[front cover] NOVEMBER 30, 1998
SEMIANNUAL REPORT
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AMERICAN CENTURY
[graphic of stairs]
BENHAM GROUP
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ARIZONA INTERMEDIATE-TERM MUNICIPAL
[american century logo(reg.sm)]
American
Century
[inside front cover]
AMERICAN CENTURY BROKERAGE
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We're pleased to introduce American Century's new brokerage service, which
offers a wide range of investment options and features:
* FundChoice Service--Invest in over 8,000 no-load and load mutual funds
from hundreds of different fund companies, many with no transaction fees
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* Strong research capability
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with an American Century Brokerage Access AccountSM (minimum $10,000)
To talk with a Brokerage Associate, call 1-888-345-2071.
WHAT'S NEW . . .
AMERICAN CENTURY CATALOG OF TOOLS & SERVICES lists all the free educational
materials available to investors.
We now have FOUR-PAGE PROFILES of many of our funds. The profiles follow a
standard SEC format and are intended to allow investors to compare funds easily.
You can request a profile or the full prospectus. Full prospectuses contain more
detailed fund information and you will continue to receive one after investing.
In 1999, we will provide SIMPLIFIED PROSPECTUSES that highlight important
information about our funds, including fees and expenses. More detailed data
will be in the Statement of Additional Information.
To order any of these materials, please call 1-800-345-2021.
[left margin]
BENHAM GROUP
ARIZONA INTERMEDIATE-TERM MUNICIPAL
(BEAMX)
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Our Message to You
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/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended November 30, 1998, were eventful ones for global
financial markets. Weakening economic and financial conditions, brought on by
problems in Asia, Russia, and Latin America, led to significant stock market
volatility and a dramatic decline in interest rates. Volatility was so rampant
that the U.S. central bank, the Federal Reserve, cut short-term interest rates
three times to help stabilize markets worldwide.
The third quarter of 1998 served as a good example of the markets'
extremes. Several major U.S. stock indices hit record highs in mid-July before
plunging 20% in the following six weeks. In the bond market, high demand for the
safety of Treasury bonds pushed yields down to their lowest levels ever, but
demand for corporate bonds thinned to the point where trading was all but
impossible.
This type of investment environment illustrates the importance of a
well-diversified investment portfolio. As we saw in the third quarter of 1998,
allocating your assets among stocks, bonds, and money market funds can help your
portfolio weather dramatic changes in the economic or investment climate.
Municipal bond performance fit between the extremes provided by Treasurys
and corporates. Munis posted positive returns as interest rates fell, but their
performance was not as strong as that of Treasurys. Arizona Intermediate-Term
Municipal continued to outperform its peer group and its benchmark while
providing more federal tax-free income than the average municipal debt fund. We
achieved these returns while maintaining our high credit standards. Our credit
research team closely monitored the health of the Arizona economy and the
issuers of Arizona municipal debt, helping fund managers maintain Arizona
Intermediate-Term Municipal's credit strength and integrity.
Another situation we've been watching closely is preparation of the world's
computer systems for the year 2000. At American Century, we're devoting
substantial resources to this endeavor. Throughout 1999, our technology team
will be extensively testing our systems, including those involved with fund
performance and dividend payments.
Thank you for your continued investment with American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer
[right margin]
Table of Contents
Report Highlights .............. 2
Market Perspective ............. 3
Arizona Intermediate-Term Municipal
Performance Information ........ 4
Management Q&A ................. 5
Yields ......................... 5
Portfolio at a Glance .......... 5
Top Five Sectors ............... 6
Portfolio Composition
by Credit Rating ............... 7
Schedule of Investments ........ 8
Financial Statements
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
Other Information
Background Information
Investment Philosophy
and Policies ................ 16
Comparative Indices ......... 16
Lipper Rankings ............. 16
Credit Rating
Guidelines .................. 16
Investment Team
Leaders ........................ 16
Glossary ....................... 17
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* A sharp decline in interest rates helped municipal bonds post solid returns
for the six months ended November 30, 1998.
* Rates fell because a series of economic crises around the globe threatened
to slow the U.S. economy, and because inflation remained low.
* In an attempt to boost the economy and restore confidence to global
financial markets, the Federal Reserve lowered short-term interest rates
three times between September and November.
* Despite their gains, municipal bonds lagged Treasury securities. That's
because the bond market rally was driven by demand from international
investors, who don't benefit from municipals' tax advantages.
* Meanwhile, municipal bond supply surged as many issuers sought to lock in
lower borrowing costs by refinancing older, higher rate bonds.
MANAGEMENT Q&A
* Arizona Intermediate-Term Municipal outperformed its benchmark and its peers
for the six-month period, while providing investors with significantly more
federal tax-free income. (See Total Returns on page 4.)
* Arizona Intermediate-Term Municipal's one-year return placed the fund in the
top 10% of the 77 "Other States Intermediate Municipal Debt Funds" tracked
by Lipper Inc.
* Under the guidance of our experienced research team, we enhanced returns by
adding undervalued securities to the portfolio.
* Effective duration management--controlling the fund's price sensitivity to
changes in interest rates--was another important contributor to Arizona
Intermediate-Term Municipal's solid performance. We kept duration around 5.6
years.
* As we anticipated, the Students FIRST Act of 1998 has had little impact on
the market so far; however, the longer-term effects are much more difficult
to predict.
* Despite this uncertainty, we think the next six months will be fairly upbeat
for Arizona municipal investors.
* Part of this optimism is driven by how attractive municipal yields were
relative to comparable-maturity Treasury yields.
* Going forward, we plan to maintain a slightly long duration compared with
the average intermediate municipal fund, while continuing to monitor the
impact of Students FIRST.
[left margin]
"ARIZONA INTERMEDIATE-TERM MUNICIPAL'S ONE-YEAR RETURN PLACED THE FUND IN THE
TOP 10% OF THE 77 'OTHER STATES INTERMEDIATE MUNICIPAL DEBT FUNDS' TRACKED BY
LIPPER INC."
ARIZONA
INTERMEDIATE-TERM MUNICIPAL
(BEAMX)
TOTAL RETURNS: AS OF 11/30/98
6 Months 3.70%*
1 Year 6.83%
NET ASSETS: $44.0 million
30-DAY SEC YIELD: 3.68%
INCEPTION DATE: 4/11/94
* Not annualized.
See Total Returns on page 4.
Investment terms are defined in the Glossary on page 17.
2 1-800-345-2021
Market Perspective from Randall W. Merk
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/photo of Randall W. Merk/
Randall W. Merk, director of fixed-income investing at American Century
MODERATE MUNICIPAL RETURNS
Municipal securities posted gains during the six months ended November 30,
1998. Municipal bond prices rose as interest rates declined; however, too much
supply and too little demand limited returns. Long-term municipal bonds, which
are most sensitive to changes in interest rates, performed best. For the six
months, the Lehman Brothers Long-Term Municipal Bond Index returned 4.10%.
Intermediate-term securities, as represented by the Lehman Brothers 5-Year
General Obligation Index, returned 3.43%, while the short-term Merrill Lynch 0-
to 3-Year Municipal Index posted a 2.77% return.
RATES FELL
Declines in interest rates were sparked by a series of global economic
crises that threatened to slow the U.S. economy. In addition, an abundance of
inexpensive imported products and falling commodity prices helped keep inflation
low. The government's consumer price index rose just 1.5% for the 12 months
ended November 30, 1998. That's the slowest pace in a dozen years.
In an attempt to boost the economy and restore confidence in financial
markets, the U.S. Federal Reserve cut short-term interest rates three times
between September and November, its first rate reductions since January 1996.
MUNICIPALS LAGGED TREASURYS
Plummeting stock markets, currency devaluations, and debt defaults caused
investors around the world to demand the safety and liquidity of U.S Treasury
bonds. That surge in demand led to record low bond yields and huge gains by
Treasury securities. Because international investors don't benefit from the tax
advantages of municipal bonds, demand for municipals lagged.
Furthermore, the supply of municipals surged. Motivated by declining
interest rates, municipal issuers sought to lock in lower borrowing costs by
issuing new debt and/or refinancing older debt. For the six months ended
November 30, 1998, new issue volume was up about a third compared with the same
six-month period a year earlier. These supply and demand factors caused
municipal bonds to underperform Treasury securities for the six months.
STEEPER YIELD CURVE
Reflecting the Fed's interest rate cuts, short-term interest rates dropped
dramatically. For the six months, the yield on one-year municipal securities
fell roughly 62 basis points (0.62%--a basis point equals 0.01%), while the
yield on 30-year municipal bonds fell only about 15 basis points. This resulted
in the steeper yield curve shown in the accompanying graph. The yield difference
between a one-year note and a 30-year bond rose to 176 basis points on November
30, 1998, compared with 128 basis points just six months earlier.
[right margin]
"DECLINES IN INTEREST RATES WERE SPARKED BY A SERIES OF GLOBAL ECONOMIC CRISES
THAT THREATENED TO SLOW THE U.S. ECONOMY."
[line chart - data below]
STEEPENING MUNICIPAL YIELD CURVE
Years to Maturity 11/30/98 5/31/98
1 3.060% 3.690%
2 3.360% 3.850%
3 3.510% 3.950%
4 3.630% 4.040%
5 3.730% 4.090%
6 3.825% 4.160%
7 3.920% 4.230%
8 4.000% 4.300%
9 4.080% 4.370%
10 4.160% 4.440%
11 4.248% 4.514%
12 4.336% 4.588%
13 4.424% 4.662%
14 4.512% 4.736%
15 4.600% 4.810%
16 4.636% 4.836%
17 4.672% 4.862%
18 4.708% 4.888%
19 4.744% 4.914%
20 4.780% 4.940%
21 4.784% 4.942%
22 4.788% 4.944%
23 4.792% 4.946%
24 4.796% 4.948%
25 4.800% 4.950%
26 4.804% 4.954%
27 4.808% 4.958%
28 4.812% 4.962%
29 4.816% 4.966%
30 4.820% 4.970%
Source: Bloomberg Financial Markets
"FOR THE SIX MONTHS, THE YIELD ON ONE-YEAR MUNICIPAL SECURITIES FELL ROUGHLY 62
BASIS POINTS (0.62%--A BASIS POINT EQUALS 0.01%), WHILE THE YIELD ON 30-YEAR
MUNICIPAL BONDS FELL ONLY ABOUT 15 BASIS POINTS."
www.americancentury.com 3
Arizona Intermediate-Term--Performance
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TOTAL RETURNS AS OF NOVEMBER 30, 1998
<TABLE>
<CAPTION>
INCEPTION 4/11/94
ARIZONA
INTERM.-TERM LEHMAN 5-YEAR OTHER STATES INTERM. MUNI. DEBT FUNDS(2)
MUNICIPAL GO INDEX AVERAGE RETURN FUND'S RANKING
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<S> <C> <C> <C> <C>
6 MONTHS(1) ............ 3.70% 3.43% 3.07% --
1 YEAR ................. 6.83% 6.32% 6.11% 7 OUT OF 77
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AVERAGE ANNUAL RETURNS
3 YEARS(3) ............. 5.58% 5.68% 5.19% 11 OUT OF 60
LIFE OF FUND(3) ........ 6.67% 6.26%(4) 5.94%(4) 1 OUT OF 45(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Returns and rankings would have been lower if management fees had not been
waived.
(4) Since 4/30/94, the date nearest the fund's inception for which return data
are available.
See pages 16-17 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain chart - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 11/30/98
Arizona Intermediate-Term Municipal $13,351
Lehman 5-Year GO Index $12,808
Arizona
Intermediate-Term Lehman 5-Year
Municipal GO Index
DATE VALUE VALUE
4/30/94* $10,000 $10,000
6/30/94 $10,064 $9,996
9/30/94 $10,202 $10,077
12/31/94 $10,098 $10,044
3/31/95 $10,562 $10,450
6/30/95 $10,855 $10,717
9/30/95 $11,131 $11,010
12/31/95 $11,431 $11,211
3/31/96 $11,371 $11,246
6/30/96 $11,433 $11,295
9/30/96 $11,619 $11,479
12/31/96 $11,859 $11,730
3/31/97 $11,816 $11,711
6/30/97 $12,130 $12,002
9/30/97 $12,414 $12,264
12/31/97 $12,676 $12,490
3/31/98 $12,764 $12,636
6/30/98 $12,914 $12,764
9/30/98 $13,170 $12,983
11/30/98 $13,351 $12,808
$10,000 investment made 4/30/94
The chart at left shows the growth of a $10,000 investment over the life of the
fund, while the chart below shows the fund's year-by-year performance. The
Lehman 5-Year GO Index is provided for comparison in each chart. Arizona
Intermediate-Term Municipal's returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the returns of
the index do not. 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.
[bar chart - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED NOVEMBER 30)
Arizona
Intermediate-Term Lehman 5-Year
Municipal GO Index
DATE RETURN RETURN
11/30/94* -0.27% -0.07%
11/30/95 13.73% 11.99%
11/30/96 4.91% 5.36%
11/30/97 5.02% 5.38%
11/30/98 6.83% 6.32%
* From 4/30/94 (the date nearest the fund's inception for which index data are
available).
4 1-800-345-2021
Arizona Intermediate-Term--Q&A
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/photo of Ken Salinger/
An interview with Ken Salinger, a portfolio manager on the Arizona
Intermediate-Term Municipal investment team.
HOW DID THE FUND PERFORM FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998?
Arizona Intermediate-Term Municipal provided a solid return. For the six
months ended November 30, 1998, the fund returned 3.70%, outperforming the 3.07%
return of the 78 "Other States Intermediate Municipal Debt Funds" tracked by
Lipper Inc. Arizona Intermediate-Term Municipal's return also surpassed the
3.43% return of its benchmark, the Lehman 5-Year GO Index.
In addition, Arizona Intermediate-Term Municipal's one- and three-year
returns placed it in the top 20% of its Lipper category, while life-of-fund
returns were higher than any of its peers. (See Total Returns on page 4 for fund
performance comparisons.)
HOW DID ARIZONA INTERMEDIATE-TERM MUNICIPAL'S YIELD STACK UP?
The fund offered investors significantly more federal tax-free income than
the average intermediate municipal debt fund. The most common way of gauging a
fund's income is by looking at its 30-day SEC yield. This yield represents net
investment income earned over a 30-day period and is expressed as an annual
percentage rate based on the fund's share price at the end of the 30 days.
As of November 30, Arizona Intermediate-Term Municipal's 30-day SEC yield
was 3.68%, compared with the 3.34% average yield of other intermediate municipal
debt funds.
WHAT FUELED THE FUND'S PERFORMANCE?
Effective duration management--controlling the portfolio's price
sensitivity to changes in interest rates--continued to be an important
contributor. We kept the portfolio's duration slightly longer than that of the
average intermediate municipal debt fund throughout the six-month period.
(Remember, the longer the fund's duration, the more its share price rises when
rates fall; however, a longer duration also causes the fund's share price to
fall more when rates rise.) We chose this position because we strongly believed
that global pressures and benign inflation would lead to lower rates, which
proved to be the case.
But we certainly can't predict the short-term direction of interest rates.
Therefore, even when we feel strongly about the direction in which rates are
headed, we manage Arizona Intermediate-Term Municipal's duration conservatively.
This prevents returns from fluctuating wildly from period to period.
Generally speaking, we keep duration in a narrow band around the average
duration of other intermediate municipal debt funds. For example, we kept
duration around 5.6 years for most of the six-month period, only slightly longer
than the average duration of the fund's peers.
[right margin]
"THE FUND OFFERED INVESTORS SIGNIFICANTLY MORE FEDERAL TAX-FREE INCOME THAN THE
AVERAGE INTERMEDIATE MUNICIPAL DEBT FUND."
YIELDS AS OF NOVEMBER 30, 1998
30-DAY SEC YIELD
3.68%
30-DAY TAX-EQUIVALENT YIELDS
31.02% TAX BRACKET 5.33%
33.90% TAX BRACKET 5.57%
34.59% TAX BRACKET 5.63%
39.33% TAX BRACKET 6.07%
PORTFOLIO AT A GLANCE
11/30/98 5/31/98
NUMBER OF SECURITIES 50 42
WEIGHTED AVERAGE
MATURITY 9.3 YRS 8.3 YRS
AVERAGE DURATION 5.5 YRS 5.3 YRS
EXPENSE RATIO 0.52%* 0.54%
* Annualized.
Investment terms are defined in the Glossary on page 17.
www.americancentury.com 5
Arizona Intermediate-Term--Q&A
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(Continued)
IF NOT THROUGH AGGRESSIVE DURATION MANAGEMENT, THEN HOW DO YOU ENHANCE RETURNS?
Simply put, we stay on top of the market and search diligently for good
values. Finding securities that we believe are undervalued is a top priority.
Adding undervalued securities to the portfolio can significantly enhance returns
while often adding little or no risk. That was primarily how we enhanced returns
during the six-month period.
Take advantage of opportunities when we find them, we keep a portion of the
portfolio in very liquid municipals--ones we can sell quickly to generate cash
to buy new, undervalued securities. Typically, these sales generate very small
capital gains or losses for the fund, which helps prevent excess year-end
distributions.
HOW DO YOU FIND THESE UNDERVALUED SECURITIES?
Our experienced research team plays a pivotal role by helping us stay close
to Arizona municipal credit trends. Arizona is a complex, dynamic state, making
thorough research and analysis of its municipalities a vital ingredient to
Arizona Intermediate-Term Municipal's success.
After we find what we believe is an attractively valued security, our
research team provides input on the credit quality of the issuer. If the credit
story passes our rigorous standards, we add the security to the portfolio. Our
credit team can also instigate the process--the team often uncovers such
securities while watching the market.
These securities often appreciate in value as a result of credit upgrades.
The whole process helps us stay in front of what we call the "upgrade curve"
(the chance for securities to appreciate in value relative to their current
prices as a result of a credit upgrade).
THE STUDENTS FIRST ACT OF 1998 PASSED ON JULY 9, 1998. HOW HAS THIS LEGISLATION
AFFECTED THE ARIZONA MUNICIPAL MARKET?
The Students FIRST Act (for more information please read the fund's annual
report for the period ended May 31, 1998) affects how school districts will
issue debt in the future but does not directly impact existing municipal
securities. Within the next few years, the legislation may sizably reduce the
number of general obligation bonds issued by school districts.
As we predicted, the act has had little impact on the market so
far--municipal issuance remained high, providing plenty of outstanding
municipals from which to choose. However, the longer-term effects of Students
FIRST are much more difficult to predict. To minimize the impact on the fund, we
will continue to carefully monitor developments and remain poised to respond to
any changes.
[left margin]
"AS WE PREDICTED, THE STUDENTS FIRST ACT HAS HAD LITTLE IMPACT ON THE MARKET
SO FAR. . ."
TOP FIVE SECTORS (AS OF 11/30/98)
% OF FUND INVESTMENTS
GO 54%
HOSPITAL REVENUE 7%
COPS/LEASES 7%
SPECIAL TAX REVENUE 6%
WATER AND SEWER REVENUE 5%
TOP FIVE SECTORS (AS OF 5/31/98)
% OF FUND INVESTMENTS
GO 52%
TRANSPORTATION REVENUE 12%
COPS/LEASES 9%
SPECIAL TAX REVENUE 7%
HOSPITAL REVENUE 4%
6 1-800-345-2021
Arizona Intermediate-Term--Q&A
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(Continued)
LOOKING AHEAD TO THE NEXT SIX MONTHS, WHAT'S IN STORE FOR THE MUNICIPAL MARKET?
We think the next six months will be fairly upbeat for Arizona municipal
investors. On the inflation front, all is quiet--for the first 11 months of
1998, overall consumer prices crawled ahead at an annualized rate of 1.6%.
Global crises drove interest rates lower and led to short-term rate reductions
by the Federal Reserve (see page 3).
Another important factor working in favor of municipal investors is the
relative performance of municipal and Treasury securities. Global economic
turmoil, equity-market volatility, presidential impeachment proceedings, and
problems in the Persian Gulf caused demand for U.S. Treasury securities to far
outstrip demand for municipals during the past six months. This has driven
municipal yields to historically high ratios compared with comparable-maturity
Treasury yields.
For example, longer-term municipal yields were nearly 100% of Treasury
yields by the end of November. Historically speaking, that ratio has been closer
to 83%. The value disparity means that even investors in a relatively low tax
bracket will generally receive more after-tax income from municipal bonds right
now than from comparable-maturity Treasurys.
When demand for Treasurys eventually tapers off, we expect municipals to
outperform Treasurys as their yield relationship returns to more historically
normal ratios.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR ARIZONA INTERMEDIATE-TERM MUNICIPAL
For now, we plan to maintain a slightly long duration compared with the
average intermediate municipal fund. If interest rates continue to fall, or if
demand for municipal securities rises, the portfolio's longer duration should
boost returns. In addition, we will continue to keep an eye on developments
surrounding the Students FIRST Act of 1998.
[right margin]
"ANOTHER IMPORTANT FACTOR WORKING IN FAVOR OF MUNICIPAL INVESTORS IS THE
RELATIVE PERFORMANCE OF MUNICIPAL AND TREASURY SECURITIES."
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
AAA 60% 58%
AA 26% 25%
A 9% 9%
BBB 5% 8%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page 16
for more information.
". . .WE WILL CONTINUE TO KEEP AN EYE ON DEVELOPMENTS SURROUNDING THE STUDENTS
FIRST ACT OF 1998."
www.americancentury.com 7
Arizona Intermediate-Term--Sch. of Investments
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NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES--96.9%
ARIZONA -- 91.9%
$1,000,000 Arizona Transportation Board
Highway Rev., Series 1993 A,
6.00%, 7/1/08 $ 1,138,680
900,000 Coconino & Yavapai Counties
Joint Unified School District
No. 9, Series 1994 C, (Sedona
Project of 1992), 5.60%,
7/1/06 (FGIC) 957,609
1,000,000 East Valley Institute of Technology
No. 401 GO, 5.00%, 7/1/03
(AMBAC) 1,050,680
545,000 Gilbert County GO, Series 1994 C,
6.00%, 7/1/02 (MBIA) 586,240
1,200,000 Glendale Industrial Development
Auth. Rev., Series 1998 A,
(Midwestern University), 5.375%,
5/15/28 1,200,984
875,000 Goodyear GO, 4.60%, 7/1/11
(FGIC) 884,643
1,370,000 Maricopa County COP, 5.625%,
6/1/00 1,393,345
500,000 Maricopa County GO, 6.25%,
7/1/03 (FGIC) 550,760
1,000,000 Maricopa County Hospital Rev.,
(Sun Health Corp.), 5.75%,
4/1/07 1,078,450
1,000,000 Maricopa County Industrial
Development Auth. Hospital
Facilities Rev., (Mayo Clinic
Hospital), 5.25%, 11/15/37 1,008,980
500,000 Maricopa County Industrial
Development Auth. Hospital
Facilities Rev., (Samaritan
Health Services), 7.15%,
12/1/04 (MBIA) 580,280
1,000,000 Maricopa County Unified School
District No. 1 GO, (Phoenix
Elementary), 5.50%, 7/1/09
(MBIA) 1,094,180
1,000,000 Maricopa County Unified School
District No. 201 GO, Series
1992 E, (Phoenix), 7.10%,
7/1/04 1,158,860
800,000 Maricopa County Unified School
District No. 40 GO, Series
1995 C, 7.75%, 7/1/06 (FGIC) 988,568
500,000 Maricopa County Unified School
District No. 11 GO, Series
1998 C, (Peoria University),
4.50%, 7/1/10 (FGIC) 506,525
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) 1,083,380
Principal Amount Value
- --------------------------------------------------------------------------------
$ 180,000 Maricopa County Unified School
District No. 69 GO, Series
1998 F, (Paradise Valley School
Improvement Project 94), 4.00%,
7/1/04 (FSA) $ 181,296
1,000,000 Maricopa County Unified School
District No. 48 GO, (Scottsdale),
6.60%, 7/1/12 1,214,530
1,000,000 Maricopa County Unified School
District No. 6 GO, Series
1997 B, (Washington
Elementary), 4.75%, 7/1/11
(FGIC) 1,018,680
500,000 Maricopa County Unified School
District No. 80 GO, (Chandler),
5.20%, 7/1/13 (MBIA) 531,875
1,000,000 Maricopa County Unified School
District No. 80 GO, Series
1998 E, (Chandler), 4.75%,
7/1/11 (FGIC) 1,024,610
1,000,000 Maricopa County Unified School
District No. 90 GO, (Ruth Fisher
Elementary), 5.375%, 7/1/00 1,026,550
1,000,000 Maricopa County Unified School
District No. 97 GO, (Deer Valley),
Series 1996 A, 6.25%, 7/1/06
(MBIA) 1,141,370
500,000 Mesa Industrial Development Auth.
Rev., Series A-1, (Lutheran
Health Systems), 4.00%,
1/1/00 (MBIA) 503,345
300,000 Phoenix Airport Rev., Series
1994 C, 5.50%, 7/1/01 (MBIA) 313,077
1,000,000 Phoenix Civic Improvement Corp.
Rev., (Senior Lien), 5.00%,
7/1/03 1,044,260
1,000,000 Phoenix Civic Improvement Corp.
Wastewater System Lease Rev.,
4.85%, 7/1/07 (MBIA) 1,048,770
550,000 Phoenix GO, 6.00%, 7/1/01 582,367
1,000,000 Phoenix GO, Series 1995 B,
5.00%, 7/1/09 1,059,720
1,100,000 Phoenix Industrial Development
Auth. Single Family Mortgage
Rev., Series 1998 A, 6.60%,
12/1/29
(GNMA/FNMA/FHLMC) 1,205,996
500,000 Phoenix Street and Highway Rev.,
5.95%, 7/1/00 519,770
1,000,000 Pima County Sewer Rev., 6.20%,
7/1/00 (FGIC) 1,043,080
1,000,000 Pima County Unified School
District No. 10 GO,
(Amphitheater), 4.25%, 7/1/06
(MBIA) 1,015,210
1,000,000 Pima County Unified School
District No. 10 GO,
(Amphitheater), 5.75%, 7/1/04,
(FGIC) 1,093,330
See Notes to Financial Statements
8 1-800-345-2021
Arizona Intermediate-Term--Sch. of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$1,000,000 Pima County Unified School
District No. 10 GO,
(Amphitheater), 7.00%, 7/1/05
(MBIA) $ 1,171,200
1,000,000 Pima County Unified School
District No. 12 GO, (Sunnyside),
5.50%, 7/1/09 (MBIA) 1,077,200
1,200,000 Pima County Unified School
District No. 16 GO, (Catalina
Foothills), 5.75%, 7/1/06
(MBIA) 1,333,296
1,000,000 Salt River Project Agricultural
Improvement and Power District
Rev., Series 1993 B, 6.50%,
1/1/04 1,119,100
480,000 Scottsdale GO, 7.50%, 7/1/02 540,024
1,000,000 Scottsdale Water & Sewer Rev.,
Series 1998 E, 4.50%, 7/1/23 939,760
1,250,000 Sedona Wastewater Municipal
Property Corporate Excise Tax
Rev., 5.12%, 7/1/20 (MBIA)(2) 425,950
1,275,000 Tempe GO, 6.25%, 7/1/05 1,441,579
525,000 Tucson COP, 5.70%, 7/1/02 529,914
1,000,000 Tucson Street and Highway Rev.,
5.70%, 7/1/01 1,052,010
500,000 Yavapai County Unified School
District No. 28 GO, (Camp
Verde), 6.10%, 7/1/04 (FGIC) 554,585
-------------
41,014,618
-------------
PUERTO RICO--3.8%
1,000,000 Puerto Rico Commonwealth GO,
5.75%, 7/1/11 (MBIA) 1,134,030
Principal Amount Value
- --------------------------------------------------------------------------------
$ 500,000 Puerto Rico Commonwealth
Infrastructure Financing Auth.
Special Tax Rev., Series 1998 A,
5.50%, 7/1/08 (AMBAC) $ 554,800
-------------
1,688,830
-------------
VIRGIN ISLANDS--1.2%
500,000 Virgin Islands Water & Power
Auth. Electric System Rev.,
5.125%, 7/1/04 520,980
-------------
TOTAL MUNICIPAL SECURITIES 43,224,428
-------------
(Cost $41,571,315)
SHORT-TERM MUNICIPAL SECURITIES--3.1%
ARIZONA
1,000,000 Maricopa County Pollution Control
Rev., Series 1994 E, (Arizona
Public Service Company), VRDN,
3.35%, 12/1/98 (LOC: Bank
of America N.T. & S.A.) 1,000,000
400,000 Pinal County Industrial
Development Auth. Pollution
Control Rev., (Newmont), VRDN,
3.15%, 12/1/98 (LOC:
National Westminster Bank PLC) 400,000
-------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 1,400,000
-------------
(Cost $1,400,000)
TOTAL INVESTMENT SECURITIES-100.0% $44,624,428
=============
(Cost $42,971,315)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FHLMC = Federal Home Loan Mortgage Corp.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
GNMA = Government National Mortgage Association
GO = General Obligation
LOC = Letter of Credit
MBIA = MBIA Insurance Corp.
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, 1998.
(1) Escrowed to maturity in U.S. government securities.
(2) Security is a zero-coupon municipal bond. The yield to maturity at purchase
is indicated. Zero-coupn bonds are purchased at a substantial discount from
their value at maturity.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the principal amount of each investment
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
www.americancentury.com 9
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $42,971,315)
(Note 3) ................................................ $44,624,428
Cash ...................................................... 5,676
Receivable for investments sold ........................... 1,000,000
Interest receivable ....................................... 861,594
-----------
46,491,698
-----------
LIABILITIES
Disbursements in excess of
demand deposit cash ..................................... 1,537,056
Payable for investments purchased ......................... 928,215
Payable for capital shares redeemed ....................... 10,988
Dividends payable ......................................... 15,326
Accrued management fees
(Note 2) ................................................ 18,045
Payable for Trustees' fees
and expenses ............................................ 163
-----------
2,509,793
-----------
Net Assets ................................................ $43,981,905
===========
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) ................................... 4,061,658
===========
Net Asset Value Per Share ................................. $ 10.83
===========
NET ASSETS CONSIST OF:
Capital paid in ........................................... $42,060,764
Accumulated undistributed net
realized gain on investment
transactions ............................................ 268,028
Net unrealized appreciation
on investments (Note 3) ................................. 1,653,113
-----------
$43,981,905
===========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. The net assets divided by the total number
of shares outstanding gives you the price of an individual share, or the net
asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); net
gains earned on investment activity but not yet paid to shareholders or net
losses on investment activity (known as realized gains or losses); and gains or
losses on securities still owned by the fund (known as unrealized appreciation
or depreciation). This breakdown tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
See Notes to Financial Statements
10 1-800-345-2021
Statement of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest .................................................. $ 986,300
----------
Expenses (Note 2):
Management fees ........................................... 103,873
Trustees' fees and expenses ............................... 2,239
----------
106,112
----------
Net investment income ..................................... 880,188
----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments .......................... 184,418
Change in net unrealized
appreciation on investments ............................. 420,549
----------
Net realized and unrealized
gain on investments ..................................... 604,967
----------
Net Increase in Net Assets
Resulting from Operations ............................... $1,485,155
==========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF OPERATIONS--This statement breaks down how the
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* interest income earned from investments
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)
See Notes to Financial Statements
www.americancentury.com 11
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED) AND YEAR ENDED MAY 31, 1998
NOVEMBER 30, MAY 31,
1998 1998
Increase in Net Assets
OPERATIONS
Net investment income .................... $ 880,188 $ 1,553,800
Net realized gain on investments ......... 184,418 247,543
Change in net unrealized
appreciation on investments ............ 420,549 622,539
------------ ------------
Net increase in net assets
resulting from operations .............. 1,485,155 2,423,882
------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income ............... (880,188) (1,553,800)
From net realized gains on
investment transactions ................ -- (163,355)
------------ ------------
Decrease in net assets
from distributions ..................... (880,188) (1,717,155)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................ 8,601,476 18,049,886
Proceeds from reinvestment
of distributions ....................... 647,056 1,285,629
Payments for shares redeemed ............. (5,918,930) (10,549,469)
------------ ------------
Net increase in net assets from
capital share transactions ............. 3,329,602 8,786,046
------------ ------------
Net increase in net assets ............... 3,934,569 9,492,773
NET ASSETS
Beginning of period ...................... 40,047,336 30,554,563
------------ ------------
End of period ............................ $ 43,981,905 $ 40,047,336
============ ============
TRANSACTIONS IN
SHARES OF THE FUND
Sold ..................................... 798,417 1,695,769
Issued in reinvestment
of distributions ....................... 60,113 120,777
Redeemed ................................. (550,466) (989,926)
------------ ------------
Net increase ............................. 308,064 826,620
============ ============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* capital share transactions--shareholders' purchases, reinvestments, and
redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions results in net
assets at the end of the period.
