SEMIANNUAL
REPORT
[american century logo]
American
Century(reg.sm)
NOVEMBER 30, 1997
BENHAM
GROUP
Florida Municipal Money Market
Florida Intermediate-Term Municipal
TABLE OF CONTENTS
Report Highlights ......................................................... 1
Our Message to You ........................................................ 2
Market Perspective ........................................................ 3
Florida Municipal Money Market
Performance & Portfolio Information ............................ 4
Management Q & A ............................................... 5
Schedule of Investments ........................................ 7
Financial Highlights ........................................... 21
Florida Intermediate-Term Municipal
Performance & Portfolio Information ............................ 9
Management Q & A ............................................... 10
Schedule of Investments ........................................ 13
Financial Highlights ........................................... 22
Statements of Assets and Liabilities ...................................... 15
Statements of Operations .................................................. 16
Statements of Changes in Net Assets ....................................... 17
Notes to Financial Statements ............................................. 18
Proxy Voting Results ...................................................... 23
Background Information
Investment Philosophy & Policies ............................... 24
Comparative Indices ............................................ 24
Lipper Rankings ................................................ 24
Investment Team Leaders ........................................ 24
Glossary .................................................................. 25
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios.
We've organized our funds into three distinct groups, based on investment style
and objectives, to help simplify your fund decisions. These groups appear below.
AMERICAN CENTURY INVESTMENTS--FAMILY OF FUNDS
- -------------------------------------------------------------------------------
Benham American Century Twentieth Century(reg. tm)
Group(reg. tm) Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY 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 American Century are registered marks of American Century
Services Corporation. Benham Group is a registered mark of Benham Management
Corporation.
AMERICAN CENTURY INVESTMENTS
REPORT HIGHLIGHTS
MARKET PERSPECTIVE
* Municipal securities produced solid returns during the six months ended
November 30, 1997.
* Despite lower yields overall, low unemployment and rising wages sparked bond
market volatility.
* Credit spreads fell to historically low levels because of improving credit
quality and the increase in the number of municipal securities insured with
a AAA rating.
MUNICIPAL CREDIT REVIEW
* Continued strong economic growth coupled with fiscally conservative
budgeting practices contributed to a generally positive outlook for Florida
municipal credit quality.
* Nevertheless, the state is likely to face large capital outlays for
education and infrastructure going forward.
FLORIDA TAX-FREE MONEY MARKET
* The fund outperformed the average state tax-exempt money market fund during
the six months ended November 30, 1997.
* We've limited the fund's exposure to Japanese banks, which provide credit
backing for many municipal money market securities.
* Going forward, we'll continue to use a value-oriented approach to security
selection, buying one-year notes when we think they provide sufficiently
higher yields than shorter-term securities.
FLORIDA INTERMEDIATE-TERM MUNICIPAL
* The fund strongly outperformed both its Lipper peer group and benchmark for
the six months.
* For the year ended November 30, 1997, the fund was ranked #1 out of 20
Florida intermediate municipal debt funds, according to Lipper Analytical
Services.
* Below-average expenses, good duration management and careful security
selection were key reasons for the fund's strong returns.
* Going forward, we'll continue to take a conservative approach to security
selection and managing the fund's duration.
FLORIDA MUNICIPAL
MONEY MARKET
TOTAL RETURNS: AS OF 11/30/97
6 Months 1.66%*
1 Year 3.42%
7-DAY CURRENT YIELD: 3.55%
NET ASSETS: $80.4 million
(AS OF 11/30/97)
INCEPTION DATE: 4/11/94
TICKER SYMBOL: BEFXX
FLORIDA
INTERMEDIATE-TERM MUNICIPAL
TOTAL RETURNS: AS OF 11/30/97
6 Months 4.73%*
1 Year 6.78%
30-DAY SEC YIELD: 4.02%
NET ASSETS: $20.6 million
(AS OF 11/30/97)
INCEPTION DATE: 4/11/94
TICKER SYMBOL: ACBFX
* Not annualized.
Many of the investment terms in this report are defined in the Glossary on page
25.
SEMIANNUAL REPORT REPORT HIGHLIGHTS 1
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
The Benham Florida Municipal funds performed well during the six months
ended November 30, 1997, rewarding investors with better-than-average returns.
Healthy U.S. economic growth coupled with low inflation provided a favorable
backdrop for strong municipal bond performance. Our municipal investment team
provides details on market conditions and your fund's performance on the
following pages.
On the corporate front, the latter half of 1997 proved as eventful for
American Century as it was for investors. In July, J.P. Morgan & Co., Inc.
agreed to become a significant minority shareholder in our company. Through this
business partnership, we see many opportunities to expand the range of
investment choices and services we offer you. J.P. Morgan has been in business
for more than 150 years, serving institutions, governments and individuals with
complex financial needs. Within the framework of this relationship, American
Century will continue to operate as an independent company. Our corporate
management team will remain the same, and the Stowers family will retain voting
control of the company.
On a more personal note, 1997 was the year we said farewell to James M.
Benham, founder of the Benham Group of mutual funds. Mr. Benham, who announced
his retirement in December, was a pioneer in the no-load mutual fund industry
and the father of Capital Preservation Fund, the first money market fund for
individual investors. With the integration of Benham and Twentieth Century
successfully completed, Mr. Benham felt it was time to step back from the
business and enjoy a well-earned retirement, confident that he leaves the funds
he founded in very capable hands. Though his counsel and guidance will be
missed, much of the Benham culture has become a part of American Century,
including the educational investor seminar program Mr. Benham created. And two
of his sons, Jim A. Benham and Tim Benham, remain with the company to carry on
the Benham tradition.
Looking forward, 1998 will be a landmark year for us, marking the 40th
anniversary of the introduction of our first two funds, Twentieth Century Growth
and Twentieth Century Select. Not many fund companies have a 40-year track
record, nor have many built a fund family such as ours, which includes nearly 70
stock, bond, money and combination funds that provide investors with a wide
range of choice and flexibility.
Whatever your financial goals, we believe we have an outstanding lineup of
funds to help you pursue them.
Sincerely,
/s/James E. Stowers III /s/James M. Benham
James E. Stowers III James M. Benham
Chief Executive Officer Vice Chairman
American Century Investment American Century Investment
Management, Inc. Management, Inc
2 OUR MESSAGE TO YOU AMERICAN CENTURY INVESTMENTS
MARKET PERSPECTIVE
[line graph - data below]
MUNICIPAL YIELD CURVES
Years to Maturity 11/30/97 5/31/97
1 3.690% 3.850%
2 3.840% 4.150%
3 3.960% 4.350%
4 4.070% 4.500%
5 4.170% 4.600%
6 4.260% 4.660%
7 4.350% 4.720%
8 4.430% 4.780%
9 4.510% 4.840%
10 4.590% 4.900%
11 4.666% 4.976%
12 4.742% 5.052%
13 4.818% 5.128%
14 4.894% 5.204%
15 4.970% 5.280%
16 5.000% 5.308%
17 5.030% 5.336%
18 5.060% 5.364%
19 5.090% 5.392%
20 5.120% 5.420%
21 5.126% 5.426%
22 5.132% 5.432%
23 5.138% 5.438%
24 5.144% 5.444%
25 5.150% 5.450%
26 5.154% 5.454%
27 5.158% 5.458%
28 5.162% 5.462%
29 5.166% 5.466%
30 5.170% 5.470%
Source: Bloomberg Financial Markets
SOLID MUNICIPAL BOND RETURNS
Municipal securities produced very solid returns during the six months ended
November 30, 1997. As the accompanying graph indicates, yields fell across the
maturity spectrum.
For the period, the Lehman Brothers Long-Term Municipal Bond Index returned
6.90%. Intermediate-term securities, represented by the Lehman Brothers 5-Year
Municipal General Obligation Index, returned 4.04%. The short-term Merrill Lynch
0- to 3-Year Municipal Index posted a 2.62% return.
INCREASED MARKET VOLATILITY
Despite lower interest rates overall, municipal yields fluctuated throughout
the period. Uncertainty in the bond market over how long inflation can remain
tame with the unemployment rate so low was largely responsible for the rate
fluctuations. Low unemployment has led to inflation in the past because
companies tend to raise wages in an attempt to keep or hire employees. Because
wages account for about two-thirds of all business costs, higher wages often
lead to inflation.
But despite a November 1997 unemployment rate of 4.6%--the lowest in 24
years--and signs of rising wages, overall inflation remained low. Inflation, as
measured by the government's consumer price index, rose at the slowest pace
since 1986 for the first 11 months of calendar 1997.
Increased productivity was a key reason wages could rise without sparking
inflation, as businesses reaped the rewards of huge investments in computers and
other productivity tools. According to the Labor Department, productivity gains
in the third quarter of 1997 were the fastest in five years.
Turmoil in Asian financial markets also contributed to lower yields and U.S.
bond market volatility. Weakness in Asia caused huge cash flows to move in and
out of U.S. Treasury securities, which are considered "safe-haven" investments.
Because demand for municipal securities is often predicated on the relative
prices of municipals and Treasurys, big swings in the Treasury market can carry
over to the municipal market.
IMPACT OF BOND INSURANCE
An increase in the amount of debt being issued with bond insurance
contributed to a narrower spread, or difference in yield, between AAA and BBB
securities.
About 60% of all municipal debt now comes to market insured with a AAA
rating. That has boosted credit quality generally by dramatically reducing the
amount of paper issued at the lower investment grades. But it has also increased
demand for a shrinking supply of lower-rated, higher-yielding paper. Combined
with the improvement in credit quality generally, the net effect has been to
push credit spreads to historically low levels.
SEMIANNUAL REPORT MARKET PERSPECTIVE 3
<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
- ----------------------------------------------------------------------------------------------------------------------
YIELDS AS OF
NOVEMBER 30, 1997
Florida Municipal
<S> <C> <C> <C> <C> <C> <C>
Money Market 3.55% 3.61% 4.93% 5.14% 5.55% 5.88%
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS LIFE OF
FUND(1)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF
NOVEMBER 30, 1997(2)
Florida Municipal Money Market ....... 1.66% 3.42% 3.72% 3.63%
Average Other States Tax-Exempt
Money Market Fund(3) .............. 1.63% 3.22% 3.32% 3.23%(4)
Fund's Ranking Among Other States
Tax-Exempt Money Market Funds(3) ..... -- 7 out of 33 1 out of 26 1 out of 17(4)
</TABLE>
- ----------
(1) Inception date was April 11, 1994.
(2) Returns for periods less than one year are not annualized.
(3) According to Lipper Analytical Services.
(4) Returns from 4/30/94, the date nearest the fund's inception for which data
are available.
See pages 24-25 for more information about returns and Lipper fund rankings.
PORTFOLIO AT A GLANCE
11/30/97 5/31/97
Number of Securities 41 50
Weighted Average Maturity 64 days 48 days
Expense Ratio 0.53%(1) 0.12%(2)
(1) Annualized.
(2) Until December 31, 1996, the fund's management fees were waived by Benham
Management Corporation (BMC). As of January 1, 1997, management fees were
phased in at a rate of 0.10% each month until a rate of 0.61% was reached.
Had fees not been waived, returns would have been lower.
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.
Past performance is no guarantee of future results.
4 FLORIDA MUNICIPAL MONEY MARKET AMERICAN CENTURY INVESTMENTS
FLORIDA MUNICIPAL MONEY MARKET
MANAGEMENT Q & A
An interview with Bryan Karcher, a portfolio manager on the Florida
Municipal Money Market fund investment team.
HOW DID THE FUND PERFORM?
The fund continued to provide a higher level of tax-free income than the
average state tax-exempt money market fund. For the six months ended November
30, 1997, the fund had a total return of 1.66%, compared with the 1.63% average
return of the 33 "State Tax-Exempt Money Market Funds" tracked by Lipper
Analytical Services. (See the Total Returns table on the previous page for other
fund performance comparisons.)
HOW DID YOU POSITION THE FUND DURING THE PERIOD?
Finding longer-maturity, higher-yielding securities was difficult because
short-term securities had almost the same yields as longer-term securities for
much of the period. Inflation remained under control, and the likelihood that
the Federal Reserve would raise interest rates diminished. That caused the yield
curve between three months and one year to flatten--the yields on one-year
Treasury notes dropped, bringing the spread between three-month and one-year
Treasurys to 25 basis points, or 0.25%.
As a result, we allowed the fund's average maturity to shorten to around 30
days in September, rather than purchase one-year notes that we felt weren't
offering sufficiently higher yields than shorter-term securities. However,
one-year notes began to look more attractive in October and November, so we
extended the fund's average maturity out beyond 60 days.
HOW DO YOU DECIDE WHEN A ONE-YEAR SECURITY IS A GOOD BUY?
First, we look at how much additional yield we anticipate one-year
securities will offer versus weekly variable-rate notes (floaters), given our
outlook for interest rates. That helps us determine if we're being compensated
with enough additional yield to justify extending the fund's average maturity.
Second, we look at the relative value of one-year municipal securities as a
percentage of Treasurys. This provides a second measure of the attractiveness of
one-year municipal paper. We know one-year paper is more likely to be a good
value when both of these indicators are positive, as they were in October and
November.
THE FUND'S MANAGEMENT FEE WAS LOWERED DURING THE PERIOD. HOW WILL THAT AFFECT
THE FUND?
We lowered the fund's expenses on August 1, 1997, from 61 to 50 basis points
(from 0.61% to 0.50%), which puts us among the lowest-cost Florida money market
funds. The new, lower expenses directly benefit shareholders because we're
delivering the same strong performance, but at a lower cost. Other things being
equal, lower expenses mean higher returns and yields for our shareholders.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/97)
VRDNs 67%
Bonds less than 1 Year 12%
Commercial Paper 5%
Municipal Notes 4%
Other 12%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/97)
VRDNs 63%
Bonds
Less Than 1 Year 18%
Commercial Paper 16%
Municipal Notes 3%
SEMIANNUAL REPORT FLORIDA MUNICIPAL MONEY MARKET 5
FLORIDA MUNICIPAL MONEY MARKET
HOW DO JAPANESE BANKS AFFECT THE FUND'S PORTFOLIO?
Many municipal money market securities are backed by letters of credit
(LOCs) issued by banks, including Japanese banks. Over the last several years,
the Japanese banking system has suffered from a lengthy domestic recession and
non-performing real estate loans.
Consistent with our strict municipal credit criteria, over the last year we
reduced the number of Japanese banks whose obligations we approve for purchase.
As of December, Bank of Tokyo/Mitsubishi was the only Japanese bank whose
securities we continued to hold. We anticipate that we will no longer have any
Japanese bank exposure after February 1998.
Currently, the only securities backed by Japanese banks that we hold have
maturities of 7 days or less. That means we can get out of these securities
quickly if our credit outlook for Japanese banks should change. In addition,
we've established credit standards that prevent the fund from holding more than
5% of its assets in securities guaranteed by Japanese banks.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES GOING FORWARD?
We think the outlook for interest rates is relatively stable. The economy is
fairly strong, but inflation remains low, so we don't see a strong call for Fed
action on interest rates either way in the near future. However, supply and
demand factors in the municipal money market seem to argue for lower yields
after year's end. The first quarter tends to bring lower yields because there
are many buyers in the market at a time when there is little new issuance. As a
result, yields for tax-free money market funds tend to drop, particularly in
January.
HOW WILL YOU MANAGE THE FUND OVER THE NEXT SIX MONTHS?
We'll continue to use a value-oriented approach to security selection,
monitoring the relative values of one-year notes and shorter-term securities. We
also anticipate large cash inflows in December from investors eager to reduce
their exposure to Florida's intangibles tax. We typically put that new money to
work in daily or weekly floaters. We buy floaters, which mature quickly and are
relatively easy to buy and sell, because a lot of that money flows back out of
the fund in January.
