Rev., VRDN, 3.65%,
12-4-96 (LOC: Mellon Bank) 1,900
2,000 Michigan Hospital Finance Auth. Rev.,
Series A, (St. Mary Hospital of
Livonia), VRDN, 3.65%, 12-4-96,
(LOC: Comerica Bank) 2,000
-----
3,900
-----
MINNESOTA--2.2%
2,000 Rosemount Independent School District
GO, Series B, 5.50%, 2-1-97 (FGIC) 2,007
-----
See Notes to Financial Statements
Semiannual Report Tax-Free Money Market 9
SCHEDULE OF INVESTMENTS
TAX-FREE MONEY MARKET
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
MISSOURI--3.9%
$ 1,500 Kansas City Industrial Development
Auth. Multi-Family Housing Rev.,
(Willow Creek IV Apartments), VRDN,
3.55%, 12-4-96 (FNMA Collateral) $1,500
2,000 Saint Charles County Industrial
Development Auth. Rev., (Sun River
Apartments Project), VRDN, 3.60%,
12-5-96 (LOC: Bank of America) 2,000
-----
3,500
-----
MONTANA--2.2%
2,000 Montana Tax and Rev. Anticipation
Notes, 4.50%, 6-27-97 2,009
-----
NEW MEXICO--1.1%
1,000 Santa Fe Gross Receipts Tax Rev.
Refunding, Series A, 3.90%, 6-1-97
(AMBAC) 1,000
-----
NEW YORK--1.1%
1,000 New York City GO, Series B, VRDN,
4.25%, 12-2-96 (FGIC) 1,000
-----
OHIO--2.8%
2,500 Ohio Air Quality Development Auth.
Pollution Control Rev., Series
1988 B, 3.60%, 12-20-96 (FGIC) 2,500
-----
SOUTH CAROLINA--4.5%
4,000 Berkeley County Pollution Control Rev.
Refunding, VRDN, 3.60%, 12-5-96
(LOC: Royal Bank of Canada) 4,000
-----
TENNESSEE--2.2%
2,000 Chattanooga Industrial Development
Rev., (Market Street Limited Project),
VRDN, 3.55%, 12-4-96 (LOC:
Credit Suisse) 2,000
-----
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
TEXAS--12.2%
$ 575 Arlington Hospital Auth. Rev.,
(Arlington Memorial Hospital),
5.50%, 12-1-97 (FSA) $ 585
780 Houston Water and Sewer System
Rev., 8.00%, 12-1-97, Prerefunded
at 102% of Par(1) 827
4,000 Tarrant County Housing Finance
Corporate Rev., (Multi-Family
Housing-SF Apartments), VRDN,
3.55%, 12-4-96 (LOC: Suntrust
Bank, Nashville) 4,000
3,000 Texas Tax and Rev. Anticipation Notes,
4.75%, 8-29-97 3,018
2,500 Waller County Industrial Development
Rev., (Tubular Steel Project), VRDN,
3.60%, 12-4-96 (LOC: Wachovia
Bank) 2,500
-----
10,930
------
WASHINGTON--1.1%
1,000 Seattle Water System Rev., VRDN,
3.55%, 12-4-96 (LOC: Bayerische
Landesbank) 1,000
-----
TOTAL INVESTMENT SECURITIES--100.0% $90,076
=======
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
FGIC = Financial Guaranty Insurance Company
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 November 30, 1996.
(1) Escrowed in U.S. Government Securities.
See Notes to Financial Statements
10 Tax-Free Money Market American Century Investments
<TABLE>
<CAPTION>
INTERMEDIATE-TERM TAX-FREE
30-DAY 30-DAY TAX-EQUIVALENT YIELDS
SEC 28% 31% 36% 39.6%
YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
CURRENT YIELD (as of November 30, 1996)
<S> <C> <C> <C> <C> <C>
Intermediate-Term Tax-Free 4.08% 5.67% 5.91% 6.38% 6.75%
6 MONTHS(2) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
AVERAGE ANNUAL RETURNS (as of November 30, 1996)(1)
Intermediate-Term Tax-Free 4.86% 4.93% 4.83% 6.51% 6.48%
Lehman 5-Year General Obligation(3) 4.74% 5.37% 5.34% 6.58% 6.48%
Average Intermediate Municipal
Debt Fund(4) 4.87% 4.71% 5.03% 6.51% 6.65%
Fund's Ranking Among Intermediate
Municipal Debt Funds(5) -- 44 out of 135 52 out of 83 15 out of 33 11 out of 17
(1) Returns are defined in the Glossary on page 37.
(2) Not annualized.
(3) See page 36 for more information about the fund's comparative index.
(4) According to Lipper Analytical Services. See page 36 for more information about Lipper and the fund's category.
(5) Rankings determined by Lipper based on average annual returns for the periods indicated.
</TABLE>
[mountain graph - data below]
GROWTH OF $10,000 OVER A 10-YEAR PERIOD
$10,000
investment
made 11/30/86
Intermediate-Term Tax-Free Lehman 5-Year GO
11/30/86 $10000 $10000
12/31/86 9950 9969
1/31/87 10183 10162
2/28/87 10248 10254
3/31/87 10186 10196
4/30/87 9729 9894
5/31/87 9759 9893
6/30/87 9962 10102
7/31/87 10146 10219
8/31/87 10129 10238
9/30/87 9759 9894
10/31/87 9852 10040
11/30/87 10048 10160
12/31/87 10174 10272
1/31/88 10483 10525
2/29/88 10571 10632
3/31/88 10492 10591
4/30/88 10573 10688
5/31/88 10515 10559
6/30/88 10569 10636
7/31/88 10623 10684
8/31/88 10621 10653
9/30/88 10731 10757
10/31/88 10853 10850
11/30/88 10781 10793
12/31/88 10849 10822
1/31/89 10975 10978
2/28/89 10872 10861
3/31/89 10820 10792
4/30/89 11006 10977
5/31/89 11192 11177
6/30/89 11283 11299
7/31/89 11445 11464
8/31/89 11379 11419
9/30/89 11366 11425
10/31/89 11462 11435
11/30/89 11646 11580
12/31/89 11748 11675
1/31/90 11778 11680
2/28/90 11832 11767
3/31/90 11786 11731
4/30/90 11730 11693
5/31/90 11971 11906
6/30/90 12076 11994
7/31/90 12236 12136
8/31/90 12071 12095
9/30/90 12104 12120
10/31/90 12342 12299
11/30/90 12538 12476
12/31/90 12553 12522
1/31/91 12777 12706
2/28/91 12872 12822
3/31/91 12855 12792
4/30/91 13012 12952
5/31/91 13100 13018
6/30/91 13067 13016
7/31/91 13173 13146
8/31/91 13351 13315
9/30/91 13556 13479
10/31/91 13657 13581
11/30/91 13676 13624
12/31/91 14015 13930
1/31/92 14024 13957
2/29/92 13973 13966
3/31/92 13918 13919
4/30/92 14032 14042
5/31/92 14184 14168
6/30/92 14423 14372
7/31/92 14879 14749
8/31/92 14653 14638
9/30/92 14797 14730
10/31/92 14650 14682
11/30/92 14890 14860
12/31/92 15022 14963
1/31/93 15247 15125
2/28/93 15755 15519
3/31/93 15467 15343
4/30/93 15613 15442
5/31/93 15640 15496
6/30/93 15892 15706
7/31/93 15837 15717
8/31/93 16175 15930
9/30/93 16381 16045
10/31/93 16412 16069
11/30/93 16274 16023
12/31/93 16550 16242
1/31/94 16747 16395
2/28/94 16327 16088
3/31/94 15925 15729
4/30/94 15986 15888
5/31/94 16098 15977
6/30/94 16053 15941
7/31/94 16265 16114
8/31/94 16318 16192
9/30/94 16151 16070
10/31/94 15971 15980
11/30/94 15756 15878
12/31/94 15971 16018
1/31/95 16229 16171
2/28/95 16542 16406
3/31/95 16690 16667
4/30/95 16769 16712
5/31/95 17128 17078
6/30/95 17130 17091
7/31/95 17311 17331
8/31/95 17445 17506
9/30/95 17512 17558
10/31/95 17684 17632
11/30/95 17867 17782
12/31/95 18000 17880
1/31/96 18208 18092
2/29/96 18160 18031
3/31/96 17913 17935
4/30/96 17905 17908
5/31/96 17878 17887
6/30/96 17962 18013
7/31/96 18160 18133
8/31/96 18167 18170
9/30/96 18309 18307
10/31/96 18486 18477
11/30/96 18744 18734
Value on 11/30/96
Intermediate-
Term Tax-Free
$18,744
Lehman
5-Year GO
$18,734
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 index's total return line does not.