See Notes to Financial Statements
12 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--American Century Municipal Trust (the Trust) is registered
under the Investment Company Act of 1940 as an open-end management investment
company. American Century - Benham Arizona Intermediate-Term Municipal Fund (the
Fund) is one of the eight funds 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 are in accordance with generally accepted accounting principles.
SECURITY VALUATIONS--Securities are valued through 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 as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
INCOME TAX STATUS--It is the Fund's policy to distribute all net investment
income and net realized 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 income 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.
On December 11, 1998, the Fund declared and paid a dividend of $0.0648 per
share from short-term net realized gains on investments to shareholders of
record on that date.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net capital gains and losses for financial statement
and tax purposes and may result in reclassification among certain capital
accounts.
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, 1998.
ADDITIONAL INFORMATION--Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.
www.americancentury.com 13
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The Trust has entered into a Management Agreement with ACIM that provides
the Fund with investment advisory and management services in exchange for a
single, unified management fee. Expenses excluded from the agreement are
brokerage, taxes, portfolio insurance, interest, fees and expenses of those
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 net 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 net 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 average daily closing 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
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, and the
Trust's transfer agent, American Century Services Corporation.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of municipal debt obligations, excluding short-term
investments, totaled $18,006,694 and $14,601,757, respectively.
As of November 30, 1998, accumulated net unrealized appreciation was
$1,653,113, which consisted of unrealized appreciation of $1,677,506, and
unrealized depreciation of $24,393. The aggregate cost of investments for
federal income tax purposes was the same as the cost for financial reporting
purposes.
- --------------------------------------------------------------------------------
4. BANK LOANS
Effective December 18, 1998, the Fund, along with certain other funds
managed by ACIM, entered into an unsecured $570,000,000 bank line of credit
agreement with Chase Manhattan. Borrowings under the agreement bear interest at
the Federal Funds rate plus 0.40%.
14 1-800-345-2021
Arizona Intermediate-Term--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1998(1) 1998 1997 1996 1995 1994(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .......... $ 10.67 $ 10.44 $ 10.31 $ 10.35 $ 10.13 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income From Investment
Operations
Net Investment Income ...... 0.23 0.46 0.45 0.51 0.51 0.07
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ............... 0.16 0.28 0.13 (0.03) 0.22 0.13
---------- ---------- ---------- ---------- ---------- ----------
Total From
Investment Operations ...... 0.39 0.74 0.58 0.48 0.73 0.20
---------- ---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income . (0.23) (0.46) (0.45) (0.51) (0.51) (0.07)
From Net Realized Gains on
Investment Transactions .... -- (0.05) -- (0.01) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ........ (0.23) (0.51) (0.45) (0.52) (0.51) (0.07)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value,
End of Period ................ $ 10.83 $ 10.67 $ 10.44 $ 10.31 $ 10.35 $ 10.13
========== ========== ========== ========== ========== ==========
Total Return(3) ............ 3.70% 7.19% 5.77% 4.65% 7.52% 1.99%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...... 0.52%(4) 0.54% 0.66% 0.14% -- --
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) .... 0.52%(4) 0.60% 0.79% 0.82% 1.01% 2.33%(4)
Ratio of Net Investment
Income to Average Net Assets 4.29%(4) 4.33% 4.35% 4.85% 5.16% 5.08%(4)
Ratio of Net Investment
Income to Average Net Assets
(Before Expense Waiver) .... 4.29%(4) 4.27% 4.22% 4.17% 4.15% 2.75%(4)
Portfolio Turnover Rate ...... 36% 39% 81% 36% 33% 18%
Net Assets, End
of Period (in thousands) ..... $ 43,982 $ 40,047 $ 30,555 $ 25,789 $ 19,778 $ 7,187
</TABLE>
(1) Six months ended November 30, 1998 (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.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--This statement itemizes current period
activity and statistics and provides comparison data for the last five fiscal
years (or less, if the fund is not five years old).
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming
reinvestment of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced
See Notes to Financial Statements
www.americancentury.com 15
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND 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 following index is used in the report as a fund performance comparison.
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 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 5-10 years and which are exempt from taxation on a specified city or state
basis.
CREDIT RATING GUIDELINES
Credit ratings are issued by independent research companies such as
Standard & Poor's and Moody's. Ratings are based on an issuer's financial
strength and ability to pay interest and principal in a timely manner.
It's important to note that credit ratings are subjective, reflecting the
opinions of the rating agencies; they are not absolute standards of quality.
Securities rated AAA, AA, A or BBB are considered "investment grade,"
meaning they're relatively safe from default.
[left margin]
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGERS
KEN SALINGER
COLLEEN DENZLER
MUNICIPAL CREDIT RESEARCH DIRECTOR
STEVEN PERMUT
16 1-800-345-2021
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. (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).
www.americancentury.com 17
Notes
- --------------------------------------------------------------------------------
18 1-800-345-2021
Notes
- --------------------------------------------------------------------------------
www.americancentury.com 19
Notes
- --------------------------------------------------------------------------------
20 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
- -------------------------------------------------------------------------------
BENHAM GROUP(reg.sm)
TAXABLE BOND FUNDS
U.S. TREASURY & GOVERNMENT
Short-Term Treasury
Short-Term Government
GNMA
Intermediate-Term Treasury
Long-Term Treasury
Inflation-Adjusted Treasury
Target Maturities Trust: 2000
Target Maturities Trust: 2005
Target Maturities Trust: 2010
Target Maturities Trust: 2015
Target Maturities Trust: 2020
Target Maturities Trust: 2025
CORPORATE & DIVERSIFIED
Limited-Term Bond
Intermediate-Term Bond
Bond
Premium Bond
High-Yield Bond
INTERNATIONAL
International Bond
TAX-FREE & MUNICIPAL BOND FUNDS
MULTIPLE-STATE
Limited-Term Tax-Free
Intermediate-Term Tax-Free
Long-Term Tax-Free
High-Yield Municipal
SINGLE-STATE
Arizona Intermediate-Term Municipal
California High-Yield Municipal
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
Florida Intermediate-Term Municipal
MONEY MARKET FUNDS
TAXABLE
Capital Preservation
Government Agency Money Market
Premium Capital Reserve
Premium Government Reserve
Prime Money Market
TAX-FREE & MUNICIPAL
California Municipal Money Market
California Tax-Free Money Market
Florida Municipal Money Market
Tax-Free Money Market
AMERICAN CENTURY(reg.sm) GROUP
ASSET ALLOCATION
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
BALANCED
Balanced
CONSERVATIVE EQUITY
Income and Growth
Equity Income
Value
Equity Growth
SPECIALTY
Utilities
Real Estate
Global Natural Resources
Global Gold
SMALL CAP
Small Cap Quantitative
Small Cap Value
TWENTIETH CENTURY GROUP
GROWTH
Select
Heritage Growth
Ultra
AGGRESSIVE GROWTH
Vista
Giftrust
New Opportunities
INTERNATIONAL GROWTH
International Growth
International Discovery
Emerging Markets
GLOBAL
Global Growth
Please call for a prospectus or profile on any American Century fund. These
documents contain important information including charges and expenses, and you
should read them carefully before you invest or send money.
[right margin]
[american century logo(reg.sm)]
American
Century
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.
FUNDS DISTRIBUTOR, INC.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION
[recycled logo]
Recycled
[back cover]
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9901 Funds Distributor, Inc.
SH-BKT-15066 (c)1998 American Century Services Corporation
<PAGE>
[front cover] NOVEMBER 30, 1998
SEMIANNUAL REPORT
- ----------------
AMERICAN CENTURY
[graphic of stairs]
BENHAM GROUP
- ------------------------------------
FLORIDA MUNICIPAL MONEY MARKET
[american century logo(reg.sm)]
American
Century
[inside front cover]
AMERICAN CENTURY BROKERAGE
- --------------------------------------------------------------------------------
We're pleased to introduce American Century's new brokerage service, which
offers a wide range of investment options and features:
* FundChoice Service--Invest in over 8,000 no-load and load mutual funds
from hundreds of different fund companies, many with no transaction fees
* Buy individual stocks and bonds
* 24-hour Internet and automated phone trades are just $24.95 for up to
1,000 shares of stock, and 2 cents per share thereafter
* Strong research capability
* Build and track model portfolios
* Get news, quotes and charts
* Check free Standard & Poor's stock reports
* Access Wall Street on Demand(tm), a research service with more than
500,000 reports on industry trends, corporate earnings, and mutual
fund analysis
* Track your brokerage account on one easy-to-read statement
* Unlimited check writing and a Gold MasterCard(reg.tm) ATM/debit card
with an American Century Brokerage Access AccountSM (minimum $10,000)
To talk with a Brokerage Associate, call 1-888-345-2071.
WHAT'S NEW . . .
AMERICAN CENTURY CATALOG OF TOOLS & SERVICES lists all the free educational
materials available to investors.
We now have FOUR-PAGE PROFILES of many of our funds. The profiles follow a
standard SEC format and are intended to allow investors to compare funds easily.
You can request a profile or the full prospectus. Full prospectuses contain more
detailed fund information and you will continue to receive one after investing.
In 1999, we will provide SIMPLIFIED PROSPECTUSES that highlight important
information about our funds, including fees and expenses. More detailed data
will be in the Statement of Additional Information.
To order any of these materials, please call 1-800-345-2021.
[left margin]
BENHAM GROUP
FLORIDA MUNICIPAL MONEY MARKET
(BEFXX)
- ----------------------------------
Our Message to You
- --------------------------------------------------------------------------------
/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
Money market funds such as Florida Municipal Money Market reaffirmed their
value during the six months ended November 30, 1998, a period of extreme market
turbulence. Weakening economic and financial conditions, brought on by problems
in Asia, Russia, and Latin America, led to significant stock market volatility
and a dramatic decline in interest rates.
Volatility was so rampant that the U.S. central bank, the Federal Reserve,
cut short-term interest rates three times to help stabilize markets worldwide.
Money market yields fell in anticipation of the rate cuts, but money market
values remained stable amid the ups and downs in bond and stock prices.
The third quarter of 1998 served as a good example of the markets'
extremes. Several major U.S. stock indices hit record highs in mid-July before
plunging 20% in the following six weeks. In the bond market, high demand for the
safety of Treasury bonds pushed yields down to their lowest levels ever, but
demand for corporate bonds thinned to the point where trading was all but
impossible.
This type of investment environment illustrates the importance of a
well-diversified investment portfolio. Allocating your assets among stocks,
bonds, and money market funds can help your portfolio weather dramatic changes
in the economic or investment climate.
Florida Municipal Money Market continued to provide more federal tax-exempt
income than most of its peers. We accomplished this by keeping management
expenses low and strategically adding short-term municipal securities to the
portfolio when supply and demand fluctuations created favorable buying
opportunities. Our credit research team also closely monitored the financial
health of the banks that back municipal securities, helping the fund managers
maintain Florida Municipal Money Market's high credit quality.
Another situation we've been watching closely is preparation of the world's
computer systems for the year 2000. At American Century, we're devoting
substantial resources to this endeavor. Throughout 1999, our technology team
will be extensively testing our systems, including those involved with fund
performance and dividend payments.
Thank you for your continued investment with American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer
[right margin]
Table of Contents
Report Highlights .......... 2
Services Update ............ 3
Florida Municipal Money Market
Performance Information .... 4
Management Q&A ............. 5
Schedule of Investments .... 7
Financial Statements
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
Other Information
Background Information
Investment Philosophy
and Policies ............ 16
Lipper Rankings ......... 16
Credit Rating
Guidelines .............. 16
Investment and Credit
Research Teams .......... 16
Glossary ................... 17
www.americancentury.com 1
Report Highlights
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
* Florida Municipal Money Market continued to provide a higher level of
federal tax-exempt income than the average state-specific tax-free money
market fund.
* The fund's good relative performance could be attributed primarily to low
management expenses and a value approach to investing that helped maintain a
competitive yield.
* The seven-day current yield fell because of market factors that caused
interest rates in general to decline.
* We continue to manage the fund's credit quality conservatively. We don't take
on inappropriate credit risk to boost the fund's yield.
MARKET HIGHLIGHTS
* U.S. interest rates in general declined because of weakening global economic
conditions following a series of financial crises in Asia, Russia, and
Latin America.
* The Federal Reserve cut short-term interest rates three times from September
through November to stabilize the global markets and stimulate the U.S.
economy.
* Money market yields declined in anticipation of the Fed's interest rate
cuts.
* After successfully stabilizing global financial markets with its interest
rate cuts, we expect the Fed to take a "wait-and-see" approach to interest
rate policy. We won't be surprised if the Fed is done cutting interest rates
for a while.
[left margin]
"THE FUND'S GOOD RELATIVE PERFORMANCE COULD BE ATTRIBUTED PRIMARILY TO LOW
MANAGEMENT EXPENSES AND A VALUE APPROACH TO INVESTING THAT HELPED MAINTAIN A
COMPETITIVE YIELD."
FLORIDA MUNICIPAL MONEY MARKET
(BEFXX)
TOTAL RETURNS: AS OF 11/30/98
6 Months 1.52%*
1 Year 3.17%
NET ASSETS: $94.4 million
7-DAY CURRENT YIELD: 2.95%
INCEPTION DATE: 4/11/94
* Not annualized.
See Total Returns on page 4.
Investment terms are defined in the Glossary on page 17.
2 1-800-345-2021
Services Update
- --------------------------------------------------------------------------------
We get many questions from money market investors about our services. Here
are answers to several frequently asked questions.
CAN I MAKE DIRECT DEPOSITS INTO MY MONEY MARKET FUND?
Yes. Give us a call, and we can send you the information you need to set up
direct deposit of your paycheck, Social Security check, Treasury Direct interest
payment, military allotment, or payments from other government agencies.
WHAT IS THE HOLDING PERIOD ON NEW DEPOSITS INTO MY ACCOUNT?
Generally there is an eight-business-day holding period for deposited funds
(initial investments in a new account are held for 15 calendar days). There is a
one-day holding period for U.S. Treasury checks, money orders, and travelers'
checks.
IS THERE AN EASY WAY TO MOVE MONEY FROM MY MONEY MARKET ACCOUNT INTO MY STOCK
AND BOND FUND ACCOUNTS ON A REGULAR BASIS, FOR DOLLAR-COST-AVERAGING PURPOSES?
Yes. Our "Automatic Exchange" plan allows regularly scheduled automatic
transfers from your American Century money market fund into any of your
variable-price American Century stock or bond funds. You can arrange for this
service with a phone call.
IS THERE A LIMIT TO THE NUMBER OF EXCHANGES I CAN MAKE OUT OF MY MONEY MARKET
FUND?
If you are exchanging from your money market fund into your bond or stock
fund, there is no limit. However, there is a limit of six exchanges per calendar
year out of your bond and stock funds.
Exchanges can be made by:
* calling an Investor Services Representative at 1-800-345-2021
* calling our Automated Information Line at 1-800-345-8765*
* writing us a letter
* visiting our Web site at
www.americancentury.com*
IS THERE A FEE FOR WRITING CHECKS AGAINST MY MONEY MARKET FUND?
No. You can write as many checks as you like at no charge, as long as each
check is for $100 or more.
IF YOU HAVE ANY QUESTIONS ABOUT OUR SERVICES, CALL US TOLL FREE AT
1-800-345-2021 OR E-MAIL US AT OUR WEB SITE (WWW.AMERICANCENTURY.COM).
[right margin]
ACCESSING YOUR MONEY. . .
WE CAN SEND A CHECK DIRECTLY TO YOU AT YOUR ADDRESS OF RECORD. ALL YOU NEED TO
DO IS GIVE US A CALL OR WRITE US A LETTER REQUESTING THE CHECK. WE CAN ALSO MAKE
AUTOMATIC DEPOSITS FROM YOUR MONEY MARKET FUND TO YOUR BANK ACCOUNT.
* Requires shareholder authorization.
www.americancentury.com 3
Florida Muni. Money Mkt.--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1998
<TABLE>
INCEPTION 4/11/94
FLORIDA MUNICIPAL OTHER STATES TAX-EXEMPT MONEY MARKET FUNDS(2)
MONEY MARKET AVERAGE RETURN FUND'S RANKING
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
6 MONTHS(1) ....... 1.52% 1.47% --
1 YEAR ............ 3.17% 3.06% 13 OUT OF 33
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS(3) ........ 3.42% 3.14% 4 OUT OF 30
LIFE OF FUND(3) ... 3.53% 3.20%(4) 1 OUT OF 17(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Returns and rankings would have been lower if management fees had not been
waived from 4/11/94 to 12/31/96.
(4) Since 4/30/94, the date nearest the fund's inception for which return data
are available.
See pages 16-17 for more information about returns and Lipper fund rankings.
PORTFOLIO AT A GLANCE
11/30/98 5/31/98
NUMBER OF SECURITIES 43 45
WEIGHTED AVERAGE
MATURITY 33 DAYS 54 DAYS
EXPENSE RATIO 0.50%(1) 0.51%(2)
(1) Annualized.
(2) On August 1, 1997, a new management agreement with American Century
Investment Management, Inc. went into effect. The agreement reduced
management fees to approximately 0.50%.
YIELDS AS OF NOVEMBER 30, 1998
7-DAY CURRENT YIELD
2.95%
7-DAY EFFECTIVE YIELD
2.99%
7-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 4.10%
31.0% TAX BRACKET 4.28%
36.0% TAX BRACKET 4.61%
39.6% TAX BRACKET 4.88%
Past performance does not guarantee future results.
Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.
Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund. The 7-day yield more closely reflects earnings of the fund than the total
return.
4 1-800-345-2021
Florida Municipal Money Market--Q&A
- --------------------------------------------------------------------------------
/photo of Bryan Karcher/
An interview with Bryan Karcher, a portfolio manager on the Florida
Municipal Money Market investment team.
HOW DID FLORIDA MUNICIPAL MONEY MARKET PERFORM DURING THE SIX MONTHS ENDED
NOVEMBER 30, 1998?
Florida Municipal Money Market continued to provide a higher level of
federal tax-exempt income than the average state-specific tax-free money market
fund. The fund's total return was 1.52%, compared with the 1.47% average return
of the 34 "Other States Tax-Exempt Money Market Funds" tracked by Lipper Inc.
(formerly Lipper Analytical Services). In addition, the fund's 12-month return
was 3.17%, compared with 3.06% for the Lipper average. (See the Total Returns
table on the previous page for other fund performance comparisons.)
WHY DID FLORIDA MUNICIPAL MONEY MARKET BEAT THE AVERAGE RETURN OF ITS LIPPER
PEER GROUP?
One reason is low management fees--just 50 basis points (0.50%--a basis
point equals 0.01%). Lower management expenses directly benefit shareholders
because we're delivering returns at a reduced cost. Other things being equal,
lower expenses mean higher returns and yields for our shareholders.
We also work hard to maximize the fund's yield. We do this by adding
securities at times of the year when yields are relatively high due to seasonal
supply and demand factors, and by structuring the maturity of the portfolio so
we avoid replacing maturing securities when yields are relatively low. In
addition, we closely monitor several different types of municipal money market
paper, including variable-rate demand notes (VRDNs), put bonds, and municipal
notes of different maturities. We typically buy what offers the most attractive
yield as a result of supply and demand factors.
RELATIVE PERFORMANCE WAS STRONG, BUT FLORIDA MUNICIPAL MONEY MARKET'S YIELD
DECLINED. WHY?
The current yield declined from 3.26% on May 31 to 2.95% on November 30 due
primarily to an overall decline in interest rates. Interest rates tend to fall
when the economy weakens--lower interest rates help stimulate growth. When it
appeared the U.S. economy was heading for recession as a result of economic and
financial turmoil overseas, the Federal Reserve (the Fed), the U.S. central
bank, cut short-term interest rates three times between late September and
mid-November. The yields on money market securities declined in anticipation of
the Fed's actions.
HOW DID THE FED'S ACTIONS INFLUENCE YOUR MANAGEMENT OF THE FUND?
The Fed's rate cuts caused us to extend Florida Municipal Money Market's
weighted average maturity (WAM) in September. When the Fed starts cutting rates
and more cuts are anticipated, we want to lock in the highest possible yields
for the longest period of time. To accomplish this, we
[right margin]
"FLORIDA MUNICIPAL MONEY MARKET CONTINUED TO PROVIDE A HIGHER LEVEL OF
TAX-EXEMPT INCOME THAN THE AVERAGE STATE-SPECIFIC TAX-FREE MONEY MARKET FUND."
[pie charts - data below]
PORTFOLIO COMPOSITION BY SECURITY TYPE
AS OF NOVEMBER 30, 1998
VRDNs 81%
Put Bonds 9%
Bonds
less than 1 Year 7%
Commercial Paper 3%
AS OF MAY 31, 1998
VRDNs 70%
Other 3%
Bonds
less than 1 Year 24%
Commercial Paper 3%
Security types are defined on page 17.
www.americancentury.com 5
Florida Municipal Money Market--Q&A
- --------------------------------------------------------------------------------
(Continued)
typically buy longer-term securities. Fortunately, longer-term muni money market
securities were priced attractively in September, due in part to corporate tax
payments on September 15, which increased supply and reduced demand.
We determine the relative value of one-year munis by looking at their
yields in relation to Treasury yields. During September, one-year muni yields as
a percentage of one-year Treasury yields climbed from about 67% to 75%. We
consider anything above 70% attractive. With one-year muni yields at such a
relatively high level, we bought one-year munis and extended the fund's WAM in
October.
FLORIDA MUNICIPAL MONEY MARKET'S WAM FELL FROM 54 DAYS ON MAY 31 TO 33 DAYS ON
NOVEMBER 30 EVEN THOUGH YOU EXTENDED THE WAM DURING SEPTEMBER. WHY?
Focusing on the WAM's decline during that period is a little misleading. We
often increase our holdings of longer-term securities in April and May, which
significantly boosts the WAM on May 31. Late spring is when one-year munis are
competitively priced--shareholders are withdrawing money from muni money market
funds to pay their income taxes, which reduces demand (and prices) and boosts
supply (and yields).
After tax season, we didn't make significant additional long-term purchases
until early fall. If we don't purchase notes for a while, the portfolio's notes
steadily decline in maturity ("roll down"), and the WAM declines.
WHAT STEPS HAVE YOU TAKEN TO KEEP FLORIDA MUNICIPAL MONEY MARKET'S CREDIT
QUALITY HIGH?
We continue to be very conservative, more so than the SEC requires in terms
of the credit quality of the fund's holdings. We are very careful to purchase
securities that are backed by strong financial institutions. As a result, we
haven't owned Japanese bank-backed paper since February 1998. Furthermore, our
credit analysis team is now carefully evaluating European banks, many of which
may not be prepared for the year 2000 computer problem.
WHAT IS YOUR OUTLOOK FOR SHORT-TERM INTEREST RATES AND FUND STRATEGY?
The U.S. economy remains vulnerable to financial events overseas, but it
also was bolstered by the Fed's interest rate cuts. Consumer confidence and
spending remain strong, but they're being offset by weakness in the corporate
and manufacturing sectors. The Fed may need time to evaluate these mixed signals
and the results of its rate cuts in 1998. Therefore, we expect the Fed to take a
"wait-and-see" approach to interest rate policy, with no additional interest
rate cuts for a while. This argues for greater interest rate stability in early
1999, barring any cataclysmic events.
We'll continue to emphasize conservative credit standards. In addition,
we'll attempt to maintain a competitive yield by monitoring supply and demand in
the marketplace and the yield relationships between VRDNs, six-month munis,
one-year munis, and comparable-maturity Treasurys.
[left margin]
"WE ARE VERY CAREFUL TO PURCHASE SECURITIES THAT ARE BACKED BY STRONG FINANCIAL
INSTITUTIONS."
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
SP1+ 88% 90%
SP1 12% 10%
SP1+ and SP1 are Standard & Poor's highest credit ratings for short-term
municipal securities. See Credit Rating Guidelines on page 16 for more
information.
6 1-800-345-2021
Florida Muni. Money Market--Sch. of Investments
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES
$ 500,000 Broward County Housing Finance
Auth. Multifamily Housing Rev.,
Series 1990 A,
(Palm Aire-Oxford), VRDN,
3.25%, 12/2/98 (Guaranteed:
Continental Casualty Co.) $ 500,000
2,270,000 Broward County Industrial
Development Rev., (Fast Real
Estate Partners), VRDN, 3.30%,
12/2/98 (LOC: Suntrust Bank
South Florida, N.A.) 2,270,000
2,500,000 Broward County Industrial
Development Rev., (HEICO
Aerospace Corp.), VRDN,
3.30%, 12/2/98 (LOC:
Suntrust Bank South Florida,
N.A.) 2,500,000
2,230,000 Broward County Industrial
Development Rev., (MDR
Fitness Corp.), VRDN, 3.30%,
12/2/98 (LOC: Suntrust Bank,
Miami, N.A.) 2,230,000
1,800,000 Broward County Industrial
Development Rev., (W.R. Bonsal
Co.), VRDN, 3.35%, 12/3/98
(LOC: NationsBank, N.A.)
(Acquired 3/18/98, Cost
$1,800,000)(1) 1,800,000
3,460,000 Coral Springs Industrial
Development Rev., (Royal
Plastics Group), VRDN, 3.30%,
12/2/98 (LOC: Suntrust Bank
South Florida, N.A.) 3,460,000
2,500,000 Dade County Aviation Rev., Series
1997 A, (Miami International
Airport), 4.60%, 10/1/99
(FSA) 2,529,886
1,000,000 Dade County Industrial
Development Auth. Rev., Series
1989 B, (Stephen M. Green),
VRDN, 3.25%, 12/2/98 (LOC:
Suntrust Bank, Miami, N.A.) 1,000,000
4,000,000 Dade County Special Obligation
Trust Receipts, Series 1998 C-2,
VRDN, 3.65%, 12/2/98 (LOC:
Bank of America N.T. & S.A.)
(Acquired 11/24/98, Cost
$4,000,000)(1) 4,000,000
7,320,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., VRDN, 3.35%,
12/3/98 (Liquidity: Merrill
Lynch & Co., Inc.) (Acquired
4/9/98-5/20/98, Cost
$7,320,000)(1) 7,320,000
Principal Amount Value
- --------------------------------------------------------------------------------
$1,710,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., VRDN, 3.35%,
12/3/98 (SBBPA: Merrill
Lynch & Co., Inc.) (Acquired
12/3/96, Cost $1,710,000)(1) $ 1,710,000
4,000,000 Florida Housing Finance Agency
Rev., Series 1990 B,
(Beville-Oxford), VRDN, 3.25%,
12/2/98 (SBBPA: Continental
Casualty Co.) 4,000,000
3,300,000 Florida Housing Finance Agency
Rev., (Country
Club), VRDN, 3.20%, 12/1/98 (LOC:
Northern Trust Company) 3,300,000
4,650,000 Florida Housing Finance Agency
Rev., Series 1989 J, (Ashley
Lake II), VRDN, 3.25%,
12/2/98 (LOC: Morgan
Guaranty Trust Co. of New York) 4,650,000
4,500,000 Florida Housing Finance Agency
Rev., Series 1996 F, (Caribbean
Key), VRDN, 3.25%, 12/2/98
(LOC: KeyBank, N.A.) 4,500,000
2,000,000 Florida Housing Finance Agency
Rev., Series 1996 P, (Tiffany
Club), VRDN, 3.25%, 12/2/98
(LOC: NationsBank, N.A.) 2,000,000
2,500,000 Florida Housing Finance Agency
Rev., Series 1996 U, (Heron
Park), VRDN, 3.25%, 12/2/98
(LOC: NationsBank, N.A.) 2,500,000
4,345,000 Florida Housing Finance Agency
Trust Receipts, VRDN, 3.55%,
12/2/98 (MBIA) (SBBPA:
Bank of New York) (Acquired
2/12/98, Cost $4,345,000)(1) 4,345,000
4,000,000 Florida Housing Finance Corp.
Rev., Series 1998 E,
(Club at Vero Apartments),
VRDN, 3.25%, 12/2/98 (LOC:
NationsBank, N.A.) 4,000,000
3,000,000 Florida Housing Finance Corp.
Rev., Series 1998-6,
(Homeowner Mortgage),
3.80%, 6/15/99 (GIC: FGIC
Capital Markets) 3,000,000
500,000 Florida State Division Board of
Finance Department General
Services Rev., Series 1991 A,
(Preservation 2000), 6.20%,
7/1/99 (AMBAC) 508,438
1,740,000 Florida State GO, (Department of
Transportation), 6.875%,
7/1/99 1,776,608
500,000 Florida State GO, Series 1997 B,
(Department of Transportation),
5.00%, 7/1/99 504,853
See Notes to Financial Statements
www.americancentury.com 7
Florida Municipal Money Market--Sch. of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$1,815,000 Gulf Breeze Rev., Series 1985 B,
(Local Government
Loan Program), VRDN, 3.10%,
12/3/98 (FGIC) (SBBPA:
Credit Locale de France) $ 1,815,000
2,000,000 Indian River County Hospital
District Rev., (Sunhealth
Network), Commercial Paper,
3.25%, 2/12/99 (LOC: KBC
Bank and Insurance Holding) 2,000,000
900,000 Indian River County Industrial
Development Rev., (Florida
Convention Centers), VRDN,
3.55%, 12/1/98 (LOC:
Toronto-Dominion Bank) 900,000
1,000,000 Lake County Sales Tax Rev.,
5.125%, 12/1/98 (FGIC) 999,999
1,000,000 Marion County Housing Finance
Auth. Multifamily Rev., Series
1985 F, (Paddock Place),
VRDN, 3.15%, 12/3/98 (LOC:
Suntrust Bank, Atlanta, GA) 1,000,000
780,000 Martin County Industrial
Development Auth. Rev.,
(Florida R.F. Labs Inc.), VRDN,
3.30%, 12/2/98 (LOC:
Suntrust Bank Central Florida,
N.A.) 780,000
300,000 Martin County Industrial
Development Auth. Rev., (Tampa
Farm Service Inc.), VRDN,
3.30%, 12/2/98 (LOC:
Suntrust Bank Central Florida,
N.A.) (Acquired 6/13/96,
Cost $300,000)(1) 300,000
1,000,000 Martin County Pollution Control
Rev., (Florida Power & Light
Co.), VRDN, 3.35%, 12/1/98 1,000,000
1,800,000 Miami-Dade County Industrial
Development Auth. Rev.,
(Dutton Press Inc.), VRDN,
3.30%, 12/2/98 (LOC:
Suntrust Bank, Miami, N.A.)