[pie charts]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/97)
SP1+ 76%
SP1 24%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/97)
SP1+ 75%
SP1 25%
6 FLORIDA MUNICIPAL MONEY MARKET AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
FLORIDA MUNICIPAL MONEY MARKET
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES
<S> <C> <C>
$1,000,000 Alachua County Industrial
Development Rev., (Florida Rock
Industries Income Project),
VRDN, 4.00%, 12/4/97 (LOC:
Bank of America N.T. & S.A.) $ 1,000,000
550,000 Broward County Housing Finance
Auth. Multi-Family Housing Rev.,
Series 1990 A, (Palm Aire
Oxford), VRDN, 4.20%, 12/3/97
(SBBPA: Continental Casualty Co.) 550,000
3,250,000 Broward County Housing Finance
Auth. Single-Family Mortgage
Rev., Series 1997 B, 4.05%,
4/1/98 (GIC: GE Capital
Corporation) 3,250,000
1,270,000 Broward County Industrial
Development Rev., (Fast Real
Estate Partners), VRDN, 4.05%,
12/3/97 (LOC: Suntrust Bank
South Florida, N.A.) 1,270,000
2,500,000 Broward County Industrial Development Rev.,
(HEICO), VRDN, 4.05%, 12/3/97 (LOC:
Suntrust Bank South Florida, N.A.) 2,500,000
2,420,000 Broward County Industrial
Development Rev., (MDR Fitness
Project), VRDN, 4.05%, 12/3/97
(LOC: Suntrust Bank, Miami, N.A.) 2,420,000
3,000,000 Broward County School District
Rev., Series 1997 C, 4.50%,
4/22/98 3,006,396
2,745,000 Collier County Housing Finance
Auth. Multi-Family Rev., (Saxon
Manor Isles Project), VRDN,
3.85%, 12/3/97 (LOC: PNC
Bank, Kentucky Inc.) 2,745,000
1,860,000 Coral Springs Industrial
Development Rev., (Royal
Plastics Group Project), VRDN,
4.05%, 12/3/97 (LOC: Suntrust
Bank South Florida, N.A.) 1,860,000
3,000,000 Dade County Housing Finance
Auth. Single-Family Rev., Series
1997 C, 4.05%, 10/16/98
(GIC: FGIC) 3,000,000
Principal Amount Value
- --------------------------------------------------------------------------------------
$4,495,000 Dade County Industrial
Development Auth. Rev., (IVAX
Labs), VRDN, 4.30%, 12/3/97
(LOC: Bank of Tokyo-Mitsubishi,
Ltd.) $ 4,495,000
1,000,000 Dade County Industrial
Development Auth. Rev.,
(Stephen M. Greene), VRDN,
4.15%, 12/3/97 (LOC: Suntrust
Bank, Miami, N.A.) 1,000,000
3,295,000 Dade County Special Obligation Capital Asset
Acquisition Rev., VRDN, 4.30%, 12/3/97 (LOC:
Sanwa Bank Ltd.) 3,295,000
1,965,000 Escambia County Housing Finance
Auth. Single-Family Mortgage
Rev., VRDN, 4.10%, 12/4/97
(SBBPA: Merrill Lynch & Co. Inc.) 1,965,000
2,125,000 Florida Board of Education
Capital Outlay GO, 6.60%,
6/1/98 2,154,306
500,000 Florida Board of Education Capital Outlay GO,
Series 1995 B, 5.625%,
6/1/98 504,039
2,720,000 Florida Department of Transportation
GO, Series 1997 A, 6.40%,
7/1/98 2,760,387
4,650,000 Florida Housing Finance Agency Rev., (Ashley
Lakes Project), VRDN, 3.95%, 12/3/97 (LOC:
Barclays Bank PLC) 4,650,000
1,200,000 Florida Housing Finance Agency
Rev., (Belville-Oxford), VRDN,
4.20%, 12/3/97 (SBBPA:
Continental Casualty Co.) 1,200,000
4,500,000 Florida Housing Finance Agency Rev., (Caribbean
Key), VRDN, 4.00%, 12/3/97 (LOC:
KeyBank, N.A.) 4,500,000
3,800,000 Florida Housing Finance Agency
Rev., (Country Club Apartments),
VRDN, 4.10%, 12/1/97 (LOC:
Northern Trust Corp.) 3,800,000
2,500,000 Florida Housing Finance Agency Rev., (Heron Park
Project), VRDN, 3.95%, 12/3/97 (LOC:
NationsBank N.A.) 2,500,000
See Notes to Financial Statements
SEMIANNUAL REPORT FLORIDA MUNICIPAL MONEY MARKET 7
SCHEDULE OF INVESTMENTS
FLORIDA MUNICIPAL MONEY MARKET
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
$2,000,000 Florida Housing Finance Agency
Rev., (Tiffany Club), VRDN,
4.00%, 12/3/97 (LOC:
NationsBank N.A.) $ 2,000,000
2,200,000 Hillsborough County Aviation Auth.
Rev. Commercial Paper, 3.70%,
12/16/97 (LOC: National
Westminster Bank PLC) 2,200,000
2,000,000 Indian River County Hospital
Commercial Paper, 3.70%,
12/16/97 (LOC: Kredietbank
N.V.) 2,000,000
950,000 Indian River County Industrial
Development Rev., (Florida
Convales), VRDN, 4.00%,
12/1/97 (LOC: Toronto
Dominion Bank) 950,000
2,000,000 Jacksonville Electric Auth. Rev.,
Series 1997 B, 4.00%,
10/1/98 2,002,549
895,000 Jacksonville Health Facilities Auth.
Hospital Rev., Series 1997 A,
3.75%, 8/15/98 (MBIA) 895,000
1,000,000 Lake County Sales Tax Rev.,
5.125%, 12/1/98 (FGIC) 1,012,370
500,000 Marion County Housing Finance Auth.
Multi-Family Rev., (Summer Trace
Apartments), VRDN, 3.90%,
12/4/97 (LOC: Suntrust Bank,
Atlanta, GA) 500,000
810,000 Martin County Industrial
Development Auth. Rev., (R.F.
Labs, Inc.), VRDN, 4.05%,
12/3/97 (LOC: Suntrust Bank
Central Florida, N.A.) 810,000
300,000 Martin County Industrial
Development Auth. Rev., (Tampa
Farm Service, Inc.), VRDN, 4.05%,
12/3/97 (LOC: Suntrust Bank
Central Florida, N.A.) 300,000
200,000 Ocean Highway and Port Auth.
Rev., (1993 Remarketing),
VRDN, 3.85%, 12/3/97
(LOC: ABN Amro Bank, N.A.) 200,000
1,900,000 Ocean Highway and Port Auth.
Rev., (1995 Remarketing), VRDN,
3.85%, 12/3/97 (LOC: ABN
Amro Bank, N.A.) 1,900,000
Principal Amount Value
- --------------------------------------------------------------------------------------
$1,000,000 Orange County Health Facility Auth.
Rev., (Adventist Health System),
VRDN, 3.90%, 12/4/97 (LOC:
Rabobank) $ 1,000,000
1,000,000 Pinellas County Industrial
Development Rev., (Better
Business Forms, Inc.), VRDN,
4.05%, 12/3/97 (LOC: Suntrust
Bank, Tampa Bay) 1,000,000
2,100,000 Pinellas County Industrial Development Rev.,
(Hunter Douglas Project), VRDN, 4.05%, 12/3/97
(LOC: ABN Amro
Bank N.V.) 2,100,000
1,960,000 Putnam County Development Auth.
Pollution Control Rev., (Seminole
Electric), 3.70%, 3/15/98
(National Rural Utilities
Cooperative Finance Corp.) 1,960,000
1,000,000 Sarasota County Utility System
Rev., Series 1996 A, 5.00%,
10/1/98 (FGIC) 1,009,451
825,000 Volusia County Housing Finance
Auth. Multi-Family Housing Rev.,
Series 1985 H, (Sunpointe
Apartments), VRDN, 4.00%,
12/2/97 (LOC: Key Bank, N.A.) 825,000
700,000 Volusia County Industrial
Development Auth. Rev.,
(Daytona Plastix Inc.), VRDN,
4.05%, 12/3/97 (LOC: Suntrust
Bank Central Florida, N.A.) 700,000
---------------------
TOTAL INVESTMENT SECURITIES -- 100.0% $77,789,498
=====================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
FGIC = Financial Guaranty Insurance Co.
GIC = Guaranteed Investment Contract
GO = General Obligation
LOC = Letter of Credit
MBIA = MBIA Insurance Company
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, 1997.
See Notes to Financial Statements
8 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
- -----------------------------------------------------------------------------------------------------------------------
YIELDS AS OF NOVEMBER 30, 1997
<S> <C> <C> <C> <C> <C>
Florida Intermediate-Term Municipal 4.02% 5.58% 5.83% 6.28% 6.66%
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS LIFE OF
FUND(1)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1997(2)
Florida Intermediate-Term Municipal .................. 4.73% 6.78% 8.51% 6.85%
Lehman 5-Year General Obligation Index ............... 4.04% 5.38% 7.53% 6.25%(3)
Average Florida Intermediate
Municipal Debt Fund(4) ............................... 4.10% 5.28% 7.77% 6.01%(3)
Fund's Ranking Among Florida Intermediate
Municipal Debt Funds(4) .............................. -- 1 out of 20 3 out of 16 2 out of 13(3)
</TABLE>
(1) Inception date was April 11, 1994.
(2) Returns for periods less than one year are not annualized.
(3) Returns from 4/30/94, the date nearest the fund's inception for which data
are available.
(4) According to Lipper Analytical Services.
See pages 24-25 for more information about returns and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
$10,000 investment made 4/30/94*
Value on 11/30/97
Florida
Intermediate-Term Lehman 5-Year
Municipal GO Index
$10,000 $10,000
May-94 $10,093 $10,056
Jun-94 $10,054 $10,033
Jul-94 $10,195 $10,142
Aug-94 $10,252 $10,191
Sep-94 $10,173 $10,114
Oct-94 $10,045 $10,058
Nov-94 $9,876 $9,993
Dec-94 $10,032 $10,081
Jan-95 $10,212 $10,178
Feb-95 $10,471 $10,326
Mar-95 $10,539 $10,490
Apr-95 $10,592 $10,518
May-95 $10,830 $10,749
Jun-95 $10,811 $10,757
Jul-95 $10,930 $10,908
Aug-95 $11,021 $11,018
Sep-95 $11,069 $11,051
Oct-95 $11,195 $11,097
Nov-95 $11,297 $11,192
Dec-95 $11,386 $11,253
Jan-96 $11,513 $11,387
Feb-96 $11,481 $11,349
Mar-96 $11,328 $11,288
Apr-96 $11,310 $11,271
May-96 $11,300 $11,258
Jun-96 $11,351 $11,338
Jul-96 $11,477 $11,413
Aug-96 $11,476 $11,436
Sep-96 $11,552 $11,522
Oct-96 $11,663 $11,629
Nov-96 $11,819 $11,791
Dec-96 $11,802 $11,774
Jan-97 $11,837 $11,805
Feb-97 $11,936 $11,889
Mar-97 $11,820 $11,755
Apr-97 $11,865 $11,814
May-97 $12,049 $11,942
Jun-97 $12,195 $12,048
Jul-97 $12,448 $12,266
Aug-97 $12,365 $12,201
Sep-97 $12,504 $12,310
Oct-97 $12,562 $12,386
Nov-97 $12,619 $12,425
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. However, the fund's expenses were waived through
December 31, 1995. Had these fees not been waived, returns for those periods
would have been lower.
* 4/30/94 is the date nearest the fund's inception for which comparable
performance data exist. The fund's actual inception date is 4/11/94.
PORTFOLIO AT A GLANCE
11/30/97 5/31/97
Number of Securities 33 34
Weighted Average Maturity 7.9 years 7.8 years
Average Duration 5.4 years 5.4 years
Expense Ratio 0.57%* 0.65%
* Annualized.
SEMIANNUAL REPORT FLORIDA INTERMEDIATE-TERM MUNICIPAL 9
FLORIDA INTERMEDIATE-TERM MUNICIPAL
MANAGEMENT Q & A
An interview with Dave MacEwen and Ken Salinger, portfolio managers on the
Florida Municipal funds investment team.
HOW DID THE FUND PERFORM?
The fund strongly outperformed both its Lipper peer group and its benchmark.
For the six months ended November 30, 1997, the fund's total return was 4.73%,
compared with the 4.10% return of the average Florida intermediate municipal
fund and the benchmark's 4.04% return. According to Lipper Analytical Services,
the fund ranked #1 out of 20 "Florida Intermediate Municipal Funds" for the year
ended November 30. (See the total returns table on the previous page for other
fund performance comparisons.)
The fund also provided shareholders with higher-than-average yields. The
fund's 30-day SEC yield as of November 30 was 4.02%, compared with the 3.81%
yield of the average Florida intermediate fund.
WHY DID THE FUND PERFORM SO WELL?
One reason was our conservative, value-oriented approach to security
selection--our credit research staff helped us find many undervalued securities
that subsequently appreciated.
Another reason the fund performed well was its below-average expenses. The
new unified fee structure shareholders approved in July 1997 lowered the
management fee for this fund to well below the expense ratio for the average
Florida intermediate municipal fund. That directly benefits shareholders because
we're delivering the same strong performance, but at a lower cost. And other
things being equal, lower expenses mean higher yields and returns for our
shareholders.
HOW WAS THE PORTFOLIO'S DURATION POSITIONED VERSUS THE FUND'S PEER GROUP?
We kept the fund's duration at around 5.5 years, slightly longer than that
of its Lipper peer group average, which helped enhance the fund's returns.
(Duration is a measure of a portfolio's sensitivity to changes in interest
rates. The longer a fund's duration, the more its share price tends to rise or
fall when rates change.) When inflation remained benign and the possibility of a
short-term interest rate increase by the Federal Reserve evaporated, we
lengthened the fund's duration, extending it as far as 5.75 years. This
benefited performance because interest rates fell overall.
[bar graph - data below]
FLORIDA INTERMEDIATE-TERM MUNICIPAL'S
ONE-YEAR RETURNS SINCE INCEPTION (Periods ended November 30)
Florida
Intermediate-Term Lehman 5-Year
Municipal GO Index
11/94* -1.24% -0.07%
11/95 14.39% 11.99%
11/96 4.61% 5.36%
11/97 6.78% 5.38%
This graph illustrates the fund's returns since its inception and compares them
with the index's returns. The fund's expenses were waived through December 31,
1995. Had these fees not been waived, returns for those periods would have been
less. The fund's total returns for the 1996 and 1997 fiscal years include
operating expenses, while the comparative index's returns do not. See page 24
for a definition of the index.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
* Return from 4/30/94 (the date nearest the fund's inception for which index
data are available) to 11/30/94.
10 FLORIDA INTERMEDIATE-TERM MUNICIPAL AMERICAN CENTURY INVESTMENTS
FLORIDA INTERMEDIATE-TERM MUNICIPAL
HOW DID YOU STRUCTURE THE FUND'S PORTFOLIO?
We used a fairly bulleted structure as the period began, because we expected
the municipal yield curve to move from flat to steep. (The yield curve steepens
when long-term interest rates rise faster than short-term rates, or when
short-term rates fall faster than long-term rates, which happened during the
summer.) To attain this bulleted structure, we chose more intermediate bonds
with six- to seven-year maturities, which were close to the fund's average
maturity. As short-term interest rates fell during the summer, our intermediate
securities appreciated more than longer-term securities, which remained fairly
stable.
However, as inflation stayed low, longer-term interest rates also began to
fall, causing the yield curve to flatten (long-term rates fell faster than
short-term rates). Responding to this shift in market sentiment, we moved the
fund to a more barbelled position by switching its emphasis on intermediate
securities to short and long securities. This change allowed the fund to take
advantage of the flattening yield curve as intermediate municipals were
outperformed by longer ones. (When long-term interest rates are falling, long
bonds tend to produce more price appreciation than intermediate securities,
while the fund's shorter securities provide a relatively steady yield.)
DID YOU CONTINUE USING SWAP TRADES TO ENHANCE THE FUND'S PERFORMANCE ?
Yes, swaps played a significant role. In a typical swap trade, we exchange
one of the fund's securities with a broker for one of their securities that we
believe is undervalued. As mentioned in the previous report, we believe swap
trades are an excellent way to add value to the fund. These trades allow us to
take advantage of occasional market inefficiencies and to quickly adjust the
fund's structure.
During the third quarter in particular, we made many profitable swaps,
partly due to unusually high levels of municipal issuance. By the fourth
quarter, however, the number of swaps decreased because new municipal issuance
began to dry up.
YOU INCREASED THE PERCENTAGE OF SECURITIES RATED AAA IN THE FUND DURING THE
PERIOD, WHILE DECREASING THE AMOUNT OF SECURITIES RATED AA. WHY?
We were able to improve the fund's credit quality significantly while
sacrificing very little yield. That's because Florida's credit quality continued
to improve, and the difference in yield between AAA and AA securities decreased.
As a result, we tended to buy more AAA securities, but didn't give up much
yield.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/97)
Revenue Bonds 76%
Land-Secured 16%
GO 7%
Prerefunded/ETM 1%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/97)
Revenue Bonds 61%
Land-Secured 15%
GO 13%
COPs/Leases 8%
Prerefunded/ETM 1%
Other 2%
SEMIANNUAL REPORT FLORIDA INTERMEDIATE-TERM MUNICIPAL 11
FLORIDA INTERMEDIATE-TERM MUNICIPAL
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET OVER THE NEXT SIX MONTHS?
We have a positive outlook. Inflation remains tame, having risen at an
annualized rate of only 1.8% for the first 11 months of 1997. "Real" interest
rates (nominal interest rates minus the inflation rate) are at relatively high
levels that should inhibit inflation and economic growth from reaching
unmanageable levels. In addition, strong productivity gains should continue to
offset wage gains in the near future.
Economic turmoil in Asia also means a reduced chance for inflation in the
U.S. Slower growth overseas could take the edge off U.S. economic growth because
it means slower business for U.S. exporters. And a strong U.S. dollar and weak
Asian currencies mean Americans will be able to buy imported goods at reduced
prices, putting price pressure on American products.
The shrinking federal budget deficit also boosts the Treasury market by
reducing the supply of available Treasury securities. Higher Treasury prices
help make municipal securities a better relative value, which supports
municipals by attracting more buyers.
WITH THIS OUTLOOK IN MIND, WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
For now, we'll likely keep the fund's duration neutral to slightly long
compared with its Lipper peer group.
We'll continue to work closely with our credit research team as part of our
conservative, value-oriented approach to security selection. We'll also keep an
eye out for attractive swap-trade opportunities. We will also continue to
monitor the municipal yield curve closely, looking for opportunities to enhance
returns by restructuring the fund to benefit from changing market conditions.