PORTFOLIO AT A GLANCE
11/30/96 5/31/96
Number of Issues 57 54
Weighted Average Maturity 7.23 years 7.15 years
Average Duration 5.33 years 5.44 years
Expense Ratio 0.67%* 0.70%
* Annualized.
See the Glossary on page 37.
Semiannual Report Intermediate-Term Tax-Free 11
INTERMEDIATE-TERM TAX-FREE
Management Q&A
An interview with Joel Silva, a municipal portfolio manger on the
Intermediate-Term Tax-Free fund management team.
How did the fund perform?
The fund performed in line with its peers. For the six months ended November
30, 1996, the fund's total return was 4.86%, compared with the 4.87% average
return of the 142 "Intermediate Municipal Debt Funds" tracked by Lipper
Analytical Services over the same period. However, the fund's one-year return
for the period ended November 30, 1996, was 4.93%, exceeding the 4.71% average
annual return of its peers. (See the Average Annual Returns table on the
previous page.)
What are some of the factors that contributed to the fund's performance during
the period?
One contributing factor was the fund's large contingent of premium
noncallable bonds, which performed even better than we had expected. (Premium
bonds are bonds that trade at prices above face value because their interest
coupons are higher than the prevailing market interest rate.) Noncallable bonds
cannot be repurchased by the issuer prior to maturity and replaced with
lower-yielding securities if interest rates decline. We sold many of these
premium noncallable bonds near the end of the period at a substantial profit.
In addition, the fund's returns were enhanced by our strong credit research
staff, which accurately assessed many specific credit situations throughout the
U.S. Thanks to our credit team's diligent work, we purchased many undervalued
securities that subsequently appreciated in value.
[bar graph - data below]
INTERMEDIATE-TERM TAX-FREE FISCAL YEAR-BY-YEAR RETURNS (Periods ended May 31)
Intermediate-Term Tax-Free Lehman Five-Year General Obligation
'87 6.03% 6.7%
'88 7.75 6.73
'89 6.44 5.85
'90 6.95 6.53
'91 9.43 9.34
'92 8.28 8.83
'93 10.26 9.38
'94 2.93 3.1
'95 6.4 6.89
'96 4.38 4.74
This chart illustrates the historical year-by-year volatility of the fund's
returns over the previous 10 years. The fund's total returns include operating
expenses, while the index's returns do not.
See page 36 for a definition of the fund's comparative index.
12 Intermediate-Term Tax-Free American Century Investments
INTERMEDIATE-TERM TAX-FREE
Why and how did you change the fund's position over the past six months?
During the second quarter of 1996, we began to shorten the fund's average
maturity as evidence of a strengthening economy caused the market to sell off.
By the end of May, the average maturity was down to 7.15 years, and it remained
close to that mark through the end of the period. While shortening the fund's
average maturity, we sold some longer discount bonds and used the proceeds to
purchase premium noncallable bonds. (Discount bonds are bonds that trade at
prices below face value because their interest coupons are lower than the
prevailing market interest rate.)
While moving to a more neutral stance, we shifted the fund's portfolio
holdings from a barbell structure to a laddered structure. Though the barbell
benefited the fund during the bond market rally in late 1995 and early 1996, the
laddered structure will allow us to more quickly adjust the fund to changing
market conditions going forward.
In the fund's May 31, 1996 Annual Report, you mentioned that you had purchased
attractively priced California municipal securities. How did those securities
perform?
The fund's California securities performed very well. We purchased some
California munis in the aftermath of the Orange County bankruptcy, when many
California munis were trading at relatively inexpensive prices. While
specifically avoiding Orange County securities, we were able to find a number of
bargains in California while maintaining a high level of credit quality. As
California's economy improved during 1996, these securities appreciated in
value, enhancing the fund's returns.
TOP FIVE STATES (% of fund investments)
As of As of
11/30/96 5/31/96
California 19% Texas 19%
Texas 17% California 18%
Washington 12% Washington 12%
Illinois 6% Illinois 6%
Oklahoma 5% Wisconsin 5%
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/96)
Revenue Bonds 43%
General Obligation 19%
Lease/COPs 12%
Other 26%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/96)
Revenue Bonds 46%
General Obligation 21%
Lease/COPs 10%
Other 23%
Semiannual Report Intermediate-Term Tax-Free 13
INTERMEDIATE-TERM TAX-FREE
Would you explain the recent changes to the fund's investment parameters?
Yes. The fund can now hold bonds across the entire investment-grade
category, which includes securities rated AAA, AA, A and BBB. Previously, the
fund could invest only in securities rated AAA, AA or A. The fund had been at a
competitive disadvantage because of this restriction, so we expanded its credit
criteria to better compete with the fund's peers and provide higher returns for
our shareholders. The change will also allow us to make better use of our strong
credit research team.
In addition, effective January 1, 1997, the fund will be allowed to invest up
to 20% of its assets in "private activity" bonds whose interest income is a tax
preference item under the federal alternative minimum tax (AMT).
What is the outlook for munis going forward?
A spate of recent reports suggesting the economy may have picked up speed
during the fourth quarter makes the inflation outlook uncertain. Consumer
confidence reached a seven-year high in December, while personal income and
spending rose, as did U.S. exports, housing purchases and manufacturing
activity. Although the outlook for bonds in general is rather uncertain, we
expect supply and demand factors to continue to work in munis' favor for the
near future.
Given this outlook, what are your plans for the fund over the next six months?
We will likely maintain the fund's neutral posture, lengthening or shortening
the fund's average maturity and duration in a narrow range when appropriate. If
the economic outlook does change dramatically, we believe the fund is positioned
to respond appropriately.
[pie charts]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/96)
AAA 68%
AA 18%
A 13%
BBB 1%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/96)
AAA 62%
AA 19%
A 19%
Investment terms are defined in the Glossary on page 37.
14 Intermediate-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
INTERMEDIATE-TERM TAX-FREE
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES
ALABAMA-1.6%
$ 1,000 Alabama Municipal Electric Power Auth.
Rev., 6.10%, 9-1-99 (MBIA) $ 1,052
-----
ALASKA--0.8%
500 Anchorage Hospital Rev., Series 1991,
(Sisters of Providence), 6.50%,
10-1-99 528
---
ARIZONA--0.7%
410 Pinal County Unified School District No.
43 Apache Junction GO, Series A,
6.80%, 7-1-08 (FGIC) 479
---
CALIFORNIA--19.4%
1,250 California Health Facility Auth. Rev.
Refunding, (Sisters of Providence),
6.20%, 10-1-03 (MBIA) 1,372
2,170 California Housing Finance Agency
Rev., 5.60%, 8-1-09 (MBIA) 2,227
1,000 California Public Works Board Lease
Rev., 6.00%, 1-1-05 (AMBAC) 1,093
1,100 California Public Works Board Rev.,
(Various Universities), 6.15%,
11-1-09 1,179
1,060 Ontario Redevelopment Finance Auth.