(Acquired 2/27/98, Cost
$1,800,000)(1) 1,800,000
200,000 Ocean Highway & Port Auth. Rev.,
VRDN, 3.15%, 12/2/98 (LOC:
ABN Amro Bank N.V.) 200,000
1,700,000 Ocean Highway & Port Auth. Rev.,
VRDN, 3.15%, 12/2/98 (LOC:
ABN Amro Bank N.V.) 1,700,000
Principal Amount Value
- --------------------------------------------------------------------------------
$1,000,000 Orange County Health Facilities
Auth. Rev., (Adventist Health
Systems/Sunbelt), VRDN,
3.15%, 12/3/98 (LOC:
Rabobank Nederland) $ 1,000,000
2,500,000 Orange County Health Facilities
Auth. Rev., (Presbyterian
Retirement), VRDN, 3.25%,
12/3/98 (LOC: NationsBank,
N.A.) (Acquired 11/19/98,
Cost $2,500,000)(1) 2,500,000
1,150,000 Orange County Housing Finance
Auth. Multifamily Guaranteed
Mortgage Rev., Series 1989 A,
(Sundown Association II), VRDN,
3.50%, 12/2/98 (LOC: Fleet
Bank, N.A.) 1,150,000
2,200,000 Pinellas County Industrial Council
Development Rev., (Better
Business Forms Inc.),
VRDN, 3.30%, 12/2/98 (LOC:
Suntrust Bank, Tampa Bay) 2,200,000
2,100,000 Pinellas County Industrial Council
Development Rev., (Hunter
Douglas Inc.), VRDN, 3.30%,
12/2/98 (LOC: ABN Amro
Bank N.V.) (Acquired 3/17/97,
Cost $2,100,000)(1) 2,100,000
3,300,000 Pinnellas County Housing Finance
Auth. Single Family Rev., Series
1998, 3.70%, 2/1/99 3,300,000
1,910,000 Putnam County Development Auth.
Pollution Control Rev., (Seminole
Electric), 3.30%, 3/15/99
(SBBPA: National Rural Utilities
Cooperative Finance Corp.) 1,910,000
1,100,000 Volusia County Housing Finance
Auth. Multifamily Rev., Series
1985 H, (Sun Pointe
Apartments), VRDN, 3.10%,
12/1/98 (LOC: KeyBank, N.A.) 1,100,000
1,670,000 Volusia County Industrial
Development Auth. Rev.,
(Daytona Plastix Inc.), VRDN,
3.30%, 12/2/98 (LOC:
Suntrust Bank Central Florida,
N.A.) (Acquired 7/17/96-
12/19/97, Cost $1,670,000)(1) 1,670,000
-------------
TOTAL INVESTMENT SECURITIES--100.0% $93,829,784
=============
See Notes to Financial Statements
8 1-800-345-2021
Florida Muni. Money Market--Sch. of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
FGIC = Financial Guaranty Insurance Co.
FSA = Financial Security Assurance Inc.
GIC = Guaranteed Investment Contract
GO = General Obligation
LOC = Letter of Credit
MBIA = MBIA Insurance Corp.
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, 1998.
(1) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement, and unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at November 30, 1998 was
$27,545,000, which represented 29.2% of net assets. None of these
securities are considered to be illiquid.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the principal amount of each investment
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
www.americancentury.com 9
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
ASSETS
Investment securities, at value
(amortized cost and cost for
federal income tax purposes)
(Note 1) ................................................ $93,829,784
Cash ...................................................... 1,886,221
Interest receivable ....................................... 511,342
-----------
96,227,347
-----------
LIABILITIES
Disbursements in excess of
demand deposit cash ..................................... 7,873
Payable for investments purchased ......................... 1,815,000
Payable for capital shares redeemed ....................... 11,677
Dividends payable ......................................... 1,491
Accrued management fees (Note 2) .......................... 38,157
Accrued trustees' fees and expenses ....................... 354
-----------
1,874,552
-----------
Net Assets ................................................ $94,352,795
===========
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) ................................... 94,352,795
===========
Net Asset Value Per Share ................................. $ 1.00
===========
NET ASSETS CONSIST OF:
Capital paid in ........................................... $94,352,795
===========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. The net assets divided by the total number
of shares outstanding gives you the price of an individual share, or the net
asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); and
net gains earned on investment activity but not yet paid to shareholders or net
losses on investment activity (known as realized gains or losses), if any. This
breakdown tells you the value of net assets that are performance-related, such
as investment gains or losses, and the value of net assets that are not related
to performance, such as shareholder investments and redemptions.
See Notes to Financial Statements
10 1-800-345-2021
Statement of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ................................................ $1,757,915
----------
Expenses (Note 2):
Management fees ......................................... 246,778
Trustees' fees and expenses ............................. 2,740
----------
249,518
----------
Net investment income ................................... $1,508,397
==========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF OPERATIONS--This statement breaks down how the
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* interest income earned from investments
* management fees and other expenses
See Notes to Financial Statements
www.americancentury.com 11
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED) AND YEAR ENDED MAY 31, 1998
NOVEMBER 30, MAY 31,
Decrease in Net Assets 1998 1998
OPERATIONS
Net investment income .................. $ 1,508,397 $ 3,755,691
------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income ............. (1,508,397) (3,755,691)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .............. 30,076,631 282,351,887
Proceeds from reinvestment
of distributions ..................... 1,289,231 3,240,863
Payments for shares redeemed ........... (46,697,388) (288,037,630)
------------- -------------
Net decrease in net assets from
capital share transactions ........... (15,331,526) (2,444,880)
------------- -------------
Net decrease in net assets ............. (15,331,526) (2,444,880)
NET ASSETS
Beginning of period .................... 109,684,321 112,129,201
------------- -------------
End of period .......................... $ 94,352,795 $ 109,684,321
============= =============
TRANSACTIONS IN
SHARES OF THE FUND
Sold ................................... 30,076,631 282,351,887
Issued in reinvestment
of distributions ..................... 1,289,231 3,240,863
Redeemed ............................... (46,697,388) (288,037,630)
------------- -------------
Net decrease ........................... (15,331,526) (2,444,880)
============= =============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* capital share transactions--shareholders' purchases, reinvestments, and
redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions results in net
assets at the end of the period.
See Notes to Financial Statements
12 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (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 (the
Fund) is one of the eight Funds issued by the Trust. The Fund is non-diversified
under the 1940 Act. Its 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 by investing
primarily in short-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 Florida than a fund with a broader geographical
diversification. The following significant accounting policies are in accordance
with generally accepted accounting principles.
SECURITY VALUATIONS--Portfolio securities held by the Fund 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 as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
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 income 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.
ADDITIONAL INFORMATION--Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.
www.americancentury.com 13
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The Trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM) that provides each Fund with investment
advisory and management services in exchange for a single, unified management
fee. Expenses excluded from the agreement are brokerage, taxes, portfolio
insurance, interest, fees and expenses of those 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 net 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 Money Market
Fund Category. Second, a separate fee rate schedule is applied to the net 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 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
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, and the
Trust's transfer agent, American Century Services Corporation.
14 1-800-345-2021
Florida Muni. Money Mkt.--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1998(1) 1998 1997 1996 1995 1994(2)
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 0.04 0.04 --
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income . (0.02) (0.03) (0.03) (0.04) (0.04) --
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =========== ===========
Total Return(3) ............ 1.52% 3.31% 3.55% 3.86% 3.71% 0.40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...... 0.50%(4) 0.51% 0.12% 0.01% -- --
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) .... 0.50%(4) 0.53% 0.66% 0.71% 0.88% 1.58%(4)
Ratio of Net Investment
Income to Average Net Assets 3.02%(4) 3.25% 3.48% 3.75% 3.93% 2.99%(4)
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) .... 3.02%(4) 3.23% 2.94% 3.05% 3.05% 1.41%(4)
Net Assets, End of Period
(in thousands) ............... $ 94,353 $ 109,684 $ 112,129 $ 99,993 $ 45,147 $ 5,565
</TABLE>
(1) Six months ended November 30, 1998 (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.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--This statement itemizes current period
activity and statistics and provides comparison data for the last five fiscal
years.
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming
reinvestment of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
See Notes to Financial Statements
www.americancentury.com 15
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND 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 benchmark 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
FLORIDA MUNICIPAL MONEY MARKET seeks interest income exempt from state and
federal income taxes, as well as the Florida intangibles tax, by investing
primarily in high-quality, short-term Florida municipal securities.
Investments in Florida Municipal Money Market are neither insured nor
guaranteed by the FDIC or any other government agency. Yields will fluctuate,
and although the fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the fund.
LIPPER RANKINGS
LIPPER 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 category for the Florida Municipal Money Market fund is:
OTHER STATES TAX-EXEMPT MONEY MARKET FUNDS--funds that invest in
high-quality municipal obligations with dollar-weighted average maturities of
less than 90 days.
CREDIT RATING GUIDELINES
Credit quality (the issuer's financial strength and the likelihood of
timely payment of interest and principal) is a key factor in fixed-income
investment analysis. Credit ratings issued by independent rating and research
companies such as Standard & Poor's help quantify credit quality--the stronger
the issuer, the higher the credit rating. In turn, credit quality and ratings
greatly influence the prices and yields of fixed-income securities--high ratings
mean higher prices and less current income (yield) as compensation for risk.
But credit ratings are subjective. They reflect the opinions of the rating
agencies that issue them and are not absolute standards of quality. Furthermore,
high credit ratings do not guarantee good investment performance. They do not
reflect the price stability of a municipal security when economic or market
conditions change.
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGER
BRYAN KARCHER
MUNICIPAL CREDIT RESEARCH TEAM
MANAGER
STEVEN PERMUT
MUNICIPAL CREDIT ANALYSTS
DAVID MOORE
ROBERT MILLER
BILL MCCLINTOCK
TIM BENHAM
BRAD BODE
16 1-800-345-2021
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
* 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 equal one percentage point (or 1%).
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.
* PUT BONDS--long-term securities that can be "put back" (i.e., sold at face
value) to a specified buyer at a prearranged date.
* VARIABLE-RATE DEMAND NOTES (VRDNS)--securities that track market interest
rates and stabilize their market values using periodic (daily or weekly)
interest rate adjustments.
www.americancentury.com 17
Notes
- --------------------------------------------------------------------------------
18 1-800-345-2021
Notes
- --------------------------------------------------------------------------------
www.americancentury.com 19
Notes
- --------------------------------------------------------------------------------
20 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
- -------------------------------------------------------------------------------
BENHAM GROUP(reg.sm)
TAXABLE BOND FUNDS
U.S. TREASURY & GOVERNMENT
Short-Term Treasury
Short-Term Government
GNMA
Intermediate-Term Treasury
Long-Term Treasury
Inflation-Adjusted Treasury
Target Maturities Trust: 2000
Target Maturities Trust: 2005
Target Maturities Trust: 2010
Target Maturities Trust: 2015
Target Maturities Trust: 2020
Target Maturities Trust: 2025
CORPORATE & DIVERSIFIED
Limited-Term Bond
Intermediate-Term Bond
Bond
Premium Bond
High-Yield Bond
INTERNATIONAL
International Bond
TAX-FREE & MUNICIPAL BOND FUNDS
MULTIPLE-STATE
Limited-Term Tax-Free
Intermediate-Term Tax-Free
Long-Term Tax-Free
High-Yield Municipal
SINGLE-STATE
Arizona Intermediate-Term Municipal
California High-Yield Municipal
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
Florida Intermediate-Term Municipal
MONEY MARKET FUNDS
TAXABLE
Capital Preservation
Government Agency Money Market
Premium Capital Reserve
Premium Government Reserve
Prime Money Market
TAX-FREE & MUNICIPAL
California Municipal Money Market
California Tax-Free Money Market
Florida Municipal Money Market
Tax-Free Money Market
AMERICAN CENTURY(reg.sm) GROUP
ASSET ALLOCATION
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
BALANCED
Balanced
CONSERVATIVE EQUITY
Income and Growth
Equity Income
Value
Equity Growth
SPECIALTY
Utilities
Real Estate
Global Natural Resources
Global Gold
SMALL CAP
Small Cap Quantitative
Small Cap Value
TWENTIETH CENTURY GROUP
GROWTH
Select
Heritage Growth
Ultra
AGGRESSIVE GROWTH
Vista
Giftrust
New Opportunities
INTERNATIONAL GROWTH
International Growth
International Discovery
Emerging Markets
GLOBAL
Global Growth
Please call for a prospectus or profile on any American Century fund. These
documents contain important information including charges and expenses, and you
should read them carefully before you invest or send money.
[right margin]
[american century logo(reg.sm)]
American
Century
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.
FUNDS DISTRIBUTOR, INC.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION
[recycled logo]
Recycled
[back cover]
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9901 Funds Distributor, Inc.
SH-BKT-15063 (c)1998 American Century Services Corporation
<PAGE>
[front cover] NOVEMBER 30, 1998
SEMIANNUAL REPORT
- ----------------
AMERICAN CENTURY
[graphic of stairs]
BENHAM GROUP
- ------------------------------------
FLORIDA INTERMEDIATE-TERM MUNICIPAL
[american century logo(reg.sm)]
American
Century
[inside front cover]
AMERICAN CENTURY BROKERAGE
- --------------------------------------------------------------------------------
We're pleased to introduce American Century's new brokerage service, which
offers a wide range of investment options and features:
* FundChoice Service--Invest in over 8,000 no-load and load mutual funds
from hundreds of different fund companies, many with no transaction fees
* Buy individual stocks and bonds
* 24-hour Internet and automated phone trades are just $24.95 for up to
1,000 shares of stock, and 2 cents per share thereafter
* Strong research capability
* Build and track model portfolios
* Get news, quotes and charts
* Check free Standard & Poor's stock reports
* Access Wall Street on Demand(tm), a research service with more than
500,000 reports on industry trends, corporate earnings, and mutual
fund analysis
* Track your brokerage account on one easy-to-read statement
* Unlimited check writing and a Gold MasterCard(reg.tm) ATM/debit card
with an American Century Brokerage Access AccountSM (minimum $10,000)
To talk with a Brokerage Associate, call 1-888-345-2071.
WHAT'S NEW . . .
AMERICAN CENTURY CATALOG OF TOOLS & SERVICES lists all the free educational
materials available to investors.
We now have FOUR-PAGE PROFILES of many of our funds. The profiles follow a
standard SEC format and are intended to allow investors to compare funds easily.
You can request a profile or the full prospectus. Full prospectuses contain more
detailed fund information and you will continue to receive one after investing.
In 1999, we will provide SIMPLIFIED PROSPECTUSES that highlight important
information about our funds, including fees and expenses. More detailed data
will be in the Statement of Additional Information.
To order any of these materials, please call 1-800-345-2021.
[left margin]
BENHAM GROUP
FLORIDA INTERMEDIATE-TERM MUNICIPAL
(ACBFX)
- ----------------------------------
Our Message to You
- --------------------------------------------------------------------------------
/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended November 30, 1998, were eventful ones for global
financial markets. Weakening economic and financial conditions, brought on by
problems in Asia, Russia, and Latin America, led to significant stock market
volatility and a dramatic decline in interest rates. Volatility was so rampant
that the U.S. central bank, the Federal Reserve, cut short-term interest rates
three times to help stabilize markets worldwide.
The third quarter of 1998 served as a good example of the markets'
extremes. Several major U.S. stock indices hit record highs in mid-July before
plunging 20% in the following six weeks. In the bond market, high demand for the
safety of Treasury bonds pushed yields down to their lowest levels ever, but
demand for corporate bonds thinned to the point where trading was all but
impossible.
This type of investment environment illustrates the importance of a
well-diversified investment portfolio. As we saw in the third quarter of 1998,
allocating your assets among stocks, bonds, and money market funds can help your
portfolio weather dramatic changes in the economic or investment climate.
Municipal bond performance fit between the extremes provided by Treasurys
and corporates. Munis posted positive returns as interest rates fell, but their
performance was not as strong as that of Treasurys. Florida Intermediate-Term
Municipal continued to outperform its peer group and its benchmark while
providing more federal tax-free income than the average municipal debt fund. We
achieved these returns while maintaining our high credit standards. Our credit
research team closely monitored the health of the Florida economy and the
issuers of Florida municipal debt, helping fund managers maintain Florida
Intermediate-Term Municipal's credit strength and integrity.
Another situation we've been watching closely is preparation of the world's
computer systems for the year 2000. At American Century, we're devoting
substantial resources to this endeavor. Throughout 1999, our technology team
will be extensively testing our systems, including those involved with fund
performance and dividend payments.
Thank you for your continued investment with American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer
[right margin]
Table of Contents
Report Highlights .............. 2
Market Perspective ............. 3
Florida Intermediate-Term Municipal
Performance Information ........ 4
Management Q&A ................. 5
Yields ......................... 5
Portfolio at a Glance .......... 5
Top Five Sectors ............... 6
Portfolio Composition
by Credit Rating ............... 7
Schedule of Investments ........ 8
Financial Statements
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
Other Information
Background Information
Investment Philosophy
and Policies ................ 17
Comparative Indices ......... 17
Lipper Rankings ............. 17
Credit Rating
Guidelines .................. 17
Investment Team
Leaders ..................... 17
Glossary ....................... 18
www.americancentury.com 1
Report Highlights
- --------------------------------------------------------------------------------
MARKET PERSPECTIVE
* A sharp decline in interest rates helped municipal bonds post solid returns
for the six months ended November 30, 1998.
* Rates fell because a series of economic crises around the globe threatened
to slow the U.S. economy, and because inflation remained low.
* In an attempt to boost the economy and restore confidence to global
financial markets, the Federal Reserve lowered short-term interest rates
three times between September and November.
* Despite their gains, municipal bonds lagged Treasury securities. That's
because the bond market rally was driven by demand from international
investors, who don't benefit from municipals' tax advantages.
* Meanwhile, municipal bond supply surged as many issuers sought to lock in
lower borrowing costs by refinancing older, higher rate bonds.
MANAGEMENT Q&A
* Florida Intermediate-Term Municipal outperformed its benchmark and its peers
for the six-month period, while providing investors with significantly more
federal tax-free income. (See Total Returns on page 4.)
* In addition, Lipper Inc. ranked Florida Intermediate-Term Municipal first
among 15 "Florida Intermediate Municipal Debt Funds" for the twelve months
ended November 30.
* Under the guidance of our experienced research team, we enhanced returns by
adding undervalued securities to the portfolio.
* Effective duration management--controlling the fund's price sensitivity to
changes in interest rates--was another important contributor to Florida
Intermediate-Term Municipal's solid performance. We kept duration around 5.6
years.
* We think the next six months will be fairly upbeat for Florida municipal
investors.
* Part of this optimism is driven by how attractive municipal yields were
relative to comparable-maturity Treasury yields.
* Going forward, we plan to maintain a slightly long duration compared with
the average Florida intermediate municipal fund; however, we will reassess
that position if the economic outlook changes.
[left margin]
"LIPPER INC. RANKED FLORIDA INTERMEDIATE-TERM MUNICIPAL FIRST AMONG 15 'FLORIDA
INTERMEDIATE MUNICIPAL DEBT FUNDS' FOR THE TWELVE MONTHS ENDED NOVEMBER 30."
FLORIDA INTERMEDIATE-TERM
MUNICIPAL
(ACBFX)
TOTAL RETURNS: AS OF 11/30/98
6 Months 3.95%*
1 Year 7.39%
NET ASSETS: $34.5 million
30-DAY SEC YIELD: 3.71%
INCEPTION DATE: 4/11/94
* Not annualized.
See Total Returns on page 4.
Investment terms are defined in the Glossary on page 18.
2 1-800-345-2021
Market Perspective from Randall W. Merk
- --------------------------------------------------------------------------------
/photo of Randall W. Merk/
Randall W. Merk, director of fixed-income investing at American Century
MODERATE MUNICIPAL RETURNS
Municipal securities posted gains during the six months ended November 30,
1998. Municipal bond prices rose as interest rates declined; however, too much
supply and too little demand limited returns. Long-term municipal bonds, which
are most sensitive to changes in interest rates, performed best. For the six
months, the Lehman Brothers Long-Term Municipal Bond Index returned 4.10%.
Intermediate-term securities, as represented by the Lehman Brothers 5-Year
General Obligation Index, returned 3.43%, while the short-term Merrill Lynch 0-
to 3-Year Municipal Index posted a 2.77% return.
RATES FELL
Declines in interest rates were sparked by a series of global economic
crises that threatened to slow the U.S. economy. In addition, an abundance of
inexpensive imported products and falling commodity prices helped keep inflation
low. The government's consumer price index rose just 1.5% for the 12 months
ended November 30, 1998. That's the slowest pace in a dozen years.
In an attempt to boost the economy and restore confidence in financial
markets, the U.S. Federal Reserve cut short-term interest rates three times
between September and November, its first rate reductions since January 1996.
MUNICIPALS LAGGED TREASURYS
Plummeting stock markets, currency devaluations, and debt defaults caused
investors around the world to demand the safety and liquidity of U.S Treasury
bonds. That surge in demand led to record low bond yields and huge gains by
Treasury securities. Because international investors don't benefit from the tax
advantages of municipal bonds, demand for municipals lagged.
Furthermore, the supply of municipals surged. Motivated by declining
interest rates, municipal issuers sought to lock in lower borrowing costs by
issuing new debt and/or refinancing older debt. For the six months ended
November 30, 1998, new issue volume was up about a third compared with the same
six-month period a year earlier. These supply and demand factors caused
municipal bonds to underperform Treasury securities for the six months.
STEEPER YIELD CURVE
Reflecting the Fed's interest rate cuts, short-term interest rates dropped
dramatically. For the six months, the yield on one-year municipal securities
fell roughly 62 basis points (0.62%--a basis point equals 0.01%), while the
yield on 30-year municipal bonds fell only about 15 basis points. This resulted
in the steeper yield curve shown in the accompanying graph. The yield difference
between a one-year note and a 30-year bond rose to 176 basis points on November
30, 1998, compared with 128 basis points just six months earlier.
[right margin]
"MUNICIPAL BOND PRICES ROSE AS INTEREST RATES DECLINED; HOWEVER, TOO MUCH SUPPLY
AND TOO LITTLE DEMAND LIMITED RETURNS."
[line chart - data below]
STEEPENING MUNICIPAL YIELD CURVE
Years to Maturity 11/30/98 5/31/98
1 3.060% 3.690%
2 3.360% 3.850%
3 3.510% 3.950%
4 3.630% 4.040%
5 3.730% 4.090%
6 3.825% 4.160%
7 3.920% 4.230%
8 4.000% 4.300%
9 4.080% 4.370%
10 4.160% 4.440%
11 4.248% 4.514%
12 4.336% 4.588%
13 4.424% 4.662%
14 4.512% 4.736%
15 4.600% 4.810%
16 4.636% 4.836%
17 4.672% 4.862%
18 4.708% 4.888%
19 4.744% 4.914%
20 4.780% 4.940%
21 4.784% 4.942%
22 4.788% 4.944%
23 4.792% 4.946%
24 4.796% 4.948%
25 4.800% 4.950%
26 4.804% 4.954%
27 4.808% 4.958%
28 4.812% 4.962%
29 4.816% 4.966%
30 4.820% 4.970%
Source: Bloomberg Financial Markets
"FOR THE SIX MONTHS, THE YIELD ON ONE-YEAR MUNICIPAL SECURITIES FELL ROUGHLY 62
BASIS POINTS (0.62%--A BASIS POINT EQUALS 0.01%), WHILE THE YIELD ON 30-YEAR
MUNICIPAL BONDS FELL ONLY ABOUT 15 BASIS POINTS."
www.americancentury.com 3
Florida Intermediate-Term--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1998
<TABLE>
INCEPTION 4/11/94
FLORIDA
INTERM.-TERM LEHMAN 5-YEAR FLORIDA INTERM. MUNICIPAL DEBT FUNDS(2)
MUNICIPAL GO INDEX AVERAGE RETURN FUND'S RANKING
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 MONTHS(1) ......... 3.95% 3.43% 3.05% --
1 YEAR .............. 7.39% 6.32% 6.12% 1 OUT OF 15
- ----------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS(3) .......... 6.25% 5.68% 5.09% 1 OUT OF 11
LIFE OF FUND(3) ..... 6.97% 6.26%(4) 5.85%(4) 1 OUT OF 10(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Returns and rankings would have been lower if management fees had not been
waived.
(4) Since 4/30/94, the date nearest the fund's inception for which return data
are available.
See pages 17-18 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain chart - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 11/30/98
Florida Intermediate-Term Municipal $13,551
Lehman 5-Year GO Index $12,808
Florida
Intermediate- Lehman 5-Year
Term Municipal GO Index
DATE VALUE VALUE
4/30/94* $10,000 $10,000
6/30/94 $10,054 $9,996
9/30/94 $10,173 $10,077
12/31/94 $10,031 $10,044
3/31/95 $10,539 $10,450
6/30/95 $10,811 $10,717
9/30/95 $11,068 $11,010
12/31/95 $11,396 $11,211
3/31/96 $11,338 $11,246
6/30/96 $11,361 $11,295
9/30/96 $11,561 $11,479
12/31/96 $11,812 $11,730
3/31/97 $11,830 $11,711
6/30/97 $12,205 $12,002
9/30/97 $12,514 $12,264
12/31/97 $12,784 $12,490
3/31/98 $12,918 $12,636
6/30/98 $13,094 $12,764
9/30/98 $13,315 $12,983
11/30/98 $13,551 $12,808
$10,000 investment made 4/30/94
The chart at left shows the growth of a $10,000 investment over the life of the
fund, while the chart below shows the fund's year-by-year performance. The
Lehman 5-Year GO Index is provided for comparison in each chart. Florida
Intermediate-Term Municipal's returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the returns of
the index do not. 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.
[bar chart - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED NOVEMBER 30)
Florida
Intermediate-Term Lehman 5-Year
Municipal GO Index
DATE RETURN RETURN
11/30/94* -1.24% -0.07%
11/30/95 14.39% 11.99%
11/30/96 4.61% 5.36
11/30/97 6.78% 5.38
11/30/98 7.39% 6.32
* From 4/30/94 (the date nearest the fund's inception for which index data are
available).
4 1-800-345-2021
Florida Intermediate-Term--Q&A
- --------------------------------------------------------------------------------
/photo of Ken Salinger/
An interview with Ken Salinger, a portfolio manager on the Florida
Intermediate-Term Municipal investment team.
HOW DID THE FUND PERFORM FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998?
Florida Intermediate-Term Municipal continued to provide noteworthy
returns. For the six-months ended November 30, 1998, the fund returned 3.95%,
solidly outperforming the 3.05% return of the 15 "Florida Intermediate Municipal
Funds" tracked by Lipper Inc. Florida Intermediate-Term Municipal's returns also
surpassed the 3.43% return of its benchmark, the Lehman 5-Year GO Index.
In addition, Florida Intermediate-Term Municipal's one-year, three-year,
and life-of-fund returns earned the fund a number-one ranking in its Lipper
category and also outpaced the fund's benchmark. (See Total Returns on page 4
for fund performance comparisons.)
The fund also recently received Morningstar's much-coveted five-star rating
for three-year and overall performance. Morningstar proprietary ratings reflect
risk-adjusted performance as of December 31, 1998. The overall rating, which may
change monthly, is calculated from the fund's three-, five-, and 10-year (when
available) average total returns in excess of 90-day Treasury bill returns with
appropriate fee adjustments and a risk factor that reflects fund performance
below 90-day Treasury bill returns.
The top ten percent of funds in an investment category receive five stars,
the next 22.5% receive four stars, the next 35% receive three stars, the next
22.5% receive two stars, and the bottom ten percent receive one star.
HOW DID FLORIDA INTERMEDIATE-TERM MUNICIPAL'S YIELD STACK UP?
The fund offered investors significantly more federal tax-free income than
its peers. The most common way of gauging a fund's income is by looking at its
30-day SEC yield. This yield represents net investment income earned over a
30-day period and is expressed as an annual percentage rate based on the fund's
share price at the end of the 30 days.
As of November 30, Florida Intermediate-Term Municipal's 30-day SEC yield
was 3.71%, compared with the 3.35% average yield of Florida intermediate
municipal funds.
WHAT FUELED THE FUND'S PERFORMANCE?
Effective duration management--controlling the portfolio's price
sensitivity to changes in interest rates--continued to be an important
contributor. We kept the portfolio's duration slightly longer than that of the
average Florida intermediate municipal fund throughout the six-month period.
(Remember, the longer the fund's duration, the more its share price rises when
rates fall; however, a longer duration also causes the fund's share price to
fall more when rates rise.) We chose this position because we strongly believed
that global pressures and benign inflation would lead to lower rates, which
proved to be the case.
[right margin]
"FLORIDA INTERMEDIATE-TERM MUNICIPAL CONTINUED TO PROVIDE NOTEWORTHY RETURNS."
YIELDS AS OF NOVEMBER 30, 1998
30-DAY SEC YIELD
3.71%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 5.15%
31.0% TAX BRACKET 5.38%
36.0% TAX BRACKET 5.80%
39.6% TAX BRACKET 6.14%
PORTFOLIO AT A GLANCE
11/30/98 5/31/98
NUMBER OF SECURITIES 52 45
WEIGHTED AVERAGE
MATURITY 8.9 YRS 8.5 YRS
AVERAGE DURATION 5.6 YRS 5.6 YRS
EXPENSE RATIO 0.51%* 0.54%
* Annualized.
Investment terms are defined in the Glossary on page 18.
www.americancentury.com 5
Florida Intermediate-Term--Q&A
- --------------------------------------------------------------------------------
(Continued)
But we certainly can't predict the short-term direction of interest rates.
Therefore, even when we feel strongly about the direction in which rates are
headed, we manage Florida Intermediate-Term Municipal's duration conservatively.
This prevents returns from fluctuating wildly from period to period.
Generally speaking, we keep duration in a narrow band around the average
duration of other Florida intermediate municipal funds. For example, we kept
duration around 5.6 years for most of the six-month period, only slightly longer
than the average duration of the fund's peers.
IF NOT THROUGH AGGRESSIVE DURATION MANAGEMENT, THEN HOW DO YOU ENHANCE RETURNS?
Simply put, we stay on top of the market and search diligently for good
values. Finding securities that we believe are undervalued is a top priority.
Adding undervalued securities to the portfolio can significantly enhance returns
while often adding little or no risk. That was primarily how we enhanced returns
during the six-month period.
To take advantage of opportunities when we find them, we keep a portion of
the portfolio in very liquid municipals--ones we can sell quickly to generate
cash to buy new, undervalued securities. Typically, these sales generate very
small capital gains or losses for the fund, which helps prevent excess year-end
distributions.
HOW DO YOU FIND THESE UNDERVALUED SECURITIES?
Our experienced research team plays a pivotal role by helping us stay close
to Florida municipal credit trends. Florida is a complex, dynamic state, making
thorough research and analysis of its municipalities a vital ingredient to
Florida Intermediate-Term Municipal's success.
After we find what we believe is an attractively valued security, our
research team provides input on the credit quality of the issuer. If the credit
story passes our rigorous standards, we add the security to the portfolio. Our
credit team can also instigate the process--the team often uncovers such
securities while watching the market.
These undervalued securities can appreciate in value as a result of credit
upgrades. This process helps us stay in front of what we call the "upgrade
curve" (the chance for securities to appreciate in value as a result of a credit
upgrade).
CAN YOU CITE SOME SECURITIES YOU FOUND THROUGH THIS PROCESS?
In July, we added some municipal notes issued by Barry University, an
international university founded in 1940 and located in Miami Shores. These
municipals were rated BBB and attractively priced with relatively high yields.