[pie charts]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/97)
AAA 81%
AA 19%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/97)
AAA 63%
AA 37%
12 FLORIDA INTERMEDIATE-TERM MUNICIPAL AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
FLORIDA INTERMEDIATE-TERM MUNICIPAL
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
MUNICIPAL SECURITIES
<S> <C> <C>
$ 300,000 Boca Raton Water and Sewer
Rev., 6.40%, 10/1/02 $ 312,258
300,000 Broward County School District
GO, 6.75%, 2/15/00(1) 315,192
1,000,000 Dade County Aviation Rev., Series
1997 A, (Miami International
Airport), 5.50%, 10/1/02 (FSA) 1,047,660
500,000 Dade County Aviation Rev., Series
1995 E, 5.50%, 10/1/10
(AMBAC) 525,560
1,000,000 Dade County Housing Finance
Auth. Single-Family Mortgage
Rev., Series 1997 C, 4.05%,
10/16/98 (FGIC) 1,000,080
500,000 Duval County School District GO,
6.25%, 8/1/05 (AMBAC) 546,600
500,000 East County Water Control District
Rev., 5.375%, 11/1/01 (Asset
Guaranty) 519,295
300,000 Escambia County Housing Finance
Auth. Single-Family Mortgage
Rev., 6.00%, 4/1/02
(GNMA/FNMA) 310,314
350,000 Florida Housing Finance Agency
Multi-Family Housing Rev.,
5.35%, 6/1/00 354,904
450,000 Florida Housing Finance Agency
Rev., (Williamsburg Village
Apartments), 5.60%, 12/1/07
(AMBAC) 471,780
500,000 Florida Housing Finance Agency
Rev., (Windwood), 5.65%,
12/1/07 (AXA Insurance) 518,225
350,000 Gainesville Utilities System Rev.,
Series 1996 A, 5.75%, 10/1/09 384,395
800,000 Hillsborough County Aviation Auth.
Rev., Series 1997 A, (Tampa
International Airport), 5.00%,
10/1/05 (AMBAC) 818,968
400,000 Hillsborough County Port District
Special Rev., 6.50%, 6/1/04
(FSA) 446,372
Principal Amount Value
- --------------------------------------------------------------------------------------
$ 400,000 Indian Trace Community
Development District Water
Management Special Benefit
Assessment, Series 1995 A,
5.25%, 5/1/03 (MBIA) $ 418,592
750,000 Indian Trace Community
Development District Water
Management Special Benefit
Assessment, 5.00%, 5/1/10
(MBIA) 756,473
480,000 Jacksonville Electric Auth. Rev., (St.
John's River Power Project),
6.00%, 10/1/05 529,766
500,000 Jacksonville Electric Auth. Rev.,
Series 1995 6-C, (St. John's
River Power Project), 6.50%,
10/1/01 539,160
1,250,000 Jacksonville Excise Tax Rev.,
5.20%, 10/1/04 (FGIC) 1,295,487
1,000,000 Lee County Rev., Series 1997 A,
5.75%, 10/1/11 (MBIA) 1,093,070
1,000,000 Miami Beach Parking Rev., 5.00%,
9/1/10 (FSA) 1,007,380
550,000 Orange County Health Facilities
Auth. Rev., Series 1996 A,
6.00%, 10/1/04 (MBIA) 602,828
450,000 Orlando and Orange County
Expressway Auth. Rev., 6.50%,
7/1/11 (FGIC) 524,723
500,000 Orlando Utility Commission Water
and Electric Rev., 5.70%,
10/1/04 539,235
300,000 Pensacola Airport Rev., Series
1998 A, 6.00%, 10/1/01
(MBIA)(2) 314,235
500,000 Pensacola Airport Rev., Series
1997 B, 5.40%, 10/1/07
(MBIA) 527,695
1,000,000 Polk County Housing Finance
Auth. Multi-Family Housing Rev.,
Series 1997 A, (Winter Oaks
Apartments), 5.25%, 7/1/07
(FNMA) 1,025,670
200,000 Reedy Creek Improvement District
Utility Rev., Series 1991-1,
6.25%, 10/1/01, Prerefunded
at 101% of Par (MBIA)(3) 216,356
See Notes to Financial Statements
SEMIANNUAL REPORT FLORIDA INTERMEDIATE-TERM MUNICIPAL 13
SCHEDULE OF INVESTMENTS
FLORIDA INTERMEDIATE-TERM MUNICIPAL
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
$1,675,000 Reedy Creek Improvement District
Utility Rev., Series 1, 5.50%,
10/1/05 (AMBAC) $ 1,794,829
400,000 St. Cloud Utility Rev., 6.40%,
8/1/06 (MBIA) 433,804
175,000 Tampa Palms Community
Development Special
Assessment Rev., 4.90%,
5/1/99 (MBIA) 177,179
1,000,000 Tampa Sports Auth. Rev., 4.50%,
1/1/99 (MBIA) 1,007,300
500,000 Volusia County School District GO,
6.20%, 8/1/03 (FGIC) 539,780
---------------------
TOTAL INVESTMENT SECURITIES -- 100.0% $20,915,165
=====================
(Cost $20,298,804)
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Indemnity Corporation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance
GNMA = Government National Mortgage Association
GO = General Obligation
MBIA = MBIA Insurance Company
(1) Denotes security which has been segregated at the custodian bank for a
when-issued security.
(2) When-issued security.
(3) Escrowed to maturity in U.S. Government securities.
See Notes to Financial Statements
14 FLORIDA INTERMEDIATE-TERM MUNICIPAL AMERICAN CENTURY INVESTMENTS
STATEMENTS OF ASSETS AND LIABILITIES
FLORIDA FLORIDA
MUNICIPAL INTERMEDIATE-TERM
NOVEMBER 30, 1997 (UNAUDITED) MONEY MARKET MUNICIPAL
ASSETS
Investment securities, at value
(amortized cost and identified
cost of $20,298,804,
respectively) (Note 3) ............... $77,789,498 $20,915,165
Cash ................................... 2,074,228 25,552
Investment in affiliated money
market fund (Note 2) ................. -- 502,834
Interest receivable .................... 598,961 294,478
-------------- -------------
80,462,687 21,738,029
-------------- -------------
LIABILITIES
Disbursements in excess of
demand deposit cash .................. 29,659 12,934
Payable for investments purchased ...... -- 1,115,078
Payable for capital shares redeemed .... 7,615 12,163
Dividends payable ...................... 17,156 5,335
Accrued management fees (Note 2) ....... 42,812 8,457
-------------- -------------
97,242 1,153,967
-------------- -------------
Net Assets ............................. $80,365,445 $20,584,062
============== =============
CAPITAL SHARES
Outstanding (Unlimited number of
shares authorized) ................... 80,365,445 1,942,597
============== =============
Net Asset Value Per Share .............. $1.00 $10.60
============== =============
NET ASSETS CONSIST OF:
Capital paid in ........................ $80,365,445 $19,651,730
Accumulated undistributed net
realized gain on investments ......... -- 315,971
Net unrealized appreciation
on investments (Note 3) .............. -- 616,361
-------------- -------------
$80,365,445 $20,584,062
============== =============
See Notes to Financial Statements
SEMIANNUAL REPORT STATEMENTS OF ASSETS AND LIABILITIES 15
STATEMENTS OF OPERATIONS
FLORIDA FLORIDA
FOR THE SIX MONTHS ENDED MUNICIPAL INTERMEDIATE-TERM
NOVEMBER 30, 1997 (UNAUDITED) MONEY MARKET MUNICIPAL
INVESTMENT INCOME
Income:
Interest ............................... $1,715,869 $ 576,555
-------------- -------------
Expenses (Note 2):
Investment advisory fees ............... 211,738 57,455
Administrative fees .................... 15,789 3,851
Printing and postage ................... 11,787 5,724
Transfer agency fees ................... 6,746 1,484
Auditing and legal fees ................ 3,836 677
Custodian fees ......................... 3,178 5,715
Trustees' fees and expenses ............ 1,404 1,095
Organization costs ..................... 219 196
Other operating expenses ............... 2,272 1,947
-------------- -------------
256,969 78,144
Amount waived .......................... (17,730) (10,329)
-------------- -------------
Net expenses ......................... 239,239 67,815
-------------- -------------
Net investment income .................. 1,476,630 508,740
-------------- -------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ....... -- 264,519
Change in net unrealized
appreciation on investments .......... -- 309,053
-------------- -------------
Net realized and unrealized
gain on investments .................... -- 573,572
-------------- -------------
Net Increase in Net Assets
Resulting from Operations .............. $1,476,630 $1,082,312
============== =============
See Notes to Financial Statements
16 STATEMENTS OF OPERATIONS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED) AND YEAR ENDED MAY 31, 1997
FLORIDA MUNICIPAL FLORIDA INTERMEDIATE-TERM
MONEY MARKET MUNICIPAL
Increase (Decrease) in Net Assets November 30, May 31, November 30, May 31,
1997 1997 1997 1997
- -------------------------------------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income .......... $ 1,476,630 $ 4,590,342 $ 508,740 $ 512,380
Net realized gain on investments -- -- 264,519 51,857
Change in net unrealized
appreciation on investments .. -- -- 309,053 177,601
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations ... 1,476,630 4,590,342 1,082,312 741,838
------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income ..... (1,476,630) (4,590,342) (508,740) (512,380)
From net realized gains on
investment transactions ...... -- -- -- (39,475)
------------- ------------- ------------- -------------
Decrease in net assets
from distributions ........... (1,476,630) (4,590,342) (508,740) (551,855)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ...... 49,163,958 211,673,148 10,823,384 14,609,503
Proceeds from reinvestment
of distributions ............. 1,380,332 4,249,244 437,614 409,403
Payments for shares redeemed ... (82,308,046) (203,786,255) (7,763,123) (9,015,107)
------------- ------------- ------------- -------------
Net increase (decrease) in net
assets from capital share
transactions ................. (31,763,756) 12,136,137 3,497,875 6,003,799
------------- ------------- ------------- -------------
Net increase (decrease) in
net assets ................... (31,763,756) 12,136,137 4,071,447 6,193,782
NET ASSETS
Beginning of period ............ 112,129,201 99,993,064 16,512,615 10,318,833
------------- ------------- ------------- -------------
End of period .................. $ 80,365,445 $ 112,129,201 $ 20,584,062 $ 16,512,615
============= ============= ============= =============
TRANSACTIONS IN SHARES
OF THE FUNDS
Sold ........................... 49,163,958 211,673,148 1,040,203 1,420,596
Issued in reinvestment
of distributions ............. 1,380,332 4,249,244 41,498 39,811
Redeemed ....................... (82,308,046) (203,786,255) (736,772) (876,033)
------------- ------------- ------------- -------------
Net increase (decrease) ........ (31,763,756) 12,136,137 344,929 584,374
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements
SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS 17
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997 (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 seven Funds issued by
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 Funds invest primarily in municipal
obligations with maturities based on each Fund's investment objective. 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--Portfolio 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 accretion of discounts and amortization of premiums.
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.
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 options 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
contracts may include the possibility that the changes 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 an unrealized gain or loss. The Fund
recognizes a realized gain or loss when the contract is closed or expires. There
were no open futures contracts at November 30, 1997.
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.
18 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The shareholders of the Funds approved a new management agreement with
American Century Investment Management, Inc. (ACIM) on July 30, 1997, effective
August 1, 1997, which replaced the existing contracts between the Funds and
Benham Management Corporation and American Century Services Corporation (ACSC)
for advisory, administrative and transfer agency services. Under the agreement,
ACIM will provide all services required by the Funds in exchange for one unified
management fee. Expenses excluded from the agreement are brokerage, taxes,
portfolio insurance, interest, fees and expenses of Trustees who are not
considered "interested persons" as defined in the Investment Company Act of 1940
(including counsel fees) and extraordinary expenses. The annual rate at which
this fee is assessed is determined monthly in a two-step process: First, a fee
rate schedule is applied to the assets of all of the funds in the Fund's
investment category which are managed by ACIM (the "Investment Category Fee").
The overall investment objective of each Fund determines its Investment
Category. The three investment categories are: the Money Market Fund Category,
the Bond Fund Category, and the Equity Fund Category. The Money Market Fund is
included in the Money Market Fund Category and the Intermediate-Term Fund is
included in the Bond Fund Category. Second, a separate fee rate schedule is
applied to the assets of all of the funds managed by ACIM (the "Complex Fee").
The Investment Category Fee and the Complex Fee are then added to determine the
unified management fee rate. The management fee is paid monthly by each Fund
based on each Fund's aggregate average daily net assets during the previous
month multiplied by the monthly management fee rate. The annualized Investment
Category Fee schedule for each Fund is as follows:
Money Market Fund:
0.2700% of the first $1 billion
0.2270% of the next $1 billion
0.1860% of the next $3 billion
0.1690% of the next $5 billion
0.1580% of the next $15 billion
0.1575% of the next $25 billion
0.1570% of the average daily net assets over $50 billion
Intermediate-Term Fund:
0.2800% of the first $1 billion
0.2280% of the next $1 billion
0.1980% of the next $3 billion
0.1780% of the next $5 billion
0.1650% of the next $15 billion
0.1630% of the next $25 billion
0.1625% of the average daily net assets over $50 billion
The annualized Complex Fee schedule (for all Funds) is as follows:
0.3100% of the first $2.5 billion
0.3000% of the next $7.5 billion
0.2985% of the next $15 billion
0.2970% of the next $25 billion
0.2960% of the next $50 billion
0.2950% of the next $100 billion
0.2940% of the next $100 billion
0.2930% of the next $200 billion
0.2920% of the next $250 billion
0.2910% of the next $500 billion
0.2900% of the average daily net assets over $1,250 billion
Management fees of $136,918 and $40,258 were incurred under the new
management agreement and are included in Investment Advisory Fees in the
Statements of Operations for the Money Market Fund and the Intermediate-Term
Fund, respectively. Expenses net of waiver, under the previous agreement for the
two months ended July 31, 1997 were $102,321 and $27,557 for the Money Market
Fund and the Intermediate-Term Fund, respectively. The annualized ratio of
operating expenses to average net assets for the two months ended July 31, 1997
was 0.60% and 0.67% for the Money Market Fund and the Intermediate-Term Fund,
respectively.
Certain officers and trustees of the Trust are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the Trust's investment manager, ACIM, the Trust's
transfer agent, ACSC, and the registered broker dealer American Century
Investment Services, Inc..
As of November 30, 1997, the Intermediate-Term Fund had invested $502,834 in
shares of the Money Market Fund. The terms of the transaction were identical to
those with non-related entities except that, to avoid duplicative management
fees, the Intermediate-Term Fund did not pay ACIM management fees with respect
to assets invested in the Money Market Fund.
SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 19
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of municipal debt obligations for the Intermediate-Term
Fund, excluding short-term investments, totaled $24,507,875 and $22,137,082,
respectively.
As of November 30, 1997, accumulated net unrealized appreciation for the
Intermediate-Term Fund was $616,361, which consisted entirely of unrealized
appreciation. The aggregate cost of investments for federal income tax purposes
for the Money Market Fund and the Intermediate-Term Fund was the same as the
cost for financial reporting purposes.
20 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FLORIDA MUNICIPAL MONEY MARKET
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
1997(1) 1997 1996 1995 1994(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Period .............. $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ----------
Income From
Investment Operations
Net Investment Income .......... 0.02 0.03 0.04 0.04 --
---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income ..... (0.02) (0.03) (0.04) (0.04) --
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ... $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
Total Return(3) ................ 1.66% 3.55% 3.86% 3.71% 0.40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............0.53%(4) 0.12% 0.01% -- --
Ratio of Operating Expenses
to AverageNet Assets
(Before Expense Waiver) ..........0.57%(4) 0.66% 0.71% 0.88% 1.58%(4)
Ratio of Net Investment
Income to Average Net Assets .....3.29%(4) 3.48% 3.75% 3.93% 2.99%(4)
Ratio of Net Investment
Income to Average Net Assets
(Before Expense Waiver) ..........3.25%(4) 2.94% 3.05% 3.05% 1.41%(4)
Net Assets, End
of Period (in thousands) ......... $80,365 $112,129 $99,993 $45,147 $5,565
</TABLE>
- ----------
(1) Six months ended November 30, 1997 (unaudited).
(2) April 11, 1994 (inception) through May 31, 1994.
(3) Total return assumes reinvestment of dividends. Total returns for periods
less than one year are not annualized.
(4) Annualized.
See Notes to Financial Statements
SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS 21
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FLORIDA INTERMEDIATE-TERM MUNICIPAL
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
1997(1) 1997 1996 1995 1994(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Period .................. $10.34 $10.18 $10.30 $10.11 $10.00
---------- ---------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income .............. 0.23 0.46 0.52 0.52 0.07
Net Realized and Unrealized
Gain (Loss)
on Investment Transactions ......... 0.26 0.20 (0.08) 0.19 0.11
---------- ---------- ---------- ---------- ----------
Total From Investment Operations ... 0.49 0.66 0.44 0.71 0.18
---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income ......... (0.23) (0.46) (0.52) (0.52) (0.07)
From Net Realized Capital Gains .... -- (0.04) (0.04) -- --
---------- ---------- ---------- ---------- ----------
Total Distributions ................ (0.23) (0.50) (0.56) (0.52) (0.07)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ....... $10.60 $10.34 $10.18 $10.30 $10.11
========== ========== ========== ========== ==========
Total Return(3) .................... 4.73% 6.63% 4.34% 7.31% 1.79%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.57%(4) 0.65% 0.13% -- --
Ratio of Operating Expenses
to AverageNet Assets
(Before Expense Waiver) .............. 0.66%(4) 0.86% 0.88% 1.09% 1.92%(4)
Ratio of Net Investment
Income to Average Net Assets ......... 4.29%(4) 4.42% 5.05% 5.23% 5.02%(4)
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) .............. 4.20%(4) 4.21% 4.30% 4.14% 3.10%(4)
Portfolio Turnover Rate .............. 98% 82% 66% 37% 6%
Net Assets, End
of Period (in thousands) ............. $20,584 $16,513 $10,319 $9,532 $5,892
</TABLE>
- ----------
(1) Six months ended November 30, 1997 (unaudited).