Special Assessment, (Local Agency
Series A), 5.90%, 9-2-07 (FSA) 1,141
1,100 Sacramento Regional Transportation
Certificates of Participation,
Series A, 6.20%, 3-1-00 1,163
1,000 Sacramento Schools Ins. Auth. Rev.,
Worker's Compensation Program,
Series C, 5.75%, 6-1-03 1,063
1,000 San Bernardino County Certificates of
Participation, 5.75%, 8-1-06 (MBIA) 1,080
1,000 State of California GO, 5.75%,
10-1-10 1,065
1,080 Y/S School Facility Finance Auth. Rev.,
Series 1990, 5.65%, 9-1-06 (MBIA) 1,128
------
12,511
------
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
FLORIDA--2.5%
$ 700 Broward County School District GO,
6.75%, 2-15-00 $ 749
775 Lakeland Electric and Water Rev.
Refunding, Series B, 6.00%, 10-1-09,
(FGIC) 854
---
1,603
-----
GEORGIA--3.5%
2,000 Fulton County Water and Sewer
Rev. Refunding, 6.25%, 1-1-09
(FGIC) 2,237
-----
HAWAII--1.7%
1,000 Hawaii GO, Series A, (Escrowed to
Maturity), 7.00%, 6-1-00 (FGIC)(1) 1,091
-----
ILLINOIS--6.0%
2,000 City of Chicago GO, (Emergency
Telephone), 5.25%, 1-1-04 (FGIC) 2,073
700 City of Chicago Metropolitan Water
Reclamation District GO, 7.25%,
1-1-99, Prerefunded at 100% of
Par(1) 745
1,000 Illinois Education Facility Auth. Rev.,
Series A, (Loyola University), 6.30%,
7-1-98 1,035
30 Metropolitan Pier and Exposition Auth.
Rev., (McCormick Place Project),
(Escrowed to Maturity), 5.20%,
6-15-99(1) 31
-----
3,884
-----
INDIANA--2.3%
500 Indiana University Student Fee Rev.,
Series F, 7.10%, 8-1-97 512
1,000 South Montgomery Industrial Building
Improvement Certificates of
Participation, 4.06%(2), 1-1-98
(AMBAC) 957
---
1,469
-----
MASSACHUSETTS--1.6%
1,000 Massachusetts GO, Series B, 5.40%,
11-1-07 (MBIA) 1,052
-----
See Notes to Financial Statements
Semiannual Report Intermediate-Term Tax-Free 15
SCHEDULE OF INVESTMENTS
INTERMEDIATE-TERM TAX-FREE
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
MICHIGAN--2.4%
$ 1,500 Detroit Water Supply System Rev.,
Series A, 5.30%, 7-1-09 (MBIA) $1,530
-----
NEW JERSEY--1.7%
1,000 New Jersey Transportation Trust
Fund Auth. Rev., Series A, 6.00%,
12-15-05 (MBIA) 1,101
-----
NEW YORK--4.1%
1,000 New York State Thruway Auth. Service
Contract, 5.30%, 4-1-04 1,023
1,000 New York State Urban Development
Corp. Rev., 6.25%, 4-1-05 (MBIA) 1,105
500 New York State Local Government
Assistance, Series A, 6.00%, 4-1-07 542
-----
2,670
-----
NORTH CAROLINA--3.4%
2,000 North Carolina Eastern Municipal
Power Agency Rev., Series 1993,
6.00%, 1-1-06 (FSA) 2,157
-----
OHIO--1.7%
1,000 Ohio State Building Auth. Rev., Series
A, (Correctional Facility), 6.25%,
10-1-00 1,070
-----
OKLAHOMA--4.5%
2,500 Oklahoma Industrial Auth. Health
System Rev. Refunding, Series
1995 C, 7.00%, 8-15-04 (AMBAC) 2,883
-----
PENNSYLVANIA--1.3%
845 Philadelphia Water and Wastewater
Rev., 5.00%, 6-15-12 (FGIC) 822
-----
SOUTH CAROLINA--1.6%
1,000 South Carolina Public Service Rev.,
6.25%, 1-1-00 (AMBAC) 1,058
-----
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
TEXAS--16.8%
$ 115 Austin County GO, 6.75%, 9-1-00,
Prerefunded at Par(1) $ 125
885 Austin County GO, Series C, 6.75%,
9-1-01 959
535 City of Austin Utility System Rev.,
(Escrowed to Maturity), 7.50%,
11-15-98(1) 571
1,500 Harris County Health Facility Memorial
Hospital Rev., (Systems Project),
6.80%, 6-1-01 1,626
1,000 Houston Independent School District
GO, (Guaranteed by Texas Permanent
School Fund), 8.375%, 8-15-98 1,074
1,500 Houston Water and Sewer System Rev.,
5.60%, 12-1-02 (MBIA) 1,595
500 North Texas Higher Education Student
Loan Rev., 6.875%, 4-1-02
(AMBAC) 532
2,000 Texas Municipal Power Agency Rev.,
5.75%, 9-1-02 (MBIA) 2,137
1,000 Texas Public Financing Agency GO,
Series 1995, (Systems Project),
6.50%, 10-1-03 1,120
1,000 Texas Turnpike Auth. Rev., Series
1990 A, 7.00%, 1-1-99, Prerefunded
at 102% of Par, (AMBAC)(1) 1,079
------
10,818
------
UTAH--4.2%
1,600 Utah Housing Finance Agency Single
Family Mortgage Rev., 5.65%,
7-1-06 1,645
1,000 Utah State MFC University Rev., Series
1991, (Utah Hospital), 6.60%,
5-15-00 1,072
-----
2,717
-----
See Notes to Financial Statements
16 Intermediate-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
INTERMEDIATE-TERM TAX-FREE
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
VIRGINIA--1.6%
$ 1,000 Virginia State Public Building Auth. Rev.
Refunding, Series A, 5.70%, 8-1-00$ 1,052
-----
WASHINGTON--12.4%
1,000 Pierce County School District No. 3 GO,
Series B, 5.80%, 12-1-99 1,045
1,000 Pierce County School District #320
GO, 5.75%, 12-1-02 1,060
2,000 Snohomish County Public Utility
District Rev., Series 1993, 5.625%,
1-1-05 (FGIC) 2,114
1,000 Snohomish County School District #15
GO, 6.125%, 12-1-03 1,067
1,000 Washington Public Power Supply
System Rev., (Project #1), 5.50%,
7-1-04 (FGIC) 1,040
1,000 Washington Public Power Supply
System Rev., (Project #1), 7.10%,
7-1-01 (FGIC) 1,102
500 Washington Public Power Supply
System Rev., Series C, 7.00%,
7-1-01 (FGIC) 551
-----
7,979
-----
WISCONSIN--3.4%
1,000 Wisconsin State Health and
Educational Facility Rev., (Aurora
Medical Group), 6.00%, 11-15-10
(FSA) 1,085
1,060 Wisconsin State Health Facility Rev.,
Series B, (Wausau Hospital), 6.30%,
8-15-00 (AMBAC) 1,131
-----
2,216
-----
TOTAL MUNICIPAL SECURITIES--99.2% 63,979
(Cost $60,949) ------
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES
FLORIDA--0.8%
$ 500 University Athletic Association, Inc.
Capital Improvement Rev., (University
of Florida Stadium Project), VRDN,
4.00%, 12-2-96, resets daily, final
maturity 2-1-20 (LOC: Suntrust
Bank Central Florida, N.A.) $ 500
---------
(Cost $500)
TOTAL INVESTMENT SECURITIES--100.0% $ 64,479
(Cost $61,449) =========
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
FGIC = Financial Guaranty Insurance Company
FSA = Financial Security Association
GO = General Obligation
LOC = Letter of Credit
MBIA = Municipal Bond Insurance Association
resets = The frequency with which a fixed-income security's coupon changes,
based on current market conditions or an underlying index. The more
frequently a security resets, the less risk the investor is taking that the
coupon will vary significantly from current market rates.
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is
effective November 30, 1996.
(1) Escrowed in U.S. Government Securities.
(2) 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.
See Notes to Financial Statements
Semiannual Report Intermediate-Term Tax-Free 17
<TABLE>
<CAPTION>
LONG-TERM TAX-FREE
30-DAY 30-DAY TAX-EQUIVALENT YIELDS
SEC 28% 31% 36% 39.6%
YIELD Tax Bracket Tax Bracket Tax Bracket Tax Bracket
CURRENT YIELD (as of November 30, 1996)
<S> <C> <C> <C> <C> <C>
Long-Term Tax-Free 4.70% 6.53% 6.81% 7.34% 7.78%
6 MONTHS(2) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
AVERAGE ANNUAL RETURNS (as of November 30, 1996)(1)
Long-Term Tax-Free 6.54% 4.62% 5.15% 7.94% 6.82%
Lehman Long-Term
Municipal Bond(3) 8.25% 6.68% 6.49% 8.80% 8.00%
Average General Municipal
Debt Fund(4) 6.15% 4.91% 4.98% 7.36% 7.22%
Fund's Ranking Among
General Municipal Debt Funds(5) -- 149 out of 228 68 out of 161 17 out of 103 47 out of 63
(1) Returns are defined in the Glossary on page 37.