However, because the securities were on the lower end of Florida
Intermediate-Term Municipal's rating limitations, our credit team was especially
careful in its research. Once the team
[left margin]
"ADDING UNDERVALUED SECURITIES TO THE PORTFOLIO CAN SIGNIFICANTLY ENHANCE
RETURNS WHILE OFTEN ADDING LITTLE OR NO RISK. . ."
TOP FIVE SECTORS (AS OF 11/30/98)
% OF FUND INVESTMENTS
TRANSPORTATION REVENUE 30%
SALES TAX REVENUE 10%
HOUSING REVENUE 9%
GO 8%
ELECTRIC REVENUE 7%
TOP FIVE SECTORS (AS OF 5/31/98)
% OF FUND INVESTMENTS
TRANSPORTATION REVENUE 28%
GO 14%
HOUSING REVENUE 14%
SPECIAL TAX REVENUE 13%
SALES TAX REVENUE 10%
6 1-800-345-2021
Florida Intermediate-Term--Q&A
- --------------------------------------------------------------------------------
(Continued)
decided it was very comfortable with the credit of the Barry University
securities, we added several bonds--which ranged in maturity from three to eight
years--to the portfolio.
This increased the portfolio's holdings of BBB securities to slightly over
3% of assets (see the table on page 7), which was comfortably balanced by the
roughly 7% position in AAA-rated holdings we added during the six months.
LOOKING AHEAD TO THE NEXT SIX MONTHS, WHAT'S IN STORE FOR THE MUNICIPAL MARKET?
We think the next six months will be fairly upbeat for Florida municipal
investors. On the inflation front, all is quiet--for the first 11 months of
1998, overall consumer prices crawled ahead at an annualized rate of 1.6%.
Global crises drove interest rates lower and led to short-term rate reductions
by the Federal Reserve (see page 3).
Another important factor working in favor of municipal investors is the
relative performance of municipal and Treasury securities. Global economic
turmoil, equity-market volatility, presidential impeachment proceedings, and
problems in the Persian Gulf caused demand for U.S. Treasury securities to far
outstrip demand for municipals during the past six months. This has driven
municipal yields to historically high ratios relative to comparable-maturity
Treasury yields.
For example, longer-term municipal yields were nearly 100% of Treasury
yields by the end of November. Historically speaking, that ratio has been closer
to 83%. The value disparity means that even investors in a relatively low tax
bracket will generally receive more after-tax income from municipal bonds right
now than from comparable-maturity Treasurys.
When demand for Treasurys eventually tapers off, we expect municipals to
outperform Treasurys as their yield relationship returns to more historically
normal ratios.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR FLORIDA INTERMEDIATE-TERM MUNICIPAL
For now, we plan to maintain a slightly long duration compared with the
average Florida intermediate municipal fund. If interest rates continue to fall,
or if demand for municipal securities rises, the portfolio's longer duration
should boost returns.
[right margin]
"ANOTHER IMPORTANT FACTOR WORKING IN FAVOR OF MUNICIPAL INVESTORS IS THE
RELATIVE PERFORMANCE OF MUNICIPAL AND TREASURY SECURITIES."
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
AAA 81% 71%
AA 13% 20%
A 3% 9%
BBB 3% --
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page 17
for more information.
www.americancentury.com 7
Florida Intermediate-Term--Sch. of Investments
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES--94.5%
FLORIDA--93.1%
$ 300,000 Boca Raton Water and Sewer
Rev., 6.40%, 10/1/02 $ 306,750
300,000 Broward County School District
GO, 6.75%, 2/15/00 308,022
500,000 Dade County Aviation Rev.,
Series 1995 E, 5.50%,
10/1/10 (AMBAC) 543,435
1,000,000 Dade County Aviation Rev.,
Series 1997 A, (Miami
International Airport), 5.50%,
10/1/02 (FSA) 1,059,180
500,000 Duval County School District GO,
6.25%, 8/1/05 (AMBAC) 540,760
500,000 East County Water Control District
Rev., 5.375%, 11/1/01
(Asset Guaranty) 523,310
270,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., 6.00%, 4/1/02
(GNMA/FNMA) 281,591
220,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
4.80%, 4/1/06 (GNMA/FNMA) 224,030
350,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
4.85%, 4/1/07 (GNMA/FNMA) 356,346
1,810,000 Florida Board of Education
Capital Outlay GO,
Series 1998 C, 4.50%, 6/1/22 (FSA) 1,701,183
1,000,000 Florida Department of Children &
Families COP, (South Florida
State Hospital), 4.30%, 7/1/08
(AMBAC)(1) 1,007,710
1,000,000 Florida Gas Utility Rev., (Gas
Project No. 1), 4.00%,
12/1/04 (FSA) 1,007,170
350,000 Florida Housing Finance Agency
Rev., 5.35%, 6/1/00 (GTEED) 352,275
450,000 Florida Housing Finance Agency
Rev., (Williamsburg Village
Apartments), 5.60%, 12/1/07
(AMBAC) 485,478
500,000 Florida Housing Finance Agency
Rev., (Windwood), 5.65%,
12/1/07 (AXA Insurance) 533,900
1,955,000 Florida Turnpike Auth. Rev.,
(Department of Transportation),
Series 1993 A, 5.00%,
7/1/13 (FGIC) 1,995,019
350,000 Gainesville Utilities System Rev.,
Series 1996 A, 5.75%,
10/1/09 396,001
Principal Amount Value
- --------------------------------------------------------------------------------
$1,000,000 Gulf Breeze Rev., Series 1997 B,
(Capital Funding), 4.50%,
10/1/27 (MBIA) $ 930,500
400,000 Hillsborough County Port District
Special Rev., 6.50%, 6/1/04
(FSA) 447,596
750,000 Indian Trace Community
Development District Water
Management Special Benefit
Assessment, 5.00%, 5/1/10
(MBIA) 789,525
400,000 Indian Trace Community
Development District Water
Special Benefit Assessment,
Series 1995 A, 5.25%,
5/1/03 (MBIA) 423,464
500,000 Jacksonville Electric Auth. Rev.,
Series 1995 6-C, (St. John's
River Power), 6.50%, 10/1/01 532,025
1,250,000 Jacksonville Excise Tax Rev.,
5.20%, 10/1/04 (FGIC) 1,300,088
865,000 Lee County Passenger Facility
Charge Rev., 4.50%, 10/1/05
(AMBAC) 886,703
1,000,000 Lee County Rev., Series 1997 A,
5.75%, 10/1/11 (MBIA) 1,129,680
650,000 Miami Parking Facilities Rev.,
5.25%, 10/1/15 (MBIA) 687,726
1,000,000 Miami-Dade County Aviation Rev.,
Series 1998 A, 5.00%,
10/1/06 (FGIC) 1,053,920
1,000,000 Miami-Dade County Aviation Rev.,
Series 1998 A, 5.25%,
10/1/07 (FGIC) 1,071,060
1,015,000 Northern Palm Beach County
Improvement District Special
Assessment, (Unit
Development 18), 4.90%,
8/1/13 (MBIA) 1,048,810
550,000 Orange County Health Facilities
Auth. Rev., Series 1996 A,
6.00%, 10/1/04 (MBIA) 606,568
1,000,000 Orlando and Orange County
Expressway Auth. Rev., 5.10%,
7/1/04 (FGIC) 1,054,840
450,000 Orlando and Orange County
Expressway Auth. Rev., 6.50%,
7/1/11 (FGIC) 539,838
500,000 Orlando Utility Commission Water
and Electric Rev., 5.70%,
10/1/04 548,320
1,500,000 Palm Beach County Criminal
Justice Facilities Rev., 5.375%,
6/1/07 (FGIC) 1,643,460
500,000 Pensacola Airport Rev.,
Series 1997 B, 5.40%,
10/1/07 (MBIA) 542,920
See Notes to Financial Statements
8 1-800-345-2021
Florida Intermediate-Term--Sch. of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 300,000 Pensacola Airport Rev.,
Series 1998 A, 6.00%,
10/1/01 (MBIA) $ 318,273
360,000 Pinellas County Educational
Facilities Auth. Rev., (Barry
University), 4.45%, 10/1/01 364,284
450,000 Pinellas County Educational
Facilities Auth. Rev., (Barry
University), 4.85%, 10/1/06 458,492
430,000 Pinnellas County Educational
Facilities Auth. Rev., (Barry
University), 4.75%, 10/1/05 437,254
300,000 Plantation Health Facilities Auth.
Rev., (Covenant Village of
Florida Inc.), 4.45%, 12/1/04 303,864
300,000 Plantation Health Facilities Auth.
Rev., (Covenant Village of
Florida Inc.), 4.55%, 12/1/05 304,584
300,000 Plantation Health Facilities Auth.
Rev., (Covenant Village of
Florida Inc.), 4.70%, 12/1/07 304,956
1,000,000 Polk County Housing Finance
Auth. Multi-Family Housing Rev.,
Series 1997 A, (Winter Oaks
Apartments), 5.25%, 7/1/07
(FNMA)(2) 1,052,960
200,000 Reedy Creek Improvement
District Utility Rev., Series
1991-1, 6.25%, 10/1/01,
Prerefunded at 101% of Par
(MBIA)(3) 216,132
400,000 St. Cloud Utility Rev., 6.40%,
8/1/06 (MBIA) 433,780
1,000,000 Tampa Rev., Series 1998 A1,
(Catholic Health), 5.25%,
11/15/05 (MBIA) 1,073,058
Principal Amount Value
- --------------------------------------------------------------------------------
$ 175,000 Tampa Palms Community
Development Special
Assessment Rev., 4.90%,
5/1/99 (MBIA) $ 176,339
1,000,000 Tampa Sports Auth. Rev., 4.50%,
1/1/99 (MBIA) 1,001,270
500,000 Volusia County School District GO,
6.20%, 8/1/03 (FGIC) 539,705
-------------
33,844,154
-------------
VIRGIN ISLANDS--1.4%
500,000 Virgin Islands Water & Power Auth.
Electric System Rev., 5.125%,
7/1/04 520,980
-------------
TOTAL MUNICIPAL SECURITIES 34,365,134
-------------
(Cost $33,320,378)
SHORT-TERM MUNICIPAL SECURITIES--5.5%
1,000,000 Dade County Industrial
Development Auth. Exempt
Facilities Rev., (Florida Power &
Light Co.), VRDN, 3.30%,
12/2/98 1,000,000
1,000,000 Florida Board of Education Capital
Outlay GO Trust Receipts, VRDN,
3.45%, 12/3/98 (SBBPA:
Societe Generale) (Acquired
11/6/98, Cost $1,000,000)(4) 1,000,000
-------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 2,000,000
-------------
(Cost $2,000,000)
TOTAL INVESTMENT SECURITIES--100.0% $36,365,134
=============
(Cost $35,320,378)
See Notes to Financial Statements
www.americancentury.com 9
Florida Intermediate-Term--Sch. of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
GNMA = Government National Mortgage Association
GO = General Obligation
GTEED = Connecticut General Life Guaranty Agreement
MBIA = MBIA Insurance Corp.
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, 1998.
(1) When-issued security.
(2) Security, or a portion thereof, has been segregated at the custodian bank
for when-issued securities.
(3) Escrowed to maturity in U.S. government or state and local government
securities.
(4) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement, and unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of these securities at November 30, 1998, was $1,000,000
which represented 2.9% of net assets.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the principal amount of each investment
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
10 1-800-345-2021
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $35,320,378)
(Note 3) ................................................ $36,365,134
Investment in affiliated money
market fund (Note 2) .................................... 310,629
Interest receivable ....................................... 445,496
-----------
37,121,259
-----------
LIABILITIES
Disbursements in excess
of demand deposit cash .................................. 1,491,559
Payable for investments purchased ......................... 1,051,688
Payable for capital shares redeemed ....................... 6,829
Dividends payable ......................................... 12,558
Accrued management fees
(Note 2) ................................................ 14,189
Payable for trustees' fees
and expenses ............................................ 128
-----------
2,576,951
-----------
Net Assets ................................................ $34,544,308
===========
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) ................................... 3,212,692
===========
Net Asset Value Per Share ................................. $ 10.75
===========
NET ASSETS CONSIST OF:
Capital paid in ........................................... $33,110,068
Accumulated undistributed net
realized gain on investments ............................ 389,484
Net unrealized appreciation
on investments (Note 3) ................................. 1,044,756
-----------
$34,544,308
===========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. The net assets divided by the total number
of fund shares outstanding gives you the price of an individual share, or the
net asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); net
gains earned on investment activity but not yet paid to shareholders or net
losses on investment activity (known as realized gains or losses); and gains or
losses on securities still owned by the fund (known as unrealized appreciation
or depreciation). This breakdown tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
See Notes to Financial Statements
www.americancentury.com 11
Statement of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ................................................... $ 747,321
----------
Expenses (Note 2):
Management fees ............................................ 79,758
Trustees' fees and expenses ................................ 2,153
----------
81,911
----------
Net investment income ...................................... 665,410
----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ........................... 257,208
Change in net unrealized appreciation
on investments ........................................... 297,965
----------
Net realized and unrealized
gain on investments ...................................... 555,173
----------
Net Increase in Net Assets
Resulting from Operations ................................ $1,220,583
==========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF OPERATIONS--This statement breaks down how the
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* interest income earned from investments
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)
See Notes to Financial Statements
12 1-800-345-2021
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED) AND YEAR ENDED MAY 31, 1998
Increase in Net Assets
NOVEMBER 30, MAY 31,
1998 1998
OPERATIONS
Net investment income .................... $ 665,410 $ 1,042,897
Net realized gain on investments ......... 257,208 397,759
Change in net unrealized
appreciation on investments ............ 297,965 439,483
------------ ------------
Net increase in net assets
resulting from operations .............. 1,220,583 1,880,139
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............... (665,410) (1,042,897)
From net realized gains on
investment transactions ................ -- (316,935)
------------ ------------
Decrease in net assets
from distributions ..................... (665,410) (1,359,832)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................ 8,149,497 28,435,575
Proceeds from reinvestment
of distributions ....................... 389,269 976,870
Payments for shares redeemed ............. (4,154,843) (16,840,155)
------------ ------------
Net increase in net assets
from capital share transactions ........ 4,383,923 12,572,290
------------ ------------
Net increase in net assets ............... 4,939,096 13,092,597
NET ASSETS
Beginning of period ...................... 29,605,212 16,512,615
------------ ------------
End of period ............................ $ 34,544,308 $ 29,605,212
============ ============
TRANSACTIONS IN
SHARES OF THE FUND
Sold ..................................... 761,666 2,709,826
Issued in reinvestment
of distributions ....................... 36,518 92,680
Redeemed ................................. (389,384) (1,596,282)
------------ ------------
Net increase ............................. 408,800 1,206,224
============ ============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* capital share transactions--shareholders' purchases, reinvestments, and
redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions results in net
assets at the end of the period.
See Notes to Financial Statements
www.americancentury.com 13
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (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 Intermediate-Term Municipal Fund (the
Fund) is one of the eight Funds issued by the Trust. The Fund is non-diversified
under the 1940 Act. Its 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 Fund
invests primarily in Florida 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 Florida than a fund with a broader geographical
diversification. The following significant accounting policies are in accordance
with generally accepted accounting principles.
SECURITY VALUATIONS--Portfolio securities held by the Fund are valued
through 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 as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
INCOME TAX STATUS--It is the Fund's policy to distribute all net investment
income and net realized 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 income taxes.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions from net investment income are
declared daily and distributed monthly. Distributions from net realized capital
gains are declared and paid annually.
On December 11, 1998, the Fund declared and paid a distribution of $0.1121
per share from net realized gains on investments to shareholders of record on
that date.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net capital gains and losses for financial statement
and tax purposes and may result in reclassification among certain capital
accounts.
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, 1998.
ADDITIONAL INFORMATION--Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.
14 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The Trust has entered into a Management Agreement with ACIM that provides
the Fund with investment advisory and management services in exchange for a
single, unified management fee. Expenses excluded from the agreement are
brokerage, taxes, portfolio insurance, interest, fees and expenses of those
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 net 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 net 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 average daily closing 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
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, and the
Trust's transfer agent, American Century Services Corporation.
As of November 30, 1998, the Fund had invested $310,629 in shares of
American Century - Benham Florida Municipal Money Market Fund (Money Market
Fund). The terms of the transaction were identical to those with non-related
entities except that, to avoid duplicative management fees, the Fund did not pay
ACIM management fees with respect to assets invested in the Money Market Fund.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of municipal debt obligations, excluding short-term
investments, totaled $30,242,753 and $26,037,068, respectively.
As of November 30, 1998, accumulated net unrealized appreciation for the
Fund was $1,044,756, which consisted of unrealized appreciation of $1,059,784
and unrealized depreciation of $15,028. The aggregate cost of investments for
federal income tax purposes was the same as the cost for financial reporting
purposes.
- --------------------------------------------------------------------------------
4. BANK LOANS
Effective December 18, 1998, the Fund, along with certain other funds
managed by ACIM, entered into an unsecured $570,000,000 bank line of credit
agreement with Chase Manhattan. Borrowings under the agreement bear interest at
the Federal Funds rate plus 0.40%.
www.americancentury.com 15
Florida Intermediate-Term--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1998(1) 1998 1997 1996 1995 1994(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .................$ 10.56 $ 10.34 $ 10.18 $ 10.30 $ 10.11 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income From Investment
Operations
Net Investment Income ............. 0.22 0.45 0.46 0.52 0.52 0.07
Net Realized and Unrealized
Gain (Loss)
on Investment Transactions ........ 0.19 0.38 0.20 (0.08) 0.19 0.11
---------- ---------- ---------- ---------- ---------- ----------
Total From Investment Operations .. 0.41 0.83 0.66 0.44 0.71 0.18
---------- ---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income ........ (0.22) (0.45) (0.46) (0.52) (0.52) (0.07)
From Net Realized Capital Gains ... -- (0.16) (0.04) (0.04) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ............... (0.22) (0.61) (0.50) (0.56) (0.52) (0.07)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ......$ 10.75 $ 10.56 $ 10.34 $ 10.18 $ 10.30 $ 10.11
========== ========== ========== ========== ========== ==========
Total Return(3) ................... 3.95% 8.20% 6.63% 4.34% 7.31% 1.79%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............. 0.51%(4) 0.54% 0.65% 0.13% -- --
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) ........... 0.51%(4) 0.58% 0.86% 0.88% 1.09% 1.92%(4)
Ratio of Net Investment Income
to Average Net Assets ............. 4.12%(4) 4.28% 4.42% 5.05% 5.23% 5.02%(4)
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) ........... 4.12%(4) 4.24% 4.21% 4.30% 4.14% 3.10%(4)
Portfolio Turnover Rate ............. 82% 154% 82% 66% 37% 6%
Net Assets, End of Period
(in thousands) ......................$ 34,544 $ 29,605 $ 16,513 $ 10,319 $ 9,532 $ 5,892
</TABLE>
(1) Six months ended November 30, 1998 (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.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--This statement itemizes current period
activity and statistics and provides comparison data for the last five fiscal
years.
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
16 1-800-345-2021
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND 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, the fund has its own investment policies:
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.
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.
Fund shares are intended to be exempt from the Florida intangibles tax.
COMPARATIVE INDICES
The following index is used in the report as a fund performance comparison.
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 INC. is an independent mutual fund ranking service. Rankings are
based on average annual returns for each fund in a given category for the
periods indicated. Rankings are not included for periods less than one year.
The funds in Lipper's FLORIDA INTERMEDIATE MUNICIPAL DEBT FUNDS category
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
CREDIT RATING GUIDELINES
Credit ratings are issued by independent research companies such as
Standard & Poor's and Moody's. Ratings are based on an issuer's financial
strength and ability to pay interest and principal in a timely manner.
It's important to note that credit ratings are subjective, reflecting the
opinions of the rating agencies; they are not absolute standards of quality.
Securities rated AAA, AA, A or BBB are considered "investment grade,"
meaning they're relatively safe from default.
[right margin]
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGERS
KEN SALINGER
DAVE MACEWEN
MUNICIPAL CREDIT RESEARCH DIRECTOR
STEVEN PERMUT
www.americancentury.com 17
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
* 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).
18 1-800-345-2021
Notes
- --------------------------------------------------------------------------------
www.americancentury.com 19
Notes
- --------------------------------------------------------------------------------
20 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
- -------------------------------------------------------------------------------
BENHAM GROUP(reg.sm)
TAXABLE BOND FUNDS
U.S. TREASURY & GOVERNMENT
Short-Term Treasury
Short-Term Government
GNMA
Intermediate-Term Treasury
Long-Term Treasury
Inflation-Adjusted Treasury
Target Maturities Trust: 2000
Target Maturities Trust: 2005
Target Maturities Trust: 2010
Target Maturities Trust: 2015
Target Maturities Trust: 2020
Target Maturities Trust: 2025
CORPORATE & DIVERSIFIED
Limited-Term Bond
Intermediate-Term Bond
Bond
Premium Bond
High-Yield Bond
INTERNATIONAL
International Bond
TAX-FREE & MUNICIPAL BOND FUNDS
MULTIPLE-STATE
Limited-Term Tax-Free
Intermediate-Term Tax-Free
Long-Term Tax-Free
High-Yield Municipal
SINGLE-STATE
Arizona Intermediate-Term Municipal
California High-Yield Municipal
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
Florida Intermediate-Term Municipal
MONEY MARKET FUNDS
TAXABLE
Capital Preservation
Government Agency Money Market
Premium Capital Reserve
Premium Government Reserve
Prime Money Market
TAX-FREE & MUNICIPAL
California Municipal Money Market
California Tax-Free Money Market
Florida Municipal Money Market
Tax-Free Money Market
AMERICAN CENTURY(reg.sm) GROUP
ASSET ALLOCATION
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
BALANCED
Balanced
CONSERVATIVE EQUITY
Income and Growth
Equity Income
Value
Equity Growth
SPECIALTY
Utilities
Real Estate
Global Natural Resources
Global Gold
SMALL CAP
Small Cap Quantitative
Small Cap Value
TWENTIETH CENTURY GROUP
GROWTH
Select
Heritage Growth
Ultra
AGGRESSIVE GROWTH
Vista
Giftrust
New Opportunities
INTERNATIONAL GROWTH
International Growth
International Discovery
Emerging Markets
GLOBAL
Global Growth
Please call for a prospectus or profile on any American Century fund. These
documents contain important information including charges and expenses, and you
should read them carefully before you invest or send money.
[right margin]
[american century logo(reg.sm)]
American
Century
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.
FUNDS DISTRIBUTOR, INC.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION
[recycled logo]
Recycled
[back cover]
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9901 Funds Distributor, Inc.
SH-BKT-15065 (c)1998 American Century Services Corporation
<PAGE>
[front cover] NOVEMBER 30, 1998
SEMIANNUAL REPORT
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AMERICAN CENTURY
[graphic of stairs]
BENHAM GROUP
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TAX-FREE MONEY MARKET
[american century logo(reg.sm)]
American
Century
[inside front cover]
AMERICAN CENTURY BROKERAGE
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We're pleased to introduce American Century's new brokerage service, which
offers a wide range of investment options and features:
* FundChoice Service--Invest in over 8,000 no-load and load mutual funds
from hundreds of different fund companies, many with no transaction fees
* Buy individual stocks and bonds
* 24-hour Internet and automated phone trades are just $24.95 for up to
1,000 shares of stock, and 2 cents per share thereafter
* Strong research capability
* Build and track model portfolios
* Get news, quotes and charts
* Check free Standard & Poor's stock reports
* Access Wall Street on Demand(tm), a research service with more than
500,000 reports on industry trends, corporate earnings, and mutual
fund analysis
* Track your brokerage account on one easy-to-read statement
* Unlimited check writing and a Gold MasterCard(reg.tm) ATM/debit card
with an American Century Brokerage Access AccountSM (minimum $10,000)
To talk with a Brokerage Associate, call 1-888-345-2071.
WHAT'S NEW . . .
AMERICAN CENTURY CATALOG OF TOOLS & SERVICES lists all the free educational
materials available to investors.
We now have FOUR-PAGE PROFILES of many of our funds. The profiles follow a
standard SEC format and are intended to allow investors to compare funds easily.
You can request a profile or the full prospectus. Full prospectuses contain more
detailed fund information and you will continue to receive one after investing.
In 1999, we will provide SIMPLIFIED PROSPECTUSES that highlight important
information about our funds, including fees and expenses. More detailed data
will be in the Statement of Additional Information.
To order any of these materials, please call 1-800-345-2021.
[left margin]
BENHAM GROUP
TAX-FREE MONEY MARKET
(BNTXX)
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Our Message to You
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/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
Money market funds such as Tax-Free Money Market reaffirmed their value
during the six months ended November 30, 1998, a period of extreme market
turbulence. Weakening economic and financial conditions, brought on by problems
in Asia, Russia, and Latin America, led to significant stock market volatility
and a dramatic decline in interest rates.
Volatility was so rampant that the U.S. central bank, the Federal Reserve,
cut short-term interest rates three times to help stabilize markets worldwide.
Money market yields fell in anticipation of the rate cuts, but money market
values remained stable amid the ups and downs in bond and stock prices.
The third quarter of 1998 served as a good example of the markets'
extremes. Several major U.S. stock indices hit record highs in mid-July before
plunging 20% in the following six weeks. In the bond market, high demand for the
safety of Treasury bonds pushed yields down to their lowest levels ever, but
demand for corporate bonds thinned to the point where trading was all but
impossible.
This type of investment environment illustrates the importance of a
well-diversified investment portfolio. Allocating your assets among stocks,
bonds, and money market funds can help weatherproof your portfolio against
dramatic changes in the economic or investment climate.
Tax-Free Money Market continued to provide more federal tax-exempt income
than most of its peers. We accomplished this by waiving management expenses for
part of the period and by adding short-term municipal securities to the
portfolio when supply and demand fluctuations created favorable buying
opportunities. Our credit research team also closely monitored the financial
health of the banks that back municipal securities, helping the fund managers
maintain Tax-Free Money Market's high credit quality.
Another situation we've been watching closely is preparation of the world's
computer systems for the year 2000. At American Century, we're devoting
substantial resources to this endeavor. Throughout 1999, our technology team
will be extensively testing our systems, including those involved with
performance and dividend payments.
Thank you for your continued investment with American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...... 2
Services Update ........ 3
TAX-FREE MONEY MARKET
Performance Information 4
Management Q&A ......... 5
Portfolio Composition
by Security Type ....... 5
Portfolio Composition
by Credit Rating ....... 6
Schedule of Investments 7
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ............ 13
Statement of Operations 14
Statements of Changes
in Net Assets .......... 15
Notes to Financial
Statements ............. 16
Financial Highlights ... 18
OTHER INFORMATION
Background Information
Investment Philosophy
and Policies ........ 19
Lipper Rankings ..... 19
Credit Rating
Guidelines .......... 19
Investment and Credit
Research Teams ...... 19
Glossary ............... 20
www.americancentury.com 1
Report Highlights
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FUND HIGHLIGHTS
* Tax-Free Money Market continued to provide a higher level of federal
tax-exempt income than the average tax-free money market fund.
* Lipper Inc. ranked Tax-Free Money Market number one among 133 "Tax-Exempt
Money Market Funds" for the 12 months ended November 30.
* Tax-Free Money Market's exceptional performance is due in part to a
promotional program in which we waived management expenses.
* The full expense waiver expired in August, and we gradually reinstated
management fees until December.
* The seven-day current yield declined because of the reinstatement of
expenses and market factors that caused interest rates to decline.
* Even at full expenses, Tax-Free Money Market's management fees are lower
than approximately 75% of tax-free money market funds according to Lipper,
which should help keep the fund's yield competitive.
* We continue to manage the portfolio's credit quality conservatively. We
don't take on inappropriate credit risk to boost the fund's yield.
MARKET HIGHLIGHTS
* U.S. interest rates in general declined because of weakening global economic
conditions in the wake of a series of financial crises in Asia, Russia, and
Latin America.
* The Federal Reserve cut short-term interest rates three times from September
through November to stabilize global markets and stimulate the U.S.
economy.
* Money market yields declined in anticipation of the Fed's interest rate
cuts.
* After successfully stabilizing global financial markets with its interest
rate cuts, we expect the Fed to take a "wait-and-see" approach to interest
rate policy. We won't be surprised if the Fed is done cutting interest rates
for a while.
[left margin]
"LIPPER INC. RANKED TAX-FREE MONEY MARKET NUMBER ONE AMONG 133 'TAX-EXEMPT
MONEY MARKET FUNDS' FOR THE 12 MONTHS ENDED NOVEMBER 30."
TAX-FREE MONEY MARKET
(BNTXX)
TOTAL RETURNS: AS OF 11/30/98
6 Months 1.68%(1)
1 Year 3.56%
NET ASSETS: $432.9 million
7-DAY CURRENT YIELD: 2.97%(2)
INCEPTION DATE: 7/31/84
(1) Not annualized.
(2) Without the fee waiver, the fund's yield would have been 2.87%
See Total Returns on page 4.
Investment terms are defined in the Glossary on page 20.
2 1-800-345-2021
Services Update
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We get many questions from money market investors about our services. Here
are answers to several frequently asked questions.
CAN I MAKE DIRECT DEPOSITS INTO MY MONEY MARKET FUND?
Yes. Give us a call, and we can send you the information you need to set up
direct deposit of your paycheck, Social Security check, Treasury Direct interest
payment, military allotment, or payments from other government agencies.
WHAT IS THE HOLDING PERIOD ON NEW DEPOSITS INTO MY ACCOUNT?
Generally there is an eight-business-day holding period for deposited funds
(initial investments in a new account are held for 15 calendar days). There is a
one-day holding period for U.S. Treasury checks, money orders, and travelers'
checks.
IS THERE AN EASY WAY TO MOVE MONEY FROM MY MONEY MARKET ACCOUNT INTO MY STOCK
AND BOND FUND ACCOUNTS ON A REGULAR BASIS, FOR DOLLAR-COST-AVERAGING PURPOSES?
Yes. Our "Automatic Exchange" plan allows regularly scheduled automatic
transfers from your American Century money market fund into any of your
variable-price American Century stock or bond funds. You can arrange for this
service with a phone call.
IS THERE A LIMIT TO THE NUMBER OF EXCHANGES I CAN MAKE OUT OF MY MONEY MARKET
FUND?
If you are exchanging from your money market fund into your bond or stock
fund, there is no limit. However, there is a limit of six exchanges per calendar
year out of your bond and stock funds.
Exchanges can be made by:
* calling an Investor Services Representative at 1-800-345-2021
* calling our Automated Information Line at 1-800-345-8765*
* writing us a letter
* visiting our Web site at
www.americancentury.com*
IS THERE A FEE FOR WRITING CHECKS AGAINST MY MONEY MARKET FUND?
No. You can write as many checks as you like at no charge, as long as each
check is for $100 or more.
IF YOU HAVE ANY QUESTIONS ABOUT OUR SERVICES, CALL US TOLL FREE AT
1-800-345-2021 OR E-MAIL US AT OUR WEB SITE (WWW.AMERICANCENTURY.COM).
* Requires shareholder authorization.
[right margin]
Accessing your money. . .
WE CAN SEND A CHECK DIRECTLY TO YOU AT YOUR ADDRESS OF RECORD. ALL YOU NEED TO
DO IS GIVE US A CALL OR WRITE US A LETTER REQUESTING THE CHECK. WE CAN ALSO MAKE
AUTOMATIC DEPOSITS FROM YOUR MONEY MARKET FUND TO YOUR BANK ACCOUNT.
www.americancentury.com 3
Tax-Free Money Market--Performance
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TOTAL RETURNS AS OF NOVEMBER 30, 1998
INCEPTION 7/31/84
TAX-FREE TAX-EXEMPT MONEY MARKET FUNDS(2)
MONEY MARKET AVERAGE RETURN FUND'S RANKING
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6 MONTHS(1) .............. 1.68% 1.43% --
1 YEAR ................... 3.56% 2.96% 1 OUT OF 133
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AVERAGE ANNUAL RETURNS
3 YEARS .................. 3.30% 3.01% 8 OUT OF 124
5 YEARS .................. 3.09% 2.92% 15 OUT OF 105
10 YEARS ................. 3.59% 3.50% 14 OUT OF 70
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 19-20 for more information about returns and Lipper fund rankings.