(2) April 11, 1994 (inception) through May 31, 1994.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements
22 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
PROXY VOTING RESULTS
An annual meeting of shareholders was held on July 30, 1997, to vote on the
following proposals. All of the proposals received the required majority of
votes and were adopted.
A summary of voting results is listed below each proposal.
PROPOSAL 1:
To vote on the selection by the Board of Trustees of Coopers & Lybrand LLP
as independent auditors for the Trust.
MUNICIPAL INTERMEDIATE-
MONEY MARKET TERM MUNICIPAL
For: 62,589,478 1,026,612
Against: 2,066,291 25,426
Abstain: 580,265 2,974
PROPOSAL 2:
To vote on the approval of a Management Agreement with American Century
Investment Management, Inc.
MUNICIPAL INTERMEDIATE-
MONEY MARKET TERM MUNICIPAL
For: 60,994,259 998,927
Against: 3,521,917 42,416
Abstain: 719,858 13,669
PROPOSAL 3:
To vote on the adoption of standardized investment limitations for the
following items:
* Amend the fundamental investment limitation concerning borrowing.
MUNICIPAL INTERMEDIATE-
MONEY MARKET TERM MUNICIPAL
For: 57,526,258 936,381
Against: 6,829,959 89,880
Abstain: 877,451 6,770
Broker
Non-Vote: 2,366 21,981
* Amend the fundamental investment limitation concerning lending.
MUNICIPAL INTERMEDIATE-
MONEY MARKET TERM MUNICIPAL
For: 58,616,129 936,381
Against: 5,740,088 89,880
Abstain: 877,451 6,770
Broker
Non-Vote 2,366 21,981
* Amend the fundamental investment limitation concerning underwriting.
MUNICIPAL INTERMEDIATE-
MONEY MARKET TERM MUNICIPAL
For: 58,616,129 936,381
Against: 5,740,088 89,880
Abstain: 877,451 6,770
Broker
Non-Vote: 2,366 21,981
* Amend the fundamental investment limitation concerning commodities.
MUNICIPAL INTERMEDIATE-
MONEY MARKET TERM MUNICIPAL
For: 58,506,138 931,282
Against: 5,850,079 90,678
Abstain: 877,451 11,071
Broker
Non-Vote: 2,366 21,981
* Eliminate the fundamental investment limitation concerning investments in
oil, gas and mineral exploration development programs.
MUNICIPAL INTERMEDIATE-
MONEY MARKET TERM MUNICIPAL
For: 58,605,974 932,080
Against: 5,750,243 89,880
Abstain: 877,451 11,071
Broker
Non-Vote: 2,366 21,981
SEMIANNUAL REPORT PROXY VOTING RESULTS 23
BACKGROUND INFORMATION
INVESTMENT PHILOSOPHY & POLICIES
The Benham Group offers 38 fixed-income funds, ranging from money market
funds to long-term bond funds and including both taxable and tax-exempt funds.
Each fund is managed to provide a "pure play" on a specific sector of the
fixed-income market. To ensure adherence to this principle, the basic structure
of each fund's portfolio is tied to a specific market index. Fund managers
attempt to add value by making modest portfolio adjustments based on their
analysis of prevailing market conditions. Investment decisions are made by
management teams, which meet regularly to discuss market analysis and investment
strategies.
In addition to these principles, each fund has its own investment policies:
The FLORIDA MUNICIPAL FUNDS seek to provide interest income exempt from
federal income taxes by investing at least 65% of their net assets in Florida
municipal securities. Fund shares are intended to be exempt from the Florida
intangibles tax.
Depending on your tax status, investment income may be subject to the
federal alternative minimum tax. Capital gains are not exempt from federal
income tax.
FLORIDA MUNICIPAL MONEY MARKET is a money market fund that seeks interest
income exempt from federal income taxes by investing primarily in high-quality,
short-term Florida municipal securities.
Investments in Florida Municipal Money Market 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 net asset value of $1
per share.
FLORIDA INTERMEDIATE-TERM MUNICIPAL is a variable-price bond fund that
invests primarily in intermediate-term Florida municipal securities with
maturities of four or more years. The fund maintains a weighted average maturity
of 5-10 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 Lipper categories for the Florida Municipal funds are:
OTHER STATES TAX-EXEMPT MONEY MARKET FUNDS (Florida Municipal Money Market)
- --funds that invest in high-quality municipal obligations with dollar-weighted
average maturities of less than 90 days.
FLORIDA INTERMEDIATE MUNICIPAL DEBT FUNDS (Florida Intermediate-Term
Municipal)--funds that invest at least 65% of their assets in municipal debt
issues that are exempt from taxation in Florida, with dollar-weighted average
maturities of 5-10 years.
INVESTMENT TEAM LEADERS
Portfolio Managers Bryan Karcher
Dave MacEwen
Ken Salinger
Credit Research Manager Steven Permut
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. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on pages 21-22.
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.
* TAX-EQUIVALENT YIELDS show the taxable yields that investors in a federal
income tax bracket would have to earn before taxes to equal the fund's tax-free
yield.
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.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES--the number of different securities held by a fund on a
given date.
* WEIGHTED AVERAGE MATURITY (WAM)--a measurement of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount.
* AVERAGE DURATION--another measure of the sensitivity of a fixed-income
portfolio to interest rate changes. Duration is a time-weighted average of the
interest and principal payments of the securities in a portfolio.
* EXPENSE RATIO--the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF MUNICIPAL SECURITIES
* COPS/LEASES--securities issued to finance public property improvements (such
as city halls and police stations) and equipment purchases. Certificates of
participation represent long-term debt obligations, while leases have a higher
risk profile than GOs because they require annual appropriation.
* GO BONDS--general obligation securities backed by the taxing power of the
issuer.
* LAND-SECURED BONDS--securities such as Mello-Roos bonds and 1915-Act bonds
that are issued to finance real estate development projects.
* PREREFUNDED BONDS/ETM BONDS--securities refinanced or escrowed to maturity by
the issuer because of their premium coupons (higher-than-market interest rates).
These bonds tend to have higher credit ratings because they are backed by
Treasury securities.
* REVENUE BONDS--securities backed by revenues from sales taxes or from a
specific project, system or facility (such as a hospital, electric utility or
water system).
SEMIANNUAL REPORT GLOSSARY 25
[american century logo]
American
Century(reg.sm)
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES:
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 816-444-3485
FAX: 816-340-7962
INTERNET: WWW.AMERICANCENTURY.COM
AMERICAN CENTURY MUNICIPAL TRUST
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION FUNDS DISTRIBUTOR, INC.
9801 [recycled logo]
SH-BKT-10687 Recycled
<PAGE>
SEMIANNUAL
REPORT
[american century logo]
American
Century(reg.sm)
NOVEMBER 30, 1997
BENHAM
GROUP
Arizona Intermediate-Term Municipal
TABLE OF CONTENTS
Report Highlights ....................................................... 1
Our Message to You ...................................................... 2
Market Perspective ...................................................... 3
Performance & Portfolio Information ..................................... 4
Management Q & A ........................................................ 5
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 .................................................... 15
Proxy Voting Results .................................................... 16
Background Information
Investment Philosophy & Policies ............................. 20
Comparative Indices .......................................... 20
Lipper Rankings .............................................. 20
Investment Team Leaders ...................................... 20
Glossary ................................................................ 21
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios.
We've organized our funds into three distinct groups, based on investment style
and objectives, to help simplify your fund decisions. These groups appear below.
AMERICAN CENTURY INVESTMENTS--FAMILY OF FUNDS
- -------------------------------------------------------------------------------
Benham American Century Twentieth Century(reg. tm)
Group(reg. tm) Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY 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 American Century are registered marks of American Century
Services Corporation. Benham Group is a registered mark of Benham Management
Corporation.
AMERICAN CENTURY INVESTMENTS
REPORT HIGHLIGHTS
MARKET PERSPECTIVE
* Municipal securities produced solid returns during the six months ended
November 30, 1997.
* Despite lower yields overall, low unemployment and inflation fears sparked
bond market volatility.
* Credit spreads fell to historically low levels because of improving credit
quality and the increase in the number of municipal securities insured with
a AAA rating.
MUNICIPAL CREDIT REVIEW
* Arizona continued to be one of the fastest-growing states during the second
half of 1997.
* While the state's population rose, its overall unemployment rate fell to 5%
by August.
* Job growth was most impressive in the Phoenix and Tucson areas.
* A steady increase in taxable sales improved the state's budget, which led to
improvement in overall municipal credit quality.
MANAGEMENT Q & A
* The fund's six-month return was slightly above the return of the average
intermediate municipal fund and matched the return of its benchmark.
* We maintained a slightly longer duration than the fund's peers because of
our expectations for lower interest rates.
* While we continue actively searching for bargains among lower-rated issues,
the mainstay of the fund continues to be municipal securities rated AAA and
AA.
* Going forward, we'll likely keep the fund's duration neutral to slightly
long compared with the average of its peers.
ARIZONA INTERMEDIATE-TERM MUNICIPAL
TOTAL RETURNS: AS OF 11/30/97
6 Months 4.04%*
1 Year 5.02%
30-DAY SEC YIELD: 4.01%
NET ASSETS: $36.0 million
(AS OF 11/30/97)
INCEPTION DATE: 4/11/94
TICKER SYMBOL: BEAMX
* Not annualized.
Many of the investment terms in this report are defined in the Glossary on page
21.
SEMIANNUAL REPORT REPORT HIGHLIGHTS 1
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
The Benham Arizona Intermediate-Term Municipal fund performed well during
the six months ended November 30, 1997, rewarding investors with
better-than-average returns. Healthy economic growth in Arizona coupled with low
inflation provided a favorable backdrop for strong municipal bond performance.
Our municipal investment team provides details on market conditions and your
fund's performance on the following pages.
On the corporate front, the latter half of 1997 proved as eventful for
American Century as it was for investors. In July, J.P. Morgan & Co., Inc.
agreed to become a significant minority shareholder in our company. Through this
business partnership, we see many opportunities to expand the range of
investment choices and services we offer you. J.P. Morgan has been in business
for more than 150 years, serving institutions, governments and individuals with
complex financial needs. Within the framework of this relationship, American
Century will continue to operate as an independent company. Our corporate
management team will remain the same, and the Stowers family will retain voting
control of the company.
On a more personal note, 1997 was the year we said farewell to James M.
Benham, founder of the Benham Group of mutual funds. Mr. Benham, who announced
his retirement in December, was a pioneer in the no-load mutual fund industry
and the father of Capital Preservation Fund, the first money market fund for
individual investors. With the integration of Benham and Twentieth Century
successfully completed, Mr. Benham felt it was time to step back from the
business and enjoy a well-earned retirement, confident that he leaves the funds
he founded in very capable hands. Though his counsel and guidance will be
missed, much of the Benham culture has become a part of American Century,
including the educational investor seminar program Mr. Benham created. And two
of his sons, Jim A. Benham and Tim Benham, remain with the company to carry on
the Benham tradition.
Looking forward, 1998 will be a landmark year for us, marking the 40th
anniversary of the introduction of our first two funds, Twentieth Century Growth
and Twentieth Century Select. Not many fund companies have a 40-year track
record, nor have many built a fund family such as ours, which includes nearly 70
stock, bond, money market and combination funds that provide investors with a
wide range of choice and flexibility.
Whatever your financial goals, we believe we have an outstanding lineup of
funds to help you reach them.
Sincerely,
/s/James E. Stowers III /s/James M. Benham
James E. Stowers III James M. Benham
Chief Executive Officer Vice Chairman
American Century Investment American Century Investment
Management, Inc. Management, Inc
2 OUR MESSAGE TO YOU AMERICAN CENTURY INVESTMENTS
MARKET PERSPECTIVE
[line graph - data below]
MUNICIPAL YIELD CURVES
Years to Maturity 11/30/97 5/31/97
1 3.690% 3.850%
2 3.840% 4.150%
3 3.960% 4.350%
4 4.070% 4.500%
5 4.170% 4.600%
6 4.260% 4.660%
7 4.350% 4.720%
8 4.430% 4.780%
9 4.510% 4.840%
10 4.590% 4.900%
11 4.666% 4.976%
12 4.742% 5.052%
13 4.818% 5.128%
14 4.894% 5.204%
15 4.970% 5.280%
16 5.000% 5.308%
17 5.030% 5.336%
18 5.060% 5.364%
19 5.090% 5.392%
20 5.120% 5.420%
21 5.126% 5.426%
22 5.132% 5.432%
23 5.138% 5.438%
24 5.144% 5.444%
25 5.150% 5.450%
26 5.154% 5.454%
27 5.158% 5.458%
28 5.162% 5.462%
29 5.166% 5.466%
30 5.170% 5.470%
Source: Bloomberg Financial Markets%
SOLID MUNICIPAL BOND RETURNS
Municipal securities produced solid returns during the six months ended
November 30, 1997. As the accompanying graph indicates, yields fell across the
maturity spectrum.
For the period, the Lehman Brothers Long-Term Municipal Bond Index returned
6.90%. Intermediate-term securities, represented by the Lehman Brothers 5-Year
Municipal General Obligation Index, returned 4.04%. The short-term Merrill Lynch
0- to 3-Year Municipal Index posted a 2.62% return.
INCREASED MARKET VOLATILITY
Despite lower interest rates overall, municipal yields fluctuated throughout
the period. Uncertainty in the bond market over how long inflation can remain
tame with the unemployment rate so low was largely responsible for the rate
fluctuations. Low unemployment has led to inflation in the past because
companies tend to raise wages in an attempt to keep or hire employees. Because
wages account for about two-thirds of all business costs, higher wages often
lead to rising prices.
But despite a November 1997 unemployment rate of 4.6%--the lowest in 24
years--and signs of rising wages, overall inflation remained low. Inflation, as
measured by the government's consumer price index, was just 1.9% for the year
ended November 30, 1997.
Increased productivity was a key reason wages could rise without sparking
inflation, as businesses reaped the rewards of huge investments in technology
and other productivity tools. According to the Labor Department, productivity
gains in the third quarter of 1997 were the fastest in five years.
Turmoil in Asian financial markets also contributed to volatility in the
U.S. bond market. A currency crisis in Southeast Asia caused investors to seek a
"safe-haven" in U.S. Treasury securities. Because demand for municipal
securities is often predicated on the relative prices of municipals and
Treasurys, big swings in the Treasury market can carry over to the municipal
market.
IMPACT OF BOND INSURANCE
An increase in the amount of debt being issued with bond insurance
contributed to a narrower spread, or difference in yield, between AAA and BBB
securities.
About 60% of all municipal debt now comes to market insured with a AAA
rating. That has boosted credit quality generally by dramatically reducing the
amount of debt issued at the lower investment grades. But it has also increased
demand for a shrinking supply of lower-rated, higher-yielding securities. The
net effect has been to push credit spreads to historically low levels.
SEMIANNUAL REPORT MARKET PERSPECTIVE 3
<TABLE>
<CAPTION>
PERFORMANCE & PORTFOLIO INFORMATION
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
- ---------------------------------------------------------------------------------------------------------------------------
YIELDS AS OF NOVEMBER 30, 1997
<S> <C> <C> <C> <C> <C>
Arizona Intermediate-Term Municipal 4.01% 5.81% 6.07% 6.13% 6.61%
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS LIFE OF
FUND(1)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1997(2)
Arizona Intermediate-Term Municipal ..................... 4.04% 5.02% 7.81% 6.63%
Lehman 5-Year General Obligation Index .................. 4.04% 5.38% 7.53% 6.25%(3)
Average Other States Intermediate
Municipal Debt Fund(4) .................................. 3.96% 5.21% 7.74% 5.87%(3)
Fund's Ranking Among Other States
Intermediate Municipal Debt Funds(4) .................... -- 44 out of 74 36 out of 63 6 out of 54(3)
</TABLE>
Yields are defined in the Glossary on page 21.
(1) Inception date was April 11, 1994.
(2) Returns for periods less than one year are not annualized.
(3) Returns from 4/30/94, the date nearest the fund's inception for which data
are available.
(4) According to Lipper Analytical Services.