(2) Not annualized.
(3) See page 36 for more information about the fund's comparative index.
(4) According to Lipper Analytical Services. See page 36 for more information about Lipper and the fund's category.
(5) Rankings determined by Lipper based on average annual returns for the periods indicated.
</TABLE>
[mountain graph - data below]
GROWTH OF $10,000 OVER A 10-YEAR PERIOD
$10,000
investment
made 11/30/86
Long-Term Tax-Free Lehman Long-Term Muni
11/30/86 $10000 $10000
12/31/86 9946 9987
1/31/87 10235 10323
2/28/87 10304 10352
3/31/87 10206 10199
4/30/87 9367 9627
5/31/87 9249 9521
6/30/87 9415 9217
7/31/87 9499 9303
8/31/87 9497 9344
9/30/87 9007 8962
10/31/87 8917 8962
11/30/87 9129 9248
12/31/87 9275 9369
1/31/88 9687 9743
2/29/88 9790 9858
3/31/88 9589 9716
4/30/88 9661 9793
5/31/88 9649 9803
6/30/88 9805 9994
7/31/88 9871 10061
8/31/88 9899 10101
9/30/88 10059 10330
10/31/88 10261 10565
11/30/88 10161 10451
12/31/88 10317 10633
1/31/89 10496 10884
2/28/89 10379 10731
3/31/89 10376 10740
4/30/89 10617 11055
5/31/89 10861 11311
6/30/89 10999 11483
7/31/89 11160 11635
8/31/89 10985 11458
9/30/89 10861 11423
10/31/89 11003 11574
11/30/89 11234 11820
12/31/89 11310 11907
1/31/90 11171 11787
2/28/90 11309 11920
3/31/90 11297 11932
4/30/90 11080 11787
5/31/90 11491 12120
6/30/90 11583 12239
7/31/90 11841 12455
8/31/90 11459 12158
9/30/90 11433 12139
10/31/90 11719 12396
11/30/90 11989 12710
12/31/90 12064 12766
1/31/91 12242 12938
2/28/91 12257 13028
3/31/91 12273 13060
4/30/91 12456 13262
5/31/91 12580 13418
6/30/91 12504 13393
7/31/91 12678 13600
8/31/91 12846 13795
9/30/91 13065 13995
10/31/91 13213 14142
11/30/91 13205 14159
12/31/91 13622 14496
1/31/92 13556 14488
2/29/92 13582 14510
3/31/92 13530 14547
4/30/92 13656 14686
5/31/92 13891 14901
6/30/92 14194 15189
7/31/92 14805 15746
8/31/92 14513 15534
9/30/92 14539 15603
10/31/92 14231 15343
11/30/92 14649 15775
12/31/92 14877 15979
1/31/93 15058 16130
2/28/93 15854 16880
3/31/93 15548 16677
4/30/93 15830 16905
5/31/93 15920 17045
6/30/93 16211 17365
7/31/93 16146 17383
8/31/93 16624 17828
9/30/93 16870 18059
10/31/93 16856 18094
11/30/93 16645 17875
12/31/93 16998 18336
1/31/94 17195 18552
2/28/94 16669 17938
3/31/94 15963 16867
4/30/94 15976 16997
5/31/94 16165 17196
6/30/94 16064 16990
7/31/94 16410 17426
8/31/94 16401 17463
9/30/94 16153 17058
10/31/94 15835 16534
11/30/94 15588 16098
12/31/94 15952 16669
1/31/95 16392 17402
2/28/95 16839 18111
3/31/95 16980 18328
4/30/95 16964 18319
5/31/95 17506 19099
6/30/95 17293 18748
7/31/95 17420 18843
8/31/95 17593 19109
9/30/95 17730 19258
10/31/95 18076 19724
11/30/95 18497 20233
12/31/95 18775 20549
1/31/96 18815 20637
2/29/96 18637 20385
3/31/96 18253 20012
4/30/96 18145 19932
5/31/96 18163 19942
6/30/96 18364 20250
7/31/96 18532 20451
8/31/96 18548 20424
9/30/96 18841 20878
10/31/96 19039 21133
11/30/96 19353 21587
Value on 11/30/96
Lehman Long-
Term Muni
$21,587
Long-Term
Tax-Free
$19,353
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 index's total return line does not.
PORTFOLIO AT A GLANCE
11/30/96 5/31/96
Number of Issues 42 36
Weighted Average Maturity 18.46 years 17.28 years
Average Duration 8.20 years 8.04 years
Expense Ratio 0.68%* 0.70%
* Annualized.
See the Glossary on page 37.
18 Long-Term Tax-Free American Century Investments
LONG-TERM TAX-FREE
Management Q&A
An interview with Dave MacEwen, vice president and a senior portfolio manager
on the Long-Term Tax-Free fund management team.
How did the fund perform?
The fund outperformed its peers for the six months ended November 30, 1996,
posting a total return of 6.54%, which exceeded the 6.15% average return of the
233 "General Municipal Debt Funds" tracked by Lipper Analytical Services over
the same period. However, the fund's one-year return of 4.62% lagged the 4.91%
average annual return of its peer group for the period ended November 30, 1996.
(See the Average Annual Return table on the previous page.)
Why did the fund perform well relative to its peers over the last six months?
One contributing factor was the fund's large contingent of premium
noncallable bonds, which performed even better than we had expected. (Premium
bonds are bonds that trade at prices above face value because their interest
coupons are higher than the prevailing market interest rate.) Noncallable bonds
cannot be repurchased by the issuer prior to maturity and replaced with
lower-yielding securities if interest rates decline. We sold many of these
premium noncallable bonds near the end of the period at a substantial profit.
In addition, the fund's returns were enhanced by our strong credit research
staff, which accurately assessed many specific credit situations throughout the
U.S. Thanks to our credit team's diligent work, we purchased many undervalued
securities that subsequently appreciated in value.
[bar graph - data below]
LONG-TERM TAX-FREE FISCAL YEAR-BY-YEAR RETURNS (Periods ended May 31)
Long-Term Tax-Free Lehman Long-Term Muni Bond
'87 2.39% 5.83%
'88 4.32 2.97
'89 12.56 15.38
'90 5.8 7.15
'91 9.48 10.71
'92 10.42 11.05
'93 14.61 14.39
'94 1.54 0.89
'95 8.29 11.07
'96 3.75 4.41
This chart illustrates the historical year-by-year volatility of the fund's
returns over the previous 10 years. The fund's total returns include operating
expenses, while the index's returns do not.
See page 36 for a definition of the fund's comparative index.
Semiannual Report Long-Term Tax-Free 19
LONG-TERM TAX-FREE
Why did the fund underperform its peers over the last twelve months?
The primary reason was that we kept the fund's duration longer than that of
many of its peers heading into 1996 because we anticipated a weakening U.S.
economy and lower interest rates from the Federal Reserve. Market expectations
for interest rates changed in mid-February 1996, when economic reports showed a
surprisingly resilient U.S. economy. In a rising interest rate environment, the
fund's longer duration caused it to experience more price depreciation than many
of its peers.
Why and how did you change the fund's position over the past six months?
During the second quarter of 1996, we began to shorten the fund's average
maturity as evidence of a strengthening economy caused the market to sell off.
By mid-June, the average maturity was down to 17 years. While shortening the
fund's average maturity, we sold some longer discount bonds and used the
proceeds to purchase premium noncallable bonds. (Discount bonds are bonds that
trade at prices below face value because their interest coupons are lower than
the prevailing market interest rate.)
While moving to a more neutral stance, we shifted the fund's portfolio
holdings from a barbell structure to a laddered structure. Though the barbell
benefited the fund during the bond market rally in late 1995 and early 1996, the
laddered structure will allow us to more quickly adjust the fund to changing
market conditions going forward.