Returns and rankings would have been lower if management fees had not been
waived.
PORTFOLIO AT A GLANCE
11/30/98 5/31/98
NUMBER OF SECURITIES 103 103
WEIGHTED AVERAGE
MATURITY 34 DAYS 55 DAYS
EXPENSE RATIO 0.17%* 0.04%*
* American Century Investment Management, Inc. voluntarily waived its management
fee from August 1, 1997, through July 31, 1998. In absence of the waiver, the
fund's expense ratio would have been 0.50% for the six months ended November
30, 1998 and 0.52% for the year ended May 31, 1998.
YIELDS AS OF NOVEMBER 30, 1998
7-DAY CURRENT YIELD
2.97%
7-DAY EFFECTIVE YIELD
3.01%
7-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 4.13%
31.0% TAX BRACKET 4.30%
36.0% TAX BRACKET 4.64%
39.6% TAX BRACKET 4.92%
Yields would have been 2.87%, 2.91%, 4.03%, 4.20%, 4.54%, and 4.82%,
respectively, if management fees had not been waived.
Past performance does not guarantee future results.
Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.
Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund. The 7-day yield more closely reflects earnings of the fund than the total
return.
4 1-800-345-2021
Tax-Free Money Market--Q&A
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/photo of Bryan Karcher/
An interview with Bryan Karcher, a portfolio manager on the Tax-Free Money
Market investment team.
HOW DID TAX-FREE MONEY MARKET PERFORM DURING THE SIX MONTHS ENDED NOVEMBER 30,
1998?
Tax-Free Money Market continued to provide a higher level of federal
tax-exempt income than the average tax-free money market fund. The fund's total
return was 1.68%, compared with the 1.43% average return of the 133 "Tax-Exempt
Money Market Funds" tracked by Lipper Inc. (formerly Lipper Analytical
Services). This performance put Tax-Free Money Market in the top 2% of the funds
in its Lipper category. In addition, Lipper ranked the fund number one out of
the 133 funds in its category for the 12 months ended November 30. During that
period, Tax-Free Money Market's total return was 3.56%, compared with 2.96% for
the Lipper average. (See the Total Returns table on the previous page for other
fund performance comparisons.)
WHY DID TAX-FREE MONEY MARKET PERFORM SO WELL?
A major reason was a promotional program in which we completely waived
management expenses from August 1, 1997, to July 31, 1998, and partially waived
expenses from August 1, 1998, to November 30, 1998. We started reinstating
expenses in August 1998 at a rate of 10 basis points (0.10% --a basis point
equals 0.01%) per month. By December, the fund reached its full expense ratio of
50 basis points.
HOW DOES THE FUND'S FULL EXPENSE RATIO COMPARE WITH THE EXPENSE RATIOS OF OTHER
TAX-FREE MONEY MARKET FUNDS?
Very favorably. Even without the expense waiver, Tax-Free Money Market's
expenses are lower than approximately 75% of tax-free money market funds,
according to Lipper.
YOUR RELATIVE PERFORMANCE WAS STRONG, BUT THE FUND'S YIELD DECLINED. WHY?
The current yield declined from 3.90% on May 31 to 2.97% on November 30,
due partly to the reinstatement of expenses, but also due to an overall decline
in interest rates. Interest rates tend to fall when the economy weakens --lower
interest rates help stimulate growth. When it appeared the U.S. economy was
heading for recession as a result of economic and financial turmoil overseas,
the Federal Reserve (the Fed), the U.S. central bank, cut short-term interest
rates three times between late September and mid-November. The yields on money
market securities declined in anticipation of the Fed's actions.
HOW DID THE FED'S ACTIONS INFLUENCE YOUR MANAGEMENT OF THE FUND?
The Fed's rate cuts caused us to extend Tax-Free Money Market's weighted
average maturity (WAM) in September. When the Fed starts cutting rates and more
cuts are anticipated, we want to lock in the highest possible yields for the
longest period of time. To do this, we typically buy longer-term
[right margin]
"TAX-FREE MONEY MARKET CONTINUED TO PROVIDE A HIGHER LEVEL OF FEDERAL
TAX-EXEMPT INCOME THAN THE AVERAGE TAX-FREE MONEY MARKET FUND."
PORTFOLIO COMPOSITION BY SECURITY TYPE
AS OF NOVEMBER 30, 1998
VRDNs 82%
Put Bonds 9%
Bonds
less than 1 Year 7%
Municipal Notes 2%
AS OF MAY 31, 1998
VRDNs 82%
Other 3%
Bonds
less than 1 Year 12%
Municipal Notes 2%
Commercial Paper 1%
Security types are defined on page 20.
www.americancentury.com 5
Tax-Free Money Market--Q&A
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(Continued)
securities. Fortunately, longer-term muni money market securities were priced
attractively in September. That's because many corporations sold municipal
securities to make corporate tax payments on September 15, increasing supply and
reducing demand.
We determine the relative attractiveness of one-year munis by looking at
their yields in relation to Treasury yields. During September, one-year muni
yields as a percentage of one-year Treasury yields climbed from about 67% to
75%. We consider anything above 70% attractive. With one-year muni yields at
such a relatively high level, we bought one-year munis and extended the fund's
WAM by about 10 days at the end of September.
TAX-FREE MONEY MARKET'S WAM FELL FROM 55 DAYS ON MAY 31 TO 34 DAYS ON NOVEMBER
30 EVEN THOUGH YOU EXTENDED THE WAM DURING SEPTEMBER. WHY?
Focusing on the WAM's decline during that period is a little misleading. We
often increase our holdings of longer-term securities in April and May, which
significantly boosts the May 31 WAM. That's when one-year munis are
competitively priced--shareholders are withdrawing money from muni money market
funds to pay their income taxes, which reduces demand (and prices) and boosts
supply (and yields).
After tax season, we didn't make significant additional long-term purchases
until early fall. If we don't purchase notes for a while, the portfolio's notes
steadily decline in maturity ("roll down"), and the WAM declines.
WHAT STEPS HAVE YOU TAKEN TO KEEP TAX-FREE MONEY MARKET'S CREDIT QUALITY HIGH?
We continue to be very conservative, more so than the SEC requires in terms
of the credit quality of the fund's holdings. We are very careful to purchase
securities that are backed by strong financial institutions. As a result, we
haven't owned Japanese bank-backed paper since December 1997. Furthermore, our
credit analysis team is now carefully evaluating European banks, many of which
may not be prepared for the year 2000 computer problem.
WHAT IS YOUR OUTLOOK FOR SHORT-TERM INTEREST RATES AND FUND STRATEGY?
The U.S. economy remains vulnerable to financial events overseas, but it
also was bolstered by the Fed's interest rate cuts. Consumer confidence and
spending remain strong, but they're being offset by weakness in the corporate
and manufacturing sectors. The Fed may need time to evaluate these mixed signals
and the results of its rate cuts in 1998. Therefore, we expect the Fed to take a
"wait-and-see" approach to interest rate policy, with no additional interest
rate cuts for a while. This argues for greater interest rate stability in early
1999, barring any cataclysmic events.
We'll continue to emphasize conservative credit standards. In addition,
we'll attempt to maintain a competitive yield by monitoring supply and demand in
the marketplace and the yield relationships between variable-rate demand notes
(VRDNs), six-month munis, one-year munis, and comparable-maturity Treasurys.
[left margin]
"WE ARE VERY CAREFUL TO PURCHASE SECURITIES THAT ARE BACKED BY STRONG FINANCIAL
INSTITUTIONS."
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
SP1+ 82% 86%
SP1 18% 11%
SP2 -- 3%
SP1+ and SP1 are Standard & Poor's highest credit ratings for short-term
municipal securities. See Credit Rating Guidelines on page 19 for more
information.
6 1-800-345-2021
Tax-Free Money Market--Schedule of Investments
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NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
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SHORT-TERM MUNICIPAL SECURITIES
ALASKA--1.4%
$ 1,345,000 Anchorage GO, Series 1997 A,
4.50%, 12/1/98 (FGIC) $ 1,344,998
4,350,000 North Slope Boro, Series 1994 B,
6.10%, 6/30/99 (FSA) 4,422,578
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5,767,576
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ARKANSAS--1.0%
4,100,000 Pine Bluff Industrial Development
Rev., (Camden Wire Co., Inc.),
VRDN, 3.15%, 12/3/98 (LOC:
Chase Manhattan Bank)
(Acquired 7/31/97-9/2/98,
Cost $4,100,000)(1) 4,100,000
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CALIFORNIA--2.3%
5,500,000 California Higher Education Loan
Auth. Student Loan Rev.,
Series 1995 E-5, VRDN,
3.80%, 6/1/99 (LOC: Student
Loan Marketing) 5,500,000
4,000,000 Rialto Public Financing Auth. Tax
Allocation, Series 1998 A,
(Agua Mansa & Industrial), VRDN,
3.70%, 12/3/98 (LOC:
Union Bank of California, N.A.) 4,000,000
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9,500,000
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COLORADO--3.8%
2,000,000 Arapahoe County Industrial
Development Rev., (Denver
Jetcenter), VRDN, 3.40%,
12/1/98 (LOC: U.S. Bank,
N.A.) 2,000,000
3,500,000 Denver Multifamily Housing Rev.,
Series 1989 A, (Cottonwood
Creek), VRDN, 3.45%,
12/1/98 (LOC: General
Electric Capital Corp.) 3,500,000
5,000,000 Jefferson County School District
No. R-001 Tax Anticipation
Notes, 4.00%, 6/30/99 5,024,063
4,000,000 Lowry Economic Redevelopment
Auth. Rev., Series 1998 B,
VRDN, 3.15%, 12/2/98 (LOC:
Canadian Imperial Bank of
Commerce) 4,000,000
1,555,000 SBC Metropolitan GO, 3.65%,
12/1/98 (LOC: U.S. Bank,
N.A.)(2) 1,555,000
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16,079,063
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Principal Amount Value
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FLORIDA--24.1%
$ 1,000,000 Broward County Housing Finance
Auth. Multifamily Housing Rev.,
(Margate Investments), VRDN,
3.15%, 12/2/98 (LOC: Bank
One, Texas, N.A.) $ 1,000,000
2,500,000 Broward County Housing Finance
Auth. Multifamily Housing Rev.,
(Welleby Apartments), VRDN,
3.10%, 12/2/98 (LOC: Bank
of America N.T. & S.A.) 2,500,000
7,960,000 Broward County Housing Finance
Auth. Multifamily Housing Rev.,
Series 1990 A, (Palm
Aire-Oxford), VRDN, 3.25%,
12/2/98 (Guaranteed:
Continental Casualty Co.) 7,960,000
4,010,000 Dade County Special Obligation
Trust Receipts, Series
1998 C-2, VRDN, 3.65%,
12/2/98 (LOC: Bank of
America N.T. & S.A.) (Acquired
7/9/98, Cost $4,010,000)(1) 4,010,000
3,000,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., VRDN, 3.35%,
12/3/98 (Liquidity: Merrill
Lynch & Co., Inc.) (Acquired
5/19/98, Cost $3,000,000)(1) 3,000,000
3,600,000 Eustis Multipurpose Rev.,
Series 1997 A, (Installment),
VRDN, 3.20%, 12/2/98 (LOC:
Suntrust Bank Central Florida,
N.A.) (Acquired 3/26/98,
Cost $3,600,000)(1) 3,600,000
3,000,000 Florida Housing Finance Agency
Rev., (Carlton Arms), VRDN,
3.20%, 12/2/98 (LOC: KBC
Bank and Insurance Holding) 3,000,000
3,500,000 Florida Housing Finance Agency
Rev., (Country Club), VRDN,
3.20%, 12/1/98 (LOC:
Northern Trust Company) 3,500,000
8,000,000 Florida Housing Finance Agency
Rev., (Woodlands), VRDN,
3.50%, 12/2/98 (LOC:
Northern Trust Company) 8,000,000
5,190,000 Florida Housing Finance Agency
Rev., Series 1989 E, VRDN,
3.25%, 12/2/98 (LOC:
Comerica Bank) 5,190,000
3,965,000 Florida Housing Finance Agency
Rev., Series 1990 B,
(Beville-Oxford), VRDN, 3.25%,
12/2/98 (SBBPA: Continental
Casualty Co.) 3,965,000
2,900,000 Florida Housing Finance Corp.
Rev., Series 1998 E,
(Club at Vero Apartments),
VRDN, 3.25%, 12/2/98 (LOC:
Nationsbank, N.A.) 2,900,000
See Notes to Financial Statements
www.americancentury.com 7
Tax-Free Money Market--Schedule of Investments
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(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
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$ 7,000,000 Florida Housing Finance Corp.
Rev., Series 1998-6,
(Homeowner Mortgage), 3.80%,
6/15/99 (GIC: FGIC Capital
Markets) $ 7,000,000
4,900,000 Highlands County Health Facilities
Auth. Rev., Series 1997 A,
(Adventist Health System),
VRDN, 3.20%, 12/3/98 (LOC:
Suntrust Bank Central Florida,
N.A.) 4,900,000
1,000,000 Jacksonville Electric Auth. Rev.,
VRDN, 3.23%, 12/2/98
(SBBPA: Societe Generale)
(Acquired 4/24/98, Cost
$1,000,000)(1) 1,000,000
2,995,000 Jacksonville Electric Auth. Rev.,
VRDN, 3.30%, 12/3/98
(Liquidity: Merrill Lynch & Co.,
Inc.) (Acquired 4/24/98, Cost
$2,995,000)(1) 2,995,000
700,000 Marion County Housing Finance
Auth. Multifamily Rev.,
Series 1985 D, (Summer Trace
Apartments), VRDN, 3.15%,
12/3/98 (LOC: Suntrust Bank,
Atlanta, GA) 700,000
500,000 Martin County Pollution Control
Rev., (Florida Power & Light
Co.), VRDN, 3.35%, 12/1/98 500,000
5,000,000 Orange County Educational
Facilities Auth. Rev., (Rollins
College), VRDN, 3.20%,
12/2/98 (LOC: NationsBank,
N.A.) 5,000,000
7,200,000 Orange County Housing Finance
Auth. Multifamily
Rev., Series 1992 A,
(Smokewood/Sun), VRDN, 3.10%,
12/3/98 (LOC:
Citibank, N.A.) 7,200,000
7,200,000 Palm Beach County Educational
Facilities Auth. Rev., (Atlantic
College), VRDN, 3.25%,
12/3/98 (LOC: Nationsbank,
N.A.) (Acquired
3/18/98-6/11/98, Cost
$7,200,000)(1) 7,200,000
3,500,000 Palm Beach County Educational
Facilities Auth. Rev., (Lynn
University), VRDN, 3.40%,
12/2/98 (LOC: First Union
National Bank, Charlotte, NC) 3,500,000
2,000,000 Pasco County School Board
COP, VRDN, 3.15%, 12/3/98
(AMBAC) (SBBPA: Landesbank
Hessen-Thuringen Girozentrale) 2,000,000
1,600,000 Port St. Lucie Utility Rev., VRDN,
3.30%, 12/3/98 (MBIA)
(Liquidity: Merrill Lynch & Co.,
Inc.) (Acquired 5/21/98, Cost
$1,600,000)(1) 1,600,000
Principal Amount Value
- --------------------------------------------------------------------------------
$ 4,430,000 Seminole County School Board
COP, VRDN, 3.30%, 12/3/98
(AMBAC) (SBBPA: Merrill
Lynch & Co., Inc.) (Acquired
4/9/98, Cost $4,430,000)(1) $ 4,430,000
4,690,000 Tallahassee-Leon County Civic
Center Auth. Capital
Improvement Rev.,
Series 1998 A, VRDN, 3.20%,
12/2/98 (LOC: Suntrust Bank
Central Florida N.A.) 4,690,000
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101,340,000
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GEORGIA--4.6%
7,750,000 Clayton County Hospital Auth.
Rev. Anticipation Certificates,
Series 1998 B, (Southern
Regional Medical Center),
VRDN, 3.20%, 12/2/98 (LOC:
Suntrust Bank, Atlanta, GA) 7,750,000
1,800,000 Cobb County Multifamily Housing
Rev., (Terrell Mill), VRDN, 3.40%,
12/2/98 (LOC: General
Electric Capital Corp.) (Acquired
5/1/96, Cost $1,800,000)(1) 1,800,000
1,000,000 Forsyth County Industrial
Development Auth. Rev., (World
Access Inc.), VRDN, 3.35%,
12/3/98 (LOC: Bank Austria
AG) (Acquired 9/2/98, Cost
$1,000,000)(1) 1,000,000
3,500,000 Fulton County Development Auth.
Rev., (Holy Innocents School),
VRDN, 3.20%, 12/2/98 (LOC:
Suntrust Bank, Atlanta, GA)
(Acquired 2/9/98-2/25/98,
Cost $3,500,000)(1) 3,500,000
5,300,000 Thomasville Hospital Auth. Rev.,
(Antic Certificates-J.D. Archbold),
VRDN, 3.20%, 12/2/98 (LOC:
Suntrust Bank, Atlanta, GA)
(Acquired 12/11/97-3/6/98,
Cost $5,300,000)(1)(3) 5,300,000
-------------
19,350,000
-------------
HAWAII--0.9%
3,800,000 Hawaii Housing Finance and
Development Corp. Rev.,
Series 1993 A, (Affordable
Rental Housing), VRDN, 3.15%,
12/2/98 (LOC: Banque
Nationale de Paris S.A.) 3,800,000
-------------
ILLINOIS--6.6%
1,625,000 Bartlett Multifamily Housing Rev.,
Series 1995 A, (Bartlett Square
Apartments), VRDN, 3.20%,
12/3/98 (LOC: LaSalle
National Bank) 1,625,000
See Notes to Financial Statements
8 1-800-345-2021
Tax-Free Money Market--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,750,000 Illinois Development Financing
Auth. Rev., Series 1998 A,
(Provena Health), 4.50%,
5/15/99 (MBIA) $ 3,759,485
2,000,000 Illinois Health Facilities Auth. Rev.,
Series 1996 B, (Franciscan
Eldercare), VRDN, 3.20%,
12/2/98 (LOC: LaSalle
National Bank) 2,000,000
9,900,000 Illinois Health Facilities Auth. Rev.,
Series 1998 A, (Swedish
Covenant), VRDN, 3.20%,
12/2/98 (AMBAC) (SBBPA:
First National Bank of Chicago) 9,900,000
5,295,000 Illinois Industrial Development
Financing Auth. Rev.,
(Continental/Midland), VRDN,
3.35%, 12/3/98 (LOC: LaSalle
National Bank) (Acquired
5/8/98-6/25/98, Cost
$5,295,000)(1) 5,295,000
2,000,000 McCook Rev., Series 1996 B, (St.
Andrew Society), VRDN, 3.25%,
12/3/98 (LOC: Northern Trust
Company) 2,000,000
3,000,000 Schaumburg Multifamily Housing
Rev., (Windsong Apartments),
VRDN, 3.28%, 12/3/98 (LOC:
LaSalle National Bank) 3,000,000
-------------
27,579,485
-------------
INDIANA--0.6%
580,000 Delphi Community Multibuilding
Corp. Rev., (First Mortgage),
3.60%, 1/5/99 (AMBAC) 580,000
1,000,000 Gary Industrial Development Rev.,
(Tinplate Partners International,
Inc.), VRDN, 3.35%, 12/3/98
(LOC: LaSalle National Bank) 1,000,000
960,000 Vincennes University Rev.,
Series 1997 E, (Student Fee),
3.95%, 12/1/98 (AMBAC) 960,000
-------------
2,540,000
-------------
IOWA--3.2%
10,000,000 Iowa Finance Auth. Rev.,
Series 1998 A, (Wheaton
Franciscan), VRDN, 3.20%,
12/2/98 (MBIA) (SBBPA:
Toronto-Dominion Bank) 10,000,000
3,300,000 Iowa School Cash Anticipation
Program Warrants,
Series 1998 B, (Corp. Warrants
Certificates), 4.25%, 1/28/99
(FSA) 3,303,543
-------------
13,303,543
-------------
Principal Amount Value
- --------------------------------------------------------------------------------
KENTUCKY--8.3%
$ 2,200,000 Kenton County Airport Board Rev.,
VRDN, 3.40%, 12/3/98
(Liquidity: Merrill Lynch & Co.,
Inc.) (MBIA) (Acquired 2/5/98,
Cost $2,200,000)(1) $ 2,200,000
17,000,000 Kentucky Economic Development
Finance Auth. Rev., (Pooled
Hospital Loan Program), VRDN,
3.35%, 12/2/98 (Capital
Reinsurance Company) (SBBPA:
Chase Manhattan Bank) 17,000,000
13,400,000 Kentucky Turnpike Auth. Resource
Recovery Road Floating Rate
Trust Receipts, Series 1997-17,
3.45%, 12/2/98 (FSA)
(SBBPA: Commerzbank A.G.)
(Acquired 10/8/97-1/15/98,
Cost $13,400,000)(1) 13,400,000
2,400,000 Mayfield Multi-City Lease Rev.,
VRDN, 3.25%, 12/2/98
(LOC: PNC Bank) 2,400,000
-------------
35,000,000
-------------
LOUISIANA--2.5%
1,500,000 Jefferson Parish Home Mortgage
Rev., Series 1998 C-2,
(Mortgage-Backed Securities),
3.625%, 9/1/99 1,500,000
9,000,000 South Louisiana Port
Commission Rev., (Holnam
Inc.), VRDN, 3.25%, 12/2/98 (LOC:
Wachovia Bank, N.A.) 9,000,000
-------------
10,500,000
-------------
MARYLAND--1.0%
3,000,000 Maryland Health and Higher
Educational Facilities Auth. Rev.,
Series 1998 A, (Charlestown
Community), VRDN, 3.25%,
12/2/98 (LOC: First Union
National Bank, Charlotte, NC) 3,000,000
1,345,000 Prince Georges County COP,
Series 1998 A, (Equipment
Acquisition Program), 3.50%,
11/1/99 (MBIA) 1,348,007
-------------
4,348,007
-------------
MASSACHUSETTS--0.6%
2,400,000 Lynn Water and Sewer
Commission General Rev.,
VRDN, 3.25%, 12/3/98 (FSA)
(Liquidity: Merrill Lynch & Co.,
Inc.) (Acquired 12/4/97, Cost
$2,400,000)(1) 2,400,000
-------------
See Notes to Financial Statements
www.americancentury.com 9
Tax-Free Money Market--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MISSOURI--3.0%
$ 800,000 Clay County Public Building Auth.
Leasehold Rev. COP,
Series 1998 A, 4.05%,
5/15/99 (FSA) $ 800,000
515,000 Clay County Public Building Auth.
Leasehold Rev. COP,
Series 1998 B, (Jail Expansion
and Renovation), 4.05%,
5/15/99 (FSA) 515,000
2,350,000 Fenton Industrial Development
Auth. Rev., (Clayton Corp.),
VRDN, 3.50%, 12/3/98 (LOC:
Commerce Bank, N.A.) 2,350,000
2,090,000 Missouri Development Finance
Board Industrial Development
Rev., (J & J Enterprises), VRDN,
3.70%, 12/2/98 (LOC:
Commerce Bank, N.A.) 2,090,000
6,000,000 Missouri Health and Educational
Facilities Auth. Rev., (Pembroke
Hill School), VRDN, 3.30%,
12/3/98 (LOC: Commerce
Bank, N.A.) 6,000,000
1,065,000 Missouri Housing Development
Commission Mortgage
Rev., Series 1998 C,
(Single Family), VRDN, 3.90%,
4/1/99 (GIC:
FGIC Capital Markets) 1,065,000
-------------
12,820,000
-------------
NEVADA--1.4%
6,000,000 ABN Amro Munitops Certificates
Trust, Series 1998-1, VRDN,
3.45%, 12/2/98 (MBIA)
(SBBPA: ABN Amro Bank N.V.)
(Acquired 6/3/98, Cost
$6,000,000)(1) 6,000,000
-------------
NEW JERSEY--0.2%
1,015,000 Atlantic County Utilities Auth.
Sewer Rev., 3.70%, 1/15/99
(AMBAC) 1,015,000
-------------
NEW MEXICO--3.2%
6,160,600 New Mexico Finance Auth. Rev.,
Series 1997 A, (Administrative
Fee-Trims), VRDN, 3.25%,
12/2/98 (LOC: Canadian
Imperial Bank of Commerce) 6,160,600
7,300,000 Sante Fe Gross Receipts Tax Rev.,
Series 1997 B, (Wastewater
System), VRDN, 3.25%,
12/2/98 (LOC: Canadian
Imperial Bank of Commerce) 7,300,000
-------------
13,460,600
-------------
Principal Amount Value
- --------------------------------------------------------------------------------
NORTH CAROLINA--0.7%
$ 3,000,000 Columbus County Industrial
Facilities & Pollution Control
Financing Auth. Rev.,
(Conflandey), VRDN, 3.35%,
12/3/98 (LOC: Banque
Nationale de Paris S.A.)
(Acquired 8/10/98, Cost
$3,000,000)(1) $ 3,000,000
-------------
NORTH DAKOTA--0.4%
1,655,000 Hebron Industrial Development
Rev., (Dacco Inc.), VRDN,
3.45%, 12/3/98 (LOC: U.S.
Bank, N.A.) (Acquired 2/26/98,
Cost $1,655,000)(1) 1,655,000
-------------
OHIO--1.3%
700,000 Cleveland Waterworks Rev.,
Series 1996 H, (First Mortgage),
4.45%, 1/1/99 (MBIA) 700,311
4,610,000 Ohio Housing Finance Agency
Mortgage Rev., Series
1998 A-3, 3.80%, 3/1/99 (GNMA) 4,610,000
-------------
5,310,311
-------------
OREGON--3.4%
10,400,000 Klamath Falls Electric Rev.,
Series 1986 E, (Salt Caves
Hydroelectric), 3.80%, 5/3/99(4) 10,400,000
4,000,000 Oregon Health, Housing,
Educational and Cultural
Facilities Auth. Rev., (Quatama
Crossing), VRDN, 3.10%,
12/3/98 (LOC: U.S. Bank, N.A.) 4,000,000
-------------
14,400,000
-------------
PENNSYLVANIA--5.2%
6,000,000 Dauphin County General Auth.
Rev., Series 1997 A, VRDN,
3.30%, 12/2/98 (FSA)
(SBBPA: Credit Suisse First
Boston) 6,000,000
7,495,000 Delaware Valley Regional Finance
Auth. Local Government Rev.,
VRDN, 3.25%, 12/3/98
(AMBAC) (SBBPA: Merrill
Lynch & Co., Inc.) (Acquired
2/6/98, Cost $7,495,000)(1) 7,495,000
3,240,000 Pennsylvania State University Rev.,
3.75%, 1/14/99 (LOC:
Rabobank Nederland) (Acquired
1/29/98, Cost $3,240,000)(1) 3,240,000
5,305,000 Washington County Auth. Lease
Rev., (Higher Education Pooled
Equipment Lease), VRDN,
3.25%, 12/2/98 (LOC: First
Union National Bank, Charlotte,
NC) 5,305,000
-------------
22,040,000
-------------
See Notes to Financial Statements
10 1-800-345-2021
Tax-Free Money Market--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
SOUTH CAROLINA--0.5%
$2,215,000 Clemson University Rev.,
Series 1998 A, 4.50%, 5/1/99
(AMBAC) $ 2,226,689
-------------
SOUTH DAKOTA--1.1%
1,500,000 South Dakota Health &
Educational Facilities Auth. Rev.,
(Avera McKennan Issue), 4.00%,
7/1/99 (MBIA) 1,502,510
3,000,000 South Dakota Housing
Development Auth. Rev.,
Series 1998 C,
(Homeownership Mortgage),
3.75%, 8/5/99 3,000,000
-------------
4,502,510
-------------
TENNESSEE--5.7%
2,000,000 Chattanooga Industrial
Development Board Rev.,
(Market State Limited), VRDN,
3.25%, 12/2/98 (LOC: Credit
Suisse First Boston, Inc.) 2,000,000
8,190,000 Clarksville Public Building Auth.
Rev., (Tennessee Municipal
Bond Fund), VRDN, 3.20%,
12/3/98 (LOC: Nationsbank,
N.A.) (Acquired 6/25/98, Cost
$8,190,000)(1) 8,190,000
5,000,000 Dickson County Industrial
Development Board Rev.,
(Renaissance Learning Center),
VRDN, 3.20%, 12/2/98 (LOC:
Suntrust Bank, Nashville, N.A.)
(Acquired 12/19/97, Cost
$5,000,000)(1) 5,000,000
4,600,000 Memphis-Shelby County Industrial
Development Board Exempt
Facilities Rev., (Ponderosa Fibres
of America), VRDN, 3.30%,
12/3/98 (LOC: Nationsbank,
N.A.) (Acquired 2/19/98, Cost
$4,600,000)(1) 4,600,000
4,000,000 Tullahoma Industrial Development
Board Rev., (Rock Tennessee
Converting Co.), VRDN, 3.30%,
12/2/98 (LOC: Sun Trust Bank,
Atlanta, N.A. ) (Acquired 1/5/98,
Cost $4,000,000)(1) 4,000,000
-------------
23,790,000
-------------
TEXAS--5.4%
1,320,000 El Paso County GO, 5.00%,
2/15/99 (FGIC) 1,323,046
5,500,000 Gulf Coast Industrial Development
Auth. Rev., (Petrounited Term
Inc.), VRDN, 3.25%, 12/3/98
(LOC: Nationsbank, N.A.) 5,500,000
Principal Amount Value
- --------------------------------------------------------------------------------
$4,495,000 Midland County Hospital District
Rev., VRDN, 3.30%, 12/3/98
(AMBAC) (Liquidity: Merrill
Lynch & Co., Inc.) (Acquired
11/20/97, Cost $4,495,000)(1) $ 4,495,000
4,585,000 Nueces River Auth. Water Supply
Rev., VRDN, 3.30%, 12/3/98
(FSA) (Liquidity: Merrill Lynch &
Co., Inc.) (Acquired 12/4/97,
Cost $4,585,000)(1) 4,585,000
6,750,000 Tarrant County Health Facilities
Development Corporate Rev.,
(Carter Blood Care), VRDN,
3.30%, 12/3/98 (LOC: Chase
Manhattan Bank, Texas) 6,750,000
-------------
22,653,046
-------------
WASHINGTON--3.5%
1,710,000 Pierce County Economic
Development Corporate Rev.,
(K & M Holdings II), VRDN,
3.55%, 12/2/98 (LOC: Wells
Fargo Bank, N.A.) (Acquired
11/17/97, Cost $1,710,000)(1) 1,710,000
2,010,000 Washington Health Care Facilities
Auth. Rev., (Multicare Health
System), 4.00%, 8/15/99
(MBIA) 2,014,149
2,200,000 Washington Public Power Supply
System Rev., (Nuclear Project
No. 1), 7.50%, 7/1/99,
Prerefunded at 102% of Par(4) 2,296,706
2,075,000 Washington Public Power Supply
System Rev., Series 1989 A,
(Nuclear Project No. 1), 7.50%,
7/1/99, Prerefunded at 102%
of Par(4) 2,166,208
6,600,000 Washington State Housing
Finance Commission Multifamily
Mortgage Rev., (Mill Plain
Crossing), VRDN, 3.35%,
12/1/98 (LOC: Harris Trust &
Savings Bank) 6,600,000
-------------
14,787,063
-------------
WISCONSIN--4.1%
15,500,000 Ladysmith Solid Waste Disposal
Facility Rev., (City Forest Corp.),
VRDN, 3.80%, 12/2/98 (LOC:
Union Bank of California, N.A.) 15,500,000
1,700,000 Pleasant Prairie Industrial
Development Rev., (Muskie
Enterprises Inc.), VRDN, 3.30%,
12/3/98 (LOC: Harris Trust &
Savings Bank) (Acquired
1/9/97, Cost $1,700,000)(1) 1,700,000
-------------
17,200,000
-------------
TOTAL INVESTMENT SECURITIES--100.0% $420,467,893
=============
See Notes to Financial Statements
www.americancentury.com 11
Tax-Free Money Market--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FSA = Financial Security Assurance Inc.