See pages 20-21 for more information about returns, the comparative index and
Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
$10,000 investment made 4/30/94*
Value on 11/30/97
Arizona
Intermediate-Term Lehman 5-Year
Municipal GO Index
$10,000 $10,000
May-94 $10,092 $10,056
Jun-94 $10,064 $10,033
Jul-94 $10,234 $10,142
Aug-94 $10,280 $10,191
Sep-94 $10,202 $10,114
Oct-94 $10,083 $10,058
Nov-94 $9,973 $9,993
Dec-94 $10,098 $10,081
Jan-95 $10,268 $10,178
Feb-95 $10,443 $10,326
Mar-95 $10,562 $10,490
Apr-95 $10,625 $10,518
May-95 $10,852 $10,749
Jun-95 $10,855 $10,757
Jul-95 $10,985 $10,908
Aug-95 $11,085 $11,018
Sep-95 $11,130 $11,051
Oct-95 $11,233 $11,097
Nov-95 $11,343 $11,192
Dec-95 $11,426 $11,253
Jan-96 $11,574 $11,387
Feb-96 $11,541 $11,349
Mar-96 $11,365 $11,288
Apr-96 $11,378 $11,271
May-96 $11,357 $11,258
Jun-96 $11,428 $11,338
Jul-96 $11,540 $11,413
Aug-96 $11,539 $11,436
Sep-96 $11,614 $11,522
Oct-96 $11,724 $11,629
Nov-96 $11,900 $11,791
Dec-96 $11,853 $11,774
Jan-97 $11,874 $11,805
Feb-97 $11,948 $11,889
Mar-97 $11,809 $11,755
Apr-97 $11,852 $11,814
May-97 $12,010 $11,942
Jun-97 $12,122 $12,048
Jul-97 $12,386 $12,266
Aug-97 $12,270 $12,201
Sep-97 $12,407 $12,310
Oct-97 $12,453 $12,386
Nov-97 $12,498 $12,425
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. However, the fund's expenses were waived through
December 31, 1995. Had these fees not been waived, returns would have been
lower.
* 4/30/94 is the date nearest the fund's inception for which comparable
performance data exist. The fund's actual inception date is 4/11/94.
PORTFOLIO AT A GLANCE
11/30/97 5/31/97
Number of Securities 39 37
Weighted Average Maturity 7.5 years 7.2 years
Average Duration 5.3 years 5.0 years
Expense Ratio 0.57%* 0.66%
* Annualized.
4 PERFORMANCE & PORTFOLIO INFORMATION AMERICAN CENTURY INVESTMENTS
MANAGEMENT Q&A
An interview with Colleen Denzler, a portfolio manager on the Arizona
Intermediate-Term Municipal fund investment team.
HOW DID THE FUND PERFORM?
The fund benefited from falling interest rates and outperformed the average
intermediate municipal debt fund. For the six months ended November 30, 1997,
the fund's total return was 4.04%, compared with the 3.96% average return of the
83 "Other States Intermediate Municipal Debt Funds" tracked by Lipper Analytical
Services. The fund's return also matched the 4.04% return of its benchmark, the
Lehman 5-Year General Obligation Index. (See the Total Returns table on the
previous page for other fund performance comparisons.)
HOW DID YOU MANAGE THE FUND'S DURATION DURING THE PERIOD?
A lack of inflation and falling interest rates led us to maintain a slightly
longer-than-neutral duration. (Duration is a measure of a portfolio's
sensitivity to changes in interest rates. The longer a fund's duration, the more
its share price tends to rise or fall when rates change.) The fund's duration
began the period at around five years. We extended to around 5.5 years during a
sharp rally in July and August, making the fund's duration slightly longer than
that of the average intermediate municipal debt fund.
Shortly thereafter, we moved the fund to a more neutral 5.25 years. Although
we maintained this duration during October, when the market briefly declined, it
was slightly long compared with its peers because many of them shortened their
durations. The fund's relatively long position proved beneficial as bond prices
rose in late October and November.
WHAT MARKET FACTORS HAD AN IMPACT ON THE FUND?
One of the most important factors we monitored during the period was the
potential shortening of the fund's duration caused by bonds "trading to call."
Many municipal securities are issued with call provisions, which means they can
be paid off by the issuer before maturity. When interest rates fall,
municipalities often find it financially rewarding to refinance the bonds
they've issued. They can reduce their interest payments by redeem-
[bar graph - data below]
ARIZONA INTERMEDIATE-TERM MUNICIPAL'S
ONE-YEAR RETURNS SINCE INCEPTION (Periods ended November 30)
Arizona
Intermediate-Term Lehman 5-Year
Municipal GO Index
11/94* -0.27% -0.07%
11/95 13.73% 11.99%
11/96 4.91% 5.36%
11/97 5.02% 5.38%
This graph illustrates the fund's returns since its inception and compares them
with the index's returns. However, the fund's expenses were waived through
December 31, 1995. Had these fees not been waived, returns would have been
lower. Starting in 1996, the fund's total returns include operating expenses,
while the comparative index's returns do not. See page 20 for a definition of
the index.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
* Return from 4/30/94 (the date nearest the fund's inception for which index
data are available) to 11/30/94.
SEMIANNUAL REPORT MANAGEMENT Q & A 5
MANAGEMENT Q&A
ing their outstanding, higher-yielding bonds and issuing new ones at the
prevailing lower rates.
As interest rates fall, the fixed interest rate of a bond may become higher
than prevailing rates. When this occurs, there is an increased chance that the
issuer will call the bond prior to maturity. As a result, the bond"trades to
call"--the market prices the bond as if it will mature on its call date rather
than at its scheduled maturity. If this happens to a large number of bonds in
the portfolio, the fund's duration can shorten at a time when it should ideally
be longer to take advantage of rising bond prices.
Because of this concern, we frequently look to sell bonds before they trade
to call.
HAVE ANY OTHER TRENDS DEVELOPED RECENTLY IN THE MUNICIPAL MARKET?
There's been a significant increase in the supply of insured bonds. Lower
levels of new municipal issuance caused bond insurers to lower their premiums to
capture more business. That means that issuers have been able to raise the
credit rating of their bonds while paying a reduced insurance premium. A higher
credit rating on the bond allows the municipality to offer a lower interest
rate, saving them money in the long run.
As a result, investors searching for additional yield continued to show
strong demand for lower-rated, higher-yielding municipal securities. This
diminished the yield advantage of these municipals.
HOW HAS THIS TREND AFFECTED THE FUND?
It has made finding attractively priced, lower-rated issues more difficult
than ever.
While we continue actively searching for bargains among lower-rated issues,
the mainstay of the fund continues to be municipal securities rated AAA and AA.
On the positive side, this trend allows us to maintain a high level of credit
quality while sacrificing very little yield.
HOW ARE CREDIT CONDITIONS IN ARIZONA?
Better, thanks to strong economic growth during 1997. The state experienced
an increase in new jobs, pushing its unemployment rate to 5% by August. Job
growth was most impressive in Phoenix and Tucson, where August unemployment
rates fell to 2.8% and 3.3%, respectively.
Migration from neighboring high-cost states, an influx of retirees and
higher personal incomes in Arizona translated into increased retail sales. The
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/97)
GO 51%
Revenue Bonds 30%
COPs/Leases 12%
Land-Secured 4%
Prerefunded/ETM 3%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/97)
GO 51%
Revenue Bonds 20%
COPs/Leases 12%
Prerefunded/ETM 10%
Land-Secured 7%
6 MANAGEMENT Q & A AMERICAN CENTURY INVESTMENTS
MANAGEMENT Q&A
steady increase in taxable sales improved the state's budget and led to
improvement in overall municipal credit quality. A good example of this trend is
Maricopa County, which had its credit rating upgraded in 1997.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
We are cautiously optimistic about the next six months. Inflation remains
tame, having risen by only 1.9% over the past year. "Real" interest rates
(nominal interest rates minus the inflation rate) are at levels that should
inhibit inflation and economic growth. In addition, strong productivity gains
should continue to offset wage gains in the near future.
Economic turmoil in Asia also means a reduced chance for inflation in the
U.S. Slower growth overseas could take the edge off U.S. economic growth because
it means less business for U.S. exporters. And a strong U.S. dollar and weak
Asian currencies means imported goods will be cheaper, keeping overall prices
low.
The shrinking federal budget deficit also boosts the Treasury market by
reducing the supply of available Treasury securities. Higher Treasury prices
help make municipal securities a better relative value, which supports
municipals by attracting more buyers.
WITH THIS OUTLOOK IN MIND, WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
For now, we'll likely keep the fund's duration neutral to slightly long
compared with its peers. That should enhance the fund's returns if municipal
bond yields continue to decline. We will also closely watch the fund's call
risk.
From a credit perspective, we're monitoring legislative developments that
might change the way school districts issue debt in Arizona. Though nothing has
been formally decided yet on this issue, our credit research team is staying on
top of any changes that might affect the fund's holdings.
[pie charts]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/97)
AAA 51%
AA 33%
A 8%
BBB 8%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/97)
AAA 54%
AA 28%
A 9%
BBB 9%
SEMIANNUAL REPORT MANAGEMENT Q & A 7
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
MUNICIPAL SECURITIES
ARIZONA -- 96.9%
<S> <C> <C>
$1,000,000 Arizona Transportation Board
Excise Tax Rev., 7.00%, 7/1/99,
Prerefunded at 102% of Par
(MBIA)(1) $ 1,064,790
1,000,000 Arizona Transportation Board
Excise Tax Rev., Series 1995 B,
(Maricopa County Regional Area),
5.50%, 7/1/99 (AMBAC) 1,023,960
1,000,000 Arizona Transportation Board
Highway Rev., Series 1993 A,
6.00%, 7/1/08 1,114,510
1,000,000 Arizona Water Infrastructure Finance
Auth. Rev., Series 1997 A,
5.00%, 7/1/14 (MBIA) 993,270
900,000 Coconino & Yavapai County Joint
Unified School District No. 9 GO,
Series 1994 C, (Sedona Project),
5.60%, 7/1/06 (FGIC) 948,339
1,000,000 East Valley Institute of Technology
District No. 401 GO,
Series 1996 B, 5.00%, 7/1/03
(AMBAC) 1,034,930
545,000 Gilbert County GO, Series 1994 C,
6.00%, 7/1/02 (MBIA) 585,793
1,000,000 Maricopa County Community
College GO, Series 1995 A,
6.80%, 7/1/98 1,017,490
1,000,000 Maricopa County Community
College GO, Series 1997 B,
5.25%, 7/1/10 1,029,570
500,000 Maricopa County GO, 6.25%,
7/1/03 (FGIC) 548,240
1,000,000 Maricopa County Hospital Rev.,
(Sun Health Corp.), 5.75%,
4/1/07 1,049,650
500,000 Maricopa County Industrial
Development Auth. Hospital
Facility Rev., (Samaritan Health
Services), 7.15%, 12/1/04
(MBIA) 579,960
2,000,000 Maricopa County Public Financing
Corporation Certificates of
Participation, 5.625%, 6/1/00 2,048,740
Principal Amount Value
- --------------------------------------------------------------------------------------
$1,000,000 Maricopa County Unified School
District No. 1 GO, (Phoenix
Elementary), 5.50%, 7/1/09
(MBIA) $ 1,060,100
1,000,000 Maricopa County Unified School
District No. 6 GO, Series 1997 B,
(Washington Elementary),
4.75%, 7/1/11 (FGIC) 979,370
800,000 Maricopa County Unified School
District No. 40 GO, Series 1995 C,
7.75%, 7/1/06 (FGIC) 981,800
1,000,000 Maricopa County Unified School
District No. 41 GO, Series 1988 F,
(Gilbert), 6.20%, 7/1/02,
Prerefunded at 100% of
Par (FGIC)(1) 1,079,870
1,000,000 Maricopa County Unified School
District No. 48 GO, (Scottsdale),
6.60%, 7/1/12 1,176,260
1,000,000 Maricopa County Unified School
District No. 90 GO, (Ruth Fisher
Elementary), 5.375%, 7/1/00 1,027,420
1,000,000 Maricopa County Unified School
District No. 97 GO, Series 1996 A,
(Deer Valley), 6.25%, 7/1/06
(MBIA) 1,124,270
1,000,000 Maricopa County Unified School
District No. 201 GO,
Series 1992 E, (Phoenix),
7.10%, 7/1/04 1,155,770
300,000 Phoenix Airport Rev., Series 1994 C,
5.50%, 7/1/01 (MBIA) 312,459
1,000,000 Phoenix Civic Improvement Corp.
Wastewater System Lease Rev.,
4.85%, 7/1/07 (MBIA) 1,014,130
550,000 Phoenix GO, 6.00%, 7/1/01 584,359
1,000,000 Phoenix GO, Series 1995 B,
5.00%, 7/1/09 1,018,910
500,000 Phoenix Street and Highway Rev.,
5.95%, 7/1/00 523,005
1,000,000 Pima County Sewer Rev., 6.20%,
7/1/00 (FGIC) 1,052,600
1,000,000 Pima County Unified School
District No. 10 GO,
(Amphitheater), 7.00%, 7/1/05
(MBIA) 1,164,810
1,000,000 Pima County Unified School
District No. 12 GO, (Sunnyside),
5.50%, 7/1/09 (MBIA) 1,050,920
See Notes to Financial Statements
8 SCHEDULE OF INVESTMENTS AMERICAN CENTURY INVESTMENTS
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
$1,000,000 Salt River Project Agricultural
Improvement and Power District
Rev., Series 1993 B, 4.75%,
1/1/03 $ 1,020,340
1,000,000 Salt River Project Agricultural
Improvement and Power District
Rev., Series 1993 B, 6.50%,
1/1/04 1,113,360
480,000 Scottsdale GO, 7.50%, 7/1/02 545,390
1,275,000 Tempe GO, 6.25%, 7/1/05 1,424,035
525,000 Tucson Certificates of Participation,
5.70%, 7/1/02(2) 533,741
200,000 Tucson Street and Highway Rev.,
4.50%, 7/1/98 200,810
1,000,000 Tucson Street and Highway Rev.,
5.70%, 7/1/01 1,050,840
500,000 Yavapai County Unified School
District No. 28 GO, (Camp Verde),
6.10%, 7/1/04 (FGIC) 549,655
---------------------
34,783,466
---------------------
PUERTO RICO -- 3.1%
500,000 Puerto Rico Commonwealth
Infrastructure Financing Auth. Rev.
Series 1998 A, 5.50%, 7/1/08
(AMBAC)(3) 531,225
500,000 Puerto Rico Public Buildings Auth.
Rev., Series 1995 A, 6.25%,
7/1/08 (AMBAC) 568,530
---------------------
1,099,755
---------------------
TOTAL INVESTMENT SECURITIES -- 100.0% $35,883,221
=====================
(Cost $34,848,523)
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Indemnity Corporation
FGIC = Financial Guaranty Insurance Co.
GO = General Obligation
MBIA = MBIA Insurance Corporation
(1) Escrowed to maturity in U.S. Government Securities.
(2) Denotes security which has been segregated at the custodian bank for a
when-issued security.
(3) When-issued security.
See Notes to Financial Statements
SEMIANNUAL REPORT SCHEDULE OF INVESTMENTS 9
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $34,848,523)
(Note 3) ....................................... $35,883,221
Interest receivable ............................... 831,745
--------------
36,714,966
--------------
LIABILITIES
Disbursements in excess of
demand deposit cash ............................. 111,161
Payable for investments purchased ................. 528,025
Payable for capital shares redeemed ............... 32,611
Dividends payable ................................. 9,179
Accrued management fees (Note 2) .................. 15,384
--------------
696,360
--------------
Net Assets ........................................ $36,018,606
==============
CAPITAL SHARES
Outstanding (Unlimited number
of shares authorized) ........................... 3,387,247
==============
Net Asset Value Per Share ......................... $10.63
==============
NET ASSETS CONSIST OF:
Capital paid in ................................... $34,819,496
Accumulated undistributed net
realized gain on investment
transactions .................................... 164,412
Net unrealized appreciation
on investments (Note 3) ......................... 1,034,698
--------------
$36,018,606
==============
See Notes to Financial Statements
10 STATEMENT OF ASSETS AND LIABILITIES AMERICAN CENTURY INVESTMENTS
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest .......................................... $ 822,46
-------------
Expenses (Note 2):
Investment advisory fees .......................... 82,131
Printing and postage .............................. 11,971
Custodian fees .................................... 5,525
Administrative fees ............................... 4,889
Registration and filing fees ...................... 3,497
Transfer agency fees .............................. 3,255
Trustees' fees and expenses ....................... 1,164
Auditing and legal fees ........................... 1,081
Organizational expenses ........................... 168
Other operating expenses .......................... 2,809
-------------
Total expenses .................................. 116,490
Amount waived ..................................... (21,161)
-------------
Net expenses .................................... 95,329
-------------
Net investment income ............................. 727,140
-------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 3)
Net realized gain on investments .................. 164,990
Change in net unrealized
appreciation on investments ..................... 424,673
-------------
Net realized and unrealized
gain on investments ............................... 589,663
-------------
Net Increase in Net Assets
Resulting from Operations ......................... $1,316,803
=============
See Notes to Financial Statements
SEMIANNUAL REPORT STATEMENT OF OPERATIONS 11
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
AND YEAR ENDED MAY 31, 1997
November 30, May 31,
Increase in Net Assets 1997 1997
OPERATIONS
Net investment income ......................... $ 727,140 $ 1,207,103
Net realized gain on investment
transactions ................................ 164,990 12,678
Change in net unrealized
appreciation on investments ................. 424,673 303,847
------------- ------------
Net increase in net assets
resulting from operations ................... 1,316,803 1,523,628
------------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income .................... (727,140) (1,207,103)
------------- ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ..................... 7,799,513 15,353,294
Proceeds from reinvestment
of distributions ............................ 540,257 917,406
Payments for shares redeemed .................. (3,465,390) (11,821,630)
------------- ------------
Net increase in net assets from
capital share transactions .................. 4,874,380 4,449,070
------------- ------------
Net increase in net assets .................... 5,464,043 4,765,595
NET ASSETS
Beginning of period ........................... 30,554,563 25,788,968
------------- ------------
End of period ................................. $36,018,606 $30,554,563
============= ============
TRANSACTIONS IN SHARES
OF THE FUND
Sold .......................................... 736,745 1,472,637
Issued in reinvestment of
distributions ............................... 50,945 88,040
Redeemed ...................................... (327,417) (1,134,039)
------------- ------------
Net increase .................................. 460,273 426,638
============= ============
See Notes to Financial Statements
12 STATEMENTS OF CHANGES IN NET ASSETS AMERICAN CENTURY INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997 (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 seven funds issued by 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 Arizona intermediate-term municipal obligations. 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--Portfolio 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 accretion of discounts and amortization of premiums.