Why did you decrease the fund's electric utilities holdings during the period?
We are rotating out of this sector because of pressure on electric utilities
from deregulation. The federal government enacted legislation intended to create
competition among electric utilities companies in 1992. Deregulation will likely
cause sweeping changes as companies restructure in an attempt to become more
competitive. Until the full impact of deregulation is known, we'll continue to
take a very cautious approach to paper issued by electric utilities. We put the
money from the sale of our electric utilities holdings to work in what we feel
to be more stable investments, such as general obligation bonds.
TOP FIVE STATES (% of fund investments)
As of As of
11/30/96 5/31/96
Illinois 16% Illinois 19%
Washington 9% Washington 14%
California 9% Texas 8%
Texas 8% Massachussetts 8%
Florida 8% South Carolina 7%
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/96)
Revenue Bonds 51%
Lease/COPs 14%
Prerefunded 10%
Other 25%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/96)
Revenue Bonds 64%
Prerefunded 11%
Other 25%
20 Long-Term Tax-Free American Century Investments
LONG-TERM TAX-FREE
Would you explain the recent changes to the fund's investment parameters?
Yes. The fund can now hold bonds across the entire investment-grade
spectrum, which includes securities rated AAA, AA, A and BBB. Previously, the
fund could invest only in securities rated AAA, AA or A. The fund was at a
competitive disadvantage because of this restriction, so we expanded its credit
criteria to better compete with the fund's peers and provide higher returns for
our shareholders. The change will also allow us to make better use of our strong
credit research team.
In addition, effective January 1, 1997, the fund will be allowed to invest up
to 20% of its assets in "private activity" bonds whose interest income is a tax
preference item under the federal alternative minimum tax (AMT).
What is the outlook for munis going forward?
A spate of recent reports suggesting the economy may have picked up speed
during the fourth quarter makes the inflation outlook uncertain. Consumer
confidence reached a seven-year high in December, while personal income and
spending rose, as did U.S. exports, housing purchases and manufacturing
activity. Although the outlook for bonds in general is rather uncertain, we
expect supply and demand factors to continue to work in munis' favor for the
near future.
Given this outlook, what are your plans for the fund over the next six months?
We will likely maintain the fund's neutral posture, lengthening or shortening
the fund's average maturity and duration in a narrow range when appropriate. If
the economic outlook does change significantly, we believe the fund is
positioned to respond appropriately.
[pie charts]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/96)
AAA 51%
AA 39%
A 7%
BBB 3%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/96)
AAA 57%
AA 34%
A 9%
Investment terms are defined in the Glossary on page 37.
Semiannual Report Long-Term Tax-Free 21
SCHEDULE OF INVESTMENTS
LONG-TERM TAX-FREE
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES
ALABAMA --3.1%
$ 2,000 Alabama Special Care Facility
Financing Auth. Rev., (Daughters
of Charity), 5.00%, 11-1-25 $1,830
-----
ARIZONA--3.1%
1,750 Phoenix Civic Improvement Corporation
Water System Rev., 6.00%, 7-1-19 1,811
-----
CALIFORNIA--7.9%
3,270 California State Building Auth. Lease
Rev., Series A, (San Francisco Civic
Center Complex), 5.25%, 12-1-16
(AMBAC) 3,201
1,700 Los Angeles Wastewater Rev., Series
1993 D, 4.70%, 11-1-19 (FGIC) 1,517
-----
4,718
-----
FLORIDA--5.6%
890 Broward County Resource Recovery
Facility Rev., Series 1984, (South
Project), 7.95%, 12-1-08 984
1,000 Orlando Water and Electric Auth.
Rev., Series D, 6.75%, 10-1-17 1,192
1,000 St. Petersburg Health Auth. Rev.,
(Allegheny Health), 7.00%, 12-1-15
(MBIA) 1,125
-----
3,301
-----
GEORGIA--1.9%
1,000 Georgia Municipal Electric Auth.
Rev., 6.50%, 1-1-12 (MBIA) 1,133
-----
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
ILLINOIS--15.9%
$ 1,965 Chicago Metropolitan Water
Reclamation District Capital
Improvement, 6.25%, 12-1-14 $2,094
1,500 Illinois Dedicated Tax Rev., (Civic
Center Project), 6.25%, 12-15-20
(AMBAC) 1,669
1,500 Illinois Development Finance Auth.
Pollution Control Rev., Series B,
(Central Illinois Public Service),
7.60%, 3-1-14 1,640
1,840 Illinois Health Facilities Auth. Rev.
Refunding, Series C, (Evangelical
Hospital), 6.75%, 4-15-12 1,959
2,000 Springfield Water Rev., 6.50%, 3-1-15 2,098
-----
9,460
-----
INDIANA--3.9%
1,000 Indiana Municipal Power Agency Rev.,
Series A, 7.10%, 1-1-00,
Prerefunded at 102% of Par,
(AMBAC)(1) 1,102
1,000 Indiana Transportation Financing Auth.
Highway Rev., Series A, 7.25%,
6-1-15 1,213
-----
2,315
-----
MASSACHUSETTS--6.8%
1,000 Massachusetts Health and Education
Auth. Rev., Series F, 6.25%, 7-1-12
(AMBAC) 1,110
1,115 Massachusetts Housing Finance
Agency Rev., Series 1993 A,
6.375%, 4-1-21 1,141
1,690 Massachusetts Housing Finance
Agency Rev., Series 1992 H, 6.75%,
11-15-12 (FNMA) 1,792
-----
4,043
-----
See Notes to Financial Statements
22 Long-Term Tax-Free American Century Investments
SCHEDULE OF INVESTMENTS
LONG-TERM TAX-FREE
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
NEW YORK--3.1%
$ 2,000 New York State Urban Development
Corporation Rev., (Correctional
Facilities), Series 4, 5.375%,
1-1-23 $1,860
-----
PENNSYLVANIA--3.1%
2,000 Pennsylvania Intergovernmental Special
Tax Rev., 5.00%, 6-15-22 (MBIA) 1,860
-----
RHODE ISLAND--3.9%
1,100 Rhode Island Clean Water Safe
Drinking, 6.70%, 1-1-15 (AMBAC) 1,233
1,000 Rhode Island Depositors Economic
Special Obligation, 6.25%, 8-1-16
(MBIA) 1,108
-----
2,341
-----
SOUTH CAROLINA--6.8%
1,000 Columbia Water and Sewer Rev.,
7.10%, 2-1-01, Prerefunded at
102% of Par(1) 1,126
1,500 Piedmont Municipal Power Agency
Electric Rev., 6.75%, 1-1-19 (FGIC) 1,771
860 Piedmont Municipal Power Agency
Electric Rev. Refunding, Series
1991 A, 6.50%, 1-1-16 (FGIC) 980
140 Piedmont Municipal Power Agency
Electric Rev. Refunding, Series
1991 A, (Escrowed to Maturity),
6.50%, 1-1-16(1) 160
---
4,037
-----
TEXAS--8.3%
600 Lower Colorado River Auth. Rev.
Refunding, (Escrowed to Maturity),
5.25%, 1-1-15(1) 599
2,000 San Antonio Electric and Gas System
Rev., 5.31%(2), 2-1-09 (FGIC) 1,057
1,000 Tarrant County Health Facility Rev.,
6.00%, 5-15-11 (MBIA) 1,083
1,960 Texas Municipal Power Agency Rev.,
Series A, 6.75%, 9-1-12 (AMBAC) 2,176
-----
4,915
-----
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
UTAH--2.1%
$ 1,000 Salt Lake City Hospital Rev. Refunding,
Series A, (Intermountain Health
Corporation), (Escrowed to Maturity),
8.125%, 5-15-15(1) $1,217
-----
VIRGINIA--4.9%
1,000 Hampton Industrial Development Auth.