GIC = Guaranteed Investment Contract
GNMA = Government National Mortgage Association
GO = General Obligation
LOC = Letter of Credit
MBIA = MBIA Insurance Corp.
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, 1998.
(1) Security was purchased under Rule 144A of the Securities Act of 1933 or is a
private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at November 30, 1998, was
$122,500,000, which represented 28.3% of net assets. None of these
securities are considered to be illiquid.
(2) When-issued security.
(3) Security, or a portion thereof, has been segregated at the custodian bank
for when-issued securities.
(4) Escrowed to maturity in U.S. government securities or state and local
government securities.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the principal amount of each investment
* the amortized cost of each investment
* the percentage of investments in each state
See Notes to Financial Statements
12 1-800-345-2021
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
ASSETS
Investment securities, at value
(amortized cost and cost for
federal income tax purposes) (Note 1) .................. $420,467,893
Cash ...................................................... 13,574,421
Receivable for investments sold ........................... 1,555,000
Interest receivable ....................................... 2,550,417
------------
438,147,731
------------
LIABILITIES
Disbursements in excess
of demand deposit cash .................................. 483,151
Payable for investments purchased ......................... 1,555,000
Payable for capital shares redeemed ....................... 3,039,378
Accrued management fees (Note 2) .......................... 145,787
------------
5,223,316
------------
Net Assets ................................................ $432,924,415
============
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) ................................... 432,904,764
============
Net Asset Value Per Share ................................. $ 1.00
============
NET ASSETS CONSIST OF:
Capital paid in ........................................... $432,904,764
Accumulated undistributed net
realized gain on investments ............................ 19,651
------------
$432,924,415
============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. The net assets divided by the total number
of fund shares outstanding gives you the price of an individual share, or the
net asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); net
investment income not yet paid to shareholders (if any); and net gains earned on
investment activity but not yet paid to shareholders or net losses on investment
activity (known as realized gains or losses). This breakdown tells you the value
of net assets that are performance-related, such as investment gains or losses,
and the value of net assets that are not related to performance, such as
shareholder investments and redemptions.
See Notes to Financial Statements
www.americancentury.com 13
Statement of Operations
- --------------------------------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ............................................... $ 8,171,871
-----------
Expenses (Note 2):
Management fees ........................................ 1,156,431
Trustee's fees and expenses ............................ 3,877
-----------
Total expenses ......................................... 1,160,308
Amount waived .......................................... (771,286)
-----------
Net expenses ......................................... 389,022
-----------
Net investment income .................................. $ 7,782,849
===========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF OPERATIONS--This statement breaks down how the
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* interest income earned from investments
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
See Notes to Financial Statements
14 1-800-345-2021
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED) AND YEAR ENDED MAY 31, 1998
Increase (Decrease) in Net Assets
NOVEMBER 30, MAY 31,
1998 1998
OPERATIONS
Net investment income .................... $ 7,782,849 $ 8,931,358
Net realized gain on investments ......... -- 19,651
------------- -------------
Net increase in net assets
resulting from operations ............. 7,782,849 8,951,009
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............... (7,782,849) (8,931,358)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................ 349,200,231 786,813,923
Proceeds from reinvestment
of distributions ....................... 7,251,795 8,415,885
Payments for shares redeemed ............. (367,804,482) (436,702,980)
------------- -------------
Net increase (decrease) in net
assets from capital share
transactions ........................... (11,352,456) 358,526,828
------------- -------------
Net increase (decrease)
in net assets .......................... (11,352,456) 358,546,479
NET ASSETS
Beginning of period ...................... 444,276,871 85,730,392
------------- -------------
End of period ............................ $ 432,924,415 $ 444,276,871
============= =============
TRANSACTIONS IN
SHARES OF THE FUND
Sold ..................................... 349,200,231 786,813,923
Issued in reinvestment
of distributions ....................... 7,251,795 8,415,885
Redeemed ................................. (367,804,482) (436,702,980)
------------- -------------
Net increase (decrease) .................. (11,352,456) 358,526,828
============= =============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* capital share transactions--shareholders' purchases, reinvestments, and
redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.
See Notes to Financial Statements
www.americancentury.com 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (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 eight 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 are in accordance with generally accepted
accounting principles.
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 as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
Investment Income--Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
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 income 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.
Additional Information--Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.
16 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The trust has entered into a Management Agreement with American Century
Investment Management Inc. (ACIM) that provides the Fund with investment
advisory and management services in exchange for a single unified management
fee. Expenses excluded from the agreement are brokerage, taxes, portfolio
insurance, interest, fees and expenses of those 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 net 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 Money Market
Fund Category. Second, a separate fee rate schedule is applied to the net assets
of al 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
ACIM waived all expenses through July 31, 1998. Effective August 1, 1998,
ACIM began decreasing the waiver by 0.10% of the Fund's net assets on a monthly
basis. The gradual expiration of the waiver will continue until December 1998.
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, and the
Trust's transfer agent, American Century Service Corporation.
www.americancentury.com 17
Tax-Free Money Market--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1998(1) 1998 1997 1996 1995 1994
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 0.04 0.03 0.03 0.03 0.02
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income . (0.02) (0.04) (0.03) (0.03) (0.03) (0.02)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =========== ===========
Total Return(2) ............ 1.68% 3.70% 2.98% 3.19% 2.95% 1.92%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........ 0.17%(3)(4) 0.04%(4) 0.67% 0.65% 0.66% 0.67%
Ratio of Net Investment Income
to Average Net Assets ........ 3.32%(3)(4) 3.68%(4) 2.93% 3.12% 2.88% 1.89%
Net Assets, End
of Period (in thousands) ..... $ 432,924 $ 444,277 $ 85,730 $ 91,118 $ 92,034 $ 109,818
</TABLE>
(1) Six months ended November 30, 1998 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total retunrs for periods less than one year are not
annualized.
(3) Annualized
(4) ACIM has voluntarily waived its management fee from August 1, 1997 through
July 31, 1998. In absence of the waiver, the annualized ratio of operating
expenses to average net assets and annualized ratio of net investment income
to average net assets would have been 0.50% and 3.65%, respectively, for the
six months ended November 30, 1998 and 0.52% and 3.20%, respectively, for
the year ended May 31, 1998.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--This statement itemizes current period
activity and statistics and provides comparison data for the last five fiscal
years.
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming
reinvestment of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
See Notes to Financial Statements
18 1-800-345-2021
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND 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 benchmark 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 FDIC or any other government agency. Yields will fluctuate, and although the
fund seeks to preserve the value of your investment at $1 per share, it is
possible to lose money by investing in the fund.
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 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.
CREDIT RATING GUIDELINES
Credit quality (the issuer's financial strength and the likelihood of
timely payment of interest and principal) is a key factor in fixed-income
investment analysis. Credit ratings issued by independent rating and research
companies such as Standard & Poor's help quantify credit quality--the stronger
the issuer, the higher the credit rating. In turn, credit quality and ratings
greatly influence the prices and yields of fixed-income securities--high ratings
mean higher prices and less current income (yield) as compensation for risk.
But credit ratings are subjective. They reflect the opinions of the rating
agencies that issue them and are not absolute standards of quality. Furthermore,
high credit ratings do not guarantee good investment performance. They do not
reflect the price stability of a municipal security when economic or market
conditions change.
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGER
BRYAN KARCHER
MUNICIPAL CREDIT RESEARCH TEAM
MANAGER
STEVEN PERMUT
MUNICIPAL CREDIT ANALYSTS
DAVID MOORE
ROBERT MILLER
BILL MCCLINTOCK
TIM BENHAM
BRAD BODE
www.americancentury.com 19
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 18.
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%).
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.
* Put Bonds--long-term securities that can be "put back" (i.e., sold at face
value) to a specified buyer at a prearranged date.
* Variable-Rate Demand Notes (VRDNs)--securities that track market interest
rates and stabilize their market values using periodic (daily or weekly)
interest rate adjustments.
20 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
- -------------------------------------------------------------------------------
BENHAM GROUP(reg.sm)
TAXABLE BOND FUNDS
U.S. TREASURY & GOVERNMENT
Short-Term Treasury
Short-Term Government
GNMA
Intermediate-Term Treasury
Long-Term Treasury
Inflation-Adjusted Treasury
Target Maturities Trust: 2000
Target Maturities Trust: 2005
Target Maturities Trust: 2010
Target Maturities Trust: 2015
Target Maturities Trust: 2020
Target Maturities Trust: 2025
CORPORATE & DIVERSIFIED
Limited-Term Bond
Intermediate-Term Bond
Bond
Premium Bond
High-Yield Bond
INTERNATIONAL
International Bond
TAX-FREE & MUNICIPAL BOND FUNDS
MULTIPLE-STATE
Limited-Term Tax-Free
Intermediate-Term Tax-Free
Long-Term Tax-Free
High-Yield Municipal
SINGLE-STATE
Arizona Intermediate-Term Municipal
California High-Yield Municipal
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
Florida Intermediate-Term Municipal
MONEY MARKET FUNDS
TAXABLE
Capital Preservation
Government Agency Money Market
Premium Capital Reserve
Premium Government Reserve
Prime Money Market
TAX-FREE & MUNICIPAL
California Municipal Money Market
California Tax-Free Money Market
Florida Municipal Money Market
Tax-Free Money Market
AMERICAN CENTURY(reg.sm) GROUP
ASSET ALLOCATION
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
BALANCED
Balanced
CONSERVATIVE EQUITY
Income and Growth
Equity Income
Value
Equity Growth
SPECIALTY
Utilities
Real Estate
Global Natural Resources
Global Gold
SMALL CAP
Small Cap Quantitative
Small Cap Value
TWENTIETH CENTURY GROUP
GROWTH
Select
Heritage Growth
Ultra
AGGRESSIVE GROWTH
Vista
Giftrust
New Opportunities
INTERNATIONAL GROWTH
International Growth
International Discovery
Emerging Markets
GLOBAL
Global Growth
Please call for a prospectus or profile on any American Century fund. These
documents contain important information including charges and expenses, and you
should read them carefully before you invest or send money.
[right margin]
[american century logo(reg.sm)]
American
Century
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.
FUNDS DISTRIBUTOR, INC.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION
[recycled logo]
Recycled
[back cover]
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9901 Funds Distributor, Inc.
SH-BKT-15062 (c)1998 American Century Services Corporation
<PAGE>
[front cover] NOVEMBER 30, 1998
SEMIANNUAL REPORT
- ----------------
AMERICAN CENTURY
[graphic of stairs]
BENHAM GROUP
- ------------------------------------
LIMITED-TERM TAX-FREE
INTERMEDIATE-TERM TAX-FREE
LONG-TERM TAX-FREE
HIGH-YIELD MUNICIPAL
[american century logo(reg.sm)]
American
Century
[inside front cover]
AMERICAN CENTURY BROKERAGE
- --------------------------------------------------------------------------------
We're pleased to introduce American Century's new brokerage service, which
offers a wide range of investment options and features:
* FundChoice Service--Invest in over 8,000 no-load and load mutual funds
from hundreds of different fund companies, many with no transaction fees
* Buy individual stocks and bonds
* 24-hour Internet and automated phone trades are just $24.95 for up to
1,000 shares of stock, and 2 cents per share thereafter
* Strong research capability
* Build and track model portfolios
* Get news, quotes and charts
* Check free Standard & Poor's stock reports
* Access Wall Street on Demand(tm), a research service with more than
500,000 reports on industry trends, corporate earnings, and mutual
fund analysis
* Track your brokerage account on one easy-to-read statement
* Unlimited check writing and a Gold MasterCard(reg.tm) ATM/debit card
with an American Century Brokerage Access AccountSM (minimum $10,000)
To talk with a Brokerage Associate, call 1-888-345-2071.
WHAT'S NEW . . .
AMERICAN CENTURY CATALOG OF TOOLS & SERVICES lists all the free educational
materials available to investors.
We now have FOUR-PAGE PROFILES of many of our funds. The profiles follow a
standard SEC format and are intended to allow investors to compare funds easily.
You can request a profile or the full prospectus. Full prospectuses contain more
detailed fund information and you will continue to receive one after investing.
In 1999, we will provide SIMPLIFIED PROSPECTUSES that highlight important
information about our funds, including fees and expenses. More detailed data
will be in the Statement of Additional Information.
To order any of these materials, please call 1-800-345-2021.
[left margin]
BENHAM GROUP
LIMITED-TERM TAX-FREE
(TWTSX)
- ----------------------------------
BENHAM GROUP
INTERMEDIATE-TERM TAX-FREE
(TWTIX)
- ----------------------------------
BENHAM GROUP
LONG-TERM TAX-FREE
(TWTLX)
- ----------------------------------
BENHAM GROUP
HIGH-YIELD MUNICIPAL
(ABHYX)
Our Message to You
- --------------------------------------------------------------------------------
/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended November 30, 1998, was an eventful period in the
global financial markets. Weakening economic and financial conditions, brought
on by problems in Asia, Russia, and Latin America, led to significant stock
market volatility and a dramatic decline in interest rates. Volatility was so
rampant that the Federal Reserve, the U.S. central bank, cut short-term interest
rates three times to help stabilize markets worldwide.
The third quarter of 1998 served as a good example of the markets'
extremes. Several major U.S. stock indices hit record highs in mid-July before
plunging 20% in the following six weeks. In the bond market, high demand for the
safety of Treasury bonds pushed yields down to their lowest levels ever, but
demand for corporate bonds thinned to the point where trading was all but
impossible.
This type of investment environment particularly demonstrates the benefits
of a well-diversified investment portfolio. As we saw in the third quarter of
1998, allocating your assets among stocks, bonds, and money market funds can
help your portfolio weather dramatic changes in the economic or investment
climate.
Municipal bond performance fit between the extremes provided by Treasurys
and corporates. Municipals posted positive returns, though not as strong as
Treasurys, as interest rates fell.
We're proud to report that investors who diversified with the American
Century Benham Tax-Free and Municipal funds continued to receive solid
investment results--the funds each produced better returns and more federal
tax-free income than their Lipper category averages.
Looking ahead, we've been watching carefully the preparation of the world's
computer systems for the year 2000. At American Century, we're devoting
substantial resources to this endeavor. Throughout 1999, our technology team
will be extensively testing our systems, including those involved with fund
performance and dividend payments.
Thank you for your continued investment with American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...... 2
Market Perspective ..... 4
Limited-Term Tax-Free
Performance Information 5
Management Q&A ......... 6
Schedule of Investments 9
Intermediate-Term Tax-Free
Performance Information 11
Management Q&A ......... 12
Schedule of Investments 15
Long-Term Tax-Free
Performance Information 20
Management Q&A ......... 21
Schedule of Investments 24
High-Yield Municipal
Performance Information 28
Management Q&A ......... 29
Schedule of Investments 32
Financial Statements
Statements of Assets and
Liabilities ............ 35
Statements of Operations 36
Statements of Changes
in Net Assets .......... 37
Notes to Financial
Statements ............. 39
Financial Highlights ... 42
Other Information
Background Information
Investment Philosophy
and Policies ........ 46
Comparative Indices . 46
Lipper Rankings ..... 46
Credit Rating
Guidelines .......... 46
Investment and Credit
Research Teams ...... 46
Glossary ............... 47
www.americancentury.com 1
Report Highlights
- --------------------------------------------------------------------------------
MARKET PERSPECTIVE
* A sharp decline in interest rates helped municipal bonds produce solid
returns for the six months ended November 30, 1998.
* Rates fell because a series of economic crises around the globe threatened
to slow the U.S. economy, and because inflation remained low.
* In an attempt to boost the economy and restore confidence to global
financial markets, the U.S. Federal Reserve lowered short-term interest
rates three times from September to November.
* Despite their gains, municipal bonds lagged Treasury securities. That's
because the bond market rally was driven in part by demand from foreign
investors, who don't benefit from municipals' tax advantages.
* Meanwhile, municipal bond supply surged as many issuers sought to lock in
lower borrowing costs by refinancing older, higher-rate debt.
* As a result of the Federal Reserve's interest rate cuts, short-term rates
fell faster than long-term rates, resulting in a steeper municipal yield
curve.
LIMITED-TERM TAX-FREE
* Limited-Term Tax-Free produced higher returns and more federal tax-free
income than the average short/intermediate municipal fund, according to
Lipper Inc.
* We increased the portfolio's credit quality, selling some of our lower-rated
bonds after they'd been upgraded and their prices rose.
* We lengthened duration slightly over the last six months, which helped
returns as interest rates declined.
* The portfolio's yield declined as interest rates fell over the last six
months.
* Less supply and increased demand improve the outlook for the municipal
market.
INTERMEDIATE-TERM TAX-FREE
* The portfolio had higher returns and produced more federal tax-free income
than the average intermediate municipal fund, according to Lipper Inc.
* We changed the maturity structure of the portfolio from a "barbell" to a
"bullet," which enhanced returns as the municipal yield curve steepened over
the last six months (see page 13 for a detailed discussion of the fund's
maturity structure).
* We've maintained a slightly long duration for about the last year, which
helped returns as rates declined overall.
* Less supply and increased demand improve the outlook for the municipal
market.
[left margin]
"A SHARP DECLINE IN INTEREST RATES HELPED MUNICIPAL BONDS PRODUCE SOLID RETURNS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998."
LIMITED-TERM TAX-FREE
(TWTSX)
TOTAL RETURNS: AS OF 11/30/98
6 Months 2.90%*
1 Year 5.51%
NET ASSETS: $40.5 million
30-DAY SEC YIELD: 3.36%
INCEPTION DATE: 3/1/93
INTERMEDIATE-TERM
TAX-FREE
(TWTIX)
TOTAL RETURNS: AS OF 11/30/98
6 Months 3.56%*
1 Year 6.77%
NET ASSETS: $147.5 million
30-DAY SEC YIELD: 3.69%
INCEPTION DATE: 3/2/87
* Not annualized.
See Total Returns on pages 5 and 11. Investment terms are defined in the
Glossary on page 47.
2 1-800-345-2021
Report Highlights
- --------------------------------------------------------------------------------
(Continued)
LONG-TERM TAX-FREE
* Long-Term Tax-Free performed very well, continuing to produce higher returns
and more federal tax-free income than the average general municipal fund,
according to Lipper Inc.
* Keys to that solid performance were our below-average management fees and
ability to structure the portfolio to be immune to "calls" (for a complete
discussion of calls, see pages 21-22).
* The fund's longer-term returns are also quite strong--over the past five
years, Long-Term Tax-Free placed in about the top quarter of the Lipper
"General Municipal Debt Funds" category. There were 240, 198, and 141 funds
in the category for the 1-, 3-, and 5-year periods, respectively.
* The portfolio's yield declined as interest rates fell over the last six
months.
* Less supply and increased demand improve the outlook for the municipal
market.
HIGH-YIELD MUNICIPAL
* Since its inception on March 31, 1998, the fund has generated much better
returns than the average high-yield municipal fund, according to Lipper Inc.
* In addition, High-Yield Municipal produced more federal tax-free income than
its Lipper peer group average.
* That solid performance reflects the fact that we've put together an
experienced management team that's been able to invest new money coming into
the fund quickly.
* In addition, we've waived management fees through April 30, 1999, which
helped us provide competitive yields and returns right away. Without the fee
waiver, yields and returns would have been lower.
* We helped performance by keeping duration relatively long as interest rates
declined through early October.
* Less supply and increased demand improve the outlook for the municipal
market.
[right margin]
"LESS SUPPLY AND INCREASED DEMAND IMPROVE THE OUTLOOK FOR THE MUNICIPAL MARKET.
LONG-TERM TAX-FREE
(TWTLX)
TOTAL RETURNS: AS OF 11/30/98
6 Months 4.07%*
1 Year 7.77%
NET ASSETS: $125.2 million
30-DAY SEC YIELD: 4.10%
INCEPTION DATE: 3/2/87
HIGH-YIELD MUNICIPAL
(ABHYX)
TOTAL RETURNS: AS OF 11/30/98
6 Months 4.20%*
Since Inception 6.08%*
NET ASSETS: $39.5 million
30-DAY SEC YIELD: 5.34%
INCEPTION DATE: 3/31/98
* Not annualized.
See Total Returns on pages 20 and 28. Investment terms are defined in the
Glossary on page 47.
www.americancentury.com 3
Market Perspective from Randall W. Merk
- --------------------------------------------------------------------------------
/photo of Randall W. Merk/
Randall W. Merk, director of fixed-income investing at American Century
MODERATE MUNICIPAL RETURNS
Municipal securities turned in a positive performance during the six months
ended November 30, 1998. Municipal bond prices rose as interest rates declined;
however, too much supply and too little demand limited returns. Long-term
municipal bonds, which are most sensitive to changes in interest rates,
performed best. For the six months, the Lehman Brothers Long-Term Municipal Bond
Index returned 4.10%. Intermediate-term securities, represented by the Lehman
Brothers 5-Year General Obligation Index, returned 3.43%, while the short-term
Merrill Lynch 0- to 3-Year Municipal Index posted a 2.77% return.
RATES FELL
Declines in interest rates were sparked by a series of global economic
crises that threatened to slow the U.S. economy. In addition, an abundance of
cheap imports and falling commodity prices helped keep inflation low. The
government's consumer price index rose just 1.5% for the year ended November 30,
1998. That's the slowest pace in a dozen years.
In an attempt to boost the economy and restore confidence to financial
markets, the U.S. Federal Reserve cut short-term interest rates three times from
September to November, its first rate reductions since January 1996.
MUNICIPALS LAGGED TREASURYS
Plummeting stock markets, currency devaluations, and debt defaults caused
investors around the world to demand the safety and liquidity of U.S. Treasury
bonds. That surge in demand led to record low bond yields and huge gains by
Treasury securities. Because foreign investors don't benefit from the tax
advantages of municipal bonds, demand for municipals lagged.
Furthermore, the supply of municipals surged. Motivated by declining
interest rates, municipal issuers sought to lock in lower borrowing costs by
issuing new debt and/or refinancing older debt. For the six months ended
November 30, 1998, new issue volume was up about a third compared with the same
six-month period a year ago. These supply and demand factors caused municipal
bonds to underperform Treasury securities for the six months.
STEEPER YIELD CURVE
Reflecting the Fed's interest rate cuts, short-term rates dropped
dramatically. For the six months, the yield on one-year municipal securities
fell roughly 62 basis points (a basis point equals 0.01%), while the yield on
30-year municipal bonds fell only about 15 basis points. This resulted in the
steeper yield curve shown in the accompanying graph. The yield difference
between a one-year note and a 30-year bond rose to 176 basis points on November
30, 1998, compared with 128 basis points just six months earlier.
[left margin]
"MUNICIPAL SECURITIES TURNED IN A POSITIVE PERFORMANCE DURING THE SIX MONTHS
ENDED NOVEMBER 30, 1998."
[line chart - data below]
STEEPER MUNICIPAL YIELD CURVE
Years to Maturity 11/30/98 5/31/98
1 3.060% 3.690%
2 3.360% 3.850%
3 3.510% 3.950%
4 3.630% 4.040%
5 3.730% 4.090%
6 3.825% 4.160%
7 3.920% 4.230%
8 4.000% 4.300%
9 4.080% 4.370%
10 4.160% 4.440%
11 4.248% 4.514%
12 4.336% 4.588%
13 4.424% 4.662%
14 4.512% 4.736%
15 4.600% 4.810%
16 4.636% 4.836%
17 4.672% 4.862%
18 4.708% 4.888%
19 4.744% 4.914%
20 4.780% 4.940%
21 4.784% 4.942%
22 4.788% 4.944%
23 4.792% 4.946%
24 4.796% 4.948%
25 4.800% 4.950%
26 4.804% 4.954%
27 4.808% 4.958%
28 4.812% 4.962%
29 4.816% 4.966%
30 4.820% 4.970%
Source: Bloomberg Financial Markets
"DECLINES IN INTEREST RATES WERE SPARKED BY A SERIES OF GLOBAL ECONOMIC CRISES
THAT THREATENED TO SLOW THE U.S. ECONOMY."
4 1-800-345-2021
Limited-Term Tax-Free--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1998
<TABLE>
INCEPTION 3/1/93
LIMITED-TERM MERRILL LYNCH 0- TO SHORT/INTERMEDIATE MUNI DEBT FUNDS(2)
TAX-FREE 3-YEAR MUNI INDEX AVERAGE RETURN FUND'S RANKING
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 MONTHS(1) ............ 2.90% 2.77% 2.70% --
1 YEAR ................. 5.51% 5.12% 5.03% 5 OUT OF 30
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ................ 4.84% 4.56% 4.50% 6 OUT OF 24
5 YEARS ................ 4.78% 4.48% 4.37% 2 OUT OF 14
LIFE OF FUND ........... 4.62% 4.35% 4.61%(3) 7 OUT OF 11(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 3/31/93, the date nearest the fund's inception for which return data
are available.
See pages 46-47 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain chart - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 11/30/98
Limited-Term Tax-Free $12,965
Merrill-Lynch 0- to
3-Year Muni Index $12,775
Limited-Term Merrill-Lynch 0- to
Tax-Free 3-Year Muni Index
DATE VALUE VALUE
3/1/93 $10,000 $10,000
3/31/93 $10,014 $9,991
6/30/93 $10,132 $10,110
9/30/93 $10,227 $10,149
12/31/93 $10,337 $10,322
3/31/94 $10,322 $10,319
6/30/94 $10,426 $10,396
9/30/94 $10,524 $10,499
12/31/94 $10,591 $10,458
3/31/95 $10,790 $10,693
6/30/95 $10,964 $10,904
9/30/95 $11,110 $11,064
12/31/95 $11,305 $11,213
3/31/96 $11,364 $11,325
6/30/96 $11,434 $11,403
9/30/96 $11,564 $11,535
12/31/96 $11,721 $11,672
3/31/97 $11,768 $11,728
6/30/97 $12,007 $11,907
9/30/97 $12,204 $12,073
12/31/97 $12,378 $12,222
3/31/98 $12,501 $12,356
6/30/98 $12,627 $12,476
9/30/98 $12,892 $12,680
11/30/98 $12,965 $12,775
$10,000 investment made 3/1/93
The chart at left shows the growth of a $10,000 investment over the life of the
fund, while the chart below shows the fund's year-by-year performance. The
Merrill Lynch 0- to 3-Year Municipal Index is provided for comparison in each
chart. Limited-Term Tax-Free's returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the returns of
the index do not. 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.
[bar chart - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED NOVEMBER 30)
Limited-Term Merrill-Lynch 0- to
Tax-Free 3-Year Muni Index
DATE RETURN RETURN
11/30/93* 2.65% 2.54%
11/30/94 2.80% 1.67%
11/30/95 6.62% 7.19%
11/30/96 4.11% 4.15%
11/30/97 4.91% 4.42%
11/30/98 5.51% 5.12%
* From 3/1/93, the fund's inception date.
www.americancentury.com 5
Limited-Term Tax-Free--Q&A
- --------------------------------------------------------------------------------
/photo of Joel Silva/
An interview with Joel Silva, a portfolio manager on the Limited-Term
Tax-Free fund investment team.
HOW DID LIMITED-TERM TAX-FREE PERFORM DURING THE SIX MONTHS ENDED NOVEMBER 30,
1998?
The portfolio continued to perform well, producing better-than-average
returns. Over the last six months, the fund returned 2.90%, compared with the
2.70% average return of the 31 "Short/Intermediate Municipal Debt Funds" tracked
by Lipper Inc. Limited-Term Tax-Free's relative performance over the last year
is even better, with the portfolio ranking fifth in its Lipper group. (See the
Total Returns table on the previous page for additional fund performance
comparisons.)
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO OVER THE LAST SIX MONTHS?
Perhaps the biggest change we made was to upgrade the fund's credit
quality. By the end of November, more than three-quarters of assets were in
bonds rated AAA and AA, compared with about two-thirds of assets just six months
ago.
We made the change because we think municipal credit quality may have
peaked. Economic turmoil in Asia and Latin America has reduced demand for goods
produced in the U.S. While we don't expect a recession, we do believe we're in
for slower growth. That could take a toll on municipal tax revenues and drag
down credit quality. In addition, credit quality has been helped in recent years
by easy access to bond insurance. But with the economy likely to slow, bond
insurers have slowed their activity. And because lower-rated bonds tend to be
more sensitive to changes in credit conditions and the economy, we think it
makes sense to increase the portfolio's quality.
HOW DO CHANGES IN CREDIT QUALITY AFFECT THE BONDS IN THE PORTFOLIO?
A good way to understand credit risk and how it relates to a municipal bond
or fund is to look at credit spreads. The spread is the difference in yield
between municipal bonds rated BBB and AAA. We've written at length in past
reports about how credit spreads narrowed in the last few years as a result of
an improving economy, easy access to bond insurance, and heavy demand for
higher-yielding bonds. Narrower yield spreads meant BBB bonds generally
outperformed higher-rated debt in recent years. And as long as credit quality
was improving, we were content to hold lower-rated bonds and boost our
performance.
For example, let's look at the fund's New York holdings. We bought
lower-rated New York bonds at attractive prices some time ago. We sold some of
those securities in the summer after they'd been upgraded, yield spreads
narrowed, and their prices rose. That move turned out to be timely--credit
spreads widened in the late summer and fall, and these bonds underperformed AAA
securities. Spreads widened because New York's economy and tax revenues are
[left margin]
"THE PORTFOLIO CONTINUED TO PERFORM WELL, PRODUCING BETTER-THAN-AVERAGE
RETURNS."
YIELDS AS OF NOVEMBER 30, 1998
30-DAY SEC YIELD
3.36%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 4.67%
31.0% TAX BRACKET 4.87%
36.0% TAX BRACKET 5.25%
39.6% TAX BRACKET 5.56%
PORTFOLIO AT A GLANCE
11/30/98 5/31/98
NUMBER OF SECURITIES 38 36
WEIGHTED AVERAGE
MATURITY 3.7 YRS 3.6 YRS
AVERAGE DURATION 3.2 YRS 2.9 YRS
EXPENSE RATIO 0.52%* 0.52%*
* Annualized.
Investment terms are defined in the Glossary on page 47.
6 1-800-345-2021
Limited-Term Tax-Free--Q&A
- --------------------------------------------------------------------------------
(Continued)
closely tied to the health of the finance sector, which was very hard hit by
volatility in global financial markets from July to October. In our opinion, the
risk of holding some of these lower-rated bonds outweighed the advantages of
picking up the small amount of extra yield they offered. As a result, we locked
in our gains, sacrificing some yield to get the boost in return.
TAKING PROFITS BY SELLING SOME OF THOSE LOWER-RATED BONDS HAS THE POTENTIAL TO
GENERATE CAPITAL GAINS. DO YOU TRY TO LIMIT CAPITAL GAINS AT ALL?
Yes, we evaluate all our trades on the basis of after-tax total return. We
always ask ourselves, "Does this trade make sense for a tax-sensitive investor?"