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.
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 options
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 contracts may
include the possibility that the changes 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 an unrealized gain or loss. The Fund
recognizes a realized gain or loss when the contract is closed or expires. There
were no open futures contracts at November 30, 1997.
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, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The shareholders of the Fund approved a new management agreement with
American Century Investment Management, Inc. (ACIM) on July 30, 1997, effective
August 1, 1997, which replaced the existing contracts between the Fund and
Benham Management Corporation and American Century Services Corporation (ACSC)
for advisory, administrative and transfer agency services. Expenses excluded
from the agreement are brokerage, taxes, portfolio insurance, interest, fees and
expenses of the Trustees who are not considered "interested persons" as defined
in the Investment Company Act of 1940 (including counsel fees) and extraordinary
expenses. Under the agreement, ACIM will provide all services required by the
Fund in exchange for one unified management fee. The annual rate at which this
fee is assessed is determined monthly in a two-step process: First, a fee rate
schedule is applied to the assets of all of the funds in the Fund's investment
category which are managed by ACIM (the "Investment Category Fee"). The overall
investment objective of each Fund determines its Investment Category. The three
investment categories are: the Money Market Fund Category, the Bond Fund
Category, and the Equity Fund Category. The Fund is included in the Bond Fund
Category. Second, a separate fee rate schedule is applied to the assets of all
of the funds managed by ACIM (the "Complex Fee"). The Investment Category Fee
and the Complex Fee are then added to determine the unified management fee rate.
The management fee is paid monthly by the Fund based on its aggregate average
daily net assets during the previous month multiplied by the monthly management
fee rate.
The annualized Investment Category Fee schedule for the Fund is as follows:
0.2800% of the first $1 billion
0.2280% of the next $1 billion
0.1980% of the next $3 billion
0.1780% of the next $5 billion
0.1650% of the next $15 billion
0.1630% of the next $25 billion
0.1625% of the average daily net assets over $50 billion
The annualized Complex Fee schedule is as follows:
0.3100% of the first $2.5 billion
0.3000% of the next $7.5 billion
0.2985% of the next $15 billion
0.2970% of the next $25 billion
0.2960% of the next $50 billion
0.2950% of the next $100 billion
0.2940% of the next $100 billion
0.2930% of the next $200 billion
0.2920% of the next $250 billion
0.2910% of the next $500 billion
0.2900% of the average daily net assets over $1,250 billion
Management fees of $59,410 were incurred under the new management agreement
and included in Investment Advisory Fees in the Statement of Operations. Total
expenses (net of amount waived) and the annualized ratio of operating expenses
to average net assets, under the previous agreement, for the two months ended
July 31, 1997 were $35,083 and 0.67%, respectively.
Certain officers and trustees of the Trust are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the Trust's investment manager, ACIM, the Trust's
transfer agent, ACSC, and the registered broker-dealer, American Century
Investment Services, Inc.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of municipal debt obligations, excluding short-term
investments, totaled $13,833,885 and $8,077,835, respectively.
As of November 30, 1997, accumulated net unrealized appreciation was
$1,034,698, consisting of unrealized appreciation of $1,040,516 and unrealized
depreciation of $5,818. 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
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
1997(1) 1997 1996 1995 1994(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Period .............. $ 10.44 $ 10.31 $ 10.35 $ 10.13 $ 10.00
---------- ---------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income .......... 0.23 0.45 0.51 0.51 0.07
Net Realized and Unrealized
Gain (Loss)
on Investment Transactions ..... 0.19 0.13 (0.03) 0.22 0.13
---------- ---------- ---------- ---------- ---------
Total From Investment Operations 0.42 0.58 0.48 0.73 0.20
---------- ---------- ---------- ---------- ---------
Distributions
From Net Investment Income ..... (0.23) (0.45) (0.51) (0.51) (0.07)
From Net Realized Gains on
Investment Transactions ........ -- -- (0.01) -- --
---------- ---------- ---------- ---------- ---------
Total Distributions ............ (0.23) (0.45) (0.52) (0.51) (0.07)
---------- ---------- ---------- ---------- ---------
Net Asset Value, End of Period ... $ 10.63 $ 10.44 $ 10.31 $ 10.35 $ 10.13
========== ========== ========== ========== =========
Total Return(3) ................ 4.04% 5.77% 4.65% 7.52% 1.99%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............ 0.57%(4) 0.66% 0.14% -- --
Ratio of Operating Expenses to
AverageNet Assets
(Before Expense Waiver) .......... 0.69%(4) 0.79% 0.82% 1.01% 2.33%(4)
Ratio of Net Investment
Income to Average Net Assets ..... 4.33%(4) 4.35% 4.85% 5.16% 5.08%(4)
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) .......... 4.20%(4) 4.22% 4.17% 4.15% 2.75%(4)
Portfolio Turnover Rate .......... 24% 81% 36% 33% 18%
Net Assets, End
of Period (in thousands) ......... $ 36,019 $ 30,555 $ 25,789 $ 19,778 $ 7,187
</TABLE>
- ----------
(1) Six months ended November 30, 1997 (unaudited).
(2) April 11, 1994 (inception) through May 31, 1994.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements
SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS 15
PROXY VOTING RESULTS
An annual meeting of shareholders was held on July 30, 1997, to vote on the
following proposals. All of the proposals received the required majority of
votes and were adopted.
A summary of voting results is listed below each proposal.
PROPOSAL 1:
To vote on the selection by the Board of Trustees of Coopers & Lybrand
L.L.P. as independent auditors for the Trust.
For: 1,691,673
Against: 98,911
Abstain: 21,418
PROPOSAL 2:
To vote on the approval of a Management Agreement with American Century
Investment Management, Inc.
For: 1,683,019
Against: 107,041
Abstain: 21,942
PROPOSAL 3:
To vote on the adoption of standardized investment limitations.
* Amend the fundamental investment limitation concerning borrowing.
For: 1,582,354
Against: 186,401
Abstain: 28,803
Broker Non-Vote: 14,444
* Amend the fundamental investment limitation concerning lending.
For: 1,585,397
Against: 184,062
Abstain: 28,099
Broker Non-Vote 14,444
* Amend the fundamental investment limitation concerning commodities.
For: 1,567,545
Against: 193,735
Abstain: 36,278
Broker Non-Vote: 14,444
* Eliminate the fundamental investment limitation concerning investments in
oil, gas and mineral exploration development programs.
For: 1,572,814
Against: 197,021
Abstain: 27,723
Broker Non-Vote: 14,444
16 PROXY VOTING RESULTS AMERICAN CENTURY INVESTMENTS
NOTES
SEMIANNUAL REPORT NOTES 17
NOTES
18 NOTES AMERICAN CENTURY INVESTMENTS
NOTES
SEMIANNUAL REPORT NOTES 19
BACKGROUND INFORMATION
INVESTMENT PHILOSOPHY & POLICIES
The Benham Group offers 38 fixed-income funds, ranging from money market
funds to long-term bond funds and including both taxable and tax-exempt funds.
Each fund is managed to provide a "pure play" on a specific sector of the
fixed-income market. To ensure adherence to this principle, the basic structure
of each fund's portfolio is tied to a specific market index. Fund managers
attempt to add value by making modest portfolio adjustments based on their
analysis of prevailing market conditions. Investment decisions are made by
management teams, which meet regularly to discuss market analysis and investment
strategies.
In addition to these principles, each fund has its own investment policies:
ARIZONA INTERMEDIATE-TERM MUNICIPAL seeks to provide interest income exempt
from both Arizona and federal income taxes. The fund invests primarily in
intermediate-term Arizona municipal securities with maturities of four or more
years and maintains a weighted average maturity of 5-10 years.
Depending on your tax status, investment income may be subject to the
federal alternative minimum tax. Capital gains are not exempt from federal
income tax.
COMPARATIVE INDICES
The index listed below is used in the report to serve as fund performance
comparisons. 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 funds in Lipper's OTHER STATES INTERMEDIATE MUNICIPAL DEBT FUNDS
category invest in municipal debt issues with dollar-weighted average maturities
of 5-100 years and which are exempt from taxation on a specified city or state
basis.
INVESTMENT TEAM LEADERS
Portfolio Manager Colleen Denzler
Credit Research Manager Steven Permut
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. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on page 15.
YIELDS
* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's 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.
* TAX-EQUIVALENT YIELDS show the taxable yields that investors in a combined
federal and Arizona state income tax bracket would have to earn before taxes to
equal the fund's tax-free yield.
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.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES--the number of different securities issuances held by a
fund on a given date.
* WEIGHTED AVERAGE MATURITY (WAM)--a measurement of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount.
* AVERAGE DURATION--another measure of the sensitivity of a fixed-income
portfolio to interest rate changes. Duration is a time-weighted average of the
interest and principal payments of the securities in a portfolio.
* EXPENSE RATIO--the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder's account.
TYPES OF MUNICIPAL SECURITIES
* COPS/LEASES--securities issued to finance public property improvements (such
as city halls and police stations) and equipment purchases. Certificates of
participation represent long-term debt obligations, while leases have a higher
risk profile than GOs because they require annual appropriation.
* GO BONDS--general obligation securities backed by the taxing power of the
issuer.
* LAND-SECURED BONDS--securities such as Mello-Roos bonds and 1915-Act bonds
that are issued to finance real estate development projects.
* PREREFUNDED BONDS/ETM BONDS--securities refinanced or escrowed to maturity by
the issuer because of their premium coupons (higher-than-market interest rates).
These bonds tend to have higher credit ratings because they are backed by
Treasury securities.
* REVENUE BONDS--securities backed by revenues from sales taxes or from a
specific project, system or facility (such as a hospital, electric utility or
water system).
SEMIANNUAL REPORT GLOSSARY 21
[american century logo]
American
Century(reg.sm)
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES:
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 816-444-3485
FAX: 816-340-7962
INTERNET: WWW.AMERICANCENTURY.COM
AMERICAN CENTURY MUNICIPAL TRUST
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION FUNDS DISTRIBUTOR, INC.
9801 [recycled logo]
SH-BKT-10689 Recycled
<PAGE>
SEMIANNUAL
REPORT
[american century logo]
American
Century(reg.sm)
NOVEMBER 30, 1997
BENHAM
GROUP
Tax-Free Money Market
TABLE OF CONTENTS
Report Highlights ....................................................... 1
Our Message to You ...................................................... 2
Performance & Portfolio Information ..................................... 3
Management Q & A ........................................................ 4
Schedule of Investments ................................................. 6
Statement of Assets and Liabilities ..................................... 11
Statement of Operations ................................................. 12
Statements of Changes in Net Assets ..................................... 13
Notes to Financial Statements ........................................... 14
Financial Highlights .................................................... 16
Proxy Voting Results .................................................... 17
Background Information
Investment Philosophy & Policies ............................. 20
Lipper Rankings .............................................. 20
Investment Team Leaders ...................................... 20
Glossary ................................................................ 21
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios.
We've organized our funds into three distinct groups, based on investment style
and objectives, to help simplify your fund decisions. These groups appear below.
AMERICAN CENTURY INVESTMENTS--FAMILY OF FUNDS
- -------------------------------------------------------------------------------
Benham American Century Twentieth Century(reg. tm)
Group(reg. tm) Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
Tax-Free
Money Market
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 American Century are registered marks of American Century
Services Corporation. Benham Group is a registered mark of Benham Management
Corporation.
AMERICAN CENTURY INVESTMENTS
REPORT HIGHLIGHTS
MUNICIPAL MARKET PERSPECTIVE
* The Federal Reserve held short-term interest rates steady during the six
months ended November 30, 1997.
* Low inflation and strong demand contributed to lower yields overall.
* Credit spreads fell to historically low levels because of improving credit
quality and the increase in the number of municipal securities insured with
a AAA rating.
TAX-FREE MONEY MARKET
* The fund significantly outperformed the average tax-free money market fund
during the six months ended November 30, 1997.
* While past performance is no guarantee of future results, the fund had the
highest 7-day current yield of 141 "Stockbroker and General Purpose Tax-Free
Money Funds" on December 1, according to IBC's Money Fund Report
* Beginning August 1, 1997, American Century waived management fees for one
year, which helped boost the fund's yield.
* As of December, the fund had no exposure to Japanese banks, which provide
credit backing for many municipal money market securities.
* Going forward, we'll continue to use a value-oriented approach to security
selection, buying one-year notes when we think they provide sufficiently
higher yields than shorter-term securities.
TAX-FREE
MONEY MARKET
TOTAL RETURNS: AS OF 11/30/97
6 Months 1.82%*
1 Year 3.36%
7-DAY CURRENT YIELD: 4.04%
NET ASSETS: $194.8 million
(AS OF 11/30/97)
INCEPTION DATE: 7/31/84
TICKER SYMBOL: BNTXX
* Not annualized.
SEMIANNUAL REPORT REPORT HIGHLIGHTS 1
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
The Benham Tax-Free Money Market fund performed well during the six months
ended November 30, 1997, rewarding investors with a competitive level of
tax-free income. According to IBC's Money Fund Report, as of December 1, 1997,
Benham Tax-Free was the highest-yielding tax-free money market fund out of 141
funds. On the following pages, our municipal investment team provides more
details on the fund's performance.
On the corporate front, the latter half of 1997 proved as eventful for
American Century as it was for investors. In July, J.P. Morgan & Co., Inc.
agreed to become a significant minority shareholder in our company. Through this
business partnership, we see many opportunities to expand the range of
investment choices and services we offer you. J.P. Morgan has been in business
for more than 150 years, serving institutions, governments and individuals with
complex financial needs. Within the framework of this relationship, American
Century will continue to operate as an independent company. Our corporate
management team will remain the same, and the Stowers family will retain voting
control of the company.
On a more personal note, 1997 was the year we said farewell to James M.
Benham, founder of the Benham Group of mutual funds. Mr. Benham, who announced
his retirement in December, was a pioneer in the no-load mutual fund industry
and the father of Capital Preservation Fund, the first money market fund for
individual investors. With the integration of Benham and Twentieth Century
successfully completed, Mr. Benham felt it was time to step back from the
business and enjoy a well-earned retirement, confident that he leaves the funds
he founded in very capable hands. Though his counsel and guidance will be
missed, much of the Benham culture has become a part of American Century,
including the educational investor seminar program Mr. Benham created. And two
of his sons, Jim A. Benham and Tim Benham, remain with the company to carry on
the Benham tradition.
Looking forward, 1998 will be a landmark year for us, marking the 40th
anniversary of the introduction of our first two funds, Twentieth Century Growth
and Twentieth Century Select. Not many fund companies have a 40-year track
record, nor have many built a fund family such as ours, which includes nearly 70
stock, bond, money and combination funds that provide investors with a wide
range of choice and flexibility.
Whatever your financial goals, we believe we have an outstanding lineup of
funds to help you pursue them.
Sincerely,
/s/James E. Stowers III /s/James M. Benham
James E. Stowers III James M. Benham
Chief Executive Officer Vice Chairman
American Century Investment American Century Investment
Management, Inc. Management, Inc
2 OUR MESSAGE TO YOU AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
PERFORMANCE & PORTFOLIO INFORMATION
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
- ------------------------------------------------------------------------------------------------------------------------------------
YIELDS AS OF NOVEMBER 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Tax-Free Money Market 4.04% 4.12% 5.61% 5.86% 6.31% 6.69%
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10
YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1997(1)
Tax-Free Money Market ............................. 1.82% 3.36% 3.24% 2.77% 3.72%
Average Tax-Exempt Money Market Fund(2) ........... 1.55% 3.06% 3.13% 2.70% 3.66%
Fund's Ranking Among
Tax-Exempt
Money Market Funds(2) ............................. -- 8 out of 135 30 out of 118 30 out of 97 19 out of 61
</TABLE>
- ----------
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Analytical Services.
See pages 20-21 for more information about returns and Lipper fund rankings.
PORTFOLIO AT A GLANCE
11/30/97 5/31/97
Number of Securities 73 48
Weighted Average Maturity 47 days 53 days
Expense Ratio 0.18%* 0.67%
* Annualized. On August 1, 1997, American Century Investment Management, Inc.
began waiving the fund's management fees. Without the fee waiver, the fund's
7-day current and effective yields would have been 3.54% and 3.60%,
respectively. The 7-day tax-equivalent yields for the 28%, 31%, 36% and 39.6%
tax brackets would have been 4.92%, 5.13%, 5.53% and 5.86%, respectively.