Rev., Series A, (Sentara General
Hospital), 6.50%, 11-1-12 1,058
1,750 Virginia State Housing Development
Auth. Rev., Series F, (Single Family
Mortgage), 7.10%, 1-1-17 1,835
-----
2,893
-----
VERMONT--3.5%
2,000 Vermont Education and Health
Buildings Financing Agency Rev.,
6.00%, 11-1-13 2,067
-----
WASHINGTON--9.3%
1,405 Port of Seattle Rev., 7.50%, 12-1-00,
Prerefunded at 102% of Par,
(AMBAC)(1) 1,591
1,625 Seattle Metropolitan Sewer Rev.,
Series T, 6.875%, 1-1-13 1,746
1,000 Washington Public Power Supply
System Rev., Series 1990 C,
5.70%, 7-1-12 (AMBAC) 1,017
1,000 Washington State GO, Series A,
6.75%, 2-1-15 1,176
-----
5,530
-----
WISCONSIN--3.8%
1,900 Wisconsin State Clean Water Rev.,
6.875%, 6-1-11 2,240
-----
TOTAL MUNICIPAL SECURITIES--97.0% 57,571
(Cost $53,989) ------
See Notes to Financial Statements
Semiannual Report Long-Term Tax-Free 23
SCHEDULE OF INVESTMENTS
LONG-TERM TAX-FREE
NOVEMBER 30, 1996 (UNAUDITED)
Value
Principal Amount ($ in Thousands)
- --------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES
ARIZONA--0.2%
$ 100 Phoenix Industrial Dev. Auth.
Multifamily Housing Rev. Refunding,
(Ventana Palms Apartments), VRDN,
3.65%, 12-4-96, resets monthly,
final maturity 2-1-24 $ 100
---
CALIFORNIA--0.8%
500 California Statewide Communities
Refunding, VRDN, 4.10%, 12-2-96,
resets daily, final maturity 6-1-26 500
---
FLORIDA--2.0%
1,200 Jacksonville Pollution Control Rev.
Refunding, (Florida Power and
Light Company), VRDN, 4.10%,
12-2-96, resets daily, final
maturity 5-1-29 1,200
-----
TOTAL SHORT-TERM
MUNICIPAL SECURITIES--3.0% 1,800
(Cost $1,800) -----
TOTAL INVESTMENT SECURITIES-100.0% $59,371
(Cost $55,789) =======
Notes to Schedule of Investments
AMBAC = AMBAC Indemnity Corp.
FGIC = Financial Guaranty Insurance Company
FNMA = Federal National Mortgage Association
GO = General Obligation
MBIA = Municipal Bond Insurance Association
resets = The frequency with which a fixed-income security's coupon changes,
based on current market conditions or an underlying index. The more
frequently a security resets, the less risk the investor is taking that the
coupon will vary significantly from current market rates.
VRDN = Variable Rate Demand Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is
effective November 30, 1996.
(1) Escrowed in U.S. Government Securities.
(2) 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.
See Notes to Financial Statements
24 Long-Term Tax-Free American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
INTERMEDIATE-
TAX-FREE TERM LONG-TERM
MONEY MARKET TAX-FREE TAX-FREE
NOVEMBER 30, 1996 (UNAUDITED)
ASSETS $ In Thousands, Except Per Share Amounts
<S> <C> <C> <C>
Investment securities, at value
(amortized cost for Tax-Free Money Market; identified cost
of $61,449, and $55,789, respectively) ........................ $ 90,076 $ 64,479 $ 59,371
Cash ............................................................ 816 -- --
Investment in affiliated money market fund (Note 2) ............. -- -- 801
Interest receivable ............................................. 493 1,217 1,028
Prepaid expenses and other assets ............................... 1 1 --
------ ------ ------
91,386 65,697 61,200
------ ------ ------
LIABILITIES
Disbursements in excess of demand deposit cash .................. 125 441 1,024
Payable for investments purchased ............................... -- 539 3,188
Payable for shares redeemed ..................................... 79 31 22
Dividends payable ............................................... 10 18 8
Payable to affiliates (Note 2) .................................. 49 35 29
Accrued expenses and other liabilities. ......................... 1 1 2
--- ----- -----
264 1,065 4,273
--- ----- -----
Net Assets Applicable to Outstanding Shares ......................$ 91,122 $ 64,632 $ 56,927
============ ============ ===========
CAPITAL SHARES $1.00, $10.00, AND $10.00 PAR VALUE, RESPECTIVELY
Outstanding (Unlimited number of shares authorized)
(in thousands) ............................................... 91,122 5,926 4,856
====== ===== =====
Net Asset Value Per Share ........................................$ 1.00 $ 10.91 $ 11.72
============ ============ ===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ..........................$ 91,122 $ 61,895 $ 53,576
Accumulated net realized (loss) on investment transactions ....... -- (293) (231)
Net unrealized appreciation on investments (Note 3) .............. -- 3,030 3,582
------ ------ ------
$ 91,122 $ 64,632 $ 56,927
============ ============ ===========
</TABLE>
See Notes to Financial Statements
Semiannual Report Statement of Assets and Liabilities 25
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
INTERMEDIATE-
TAX-FREE TERM LONG-TERM
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED) MONEY MARKET TAX-FREE TAX-FREE
INVESTMENT INCOME $ In Thousands
Income:
<S> <C> <C> <C>
Interest ...................................................... $ 1,613 $ 1,750 $ 1,578
------------ ------------ -----------
Expenses (Note 2):
Investment advisory fee ......................................... 197 136 115
Administrative fees ............................................. 44 30 26
Transfer agency fees ............................................ 31 22 21
Printing and postage ............................................ 12 7 6
Custodian fees .................................................. 10 6 7
Auditing and legal fees ......................................... 12 9 8
Registration and filing fees .................................... 14 11 12
Directors' fees and expenses .................................... 4 3 2
Other operating expenses ........................................ 6 10 8
- -- -
Total expenses ................................................ 330 234 205
Amount (waived) (Note 2) ........................................ (22) (21) (23)
Custodian earnings credits (Note 4) ............................. (4) (2) (2)
-- -- --
Net expenses .................................................. 304 211 180
--- --- ---
Net investment income ........................................... 1,309 1,539 1,398
----- ----- -----
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 3)
Net realized gain on investments ................................ -- 145 196
Change in net unrealized appreciation on investments ............ -- 1,310 1,870
----- ----- -----
Net realized and unrealized
gain on investments ............................................. -- 1,455 2,066
----- ----- -----
Net Increase in Net Assets
Resulting from Operations ....................................... $ 1,309 $ 2,994 $ 3,464
============ ============ ===========
</TABLE>
See Notes to Financial Statements
26 Statements of Operations American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
INTERMEDIATE-
TAX-FREE TERM LONG-TERM
MONEY MARKET TAX-FREE TAX-FREE
SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED)
AND YEAR ENDED MAY 31, 1996
Nov. 30, May 31, Nov. 30, May 31, Nov. 30, May 31,
Increase (Decrease) in Net Assets 1996 1996 1996 1996 1996 1996
$ In Thousands
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ...................................... $ 1,309 $ 2,878 $ 1,539 $ 3,047 $ 1,398 $ 2,702
Net realized gain on investment transactions ............... -- -- 145 346 196 735
Change in net unrealized appreciation
(depreciation) on investments ............................ -- -- 1,310 (671) 1,870 (1,549)
----- ----- ----- ---- ----- ------
Net increase in net assets resulting from operations ....... 1,309 2,878 2,994 2,722 3,464 1,888
----- ----- ----- ----- ----- -----
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................................. (1,309) (2,878) (1,539) (3,047) (1,398) (2,702)
------ ------ ------ ------ ------ ------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................................. 37,877 93,329 4,843 12,956 32,252 64,940
Proceeds from reinvestment of distributions ................ 1,240 2,751 1,173 2,324 1,055 2,023
Payments for shares redeemed ............................... (39,113) (96,996) (5,739) (16,958) (29,828) (62,081)
------- ------- ------ ------- ------- -------
Net increase (decrease) in net assets
from capital share transactions .......................... 4 (916) 277 (1,678) 3,479 4,882
- ---- --- ------ ----- -----
Net increase (decrease) in net assets ...................... 4 (916) 1,732 (2,003) 5,545 4,068
NET ASSETS
Beginning of period ........................................ 91,118 92,034 62,900 64,903 51,382 47,314
------ ------ ------ ------ ------ ------
End of period .............................................. $ 91,122 $ 91,118 $ 64,632 $ 62,900 $ 56,927 $ 51,382
======== ======== ======== ======== ======== ========
TRANSACTIONS IN SHARES OF THE FUNDS: (IN THOUSANDS)
Sold ....................................................... 37,877 93,329 451 1,197 2,820 5,612
Issued in reinvestment of distributions .................... 1,240 2,751 109 215 108 175
Redeemed ................................................... (39,113) (96,996) (535) (1,570) (2,622) (5,361)
------- ------- ---- ------ ------ ------
Net increase (decrease) .................................... 4 (916) 25 (158) 306 426
======= ======= ==== ====== ====== ======
</TABLE>
See Notes to Financial Statements
Semiannual Report Statements of Changes in Net Assets 27
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization--American Century Municipal Trust (the Trust), is registered
under the Investment Company Act of 1940 as an open-end management investment
company. Benham Tax-Free Money Market Fund (Money Market Fund), Benham
Intermediate-Term Tax-Free Fund (Intermediate-Term Fund), and Benham Long-Term
Tax-Free Fund (Long-Term Fund) (the Funds) are three of the eight funds
composing the Trust. The Funds are diversified under the 1940 Act. Their
objective is to seek as high a level of current income exempt from federal
income taxes as is consistent with prudent investment management and
conservation of shareholders' capital. The Money Market Fund invests primarily
in short-term municipal obligations and maintains a weighted average maturity of
60 days or less. The Intermediate-Term Fund invests primarily in
intermediate-term municipal obligations and maintains a weighted average
maturity from five to ten years. The Long-Term Fund invests primarily in
long-term municipal obligations and maintains a weighted average maturity of ten
or more years. The Funds may concentrate their investments in certain states and
therefore may have more exposure to credit risk related to those states than
funds that have 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 Fund are valued at
amortized cost, which approximates current market value. Securities held by the
Intermediate-Term Fund and the Long-Term Fund (collectively the "Variable-Price
Funds") are valued at current market value as provided by a commercial pricing
service or at the mean of the most recent bid and asked prices. When valuations
are not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Trustees.