For a trade to meet that criterion, we have to be convinced that it makes sense
from both a return and a capital gain perspective. For example, when we sold
those New York bonds, not only did we look at the trade from a total return
perspective, but we also considered what it meant in terms of realized capital
gains. Ways we try to limit capital gains are by carrying over losses from
previous tax years and by doing tax-loss swaps in the current year when we can.
THE FUND'S YIELD DECLINED OVER THE LAST SIX MONTHS. IS THAT A RESULT OF SELLING
THOSE LOWER-RATED, HIGHER-YIELDING BONDS?
Not entirely. The main reason Limited-Term Tax-Free has a lower yield is
that interest rates fell quite a bit over the last six months. Rates came down
across the municipal yield curve, but they fell most sharply for short- and
intermediate-term bonds. According to Bloomberg Financial Services, the yield on
a three-year AAA municipal bond fell 43 basis points (a basis point equals
0.01%, so 43 basis points equals 0.43%). In addition, the 30-day SEC yield
depends in part on the fund's share price--the higher the price, the lower the
yield. Because Limited-Term Tax-Free's share price rose between May and
November, its yield declined (for a definition of SEC yield, see the Glossary on
page 47).
However, it is true that reducing our exposure to lower-rated municipal
bonds did marginally reduce Limited-Term Tax-Free's yield. But we think we've
done a good job of upgrading the fund's quality without throwing in the towel on
yield. For example, six months ago the portfolio's yield was 3.67%, while the
average yield of our Lipper group was 3.60%. As of November 30, the portfolio
had a 3.36% 30-day SEC yield, which was still higher than the 3.28% yield of the
Lipper category average. So we're still giving shareholders better-than-average
yields, and we did that while upgrading the fund's credit quality. However, a
portion of income will be taxable for shareholders subject to the federal
alternative minimum tax.
DID YOU MAKE ANY CHANGES TO DURATION?
Over the last six months, we lengthened duration slightly from 2.9 to 3.2
years. Interest rates declined during the period, so having a longer duration
helped returns. (The longer a fund's duration, the more its share price tends to
rise when rates decline and fall when rates increase.) That relatively small
change is consistent with our policy of making only modest adjustments to
duration over time. Rather than make big bets on the direction of interest
rates, we try to outperform our peers through careful credit analysis and
security selection.
[right margin]
"INTEREST RATES DECLINED DURING THE PERIOD, SO HAVING A LONGER DURATION HELPED
RETURNS."
TOP FIVE STATES (AS OF 11/30/98)
% OF FUND INVESTMENTS
OHIO 10.6%
MICHIGAN 9.7%
NEW YORK 9.5%
CALIFORNIA 7.1%
MISSOURI 6.9%
TOP FIVE STATES (AS OF 5/31/98)
% OF FUND INVESTMENTS
NEW YORK 18.5%
MISSOURI 11.9%
CALIFORNIA 11.3%
OHIO 10.6%
ARIZONA 5.9%
www.americancentury.com 7
Limited-Term Tax-Free--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
We like the outlook for municipal bonds for a number of reasons. Inflation
rose at the slowest annual pace in a dozen years for the year ended November 30,
1998. With inflation so low and the economy facing pressure from global economic
turmoil, we believe the Federal Reserve probably has room to lower interest
rates even further.
Supply and demand factors also look positive going forward. As interest
rates declined this year, many municipalities refinanced their older debt at the
new lower rate. All that supply limited municipal bonds' gains in 1998. But
bonds can only be refinanced a limited number of times, so we should see less
new supply going forward. Meanwhile, demand for municipal bonds is likely to be
strong because municipals are very attractively valued relative to Treasurys.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR LIMITED-TERM TAX-FREE FOR THE NEXT
SIX MONTHS?
It's a steady-at-the-helm approach--we're going to continue to work to give
investors solid tax-exempt yields and good total return. But as we've discussed,
we won't sacrifice principal to reach for extra yield. That means we're likely
to continue to upgrade the fund's credit quality when we think we can sell our
lower-rated bonds at attractive prices. Because we think interest rates are
likely to head lower, we'll continue to keep duration slightly longer than three
years. Overall, we'll use careful credit analysis and security selection to find
what we think are the best bonds in the market. That's the same strategy that's
helped the fund to such solid long-term performance.
[left margin]
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
AAA 57% 51%
AA 21% 17%
A 6% 12%
BBB 16% 20%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page 46
for more information.
TOP FIVE SECTORS (AS OF 11/30/98)
% OF FUND INVESTMENTS
GO 20%
COPS/LEASES 19%
ELECTRIC REVENUE 11%
TRANSPORTATION REVENUE 11%
SALES TAX REVENUE 7%
TOP FIVE SECTORS (AS OF 5/31/98)
% OF FUND INVESTMENTS
COPS/LEASES 27%
GO 22%
TRANSPORTATION REVENUE 12%
ELECTRIC REVENUE 7%
WATER AND SEWER REVENUE 6%
Security types are defined on page 47.
8 1-800-345-2021
Limited-Term Tax-Free--Schedule of Investments
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES--98.4%
ALASKA--4.7%
$ 850 Alaska Industrial Development &
Export Auth. Power Rev.,
Series 1998-1, (Snettisham
Hydroelectric), 4.50%, 1/1/00 $ 859
1,000 Alaska Industrial Development &
Export Auth. Rev.,
Series 1998 A, 4.50%,
4/1/01 (MBIA) 1,015
---------
1,874
---------
ARIZONA--6.5%
1,500 Arizona Transportation Board
Excise Tax Rev., (Maricopa
County), 5.60%, 7/1/02
(AMBAC) 1,593
515 Maricopa County COP, 5.625%,
6/1/00 524
500 Maricopa County School
District No. 11 GO,
Series 1998 C, (Peoria
University), 4.20%, 7/1/05
(FGIC) 508
---------
2,625
---------
CALIFORNIA--7.1%
1,225 Garden Grove Agency Community
Development Tax Allocation,
(Garden Grove Community),
5.20%, 10/1/01 1,274
1,500 Long Beach Harbor Rev.,
Series 1998 A, 5.00%,
5/15/03 (FGIC) 1,577
---------
2,851
---------
COLORADO--6.6%
1,000 Denver Colorado City & County
Airport Rev., Series 1996 B,
5.25%, 11/15/02 (MBIA) 1,050
500 Denver Health & Hospital Rev.,
Series 1998 A, 4.75%,
12/1/01 508
1,000 Highlands Ranch Metropolitan
District #2 GO, 6.00%,
6/15/02 (FSA) 1,074
---------
2,632
---------
FLORIDA--4.8%
210 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
(Multi-County Program), 4.70%,
10/1/05 (GNMA/FNMA) 213
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$1,550 Jacksonville Electric Auth. Rev.,
(St. John's River), 6.00%,
10/1/04 $ 1,714
---------
1,927
---------
ILLINOIS--2.6%
1,000 Illinois Civic Center Rev., 5.00%,
12/15/05 (AMBAC) 1,055
---------
INDIANA--2.6%
1,000 Central High School Building
Corp. Rev., 5.25%, 2/1/04
(AMBAC) 1,056
---------
KENTUCKY--2.5%
1,000 Carrollton & Henderson Public
Energy Auth. Gas Rev.,
Series 1998 B, 4.20%,
1/1/06 (FSA) 999
---------
MICHIGAN--9.7%
1,000 Detroit Downtown Development
Auth. Tax Increment Rev.,
Series 1998 C, (Development
Area No. 1), 4.10%, 7/1/03
(MBIA) 1,008
880 Detroit GO, Series 1995 A,
5.40%, 5/1/00 901
385 Detroit GO, Series 1995 B,
5.10%, 4/1/99 387
500 Detriot GO, Series 1995 B,
6.50%, 4/1/02 537
1,000 Michigan Municipal Board Auth.
Rev., 5.00%, 12/1/05 1,060
---------
3,893
---------
MISSISSIPPI--2.3%
935 Mississippi Lease Rev. COP,
Series 1997 A, 4.60%,
4/15/99 (AMBAC) 940
---------
MISSOURI--6.9%
1,675 North Kansas City School District
GO, 5.00%, 3/1/00 1,709
1,000 Springfield State Highway
Improvement Corp. Rev., 5.05%,
8/1/03 (AMBAC) 1,051
---------
2,760
---------
MONTANA--2.5%
1,000 Forsyth Pollution Control Rev.,
Series 1998 B, 4.75%, 5/1/03 1,011
---------
NEW JERSEY--5.9%
500 New Jersey Educational Facilities
Auth. Rev., Series 1998 B,
(St. Peters College), 4.60%,
7/1/01 508
See Notes to Financial Statements
www.americancentury.com 9
Limited-Term Tax-Free--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$1,750 West Windsor Plainsboro GO,
5.25%, 12/1/02 (FGIC) $ 1,850
---------
2,358
---------
NEW YORK--9.5%
2,145 New York City Municipal
Assistance Corp. Rev.,
Series 1997 I, 5.25%, 7/1/02 2,250
500 New York State Dormitory Auth.
Rev., Series 1998 I, (New York
Downtown Hospital), 4.80%,
2/15/06 512
1,000 New York State Serial Bonds GO,
6.70%, 11/15/99 1,034
---------
3,796
---------
OHIO--10.6%
2,070 Ohio Building Auth. Rev.,
Series 1997 A, (Highway
Safety Building), 5.00%,
10/1/03 (AMBAC) 2,175
500 Ohio Public Facilities Commission
Rev., Series 1998 A, 4.50%,
12/1/04 516
1,500 Ohio Water Development Auth.
Pollution Control Facilities Rev.,
5.00%, 6/1/04 (MBIA) 1,580
---------
4,271
---------
RHODE ISLAND--1.5%
570 Rhode Island Economic
Development Corp. Airport Rev.,
Series 1998 A, 5.00%,
7/1/03 (FSA) 595
---------
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
SOUTH CAROLINA--4.9%
$ 855 Piedmont Municipal Power
Agency Rev., Series 1991 A,
6.00%, 1/1/02 (FGIC) $ 909
1,000 South Carolina Public Service
Auth. Rev., Series 1998 A,
5.00%, 1/1/02 1,036
---------
1,945
---------
TENNESSEE--2.7%
1,050 Jackson Hospital Rev., (Madison
County General Hospital),
4.50%, 4/1/00 (AMBAC) 1,064
---------
TEXAS--4.5%
1,000 Colorado River Municipal Water
District Rev., Series 1991 A,
8.50%, 1/1/01, Prerefunded at
100% of Par (AMBAC)(1) 1,098
685 Denison Hospital Auth. Rev.,
(Texoma Medical Center),
5.00%, 8/15/00 695
---------
1,793
---------
TOTAL MUNICIPAL SECURITIES 39,445
---------
(Cost $38,559)
TEMPORARY CASH INVESTMENTS--1.6%
656 Units of Participation in Chase
Visa Tax-Free Money Market
Fund (Institutional Shares) 656
---------
(Cost $656)
TOTAL INVESTMENT SECURITIES--100.0% $40,101
=========
(Cost $39,215)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
GNMA = Government National Mortgage Association
GO = General Obligation
MBIA = MBIA Insurance Corp.
(1) Escrowed to maturity in U.S. Government securities.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* principal amount of each investment
* the market value of each investment
* the percentage of investments in each state
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
10 1-800-345-2021
Intermediate-Term Tax-Free--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1998
<TABLE>
INCEPTION 3/2/87
INTERMEDIATE-TERM LEHMAN 5-YEAR INTERMEDIATE MUNICIPAL DEBT FUNDS(2)
TAX-FREE GO INDEX AVERAGE RETURN FUND'S RANKING
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 MONTHS(1) ...... 3.56% 3.43% 3.18% --
1 YEAR ........... 6.77% 6.32% 6.31% 33 OUT OF 148
- ------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS .......... 5.80% 5.68% 5.57% 44 OUT OF 121
5 YEARS .......... 5.56% 5.55% 5.50% 31 OUT OF 78
10 YEARS ......... 6.59% 6.96% 6.94% 21 OUT OF 27
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 46-47 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain chart - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 11/30/98
Intermdiate-Term Tax-Free $18,938
Lehman 5-Year GO Index $19,607
Intermediate-Term Lehman 5-Year
Tax-Free GO Index
DATE VALUE VALUE
11/30/88 $10,000 $10,000
11/30/89 $10,671 $10,815
11/30/90 $11,370 $11,651
11/30/91 $12,315 $12,724
11/30/92 $13,369 $13,879
11/30/93 $14,449 $14,966
11/30/94 $14,175 $14,831
11/30/95 $15,989 $16,610
11/30/96 $16,787 $17,500
11/30/97 $17,737 $18,442
11/30/98 $18,938 $19,607
$10,000 investment made 11/30/88
The chart at left shows the growth of a $10,000 investment in the fund over 10
years, while the chart below shows the fund's year-by-year performance. The
Lehman 5-Year GO Index is provided for comparison in each chart.
Intermediate-Term Tax-Free's returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the returns of
the index do not. 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.
[bar chart - data below]
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED NOVEMBER 30)
Intermediate-Term Lehman 5-Year
Tax-Free GO Index
DATE RETURN RETURN
11/30/89 6.71% 8.15%
11/30/90 6.55% 7.73%
11/30/91 8.31% 9.21%
11/30/92 8.56% 9.08%
11/30/93 8.08% 7.83%
11/30/94 -1.90% -0.90%
11/30/95 12.80% 11.99%
11/30/96 4.99% 5.36%
11/30/97 5.66% 5.38%
11/30/98 6.77% 6.32%
www.americancentury.com 11
Intermediate-Term Tax-Free--Q&A
- --------------------------------------------------------------------------------
An interview with Joel Silva (pictured on page 6), a portfolio manager on
the Intermediate-Term Tax-Free fund investment team.
HOW DID INTERMEDIATE-TERM TAX-FREE PERFORM DURING THE SIX MONTHS ENDED NOVEMBER
1998?
The portfolio performed well. Over the last six months, the fund returned
3.56%, compared with the 3.18% average return of the 150 "Intermediate Municipal
Debt Funds" tracked by Lipper Inc. Limited-Term Tax-Free's relative performance
over the last several years is similarly strong. The fund also continued to
outperform its benchmark, the Lehman Brothers 5-Year GO Index. (See the Total
Returns table on the previous page for detailed performance comparisons.)
HOW DID INTERMEDIATE-TERM TAX-FREE'S YIELD COMPARE?
The portfolio again produced more federal tax-free income than the average
intermediate-term municipal fund. As of November 30, Intermediate-Term Tax-Free
had a 30-day SEC yield of 3.69%, significantly higher than the 3.46% yield of
its Lipper category average. (See the Yields table at left for tax-equivalent
yields.) However, a portion of income will be taxable for shareholders subject
to the federal alternative minimum tax.
THE FUND'S YIELD DECLINED OVER THE SIX MONTHS. WHY?
The primary reason Intermediate-Term Tax-Free has a lower yield is that
interest rates fell quite a bit over the last six months. Rates came down across
the municipal yield curve, but they fell most sharply for short- and
intermediate-term bonds. According to Bloomberg Financial Services, the yield on
a five-year AAA municipal bond fell 36 basis points (a basis point equals 0.01%,
so 36 basis points equals 0.36%). In addition, the SEC yield depends in part on
the fund's share price--the higher the price, the lower the yield. Because
Intermediate-Term Tax-Free's share price rose between May and November, its
yield declined (for a definition of SEC yield, see the Glossary on page 47).
But we should also point out that we've begun to reduce our exposure to
lower-rated securities. BBB bonds have higher yields than AA or AAA securities,
so increasing the portfolio's credit quality will also likely marginally reduce
the fund's yield.
WHY INCREASE INTERMEDIATE-TERM TAX-FREE'S CREDIT QUALITY?
We're making the change because we think municipal credit quality may have
peaked. Economic turmoil in Asia and Latin America has reduced demand for goods
produced in the U.S. While we don't expect a recession, we do believe we're in
for slower growth. That could take a toll on municipal tax revenues and drag
down credit quality. In addition, credit quality has been helped in recent years
by easy access to bond insurance. But with the economy likely to slow, bond
insurers have decreased their activity. And because lower-rated bonds tend to be
more sensitive to changes in credit conditions and the economy, we think it
makes sense to begin to increase the portfolio's quality.
[left margin]
"THE PORTFOLIO AGAIN PRODUCED MORE FEDERAL TAX-FREE INCOME THAN THE AVERAGE
INTERMEDIATE-TERM MUNICIPAL FUND."
YIELDS AS OF NOVEMBER 30, 1998
30-DAY SEC YIELD
3.69%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 5.13%
31.0% TAX BRACKET 5.35%
36.0% TAX BRACKET 5.77%
39.6% TAX BRACKET 6.11%
PORTFOLIO AT A GLANCE
11/30/98 5/31/98
NUMBER OF SECURITIES 112 101
WEIGHTED AVERAGE
MATURITY 8.3 YRS 7.9 YRS
AVERAGE DURATION 5.4 YRS 5.4 YRS
EXPENSE RATIO 0.51%* 0.51%*
* Annualized.
Investment terms are defined in the Glossary on page 47.
12 1-800-345-2021
Intermediate-Term Tax-Free--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHAT OTHER CHANGES DID YOU MAKE TO THE PORTFOLIO OVER THE LAST SIX MONTHS?
We changed the maturity structure from the "barbell" we'd maintained
earlier in the year to more of a "bullet" structure. A barbell--which
overweights bonds with short- and long-term maturities and underweights
intermediate-term securities--tends to perform best when the yield curve is
moving from steep to flat. A bullet, on the other hand, concentrates the
portfolio's bond maturities around an intermediate-term maturity and tends to
outperform a barbell when the yield curve steepens. Several months ago, we felt
the municipal yield curve was as flat as it was going to get and would likely
steepen going forward. As a result, we locked in some of the gains from our
barbell structure and moved toward more of a bullet.
TAKING PROFITS FROM THE MATURITY STRUCTURE TRADES YOU'VE DISCUSSED HAVE THE
POTENTIAL TO GENERATE CAPITAL GAINS. DO YOU TRY TO LIMIT CAPITAL GAINS AT ALL?
Yes, we evaluate all our trades on the basis of after-tax total return. We
always ask ourselves, "Does this trade make sense for a tax-sensitive investor?"
For a trade to meet that criterion, we have to be convinced that it makes sense
from both a return and a capital gain perspective. In making the change from a
barbell to a bullet, not only did we take into account the shape of the yield
curve and the boost the trade could give to total return, but we also considered
what we would give up in terms of realized capital gains. Other ways we try to
limit capital gains are by carrying over losses from previous tax years and by
doing tax-loss swaps in the current year when we can.
DID YOU MAKE ANY CHANGES TO DURATION?
Not really. For about the last year we've maintained a duration of 5.4
years, which is slightly longer than the duration of the average
intermediate-term municipal fund. (Duration measures a bond fund's sensitivity
to changes in interest rates. The longer a fund's duration, the more its share
price tends to move when rates change.) Interest rates declined during the
period, so having a longer duration helped returns.
But the fund, and the municipal market in general, didn't get as big a
boost as you might expect out of lower rates. That's because the decline in
market rates was driven in part by a flight to quality by foreign
investors--investors who don't benefit from municipal bonds' tax advantages. As
a result, municipal bonds didn't participate fully in the rally that sent
Treasury prices soaring.
But a side effect of that rally is that municipal bonds look very
attractive relative to Treasurys right now. In fact, we think the two most
likely scenarios suggest municipal bonds could outperform Treasurys going
forward. We believe either Treasury bond yields will stay near record lows and
municipal bond yields will also work lower, or Treasury yields will back up and
municipal bonds will stay about where they are, losing less than Treasurys if
rates rise.
[right margin]
"WE THINK THE TWO MOST LIKELY SCENARIOS SUGGEST MUNICIPAL BONDS COULD
OUTPERFORM TREASURYS GOING FORWARD."
TOP FIVE STATES (AS OF 11/30/98)
% OF FUND INVESTMENTS
NEW YORK 14.6%
TEXAS 14.2%
WASHINGTON 13.6%
MASSACHUSETTS 7.6%
CALIFORNIA 5.9%
TOP FIVE STATES (AS OF 5/31/98)
% OF FUND INVESTMENTS
NEW YORK 16.9%
TEXAS 13.7%
WASHINGTON 12.5%
MASSACHUSETTS 9.5%
PENNSYLVANIA 5.0%
www.americancentury.com 13
Intermediate-Term Tax-Free--Q&A
- --------------------------------------------------------------------------------
(Continued)
ARE THERE OTHER REASONS TO LIKE THE OUTLOOK FOR THE MUNICIPAL MARKET?
Yes, we think so. Inflation rose at the slowest annual pace in a dozen
years for the year ended November 30, 1998. With inflation so low and the
economy facing pressure from global economic turmoil, we believe the Federal
Reserve probably has room to lower interest rates even further.
Supply and demand factors also look positive going forward. As interest
rates declined this year, many municipalities refinanced their older debt at the
new lower rate. All that supply limited municipal bonds' gains in 1998. But
bonds can only be refinanced a limited number of times, so we should see less
new supply going forward. Meanwhile, demand for municipal bonds is likely to be
strong because of their attractive values relative to Treasurys.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR INTERMEDIATE-TERM TAX-FREE FOR THE
NEXT SIX MONTHS?
It's a steady-at-the-helm approach--we're going to continue to work to give
investors solid tax-exempt yields and good total return. We're likely to
continue to upgrade the fund's credit quality when we think we can sell our
lower-rated bonds at attractive prices. Because we think interest rates are
likely to head lower, we'll continue to keep duration a little longer than five
years. Overall, we'll use careful credit analysis and security selection to find
what we think are the best bonds in the market. That's the same strategy that's
helped the fund to such solid long-term performance.
[left margin]
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
AAA 73% 71%
AA 12% 13%
A 11% 10%
BBB 4% 6%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page 46
for more information.
TOP FIVE SECTORS (AS OF 11/30/98)
% OF FUND INVESTMENTS
GO 21%
WATER AND SEWER REVENUE 14%
ELECTRIC REVENUE 13%
HOSPITAL REVENUE 12%
COPS/LEASES 11%
TOP FIVE SECTORS (AS OF 5/31/98)
% OF FUND INVESTMENTS
COPS/LEASES 17%
GO 16%
ELECTRIC REVENUE 14%
WATER AND SEWER REVENUE 13%
HOSPITAL REVENUE 11%
Security types are defined on page 47.
14 1-800-345-2021
Intermediate-Term Tax-Free--Sch. of Investments
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES--98.0%
ALASKA--1.1%
$1,130 Alaska Industrial Development
&
Export Auth. Power Rev.,
(Snettisham Hydroelectric),
5.25%, 1/1/04 (AMBAC) $ 1,184
500 Anchorage Hospital Rev.,
(Sisters of Providence), 6.50%,
10/1/99 514
----------
1,698
----------
ARIZONA--1.4%
510 Maricopa County COP, 5.625%,
6/1/00 519
500 Maricopa County Unified School
District No. 80 GO, (Chandler),
5.20%, 7/1/13 (MBIA) 532
600 Pima County Unified School
District No. 6 GO, (Marana),
4.75%, 7/1/12 (FGIC) 609
1,130 Sedona Wastewater Municipal
Property Corp. Excise Tax Rev.,
4.85%, 7/1/22 (MBIA)(1) 346
----------
2,006
----------
CALIFORNIA--3.9%
1,185 Association of Bay Area
Governments Finance Auth. for
Nonprofit Corporations COP,
(Rhoda Haas Goldman Plaza),
5.00%, 5/15/06 (California
Mortgage Insurance) 1,252
2,000 California Housing Finance
Agency Rev., 5.60%, 8/1/09
(MBIA) 2,144
1,100 California Public Works Board
Lease Rev., Series 1994 A,
(Various University of California
Projects), 6.15%, 11/1/04
Prerefunded at 102% of Par(2) 1,258
1,100 Sacramento Regional
Transportation COP, Series
1992 A, 6.20%, 3/1/00 1,138
----------
5,792
----------
COLORADO--0.7%
1,000 Denver Sales Tax Rev.,
Series 1991 A, (Major League
Baseball Stadium District),
6.10%, 10/1/01 (FGIC) 1,065
----------
DISTRICT OF COLUMBIA--1.7%
1,000 District of Columbia Hospital Rev.,
Series 1993 A, (Medlantic
Health Care Group), 5.25%,
8/15/02 (MBIA) 1,045
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$1,275 Metropolitan Washington D.C.
Airports Auth. Rev.,
Series 1992 A, 6.30%,
10/1/03 (MBIA) $ 1,401
----------
2,446
----------
FLORIDA--3.2%
700 Broward County School District
GO, 6.75%, 2/15/00 719
245 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
(Multi-County Program), 4.85%,
10/1/07 (GNMA/FNMA) 250
360 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
(Multi-County Program), 4.90%,
4/1/08 (GNMA/FNMA) 366
1,775 Lakeland Electric and Water Rev.,
Series 1996 B, 6.00%,
10/1/09 (FGIC) 2,038
345 Pinellas County Educational
Facilities Auth. Rev., (Barry
University), 4.35%, 10/1/00 348
1,000 Royal Palm Beach Utility System
Rev., 5.125%, 10/1/18 (MBIA) 1,018
----------
4,739
----------
GEORGIA--4.1%
1,000 Atlanta Airport Facilities Rev.,
7.00%, 1/1/01 1,064
1,000 Atlanta Water and Sewer Rev.,
(Second Lien), 6.00%, 1/1/05
(FGIC) 1,107
2,495 Fulton County Water and Sewer
Rev., 6.25%, 1/1/09 (FGIC) 2,891
1,000 Metropolitan Atlanta Rapid Transit
Auth. Sales Tax Rev., Series
1991 M, 6.05%, 7/1/01 1,057
----------
6,119
----------
HAWAII--1.4%
1,000 Hawaii State GO, Series 1990 A,
7.00%, 6/1/00 (FGIC)(2) 1,052
1,000 Hawaii State GO, Series
1997 CN, 5.25%, 3/1/13
(FGIC) 1,046
----------
2,098
----------
ILLINOIS--1.6%
2,250 Illinois GO, 6.00%, 10/1/01 2,388
30 Metropolitan Pier and Exposition
Auth. Rev., (McCormick Place),
5.20%, 6/15/99(2) 30
----------
2,418
----------
See Notes to Financial Statements
www.americancentury.com 15
Intermediate-Term Tax-Free--Sch. of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
INDIANA--1.4%
$2,000 Indiana Health Facility Financing
Auth. Rev., (Holy Cross Health
System Corp.), 5.375%,
12/1/12 (MBIA) $ 2,121
----------
MASSACHUSETTS--7.6%
2,605 Massachusetts Bay Transportation
Auth. Rev., Series 1992 C,
5.40%, 3/1/00 2,670
1,000 Massachusetts Educational
Financing Auth. Education Loan
Rev., Series 1998 A, (Issue G),
4.55%, 12/1/06 (MBIA) 1,012
1,000 Massachusetts Health &
Educational Facilities Auth. Rev.,
Series 1998 A, (Harvard
Pilgrim Health), 5.25%, 7/1/12
(FSA) 1,054
3,000 Massachusetts Water Resource
Auth. Rev., Series 1998 A,
4.75%, 8/1/27 (FSA) 2,888
1,000 Massachusetts Water Resource
Auth. Rev., Series 1998 B,
4.50%, 8/1/22 (FSA) 938
1,650 Springfield GO, 5.25%,
11/15/14 (FSA)(3) 1,715
1,000 Worcester GO, 5.50%, 8/1/04
(MBIA) 1,079
----------
11,356
----------
MICHIGAN--2.5%
1,000 Detroit City School District,
Series 1998 B, 5.375%,
5/1/14 (FGIC)(3) 1,060
1,000 Detroit Downtown Development
Auth. Tax Increment Rev.,
Series 1998 A, (Development
Area No. 1), 5.25%, 7/1/12
(MBIA) 1,048
1,500 Detroit Water Supply System Rev.,
Series 1995 A, 5.30%,
7/1/09 (MBIA) 1,609
----------
3,717
----------
MISSISSIPPI--0.7%
1,000 Harrison County GO, 5.00%,
7/1/12 (MBIA) 1,047
----------
MISSOURI--0.7%
1,000 Missouri Board of Public
Buildings State Office Buildings
Special Obligation Rev., 6.30%,
12/1/05 1,069
----------
NEVADA--0.7%
1,000 Clark County Airport Rev.,
Series 1998 A, 5.50%,
7/1/07 (MBIA) 1,096
----------
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
NEW JERSEY--3.8%
$1,030 Atlantic City Board of Education
GO, 6.00%, 12/1/02,
Prerefunded at 102% of Par
(AMBAC)(2) $ 1,135
1,410 New Jersey Educational Facility
Auth. Rev., Series 1994 A,
(New Jersey Institute of
Technology), 5.90%, 7/1/08
(MBIA) 1,565
1,000 New Jersey Health Care Facilities
Financing Auth. Rev., (Atlantic
City Medical Center), 6.15%,
7/1/99 1,017
1,800 New Jersey Health Care Facilities
Financing Auth. Rev., (Rahway
Hospital Obligation Group),
5.00%, 7/1/05 (ACA) 1,871
----------
5,588
----------
NEW YORK--14.6%
1,950 City University of New York COP,
(John Jay College), 5.00%,
8/15/09 (AMBAC) 2,050
2,500 Nassau County GO, Series 1996 T,
5.20%, 9/1/05 (FGIC) 2,667
1,000 New York State Dormitory Auth.
Rev., (City University System),
6.00%, 7/1/03 1,079
1,500 New York State Dormitory Auth.
Rev., Series 1995 A, (State
University Educational Facilities),
6.50%, 5/15/04 1,673
1,000 New York State Dormitory Auth.
Rev., Series 1995 A, (State
University Educational Facilities),
6.50%, 5/15/06 1,141
1,000 New York State Dormitory Auth.
Rev., Series 1996 E, (Mental
Health Service Facility), 6.00%,
8/15/04 (AMBAC) 1,097
635 New York State Dormitory Auth.
Rev., Series 1998 I, (New York
Downtown Hospital), 4.80%,
2/15/06 650
1,000 New York State Dormitory Auth.
Rev., Series 1998-2, (City
University-3rd General Reserve),
5.00%, 7/1/16 997
1,175 New York State GO, Series
1997 D, 5.25%, 8/1/03 1,233
1,000 New York State GO, Series
1997 D, 5.25%, 8/1/06 (FGIC) 1,071
1,500 New York State Local Government
Assistance Corp. Rev., Series
1997 B, 5.25%, 4/1/04 (MBIA) 1,593
See Notes to Financial Statements
16 1-800-345-2021
Intermediate-Term Tax-Free--Sch. of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$ 890 New York State Medical Care
Facilities Finance Agency Rev.,
(Hospital and Nursing Home),
5.95%, 8/15/09 (FHA) $ 940
1,000 New York State Thruway Auth.
Service Contract Rev., 5.30%,
4/1/04 1,053
1,000 New York State Thruway Auth.
Service Contract Rev., 5.50%,
4/1/04 1,063
1,160 New York State Thruway Auth.
Service Contract Rev., 5.50%,
4/1/06 1,244
1,000 New York State Urban
Development Corp. Rev., Series
1996 A, 6.25%, 4/1/05 (MBIA) 1,120
1,000 Niagara Falls Bridge Commission
Toll Rev., Series 1993 B,
5.25%, 10/1/15 (FGIC) 1,066
----------
21,737
----------
NORTH CAROLINA--1.5%
2,000 North Carolina Eastern Municipal
Power Agency System Rev.,
Series 1993 B, 6.00%,
1/1/06 (FSA) 2,228
----------
OHIO--3.4%
1,200 Ohio Higher Educational Facility
Commission Rev., (University of
Dayton), 5.55%, 12/1/07
(FGIC) 1,310
3,320 Ohio Water Development Auth.