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.
Past performance does not guarantee future results.
Many of the investment terms in this report are defined in the Glossary on page
21.
SEMIANNUAL REPORT PERFORMANCE & PORTFOLIO INFORMATION 3
MANAGEMENT Q&A
An interview with Bryan Karcher, a portfolio manager on the Tax-Free Money
Market fund investment team.
HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED NOVEMBER 30, 1997?
The fund performed very well, providing a much higher level of tax-exempt
income than the average tax-free money market fund. For the six months, the fund
had a total return of 1.82%, compared with the 1.55% average return of the 136
"Tax-Exempt Money Market Funds" tracked by Lipper Analytical Services. (See the
Total Returns table on the previous page for other fund performance
comparisons.) According to IBC's Money Fund Report, the fund's 7-day current
yield as of December 1 was the highest among 141 "Stock Broker and General
Purpose Tax-Free Money Funds."
We didn't take additional credit risk or invest in risky derivatives to get
that yield--rather, we waived our management fee as part of a straightforward
promotion.
CAN YOU EXPLAIN THE CHANGES TO THE FUND'S MANAGEMENT FEE?
Sure. American Century Investment Management, Inc. (ACIM) waived its
management fee for one year, beginning August 1, 1997. The absence of fees
helped significantly boost the fund's yield. We also lowered the fund's expense
ratio from 61 basis points before the waiver to approximately 50 basis points
beginning in August 1998, or from 0.61% to 0.50%.
But it's important to note that we're not going to re-impose the entire fee
on August 1, 1998. Instead, ACIM plans to phase in expenses at a rate of 10
basis points per month. At that rate, the fund will reach its expense ratio of
approximately 0.50% in December 1998.
And even with full expenses, we anticipate the fund will have one of the
lowest expense ratios among tax-free money market funds. The new fee structure
directly benefits shareholders because we're delivering the same strong
performance, but at a lower cost. Other things being equal, lower expenses mean
higher returns and yields for our shareholders.
HOW DID YOU POSITION THE FUND DURING THE PERIOD?
Finding longer-maturity, higher-yielding securities was difficult because
short-term securities had almost the same yields as longer-term securities for
much of the period. Inflation remained under control, and the likelihood that
the Federal Reserve would raise interest rates diminished. That caused the yield
curve between three months and one year to flatten--the yields on one-year
Treasury notes dropped, bringing the spread (or difference in yield) between
three-month and one-year Treasurys to 25 basis points, or 0.25%.
As a result, we allowed the fund's average maturity to shorten to around 30
days in September, rather than purchase one-year notes that we felt weren't
offering sufficiently higher yields than shorter-term securities. However,
one-year notes began to offer
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 11/30/97)
VRDNs 78%
Bonds less than 1 Year 9%
Municipal Notes 6%
Commercial Paper 2%
Other 5%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 5/31/97)
VRDNs 59%
Bonds less than 1 Year 16%
Commercial Paper 15%
Municipal Notes 10%
4 MANAGEMENT Q & A AMERICAN CENTURY INVESTMENTS
MANAGEMENT Q&A
additional yield in October and November, so we extended the fund's average
maturity out beyond 60 days. Nevertheless, the fund's maturity ended the period
at less than 50 days because we invested large cash inflows in late November in
relatively short-term variable-rate notes (floaters).
HOW DO YOU DECIDE WHEN A ONE-YEAR SECURITY IS A GOOD BUY?
First, we look at how much additional yield we anticipate one-year
securities will offer versus weekly floaters, given our outlook for interest
rates. That helps us determine if we're being compensated with enough additional
yield to justify extending the fund's average maturity.
Second, we look at the relative value of one-year municipal securities as a
percentage of Treasurys. This provides a second measure of the attractiveness of
one-year municipal paper. We know one-year paper is more likely to be a good
value when both of these indicators are positive, as they were in October and
November.
HOW DO JAPANESE BANKS AFFECT THE FUND'S PORTFOLIO?
Many municipal money market securities are backed by letters of credit
(LOCs) from banks, including Japanese banks. Over the last several years, the
Japanese banking system has suffered from a lengthy domestic recession and
non-performing real estate loans.
Consistent with our strict municipal credit criteria, over the last year we
reduced the number of Japanese banks whose obligations we approve for purchase.
As of December, the fund no longer owned any securities backed by Japanese
banks.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES OVER THE NEXT SIX MONTHS?
We think the outlook for interest rates is relatively stable. The economy is
fairly strong, but inflation remains low, so we don't see a call for Fed action
on interest rates either way in the near future. However, supply and demand
factors in the municipal money market seem to argue for lower yields after
year's end. The first quarter tends to bring lower yields because there are many
buyers in the market at a time when there is little new issuance. As a result,
yields for tax-free money market funds tend to drop, particularly in January.
HOW WILL YOU MANAGE THE FUND OVER THE NEXT SIX MONTHS?
We'll continue to use a conservative approach to security selection,
monitoring the relative values of one-year notes and shorter-term securities.
But because one-year securities tend to be relatively unattractive in January,
we don't expect to buy these longer-term securities until at least February
unless the outlook for interest rates and yields on these securities changes
dramatically.
[pie charts]
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 11/30/97)
SP1+ 75%
SP1 25%
PORTFOLIO COMPOSITION BY CREDIT RATING (as of 5/31/97)
SP1+ 78%
SP1 22%
SEMIANNUAL REPORT MANAGEMENT Q & A 5
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES
ALASKA--0.7%
<S> <C> <C>
$1,345,000 Anchorage GO, Series 1997 A,
4.50%, 12/1/97 (FGIC)(1) $ 1,352,599
---------------------
ARKANSAS--1.6%
3,000,000 Pine Bluff Industrial Development Rev., (Camden
Wire Co., Inc.), VRDN, 4.00%, 12/4/97 (LOC:
Texas Commerce Bank, N. A.) 3,000,000
---------------------
CALIFORNIA--5.1%
5,575,000 California Rev. Anticipation Notes,
Series 1997 A, 4.50%, 6/30/98(2) 5,595,266
1,715,000 Richmond Joint Powers Financing
Auth. Port Term Lease Rev.,
VRDN, 3.85%, 12/1/97 (LOC:
Union Bank of California, N.A.) 1,715,000
2,400,000 Sacramento County Housing Auth.
Multi-Family Housing Rev., Series
1996 C, (River Terrace
Apartments), VRDN, 4.20%,
12/3/97 (LOC: Dai-Ichi Kangyo
Bank, LTD.) 2,400,000
---------------------
9,710,266
---------------------
COLORADO--1.8%
3,500,000 Denver Multi-Family Housing Rev., Series 1989 A,
(Cottonwood Creek Project), VRDN, 4.30%, 12/2/97
(LOC: GE Capital
Corp.) 3,500,000
---------------------
DELAWARE--1.3%
2,500,000 Delaware Economic Development
Auth. Industrial Rev.,
Series 1997 C, VRDN, 4.00%,
12/3/97 (LOC: Canadian
Imperial Bank of Commerce) 2,500,000
---------------------
DISTRICT OF COLUMBIA--1.1%
2,000,000 District of Columbia Rev., (American University
Issue), VRDN, 4.05%, 12/3/97, (LOC:
National Westminster Bank PLC) 2,000,000
---------------------
Principal Amount Value
- --------------------------------------------------------------------------------------
FLORIDA--19.8%
$4,000,000 Alachua County Industrial
Development Rev., (Florida Rock
Industries Income Project), VRDN,
4.00%, 12/4/97 (LOC: Bank of
America N.T. & S.A.) $ 4,000,000
1,000,000 Brevard County Housing Finance
Auth. Multi-Family Housing Rev.,
(Palm Place Project), VRDN,
3.85%, 12/3/97 (LOC: Chase
Manhattan Bank) 1,000,000
1,000,000 Broward County Housing Finance
Auth. Multi-Family Housing Rev.,
(Margate Project), VRDN, 3.85%,
12/3/97 (LOC: Chase
Manhattan Bank) 1,000,000
6,200,000 Broward County Housing Finance
Auth. Multi-Family Housing Rev.,
Series 1990 A, (Palmaire-Oxford),
VRDN, 4.20%, 12/3/97
(SBBPA: Continental Casualty
Co.) 6,200,000
1,655,000 Dade County Housing Auth. Single
Family Mortgage Rev., Series
1997 C, 4.05%, 2/1/98 1,655,000
3,000,000 Florida Housing Finance Agency
Multi-Family Housing Rev.,
(Carlton), VRDN, 4.05%,
12/3/97 (LOC: Kredietbank
N.V.) 3,000,000
3,000,000 Florida Housing Finance Agency Multi-Family
Housing Rev., (Country Club Apartments), VRDN,
4.10%,12/1/97 (LOC:
Northern Trust Company) 3,000,000
3,790,000 Florida Housing Finance Agency
Multi-Family Housing Rev., Series
1989 E, VRDN, 4.15%,
12/3/97 (LOC: Comerica Bank) 3,790,000
5,600,000 Florida Housing Finance Agency
Multi-Family Housing Rev., Series
1990 B, (Belville-Oxford), VRDN,
4.20%, 12/3/97 (SBBPA:
Continental Casualty Co.) 5,600,000
1,000,000 Jacksonville Electric Auth. Rev.,
VRDN, 4.00%, 12/3/97
(Liquidity: Societe Generale) 1,000,000
See Notes to Financial Statements
6 SCHEDULE OF INVESTMENTS AMERICAN CENTURY INVESTMENTS
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
$1,000,000 Marion County Housing Finance
Auth. Multi-Family Housing Rev.,
Series 1985 F, (Paddock Place
Project), VRDN, 3.90%,
12/4/97 (LOC: Suntrust Bank,
Atlanta) $ 1,000,000
2,000,000 Pasco County School Board
Certificates of Participation,
VRDN, 3.90%, 12/4/97
(AMBAC, SBBPA: Landesbank
Hessen-Thuringen Girozentrale) 2,000,000
2,000,000 Pinnellas County Health Facilities
Auth. Rev., VRDN, 3.85%,
12/1/97 (LOC: Chase
Manhattan Bank) 2,000,000
2,000,000 Port St. Lucie Utility Rev., VRDN,
4.10%, 12/4/97 (MBIA,
SBBPA: Merrill Lynch) 2,000,000
500,000 Tampa Sports Auth. Rev., (Trust
Receipt), VRDN, 3.95%,
12/1/97 (MBIA, SBBPA:
Societe Generale) 500,000
---------------------
37,745,000
---------------------
GEORGIA--2.5%
3,000,000 Burke County Development
Pollution Control Rev., Series
1997 B, (Oglethorpe Power
Corp.), 3.80%, 5/28/98
(AMBAC)(2) 3,000,000
1,800,000 Cobb County Multi-Family Housing
Rev., (Terrell Mill), VRDN, 4.05%,
12/3/97 (LOC: GE Capital
Corp.)(3) 1,800,000
---------------------
4,800,000
---------------------
HAWAII--1.4%
2,600,000 Hawaii State Housing Finance and Development
Corporation Rev.,(Affordable Rental Housing),
VRDN, 3.90%, 12/3/97 (LOC:
Banque Nationale De Paris S.A.) 2,600,000
---------------------
ILLINOIS--9.6%
1,625,000 Bartlett Multi-Family Housing Rev.,
Series 1995 A, (Bartlett Square
Apartments), VRDN, 3.95%,
12/4/97 (LOC: LaSalle National
Bank) 1,625,000
Principal Amount Value
- --------------------------------------------------------------------------------------
$2,900,000 Galesburg Rev., (Knox College
Project), VRDN, 3.90%,
12/4/97 (LOC: LaSalle National
Bank) $ 2,900,000
2,140,000 Hoffman Estates Tax Increment
Rev., (Economic Development
Project), 4.50%, 11/15/98
(AMBAC) 2,150,858
720,000 Illinois Health Facility Auth. Rev.,
(Sherman Health Systems),
3.90%, 8/1/98 (AMBAC) 720,000
2,000,000 Illinois Health Facility Auth. Rev.,
Series 1996 B, (Franciscan
Eldercare), VRDN, 3.95%,
12/3/97 (LOC: ABN Amro
Bank N.V.) 2,000,000
2,435,000 Illinois Industrial Development Rev.,
(Continental/Midland Project),
VRDN, 4.15%, 12/3/97 (LOC:
LaSalle National Bank) 2,435,000
2,000,000 McCook Village Rev., Series 1996 B, (St. Andrew
Society), VRDN, 3.90%, 12/4/97 (LOC:
Northern Trust Company) 2,000,000
4,375,000 Springfield Airport Auth. Rev.,
(Allied Signal Project), VRDN,
4.25%, 12/3/97 (Corporate
Guarantee: Allied Signal, Inc.) 4,375,000
---------------------
18,205,858
---------------------
INDIANA--2.9%
1,155,000 Central High School Building Corp.
Industrial Rev., 4.25%, 8/1/98
(AMBAC) 1,157,194
1,000,000 Gary Industrial Development Rev.,
(Tinplate Partners International,
Inc.), VRDN, 4.10%, 12/4/97
(LOC: LaSalle National Bank) 1,000,000
1,000,000 Huntington Economic Development
Rev., (Allied Signal Inc. Project),
VRDN, 4.00%, 12/3/97
(Corporate Guarantee: Allied
Signal Inc.) 1,000,000
940,000 Indiana Health Facilities Financing
Auth. Hospital Rev., Series 1997 A,
(Sisters of St. Francis Health),
5.00%, 11/1/98 (MBIA)(1) 949,099
455,000 Noblesville High School Building
Corp. Industrial Rev., 3.90%,
7/5/98 (AMBAC) 455,000
See Notes to Financial Statements
SEMIANNUAL REPORT SCHEDULE OF INVESTMENTS 7
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
$ 960,000 Vincennes University Rev., Series
1997 E, 3.95%, 12/1/98
(AMBAC)(1) $ 960,000
---------------------
5,521,293
---------------------
KANSAS--0.9%
1,620,000 Wichita Water & Sewer Utility Rev.,
6.50%, 10/1/98 (FGIC) 1,654,105
---------------------
KENTUCKY--5.1%
1,320,000 Kentucky Housing Corp. Rev.,
Series 1997 D, 4.00%,
12/31/97 (GIC: Bayerische
Landesbank Girozentrale) 1,320,000
6,000,000 Kentucky State Turnpike Auth.
Resource Recovery Road
Certificates of Participation,
VRDN, 4.10%, 12/3/97 (FSA,
SBBPA: Commerzbank A.G.) 6,000,000
2,400,000 Mayfield Multi-City Lease Rev., VRDN, 4.15%,
12/3/97 (LOC:
PNC Bank) 2,400,000
---------------------
9,720,000
---------------------
LOUISIANA--1.1%
2,000,000 Calcasieu Parish Sales Tax Rev.,
(District No. 4-A Sales and Use
Tax), VRDN, 3.85%, 12/4/97
(LOC: National Westminster
Bank PLC) 2,000,000
---------------------
MICHIGAN--2.6%
5,000,000 Michigan Strategic Fund Solid
Waste Disposal Rev., (Grayling
Generating Project), VRDN,
4.00%, 12/3/97 (LOC: Barclays
Bank PLC) 5,000,000
---------------------
MISSOURI--3.5%
2,500,000 Fenton Industrial Development
Auth. Rev., (Clayton Corp.
Project), VRDN, 4.40%,
12/4/97 (LOC: Commerce
Bank, N. A.) 2,500,000
3,010,000 Missouri Industrial Development
Board Rev., VRDN, 4.30%,
12/3/97 (LOC: Dai-Ichi Kangyo
Bank, Ltd. and Industrial Bank of
Japan) 3,010,000
Principal Amount Value
- --------------------------------------------------------------------------------------
$1,155,000 St. Charles Public Facilities Auth.
Leasehold Rev., 4.25%, 2/1/98
(MBIA) $ 1,155,641
---------------------
6,665,641
---------------------
NEVADA--1.2%
800,000 Clark County Industrial Development
Rev., Series 1995 A, (Nevada
Power), VRDN, 4.15%, 12/3/97
(LOC: Barclays Bank PLC) 800,000
1,500,000 Clark County Industrial Development
Rev., Series 1995 C, (Nevada
Power), VRDN, 4.05%, 12/3/97
(LOC: Barclays Bank PLC) 1,500,000
---------------------
2,300,000
---------------------
NEW MEXICO--4.8%
7,200,000 Farmington Pollution Control Rev.,
Series 1997 A, (San Juan
Project), VRDN, 4.15%,
12/3/97 (LOC: Bank of America) 7,200,000
2,000,000 New Mexico Mortgage Financing
Auth. Rev., Issue 2, 3.90%,
10/15/98 (GIC: FGIC) 2,000,000
---------------------
9,200,000
---------------------
NEW YORK--2.6%
5,000,000 New York State Energy Research
and Development Auth. Pollution
Control Rev., Series 1997 B,
(Rochester Gas & Electric Corp.),
VRDN, 4.00%, 12/3/97 (MBIA,
SBBPA: Credit Suisse First
Boston) 5,000,000
---------------------
OHIO--3.8%
3,255,000 Ohio State Building Auth. Rev.,
Series 1997 A, (Adult Correctional
Building), 4.50%, 4/1/98(2) 3,259,334
4,000,000 Ohio State Water Air Quality
Pollution Control Rev.