Security 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 premiums and discounts. Premium and original issue
discount is amortized daily using the effective interest rate method for the
Variable-Price Funds. Market discount is recognized as income upon the sale or
maturity of the security for the Variable-Price Funds. Premium and discount are
amortized daily on a straight-line basis for securities held by the Money Market
Fund.
Income Tax Status--It is the policy of the Funds 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 Intermediate-Term Fund and Long-Term Fund are declared daily and distributed
monthly. Distribution from net realized gains for these Funds are declared and
paid annually. The Money Market Fund's distributions from net investment income
are declared and credited daily and distributed monthly. The Money Market Fund
does not expect to realize any long-term capital gains, and accordingly, does
not expect to pay any capital gain distributions.
At May 31, 1996, accumulated net realized capital loss carryovers of $420,126
for the Intermediate-Term Fund and $427,920 for the Long-Term Fund (expiring
2003 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 due to differences in the recognition of income and
expense items for financial reporting and tax purposes.
Supplementary Information--Certain officers and directors 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).
Futures Contracts--The Variable-Price Funds may buy and sell interest rate
futures contracts relating to debt securities and write and buy put and call
options relating to interest rate futures contracts. The Variable-Price Funds
may use futures and option 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,
28 Notes to Financial Statements American Century Investments
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
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.
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.
.50% of the first $100 million
.45% of the next $100 million
.40% of the next $100 million
.35% of the next $100 million
.30% of the next $100 million
.25% of the next $1 billion
.24% of the next $1 billion
.23% of the next $1 billion
.22% of the next $1 billion
.21% of the next $1 billion
.20% of the next $1 billion
.19% of 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
expenses such as brokerage commissions, taxes, interest, custodian earnings
credits, and extraordinary expenses) to .67% of average daily net assets for the
Funds. 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 November 30, 1996, based on the above
agreements, were as follows:
Tax-Free Intermediate- Long-Term
Money Market Term Tax- Tax-Free
Fund Free Fund Fund
Investment Advisor ........ $ 33,617 $ 23,942 $ 19,219
Administrative Services ... 11,867 8,424 7,617
Transfer Agent ............ 3,964 2,691 2,295
------- ------- -------
$ 49,448 $ 35,057 $ 29,131
======= ======= =======
As of November 30, 1996, the Long-Term Fund had invested $801,000 in shares
of the Money Market Fund. The terms of the transaction were identical to those
with nonrelated entities except that, to avoid duplicative investment advisory
fees and administrative fees, the Long-Term Fund did not pay BMC investment
advisory fees or ACSC administrative fees with respect to assets invested in
shares of the Money Market Fund.
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 29
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
3. Investment Transactions
The aggregate cost of municipal debt obligations purchased (excluding
short-term investments) for the six-months ended November 30, 1996, for the
Intermediate-Term Fund and Long-Term Fund totaled $8,136,236 and $21,275,790,
respectively. The proceeds from sales of municipal debt obligations (excluding
short-term investments) for the six months ended November 30, 1996, for the
Intermediate-Term Fund and Long-Term Fund totaled $7,026,515 and $13,845,570,
respectively.
As of November 30, 1996, accumulated net unrealized appreciation of the
Intermediate-Term Fund and Long-Term Fund were $3,030,291 and $3,582,084
consisting of unrealized appreciation of $3,030,291 and $3,654,076, and
unrealized depreciation of $0 and $71,992, respectively. The aggregate cost of
investments for federal income tax purposes was the same as the cost for
financial reporting purposes.
- --------------------------------------------------------------------------------
4. Expense Offset Arrangements
Each Fund's Statement of Operations reflects custodian earnings credits.
These amounts are used to offset the custody fees payable by the Funds to the
custodian bank. The credits are earned when the Fund maintains a balance of
uninvested cash at the custodian bank. Beginning with the year ended May 31,
1996, the ratios of operating expenses to average net assets shown in the
Financial Highlights are calculated as if these credits had not been earned.
- --------------------------------------------------------------------------------
5. Subsequent Events
The following name changes became effective January 1, 1997:
<TABLE>
NEW NAMES FORMER NAMES
<S> <C> <C>
Fund's Issuer: American Century Municipal Trust Benham Municipal Trust
Fund: American Century - Benham Tax-Free Benham National Tax-Free Money Market Fund
Money Market Fund
American Century - Benham Benham National Tax-Free Intermediate-Term Fund
Intermediate-Term Tax-Free Fund
American Century - Benham Benham National Tax-Free Long-Term Fund
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>
30 Notes to Financial Statements American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TAX-FREE MONEY MARKET
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
1996(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 ...................... .01 .03 .03 .02 .02 .03
--- --- --- --- --- ---
Distributions
Fom Net Investment Income .................. (.01) (.03) (.03) (.02) (.02) (.03)
---- ---- ---- ---- ---- ----
Net Asset Value, End of Period ............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total Return(2) ............................ 1.45% 3.19% 2.95% 1.92% 2.12% 3.48%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets(3) ...................... .68%(4) .65% .66% .67% .68% .57%
Ratio of Net Investment Income
to Average Net Assets(3) ................... 2.87%(4) 3.12% 2.88% 1.89% 2.10% 3.40%
Net Assets, End of Period (in thousands) ... $91,122 $91,118 $92,034 $109,818 $109,875 $111,112
(1) Six months ended November 30, 1996.
(2) Total return assumes reinvestment of dividends. Total returns for periods
less than one year are not annualized.
(3) The ratios for the periods subsequent to May 31, 1995 include expenses paid
through expense offset arrangements.
(4) Annualized.