Commercial Paper, Series
1988 B, 3.75%, 12/16/97
(FGIC, LOC: General Electric
Capital Corp. Liquidity) 4,000,000
---------------------
7,259,334
---------------------
See Notes to Financial Statements
8 SCHEDULE OF INVESTMENTS AMERICAN CENTURY INVESTMENTS
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------------
OREGON--0.5%
$1,000,000 Oregon State GO Commercial
Paper, (Veterans Welfare), 4.05%,
2/2/98 $ 1,000,000
---------------------
PENNSYLVANIA--6.9%
6,000,000 Dauphin County General Auth. Rev.,
Series 1997 A, VRDN, 4.00%,
12/3/97 (FSA, SBBPA: Credit
Suisse First Boston) 6,000,000
7,200,000 Emmaus General Auth. Rev., VRDN,
3.95%, 12/3/97 (LOC:
Bayerische Landesbank
Girozentrale) 7,200,000
---------------------
13,200,000
---------------------
SOUTH CAROLINA--2.5%
4,725,000 Berkeley County Pollution Control
Rev., VRDN, 3.90%, 12/4/97
(LOC: Royal Bank of Canada) 4,725,000
---------------------
TENNESSEE--1.1%
2,000,000 Chattanooga Industrial
Development Rev., (Market
Street Limited Project), VRDN,
4.00%, 12/3/97 (LOC: Credit
Suisse First Boston, Inc.) 2,000,000
---------------------
TEXAS--10.0%
575,000 Arlington Hospital Auth. Rev.,
(Arlington Memorial Hospital),
5.50%, 12/1/97 (FSA) 575,000
500,000 Dallas GO Commercial Paper,
(Dallas, Denton and Collin Co.),
4.20%, 2/15/98 500,000
1,475,000 Greenville Electric Utility System
Rev., 4.25%, 2/15/98 (FSA)(1) 1,476,166
780,000 Houston Water and Sewer System
Rev., 8.00%, 12/1/97,
Prerefunded at 102% of Par(4) 796,234
4,495,000 Midland County Hospital District
Rev., VRDN, 4.10%, 12/4/97
(AMBAC, SBBPA: Merrill Lynch) 4,495,000
2,100,000 Tarrant County Housing Finance
Rev., (Windcastle Project), VRDN,
4.05%, 12/3/97 (LOC: Swiss
Bank Corporation) 2,100,000
Principal Amount Value
- --------------------------------------------------------------------------------------
$4,150,000 Texas Higher Education Auth. Rev.,
Series 1985 B, VRDN, 4.00%,
12/3/97 (FGIC) $ 4,150,000
5,000,000 Texas Tax and Rev. Anticipation
Notes, 4.75%, 8/31/98(2) 5,032,231
---------------------
19,124,631
---------------------
WASHINGTON--4.7%
1,800,000 Pierce County Economic Development Corporate
Rev., (K & M Holdings II Project), VRDN, 4.15%,
12/3/97 (LOC:
Wells Fargo Bank, N. A.) 1,800,000
6,600,000 Washington State Housing Finance
Commission Multi-Family
Mortgage Rev., (Mill Plain
Crossing Project), VRDN, 4.00%,
12/2/97 (LOC: Harris Trust &
Savings Bank) 6,600,000
485,000 Washington State Housing Finance
Commission Rev., Series 1997 1A,
4.00%, 4/1/98 (GIC: FGIC) 485,000
---------------------
8,885,000
---------------------
WISCONSIN--0.9%
1,800,000 Pleasant Prairie Industrial
Development Rev., (Muskie
Enterprises), VRDN, 4.05%,
12/4/97 (LOC: Bank of
Montreal) 1,800,000
---------------------
TOTAL INVESTMENT SECURITIES--100.0% $190,468,727
=====================
</TABLE>
See Notes to Financial Statements
SEMIANNUAL REPORT SCHEDULE OF INVESTMENTS 9
SCHEDULE OF INVESTMENTS
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Indemnity Corporation
FGIC = Financial Guaranty Insurance Co.
FSA = Financial Security Assurance
GIC = Guaranteed Investment Contract
GO = General Obligation
LOC = Letter of Credit
MBIA = MBIA Insurance Company
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, 1997.
(1) When-issued security.
(2) Security, or portion thereof, has been segregated at the custodian bank for
a when-issued security.
(3) Security was purchased under Rule 144A of the Securities Act of 1933 or is
otherwise restricted as to resale and, unless registered under the Act or
exempted from registration, may only be sold to qualified institutional
investors. The aggregate value of restricted securities at November 30,
1997, was $1,800,000, which represented 0.9% of net assets.
(4) Escrowed to maturity in U.S. Government Securities.
See Notes to Financial Statements
10 SCHEDULE OF INVESTMENTS AMERICAN CENTURY INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997 (UNAUDITED)
ASSETS
Investment securities, at value
(amortized cost and cost for
federal income tax purposes) .................... $190,468,727
Cash .............................................. 4,560,924
Receivable for investments sold ................... 3,900,000
Interest receivable ............................... 918,825
--------------
199,848,476
--------------
LIABILITIES
Disbursements in excess of
demand deposit cash ............................. 227,151
Payable for investments purchased ................. 4,755,372
Payable for capital shares
redeemed ........................................ 12,562
Dividends payable ................................. 44,310
--------------
5,039,395
--------------
Net Assets ........................................ $194,809,081
==============
CAPITAL SHARES
Outstanding (Unlimited number
of shares authorized) ........................... 194,809,081
==============
Net Asset Value Per Share ......................... $1.00
==============
NET ASSETS CONSIST OF:
Capital paid in ................................... $194,809,081
==============
See Notes to Financial Statements
SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES 11
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ......................................... $2,119,414
--------------
Expenses (Note 2):
Investment advisory fees ......................... 267,454
Administrative fees .............................. 13,717
Printing and postage ............................. 11,827
Registration and filing fees ..................... 11,103
Transfer agency fees ............................. 9,971
Custodian fees ................................... 3,274
Auditing and legal fees .......................... 3,057
Trustees' fees and expenses ...................... 1,053
Other operating expenses ......................... 2,094
--------------
Total expenses ................................. 323,550
Amount waived .................................... (225,014)
--------------
Net expenses ................................... 98,536
--------------
Net investment income ............................ $2,020,878
==============
See Notes to Financial Statements
12 STATEMENT OF OPERATIONS AMERICAN CENTURY INVESTMENTS
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
AND YEAR ENDED MAY 31, 1997
November 30, May 31,
Increase (Decrease) in Net Assets 1997 1997
OPERATIONS
Net investment income .................... $ 2,020,878 $ 2,620,733
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............... (2,020,878) (2,620,733)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................ 173,821,973 79,662,054
Proceeds from reinvestment
of distributions ....................... 1,858,011 2,479,220
Payments for shares redeemed ............. (66,601,295) (87,528,514)
------------- -------------
Net increase (decrease) in net
assets from capital share transactions . 109,078,689 (5,387,240)
------------- -------------
Net increase (decrease) in net assets .... 109,078,689 (5,387,240)
============= =============
NET ASSETS
Beginning of period ...................... 85,730,392 91,117,632
------------- -------------
End of period ............................ $ 194,809,081 $ 85,730,392
TRANSACTIONS IN SHARES
OF THE FUND
Sold ..................................... 173,821,973 79,662,054
Issued in reinvestment of distributions .. 1,858,011 2,479,220
Redeemed ................................. (66,601,295) (87,528,514)
------------- -------------
Net increase (decrease) .................. 109,078,689 (5,387,240)
============= =============
See Notes to Financial Statements
SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS 13
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997 (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 Tax-Free Money Market Fund (the Fund), is one
of the seven funds issued by the Trust. The Fund is diversified under the 1940
Act. Its 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 by investing primarily in short-term
municipal obligations. The Fund may concentrate its 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 Fund, are in accordance with
accounting policies generally accepted in the investment company industry.
SECURITY VALUATIONS--Portfolio securities are valued at amortized cost,
which approximates current market value. 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 accretion of discounts and amortization of premiums. Discounts and
premiums are accrued daily on a straight-line basis.
INCOME TAX STATUS--It is the policy of the Fund 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 and credited daily and distributed monthly. The 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 reporting and tax purposes.
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.
14 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997 (UNAUDITED)
2. TRANSACTIONS WITH RELATED PARTIES
The shareholders of the Fund approved a new management agreement with
American Century Investment Management, Inc. (ACIM) on July 30, 1997, effective
August 1, 1997, which replaced the existing contracts between the Fund and
Benham Management Corporation and American Century Services Corporation (ACSC)
for advisory, administrative and transfer agency services. Expenses excluded
from the agreement are brokerage, taxes, portfolio insurance, interest, fees and
expenses of the Trustees who are not considered "interested persons" as defined
in the Investment Company Act of 1940 (including counsel fees) and extraordinary
expenses. Under the agreement, ACIM will provide all services required by the
Fund in exchange for one unified management fee. The annual rate at which this
fee is assessed is determined monthly in a two-step process: First, a fee rate
schedule is applied to the assets of all of the funds in the Fund's investment
category which are managed by ACIM (the "Investment Category Fee"). The overall
investment objective of the Fund determines its Investment Category. The three
investment categories are: the Money Market Fund Category, the Bond Fund
Category, and the Equity Fund Category. The Fund is included in the Money Market
Fund Category. Second, a separate fee rate schedule is applied to the assets of
all of the funds managed by ACIM (the "Complex Fee"). The Investment Category
Fee and the Complex Fee are then added to determine the unified management fee
rate. The management fee is paid monthly by the Fund based on its aggregate
average daily net assets during the previous month multiplied by the monthly
management fee rate. The annualized Investment Category Fee schedule for the
Fund is as follows:
0.2700% of the first $1 billion
0.2270% of the next $1 billion
0.1860% of the next $3 billion
0.1690% of the next $5 billion
0.1580% of the next $15 billion
0.1575% of the next $25 billion
0.1570% of the average daily net assets over $50 billion
The annualized Complex Fee schedule is as follows:
0.3100% of the first $2.5 billion
0.3000% of the next $7.5 billion
0.2985% of the next $15 billion
0.2970% of the next $25 billion
0.2960% of the next $50 billion
0.2950% of the next $100 billion
0.2940% of the next $100 billion
0.2930% of the next $200 billion
0.2920% of the next $250 billion
0.2910% of the next $500 billion
0.2900% of the average daily net assets over $1,250 billion
Effective August 1, 1997, ACIM has agreed to waive its entire management fee
and absorb all other expenses until August 1, 1998. Management fees of $199,575
were incurred under the new management agreement and are included in Investment
Advisory Fees and Amount Waived in the Statement of Operations. Total expenses
and the annualized ratio of operating expenses to average net assets, under the
previous agreement, for the two months ended July 31, 1997 were $98,536, net of
the amount waived by Benham Management Corporation of $25,439. The annualized
ratio of operating expenses to average net assets, net of the amount waived, for
the same period was 0.67%.
Certain officers and trustees of the Trust are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the Trust's investment manager, ACIM, the
Trust's transfer agent, ACSC, and the registered broker-dealer, American Century
Investment Services, Inc.
SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 15
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
1997(1) 1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------- -------- --------- --------- ---------- ----------
Income From
Investment Operations
Net Investment Income ......... 0.02 0.03 0.03 0.03 0.02 0.02
--------- -------- --------- --------- ---------- ----------
Distributions
From Net Investment Income .... (0.02) (0.03) (0.03) (0.03) (0.02) (0.02)
--------- -------- --------- --------- ---------- ----------
Net Asset Value, End of Period .. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========= ======== ========= ========= ========== ==========
Total Return(2) ............... 1.82% 2.98% 3.19% 2.95% 1.92% 2.12%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...........0.18%(3) 0.67% 0.65% 0.66% 0.67% 0.68%
Ratio of Net Investment
Income to Average
Net Assets ......................3.67%(3) 2.93% 3.12% 2.88% 1.89% 2.10%
Net Assets, End
of Period (in thousands) ........$194,809 $85,730 $91,118 $92,034 $109,818 $109,875
</TABLE>
- ----------
(1) Six months ended November 30, 1997 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized. ACIM has voluntarily waived its management fee until August 1,
1998. In absence of the waiver, the ratio of operating expenses to average
net assets would have been 0.59% and the ratio of net investment income to
average net assets would have been 3.27%.
See Notes to Financial Statements
16 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
PROXY VOTING RESULTS
An annual meeting of shareholders was held on July 30, 1997, to vote on the
following proposals. All of the proposals received the required majority of
votes and were adopted.
A summary of voting results is listed below each proposal.
PROPOSAL 1:
To vote on the selection by the Board of Trustees of Coopers & Lybrand
L.L.P. as independent auditors for the Trust.
For: 49,222,232
Against: 2,646,331
Abstain: 321,231
PROPOSAL 2:
To vote on the approval of a Management Agreement with American Century
Investment Management, Inc.
For: 48,548,777
Against: 3,168,105
Abstain: 472,912
PROPOSAL 3:
To vote on the adoption of standardized investment limitations.
* Eliminate the fundamental investment limitation concerning diversification of
investments.
For: 45,057,390
Against: 6,079,148
Abstain: 1,053,256
* Amend the fundamental investment limitation concerning the issuance of senior
securities.
For: 44,985,317
Against: 6,151,221
Abstain: 1,053,256
* Amend the fundamental investment limitation concerning borrowing.
For: 44,949,793
Against: 6,186,745
Abstain: 1,053,256
* Amend the fundamental investment limitation concerning lending.
For: 44,938,973
Against: 6,197,565
Abstain: 1,053,256
* Eliminate the fundamental investment limitation regarding investments in
illiquid securities.
For: 46,367,051
Against: 4,769,487
Abstain: 1,053,256
* Eliminate the fundamental limitation concerning investment in other
investment companies.
For: 44,834,302
Against: 6,302,236
Abstain: 1,053,256
* Amend the fundamental investment limitation concerning investments in real
estate.
For: 44,742,211
Against: 6,394,327
Abstain: 1,053,256
* Amend the fundamental investment limitation concerning underwriting.
For: 44,681,197
Against: 6,455,341
Abstain: 1,053,256
* Amend the fundamental investment limitation concerning commodities.
For: 44,880,646
Against: 6,255,892
Abstain: 1,053,256
SEMIANNUAL REPORT PROXY VOTING RESULTS 17
PROXY VOTING RESULTS
* Eliminate the fundamental limitation concerning short sales.
For: 44,834,064
Against: 6,302,474
Abstain: 1,053,256
* Eliminate the fundamental investment limitation concerning margin purchases
of securities.
For: 46,240,501
Against: 4,896,037
Abstain: 1,053,256
* Eliminate the fundamental investment limitation concerning warrants.
For: 44,634,615
Against: 6,501,923
Abstain: 1,053,256
* Eliminate the fundamental investment limitation concerning investments in
oil, gas and mineral exploration development programs.
For: 44,844,560
Against: 6,291,978
Abstain: 1,053,256
* Eliminate the fundamental investment limitations concerning investments in
securities owned by officers and directors.
For: 44,845,122
Against: 6,291,416
Abstain: 1,053,256
18 PROXY VOTING RESULTS AMERICAN CENTURY INVESTMENTS
NOTES
SEMIANNUAL REPORT NOTES 19
BACKGROUND INFORMATION
INVESTMENT PHILOSOPHY & POLICIES
The Benham Group offers 38 fixed-income funds, ranging from money market
funds to long-term bond funds and including both taxable and tax-exempt funds.
Each fund is managed to provide a "pure play" on a specific sector of the
fixed-income market. To ensure adherence to this principle, the basic structure
of each fund's portfolio is tied to a specific market index. Fund managers
attempt to add value by making modest portfolio adjustments based on their
analysis of prevailing market conditions. Investment decisions are made by
management teams, which meet regularly to discuss market analysis and investment
strategies.
In addition to these principles, each fund has its own investment policies:
TAX-FREE MONEY MARKET is a money market fund that seeks to provide interest
income exempt from federal income taxes by investing in short-term municipal
securities.
Investments in Tax-Free Money Market 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 net asset value of $1 per share.
Investment income may be subject to certain state and local taxes, and
depending on your tax status, may be subject to the federal alternative minimum
tax. Capital gains are not exempt from federal income tax.
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 category for the fund is:
TAX-EXEMPT MONEY MARKET FUNDS --funds that intend to maintain a constant net
asset value and invest in high-quality municipal obligations with
dollar-weighted average maturities of less than 90 days.
INVESTMENT TEAM LEADERS
Portfolio Manager Bryan Karcher
Credit Research Manager Steven Permut
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. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on page 16.
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.
* TAX-EQUIVALENT YIELDS show the taxable yields that investors in a federal
income tax bracket would have to earn before taxes to equal the fund's tax-free
yield.
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.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES--the number of different securities held by a fund on a
given date.
* WEIGHTED AVERAGE MATURITY (WAM)--a measurement of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount.
* EXPENSE RATIO--the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF MUNICIPAL SECURITIES
* 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 21
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American
Century(reg.sm)
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES:
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 816-444-3485
FAX: 816-340-7962
INTERNET: WWW.AMERICANCENTURY.COM
AMERICAN CENTURY MUNICIPAL TRUST
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION FUNDS DISTRIBUTOR, INC.
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