</TABLE>
See Notes to Financial Statements
Semiannual Report Financial Highlights 31
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERMEDIATE-TERM TAX-FREE
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
1996(1) 1996 1995 1994 1993 1992
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ......................... $10.66 $10.71 $10.60 $10.90 $10.48 $10.33
Income from Investment Operations
Net Investment Income ..................... .26 .52 .50 .51 .52 .56
Net Realized and Unrealized Gain (Loss)
on Investments ............................ .25 (.05) .15 (.19) .53 .27
--- ---- --- ---- --- ---
Total From
Investment Operations ..................... .51 .47 .65 .32 1.05 .83
--- --- --- --- ---- ---
Distributions
Fom Net Investment Income ................. (.26) (.52) (.50) (.51) (.52) (.56)
From Net Realized Gains
on Investment Transactions ................ -- -- (.04) (.11) (.11) (.12)
----- ----- ---- ---- ---- ----
Total Distributions ....................... (.26) (.52) (.54) (.62) (.63) (.68)
---- ---- ---- ---- ---- ----
Net Asset Value, End of Period .............. $10.91 $10.66 $10.71 $10.60 $10.90 $10.48
====== ====== ====== ====== ====== ======
Total Return(2) ........................... 4.86% 4.38% 6.40% 2.93% 10.26% 8.28%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets(3) ..................... .67%(4) .70% .66% .67% .72% .65%
Ratio of Net Investment Income
to Average Net Assets(3) .................. 4.87%(4) 4.73% 4.82% 4.61% 4.81% 5.38%
Portfolio Turnover Rate ................... 11.25% 45.98% 47.48% 46.11% 36.31% 84.96%
Net Assets, End of Period (in thousands) .. $64,632 $62,900 $64,904 $70,925 $67,550 $44,315
(1) Six months ended November 30, 1996.
(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) The ratios for the periods subsequent to May 31, 1995, include expenses paid through expense offset arrangements.
(4) Annualized.
</TABLE>
See Notes to Financial Statements
32 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
LONG-TERM TAX-FREE
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
1996(1) 1996 1995 1994 1993 1992
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ........................... $11.29 $11.47 $11.26 $11.92 $11.26 $11.05
Income From Investment Operations
Net Investment Income ....................... .30 .61 .62 .62 .63 .67
Net Realized and Unrealized Gain (Loss)
on Investments .............................. .43 (.18) .27 (.42) .92 .43
--- ---- --- ---- --- ---
Total From
Investment Operations ....................... .73 .43 .89 .20 1.55 1.10
--- --- --- --- ---- ----
Distributions
From Net Investment Income .................. (.30) (.61) (.62) (.62) (.63) (.67)
From Net Realized Gains on
Investment Transactions ..................... -- -- (.06) (.24) (.26) (.22)
----- ----- ---- ---- ---- ----
Total Distributions ......................... (.30) (.61) (.68) (.86) (.89) (.89)
---- ---- ---- ---- ---- ----
Net Asset Value, End of Period ................ $11.72 $11.29 $11.47 $11.26 $11.92 $11.26
====== ====== ====== ====== ====== ======
Total Return(2) ............................. 6.54% 3.75% 8.29% 1.54% 14.61% 10.42%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets(3) ....................... .68%(4) .70% .66% .67% .72% .65%
Ratio of Net Investment Income
to Average Net Assets(3) ....................5.19%(4) 5.22% 5.59% 5.16% 5.40% 6.00%
Portfolio Turnover Rate ..................... 26.84% 49.17% 34.09% 39.37% 105.14% 148.26%
Net Assets, End of
Period (in thousands) ....................... $56,927 $51,382 $47,314 $57,330 $54,241 $42,146
(1) Six months ended November 30, 1996.
(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) The ratios for the periods subsequent to May 31, 1995, include expenses
paid through expense offset arrangements.
(4) Annualized.
</TABLE>
See Notes to Financial Statements
Semiannual Report Financial Highlights 33
NOTES
34 Notes American Century Investments
NOTES
Semiannual Report Notes 35
BACKGROUND INFORMATION
INVESTMENT PHILOSOPHY & POLICIES
American Century Investments offers 41 fixed-income funds, ranging from money
market funds to long-term bond funds and including both taxable and tax-exempt
funds.
Tax-Free Money Market is a money market fund that seeks as high a level of
interest income exempt from regular federal income tax as is consistent with
prudent investment management, while seeking to conserve shareholders' capital.
There can be no assurance that the fund will be able to maintain a stable net
asset value per share.
Intermediate-Term Tax-Free and Long-Term Tax-Free seek as high a level of
interest income exempt from regular federal income tax as is consistent with
prudent investment management, while seeking to conserve shareholders' capital.
An investment in the funds is neither insured nor guaranteed by the U.S.
government. There is no assurance that the funds will achieve their respective
investment objectives.
COMPARATIVE INDICES
The indices listed below are used in the report to serve as a comparison for
the performance of a fund. They are not investment products available for
purchase.
The Lehman Brothers, Inc. Five-Year Municipal General Obligation Index is a
municipal bond index composed of more than 11,000 bonds with maturities of four
to six years. The bonds are rated BBB or higher by Standard & Poor's, with an
average rating of AA. The average maturity of the index is five years.
The Lehman Brothers, Inc. Long-Term Municipal Bond Index is composed of 8,000
municipal bonds. The bonds are all investment-grade, fixed-rate, long-term
maturities (greater than two years) and are selected from issues larger than $50
million dated since January 1994.
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 Tax-Free funds are:
Tax-Exempt Money Market Funds (Tax-Free Money Market)--funds that intend to
maintain a constant net asset value and that invest in high quality municipal
obligations with dollar-weighted average maturities of less than 90 days.
Intermediate Municipal Debt Funds (Tax-Free Intermediate-Term)--funds that
invest in municipal debt issues with dollar-weighted average maturities of 5 to
10 years.
General Municipal Debt Funds (Tax-Free Long-Term)--funds that invest at least
65% of their assets in municipal debt issues in the top four credit ratings
(AAA, AA, A and BBB).
PORTFOLIO MANAGEMENT TEAM
Vice President & Senior
Municipal Portfolio Manager Dave MacEwen
Municipal Portfolio Managers Bryan Karcher, Joel Silva
Municipal Credit Research Manager Steven Permut
Credit Analysts Scott Lord, Bill McClintock
36 Background Information American Century Investments
GLOSSARY
RETURNS
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.
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.
YIELDS
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.
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.
30-Day SEC Yield represents net investment income earned by the fund over a
30-day period, expressed as an annualized 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 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.
BOND PORTFOLIO STRUCTURES
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 the yield curve is moving from steep to
flat. (Short-term rates are rising faster than long-term rates, or long-term
rates are falling faster than short-term rates.)
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, and it provides a regular schedule of maturing
securities.
INVESTMENT TERMS
Basis Point--a basis point equals one one-hundredth of a percentage point (or
0.01%). Therefore, 100 basis points equals one percentage point (or 1%).
Coupon--the stated interest rate of a security.
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.
Most "normal" yield curves start in the lower left corner of the graph and rise
to the upper right corner, indicating that yields rise as maturities lengthen.
This upward sloping yield curve illustrates a normal risk/return
relationship--more return (yield) for more risk (a longer maturity). Conversely,
a "flat" yield curve provides little or no extra return for taking on more risk.
STATISTICAL TERMINOLOGY
Market Value--the market value of a fund's investments on a given date.
Number of Issues--the number of different securities issuances held by a fund
on a given date.
Weighted Average Maturity--measures the average amount of time until the
securities in a bond portfolio mature, weighted by dollar amount.
Average Duration--measures the interest rate sensitivity of a bond portfolio.
Measured in years, average duration represents the approximate percentage change
in the value of a bond portfolio if interest rates move up or down by one
percentage point. Therefore, longer portfolio durations typically mean greater
sensitivity to changes in interest rates.
TYPES OF MUNICIPAL SECURITIES
AMT Paper--instruments with income subject to the federal alternative minimum
tax.
General Obligation (GO) Bonds--securities backed by the taxing power of the
issuer.
Municipal Commercial Paper (CP)--high-grade short-term securities backed by a
line of credit from a bank.
Municipal Notes--securities with maturities of two years or less.
Variable-Rate Demand Notes (VRDNs)--securities that track market interest
rates and stabilize their market values using periodic (daily or weekly)
interest rate adjustments.
Semiannual Report Glossary 37
[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 Municipal Trust
Investment Manager
Benham Management Corporation
Mountain View, California
This report and the financial statements contained herein 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.
9701 [recycled logo]
SH-BKT-6149 Recycled