Pollution Control Facilities Rev.,
6.00%, 12/1/05 (MBIA) 3,721
----------
5,031
----------
OKLAHOMA--1.9%
2,500 Oklahoma Industrial Auth. Health
System Rev., Series 1995 C,
7.00%, 8/15/04 (AMBAC) 2,862
----------
OREGON--1.4%
1,805 Lane County School District
No. 19 GO, (Springfield),
6.375%, 10/15/04,
Prerefunded at 101% of Par
(MBIA)(2) 2,054
----------
PENNSYLVANIA--4.6%
1,500 Pennsylvania Turnpike
Commission Rev., Series
1991 L, 6.25%, 6/1/01
(AMBAC) 1,592
2,000 Philadelphia Gas Works Rev.,
14th Series, 5.70%, 7/1/00
(FSA) 2,067
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$1,000 Philadelphia Parking Auth. Rev.,
5.50%, 9/1/04 (AMBAC) $ 1,074
2,000 Philadelphia Water and
Wastewater Rev., 5.15%,
6/15/04 (FGIC) 2,110
----------
6,843
----------
TENNESSEE--0.5%
760 Kingsport GO, (Sewer), 4.50%,
9/1/06 (MBIA)(3) 780
----------
TEXAS--14.2%
1,000 Austin Rev., (Sub-Lien), 5.25%,
5/15/12 (MBIA) 1,072
1,000 Austin Utility System Rev.,
5.125%, 11/15/16 (FSA) 1,017
1,875 Brownsville Utility System Rev.,
6.00%, 9/1/08 (AMBAC) 2,124
1,000 Dallas-Fort Worth Regional
Airport Rev., Series 1994 A,
5.90%, 11/1/08 (MBIA) 1,094
1,000 Denison Hospital Auth. Rev.,
(Texoma Medical Center),
5.90%, 8/15/07 (ACA) 1,106
1,500 Harris County Health Facilities
Development Corp. Hospital
Rev., (Memorial Hospital
System), 6.80%, 6/1/01(4) 1,613
1,000 North East Independent School
District Texas GO, 4.50%,
2/1/16 (Permanent School
Fund) 960
500 North Texas Higher Education
Student Loan Rev., 6.875%,
4/1/02 (AMBAC) 527
1,440 Plano GO, 4.75%, 9/1/18 1,405
500 San Antonio Electric & Gas Rev.,
Series 1998 A, 5.25%,
2/1/14(3) 522
1,325 Spring Independent School
District GO, Series 1998
A, 4.60%, 8/15/13 (Permanent
School Fund) 1,324
1,000 Tarrant County Health Facility
Development Corporation Health
System Rev., (Harris Methodist
Health System), 5.00%, 9/1/07
(AMBAC)(2) 1,062
1,000 Texas GO, Series 1995 A, 6.50%,
10/1/03 1,116
2,000 Texas Municipal Power Agency
Rev., 5.75%, 9/1/02 (MBIA) 2,138
1,000 Texas Municipal Power Agency
Rev., 5.25%, 9/1/09 (MBIA) 1,079
1,500 Texas Public Finance Auth.
Building Rev., (Technical
College), 6.25%, 8/1/09
(MBIA) 1,732
See Notes to Financial Statements
www.americancentury.com 17
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$1,240 Upper Trinity Regional Water
District Rev., (Treated Water
Supply System), 5.25%,
8/1/12 (MBIA) $ 1,284
----------
21,175
----------
UTAH--2.2%
1,000 Salt Lake County Municipal
Building Auth. Lease Rev.,
Series 1994 A, 6.00%,
10/1/07 (MBIA) 1,104
1,005 Utah Housing Finance Agency
Single Family Mortgage Rev.,
5.65%, 7/1/06 1,073
1,000 Utah Municipal Finance Co-op
Local Government Rev.,
(University of Utah/University
Hospital), 6.60%, 5/15/00(2) 1,045
----------
3,222
----------
WASHINGTON--13.6%
1,000 King County GO, Series 1998 B,
4.75%, 1/1/15 994
1,000 Pierce County School District
No. 3 GO, Series 1992 B,
5.80%, 12/1/99 1,026
1,000 Pierce County School District
No. 320 GO, 5.75%, 12/1/02 1,070
1,000 Port Seattle Passenger Facility
Charge Rev., Series 1998 B,
5.00%, 12/1/05 (AMBAC) 1,048
2,435 Port Seattle Rev., Series 1997 B,
5.10%, 10/1/03 (FGIC) 2,559
1,385 Port Tacoma Rev., 4.70%,
12/1/04 (AMBAC) 1,433
2,000 Snohomish County Public Utility
District Rev., 5.625%, 1/1/05
(FGIC) 2,153
1,000 Snohomish County School
District No. 15 GO, 6.125%,
12/1/03 1,065
1,000 Spokane County School District
No. 356 GO, 6.00%, 12/1/06
(FGIC) 1,130
1,730 Tacoma Electric System Rev.,
6.00%, 1/1/07 (AMBAC) 1,949
1,000 Tacoma Electric System Rev.,
6.10%, 1/1/07 (FGIC) 1,108
1,000 Washington Health Care
Facilities Auth. Rev., (Harrison
Memorial Hospital), 5.25%,
8/15/14 (AMBAC) 1,035
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$1,000 Washington Public Power Supply
System Rev., Series 1990 B,
(Nuclear Project No. 1), 7.10%,
7/1/01 (FGIC) $ 1,069
1,000 Washington Public Power Supply
System Rev., Series 1990 C,
(Nuclear Project No. 2), 7.30%,
7/1/00 1,056
500 Washington Public Power Supply
System Rev., Series 1990 C,
(Nuclear Project No. 2), 7.00%,
7/1/01 (FGIC) 539
1,000 Washington Public Power Supply
System Rev., Series 1993 A,
(Nuclear Project No. 1), 5.50%,
7/1/04 1,069
----------
20,303
----------
WEST VIRGINIA--0.8%
1,090 West Virginia GO, Series 1996 D,
5.00%, 11/1/10 (FGIC) 1,143
----------
WISCONSIN--2.8%
2,590 Wisconsin Health and
Educational Facility Rev.,
(Aurora Medical Group), 6.00%,
11/15/10 (FSA)(4) 2,984
1,060 Wisconsin Health and
Educational Facility Rev.,
Series 1991 B, (Wausau
Hospital), 6.30%, 8/15/00
(AMBAC) 1,107
----------
4,091
----------
TOTAL MUNICIPAL SECURITIES 145,844
----------
(Cost $138,836)
SHORT-TERM MUNICIPAL SECURITIES--2.0%
CALIFORNIA
3,000 San Francisco City and County
Airport Commission International
Airport Rev., Series 1998 A-48,
VRDN, 4.00%, 12/1/98
(Acquired 10/9/98-10/13/98,
Cost $3,000)(5) 3,000
----------
(Cost $3,000)
TOTAL INVESTMENT SECURITIES--100.0% $148,844
==========
(Cost $141,836)
See Notes to Financial Statements
18 1-800-345-2021
Intermediate-Term Tax-Free--Sch. of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
ACA = American Capital Access
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FHA = Federal Housing Authority
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
GNMA = Government National Mortgage Association
GO = General Obligation
MBIA = MBIA Insurance Corp.
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, 1998.
(1) Security is a zero-coupon municipal bond. The yield to maturity at purchase
is indicated. Zero-coupon securities are purchased at a substantial
discount from their value at maturity.
(2) Escrowed to maturity in U.S. Government securities or state and local
government securities.
(3) When-issued security.
(4) Security, or a portion thereof, has been segregated at the custodian bank
for a when-issued security.
(5) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement, and unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of these securities at November 30, 1998, was $3,000, which
represented 2.0% of net assets.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the principal amount of each investment
* the market value of each investment
* the percentage of investments in each state
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
www.americancentury.com 19
Long-Term Tax-Free--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1998
<TABLE>
INCEPTION 3/2/87
LONG-TERM LEHMAN LONG-TERM GENERAL MUNICIPAL DEBT FUNDS(2)
TAX-FREE MUNICIPAL BOND INDEX AVERAGE RETURN FUND'S RANKING
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 MONTHS(1) ....... 4.07% 4.10% 3.17% --
1 YEAR ............ 7.77% 8.74% 6.82% 22 OUT OF 240
- --------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ........... 6.71% 8.02% 6.24% 51 OUT OF 198
5 YEARS ........... 6.49% 7.37% 5.82% 22 OUT OF 141
10 YEARS .......... 7.93% 9.33% 7.83% 33 OUT OF 74
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 46-47 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain chart - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 11/30/98
Long-Term Tax-Free $21,457
Lehman Long-Term
Municipal Bond Index $24,392
Long-Term Lehman Long-Term
Tax-Free Municipal Bond Index
DATE VALUE VALUE
11/30/88 $10,000 $10,000
11/30/89 $11,118 $11,307
11/30/90 $11,792 $12,160
11/30/91 $12,903 $13,545
11/30/92 $14,133 $15,087
11/30/93 $15,670 $17,097
11/30/94 $14,794 $15,397
11/30/95 $17,659 $19,353
11/30/96 $18,595 $20,646
11/30/97 $19,910 $22,432
11/30/98 $21,457 $24,392
$10,000 investment made 11/30/88
The chart at left shows the growth of a $10,000 investment in the fund over 10
years, while the chart below shows the fund's year-by-year performance. The
Lehman Long-Term Municipal Bond Index is provided for comparison in each chart.
Long-Term Tax-Free's returns include operating expenses (such as transaction
costs and management fees) that reduce returns, while the returns of the index
do not. 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.
[bar chart - data below]
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED NOVEMBER 30)
Long-Term Lehman Long-Term
Tax-Free Municipal Bond Index
DATE RETURN RETURN
11/30/89 11.18% 13.07%
11/30/90 6.06% 7.54%
11/30/91 9.42% 11.39%
11/30/92 9.54% 11.39%
11/30/93 10.87% 13.32%
11/30/94 -5.59% -9.94%
11/30/95 19.37% 25.69%
11/30/96 5.30% 6.68%
11/30/97 7.07% 8.65%
11/30/98 7.77% 8.74%
20 1-800-345-2021
Long-Term Tax-Free--Q&A
- --------------------------------------------------------------------------------
/photo of Dave MacEwen/
An interview with Dave MacEwen, a portfolio manager on the Long-Term
Tax-Free fund investment team.
HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED NOVEMBER 30, 1998?
Long-Term Tax-Free performed very well, posting a 4.07% return, compared
with the 3.17% average return of the 255 "General Municipal Debt Funds" tracked
by Lipper Inc. Over the past five years, the fund's returns placed in about the
top quarter of the peer group. (See the Total Returns table on the previous page
for other fund performance comparisons.)
Long-Term Tax-Free also produced more tax-free current income than the
average general municipal fund. The portfolio's 30-day SEC yield as of November
30 was 4.10%, compared with the 3.78% average yield of the peer group.
WHY DID THE FUND PERFORM SO WELL AGAINST ITS PEERS?
One reason for the portfolio's strong performance was Long-Term Tax-Free's
below-average expenses, which gave us a head start on our competitors. But the
primary reason was that the fund was structured to be relatively immune to
"calls," which occur when municipal issuers refinance, or "call away," their
older, higher-rate debt as interest rates fall. Calls are undesirable because
they negatively affect a portfolio's duration.
CAN YOU DEFINE DURATION AND EXPLAIN HOW IT'S AFFECTED BY HOLDING CALLABLE BONDS
Duration measures a portfolio's sensitivity to changes in interest rates.
The longer the duration, the more you gain when rates fall, and the more you
lose when rates rise. Conversely, a shorter duration means a bond portfolio's
share price fluctuates less when rates change. So, ideally, you want to lengthen
duration when interest rates are falling and shorten duration when rates are
rising.
One factor that affects a bond's duration is whether it's callable. Like
homeowners, municipal issuers often refinance their debt when rates fall. In the
same way that home mortgage refinancing shortens the life of a mortgage, a call
feature effectively shortens a bond's duration. We wanted to protect the fund
from calls because they have the exact opposite effect from what we want when
rates are falling. Having call protection helped us maintain the fund's duration
at around nine years, even as rates declined.
HOW DID YOU GUARD AGAINST CALLS?
We used two strategies to insulate the fund from untimely calls. First, we
increased our holdings in non-callable bonds. Non-callable bonds can't be
redeemed by their issuers before maturity. Second, we held a relatively large
stake in discount bonds. Discount bonds trade below face value (par) because
their interest coupons are lower than prevailing market rates. Issuers of
discount bonds don't have much incentive to refinance bonds that carry interest
[right margin]
"OVER THE PAST FIVE YEARS, THE FUND'S RETURNS PLACED IN ABOUT THE TOP QUARTER
OF THE PEER GROUP."
YIELDS AS OF NOVEMBER 30, 1998
30-DAY SEC YIELD
4.10%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 5.69%
31.0% TAX BRACKET 5.94%
36.0% TAX BRACKET 6.41%
39.6% TAX BRACKET 6.79%
PORTFOLIO AT A GLANCE
11/30/98 5/31/98
NUMBER OF SECURITIES 73 71
WEIGHTED AVERAGE
MATURITY 19.0 YRS 18.2 YRS
AVERAGE DURATION 9.0 YRS 9.0 YRS
EXPENSE RATIO 0.51%* 0.51%*
* Annualized.
Investment terms are defined in the Glossary on page 47.
www.americancentury.com 21
Long-Term Tax-Free--Q&A
- --------------------------------------------------------------------------------
(Continued)
rates lower than prevailing rates. Premium bonds, on the other hand, pay
interest at a rate higher than prevailing rates and are much more likely to be
called. As interest rates declined over the past six months, discount bonds
outperformed premium and even par bonds.
YOU MADE A SHIFT TOWARD HIGHER-QUALITY MUNICIPAL BONDS. WHY THE CHANGE?
In our opinion, municipal bonds rated BBB didn't really offer enough
additional yield over higher-rated securities to compensate for their added
credit risk (the risk that the issuer would fail to make timely interest and
principal payments). At the end of November, for example, a BBB municipal
security offered a yield of around 5.20%, compared with the highest-rated AAA
security with a yield of about 4.80%. Looking at it another way, a AAA bond
offered investors over 90% of the yield of a BBB bond, but with far less credit
risk. Furthermore, our outlook calls for slower economic growth in 1999, which
we believe will be most painful for lower-quality municipal issuers. Given that
longer-term view, we felt it was prudent to begin to upgrade credit quality now.
WHY WAS THERE SUCH A SMALL YIELD DIFFERENCE BETWEEN BBB AND AAA MUNICIPAL BONDS
The reason lower-rated bonds currently offer only a small amount of
additional yield boils down to a simple case of demand outstripping supply. The
supply of BBB bonds has diminished in part because many issuers have received
credit upgrades during the past couple of years. In addition, more and more
municipal issuers now obtain insurance--guaranteeing the timely payment of a
bond's interest and principal--and receive a AAA rating in the process. An
increase in the number of insured municipal bonds has reduced the supply of BBB
bonds. And in a falling interest rate environment--as we've seen over the past
couple of years--higher-yielding, lower-rated bonds were in high demand among
investors searching for yield. Stronger demand and lower supply meant higher
prices and lower yields for BBB securities.
HOW DID LONG-TERM TAX-FREE'S ALLOCATION TO VARIOUS STATES CHANGE DURING THE PAST
SIX MONTHS?
The changes were a function of where we found the best value for individual
bonds with the structural characteristics we wanted, such as discount or
non-callable bonds. During the past six months, we cut our holdings in New York,
in large part because of its exposure to the somewhat troubled financial
services industry, and Massachusetts, where municipal prices had gotten rather
expensive. We used the proceeds from those sales to purchase bonds issued in
Texas, Washington, and Illinois when supply was quite heavy and, as a result,
prices were cheap relative to other parts of the nation.
[left margin]
TOP FIVE STATES (AS OF 11/30/98)
% OF FUND INVESTMENTS
TEXAS 14.5%
WASHINGTON 9.7%
ILLINOIS 9.4%
FLORIDA 8.1%
NEW YORK 8.1%
TOP FIVE STATES (AS OF 5/31/98)
% OF FUND INVESTMENTS
CALIFORNIA 14.0%
ILLINOIS 12.2%
NEW YORK 9.7%
MASSACHUSETTS 7.9%
FLORIDA 7.8%
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
AAA 64% 54%
AA 28% 32%
A 7% 13%
BBB 1% 1%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page 46
for more information.
22 1-800-345-2021
Long-Term Tax-Free--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET?
We're quite optimistic about the prospects for municipal bonds for a
variety of reasons. In our view, the interest rate backdrop will remain positive
over the next six months. Inflation is nearly non-existent, rising at an
annualized rate of just 1.5% for the year ended November 30, 1998. In addition,
prolonged economic challenges in Asia, Russia, and Latin America --coupled with
a continued absence of inflation here at home--could prompt the Federal Reserve
to further cut interest rates in order to stimulate the world economy.
But even if interest rates remain stable, we think that municipal bonds
could do well. Municipals lagged Treasurys in 1998 because of unfavorable supply
and demand (see the Market Perspective on page 4). We expect the supply of newly
issued municipals to decline substantially over the next year, in stark contrast
to the near-record-breaking supply of municipals issued in 1998. On the opposite
side of the equation, we believe that demand for municipal bonds will grow in
the months ahead. That's because municipals are as cheap relative to Treasurys
as they have been in nearly a decade--yields on some longer-term municipal bonds
are equal to or only slightly lower than the fully taxable yields offered by
Treasurys.
Because yields and bond prices move in the opposite direction, municipals
could gain significant ground if their yields move from the current 90%-100% of
Treasurys down to their historical average of close to 80% of Treasury yields.
In our view, it's just a matter of when, not if, investors realize the value
municipals currently offer.
WITH THAT OUTLOOK IN MIND, WHAT ARE YOUR PLANS FOR LONG-TERM TAX-FREE OVER THE
NEXT SIX MONTHS?
We're comfortable sticking with the fund's current positioning. Unless we
feel that inflationary pressures are building and that interest rates are
threatening to rise, we're likely to keep the fund's duration slightly long and
continue to emphasize discount bonds. If, on the other hand, interest rates
appear poised to move higher, we would probably begin to sell some discount
bonds in favor of par and premium bonds. And given our view that the U.S.
economy will slow, we're likely to continue to emphasize higher-quality
investments.
[right margin]
"WE'RE QUITE OPTIMISTIC ABOUT THE PROSPECTS FOR MUNICIPAL BONDS FOR A VARIETY
OF REASONS."
TOP FIVE SECTORS (AS OF 11/30/98)
% OF FUND INVESTMENTS
ELECTRIC REVENUE 23%
GO 15%
PREREFUNDED/ETM 15%
WATER AND SEWER REVENUE 13%
HOSPITAL REVENUE 5%
TOP FIVE SECTORS (AS OF 5/31/98)
% OF FUND INVESTMENTS
ELECTRIC REVENUE 23%
PREREFUNDED/ETM 17%
WATER AND SEWER REVENUE 13%
HIGHER EDUCATION 6%
SALES TAX REVENUE 5%
Security types are defined on page 47.
www.americancentury.com 23
Long-Term Tax-Free--Schedule of Investments
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES--95.2%
CALIFORNIA--5.8%
$1,000 California Public Works Lease
Rev., Series 1994 A, (University
Project), 6.20%, 10/1/08 $ 1,121
1,500 Los Angeles Community
Redevelopment Agency Tax
Allocation, Series 1993 H,
(Bunker Hill), 6.50%, 12/1/14
(FSA) 1,698
1,500 Metropolitan Water District of
Southern California Waterworks
Rev., Series 1993 A, 5.75%,
7/1/21 1,694
1,850 Northern California Power
Agency Rev., Series 1992 A,
(Hydroelectric Project #1),
6.25%, 7/1/12 (MBIA) 2,031
1,000 San Jose Redevelopment Agency
Tax Allocation, Series 1993 D,
(Merged Area Redevelopment),
5.75%, 8/1/24 1,064
----------
7,608
----------
CONNECTICUT--2.5%
1,880 Connecticut Development Auth.
Rev., Series 1994 A, 6.375%,
10/15/24 2,108
1,000 Connecticut GO, Series 1993 E,
6.00%, 3/15/12 1,155
----------
3,263
----------
DISTRICT OF COLUMBIA--3.4%
1,000 District of Columbia Metropolitan
Area Transportation Auth. Rev.,
6.00%, 7/1/10 (FGIC) 1,144
3,000 District of Columbia Water and
Sewer Auth. Public Utility Rev.,
5.50%, 10/1/23 (FSA) 3,244
----------
4,388
----------
FLORIDA--6.4%
820 Broward County Resource
Recovery Facility Rev., (South),
7.95%, 12/1/08 874
1,000 Orlando Utility Commission Water
and Electric Rev., Series
1989 D, 6.75%, 10/1/17 1,225
1,000 St. Petersburg Health Auth. Rev.,
(Allegany Health), 7.00%,
12/1/01, Prerefunded at
102% of Par (MBIA)(1) 1,113
1,350 Tampa Sports Auth. Sales Tax Rev.,
(Tampa Bay Arena), 5.75%,
10/1/25 (MBIA) 1,534
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$3,640 Village Center Community
Development District
Recreational Rev., Series
1998 A, 4.75%, 11/1/22
(MBIA) $ 3,525
----------
8,271
----------
GEORGIA--0.9%
1,000 Georgia Municipal Electric Auth.
Rev., 6.50%, 1/1/12 (MBIA) 1,184
----------
ILLINOIS--9.4%
1,000 Chicago Gas Supply Rev., Series
1985 B, (Peoples Gas), 7.50%,
3/1/15 1,063
1,000 Cook County GO, 7.00%,
11/1/00, Prerefunded at 102%
of Par (MBIA)(1) 1,084
2,000 Illinois Dedicated Tax Rev., (Civic
Center), 6.25%, 12/15/20
(AMBAC) 2,345
1,500 Illinois Development Finance Auth.
Pollution Control Rev., Series
1990 A, (Central Illinois Public
Service), 7.60%, 3/1/14 1,590
1,000 Illinois Development Finance Auth.
Waste Disposal Rev., (Armstrong
World Industries), 5.95%,
12/1/24 1,121
1,500 Illinois GO, 6.25%, 10/1/06 1,647
1,140 Illinois Health Facilities Auth. Rev.,
Series 1992 C, (Evangelical
Hospital), 6.75%, 4/15/12 1,360
700 Illinois Health Facilities Auth. Rev.,
Series 1992 C, (Evangelical
Hospital), 6.75%, 4/15/02,
Prerefunded at 102% of Par(1) 778
1,000 Illinois Regional Transportation
Auth. Rev., Series 1990 A,
7.20%, 11/1/20 (AMBAC) 1,313
----------
12,301
----------
INDIANA--1.8%
1,000 Indiana Municipal Power
Agency Rev., Series 1990
A, 7.10%, 1/1/00, Prerefunded at 102%
of Par (AMBAC)(1) 1,060
1,000 Indiana Transportation Financing
Auth. Highway Rev., Series
1990 A, 7.25%, 6/1/15 1,275
----------
2,335
----------
KANSAS--0.9%
1,000 Kansas City Utility System Rev.,
6.375%, 9/1/23 (FGIC) 1,129
----------
See Notes to Financial Statements
24 1-800-345-2021
Long-Term Tax-Free--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
KENTUCKY--0.9%
$1,000 Carroll County Pollution Control
Rev., Series 1992 A, (Kentucky
Utilities Company), 7.45%,
9/15/16 $ 1,130
----------
MASSACHUSETTS--7.2%
1,000 Massachusetts Health and
Education Auth. Rev., Series
1992 F, 6.25%, 7/1/12
(AMBAC) 1,155
1,690 Massachusetts Housing Finance
Agency Rev., Series 1993 H,
6.75%, 11/15/12 (FNMA) 1,830
2,800 Massachusetts Water Resource
Auth. Rev., Series 1993 C,
4.75%, 12/1/23 (MBIA)(2) 2,674
4,000 Massachusetts Water Resource
Auth. Rev., Series 1998 B,
4.50%, 8/1/22 (FSA) 3,753
----------
9,412
----------
MICHIGAN--5.4%
2,000 Detroit City School District GO,
Series 1998 C, 5.25%, 5/1/25
(FGIC)(3) 2,108
2,000 Detroit Downtown Development
Auth. Tax Increment Rev., Series
1998 A, (Development Area
No. 1), 4.75%, 7/1/25 (MBIA) 1,920
1,020 Paw Paw Public School District
GO, 5.00%, 5/1/25 (FGIC) 1,037
2,000 Redford Unified School District
GO, 5.00%, 5/1/22
(AMBAC)(2) 2,032
----------
7,097
----------
NEW YORK--6.4%
2,000 Long Island Power Auth.
Electrical System Rev., Series
1998 A, 5.75%, 12/1/24 2,151
1,000 Municipal Assistance Corp. Rev.,
Series 67, 7.625%, 7/1/99,
Prerefunded at 102% of Par(1) 1,046
3,000 New York City Transitional Finance
Auth. Rev., Series 1998 C,
4.75%, 5/1/23 2,893
1,000 New York State Environmental
Facilities Corp. Pollution Control
Rev., Series 1991 E, 6.30%,
6/15/01, Prerefunded at
102% of Par(1) 1,083
1,000 New York State Local Government
Assistance Corp. Rev., Series
1991 D, 6.75%, 4/1/02,
Prerefunded at 102% of Par(1) 1,112
----------
8,285
----------
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
NORTH CAROLINA--2.3%
$2,000 North Carolina Medical Care
Community Health Facilities
Rev., Series 1998 B, (Duke
University Health System),
4.75%, 6/1/21 $ 1,911
1,000 North Carolina Municipal Power
Agency #1 Rev., (Catawba
Electric), 6.00%, 1/1/10 (MBIA) 1,138
----------
3,049
----------
OHIO--1.4%
750 Ohio Higher Educational Facility
Rev., Series 1990 B (Case
Western Reserve University),
6.50%, 10/1/20 905
1,000 Washington County Hospital Rev.,
(Marietta Area Health), 4.50%,
9/1/23 (FSA) 925
----------
1,830
----------
PENNSYLVANIA--0.8%
3,725 Harrisburg GO, Series 1997 F,
5.52%, 9/15/22 (AMBAC)(4) 1,104
----------
PUERTO RICO--3.0%
3,550 Puerto Rico Commonwealth GO,
4.50%, 7/1/23 3,312
500 Puerto Rico Commonwealth GO,
6.45%, 7/1/04, Prerefunded at
101.5% of Par(1) 572
----------
3,884
----------
RHODE ISLAND--3.9%
1,100 Rhode Island Clean Water Safe
Drinking Rev., 6.70%, 1/1/15
(AMBAC) 1,258
2,000 Rhode Island Depositors Economic
Protection Corp. Special
Obligation Rev., Series 1993 A,
6.25%, 8/1/16 (MBIA)(2) 2,336
1,300 Rhode Island Depositors Economic
Protection Corp. Special
Obligation Rev., Series 1993 B,
6.00%, 8/1/17 (MBIA) 1,430
----------
5,024
----------
SOUTH CAROLINA--3.8%
2,000 Charleston Waterworks & Sewer
Rev., (Capital Improvements),
4.50%, 1/1/24 (FGIC) 1,870
860 Piedmont Municipal Power Agency
Electric Rev., Series 1991 A,
6.50%, 1/1/16 (FGIC) 1,033
140 Piedmont Municipal Power Agency
Electric Rev., Series 1991 A,
6.50%, 1/1/16 (FGIC) 168
See Notes to Financial Statements
www.americancentury.com 25
Long-Term Tax-Free--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$1,500 Piedmont Municipal Power Agency
Electric Rev., 6.75%, 1/1/19
(FGIC) $ 1,853
----------
4,924
----------
TEXAS--14.5%
1,000 Alliance Airport Auth. Special
Facilities Rev., (American
Airlines), 7.00%, 12/1/11
(GTEED) 1,182
1,000 Denton Utility System Rev.,
Series 1996 A, 5.95%,
12/1/14 (MBIA) 1,110
6,560 Lower Colorado River Auth. Rev.,
(Seventh Supply Series), 4.50%,
1/1/17 (FSA) 6,266
5,600 San Antonio Electric and Gas Rev.,
Series 1988 A, 4.50%,
2/1/21(3) 5,238
2,000 San Antonio Electric and Gas
System Rev., 7.10%, 2/1/09
(FGIC)(1)(4) 1,278
1,000 Tarrant County Health Facility Rev.,
6.00%, 5/15/11 (MBIA) 1,137
2,500 Texas Municipal Power Agency
Rev., Series 1991 A, 6.75%,
9/1/12 (AMBAC) 2,730
----------
18,941
----------
UTAH--1.0%
1,000 Salt Lake City Hospital Rev.,
Series 1988 A, (Intermountain
Health Corporation), 8.125%,
5/15/15 1,315
----------
VIRGINIA--0.9%
1,000 Hampton Industrial Development
Auth. Rev., Series 1994 A,
(Sentara General Hospital),
6.50%, 11/1/12 1,125
----------
WASHINGTON--9.7%
7,000 King County GO, Series 1998 B,
5.25%, 1/1/34 (MBIA)(2) 7,103
1,405 Port of Seattle Rev., 7.50%,
12/1/00, Prerefunded at
102% of Par (AMBAC)(1) 1,540
1,625 Seattle Metropolitan Sewer Rev.,
Series 1991 T, 6.875%,
1/1/00, Prerefunded at 102%
of Par(1) 1,718
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$1,000 Washington GO, Series 1990 A,
6.75%, 2/1/15 $ 1,227
1,000 Washington Public Power Supply
Rev., Series 1996 A, (Nuclear
Project #1), 5.75%, 7/1/12
(MBIA) 1,091
----------
12,679
----------
WISCONSIN--2.9%
1,180 Winneconne Community School
District GO, 6.75%, 4/1/14
Prerefunded at 100% of Par
(FGIC)(1) 1,380
1,900 Wisconsin Clean Water Rev.,
6.875%, 6/1/11 2,333
----------
3,713
----------
TOTAL MUNICIPAL SECURITIES 123,991
----------
(Cost $115,217)
SHORT-TERM MUNICIPAL SECURITIES--3.4%
FLORIDA--1.7%
2,200 Tampa Sports Auth. Rev. Trust
Receipts, VRDN, 3.45%,
12/1/98 (MBIA) (SBBPA:
Societe Generale) (Acquired
11/12/98, Cost $2,200)(5) 2,200
----------
NEW YORK--1.7%
2,200 New York Energy Research &
Development Auth. Pollution
Control Rev., Series 1985 A,
(Niagara Mohawk Power),
VRDN, 3.75%, 12/2/98
(LOC: Toronto-Dominion Bank) 2,200
----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 4,400
----------
(Cost $4,400)
TEMPORARY CASH INVESTMENTS--1.4%
1,795 Units of Participation in Chase
Vista Tax-Free Money Market
Fund (Institutional Shares) 1,795
----------
(Cost $1,795)
TOTAL INVESTMENT SECURITIES--100.0% $130,186
==========
(Cost $121,412)
See Notes to Financial Statements
26 1-800-345-2021
Long-Term Tax-Free--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Indemnity Corporation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
GO = General Obligation
GTEED = Connecticut General Life Guaranty Agreement
LOC = Letter of Credit
MBIA = MBIA Insurance Corporation
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, 1998.
(1) Escrowed to maturity in U.S. government securities or state and local
securities.
(2) Security, or a portion thereof, has been segregated at the custodian bank
for a when-issued security.
(3) When-issued security.
(4) Security is a zero coupon municipal bond. The yield to maturity at purchase
is indicated. Zero-coupon securities are purchased at a substantial
discount from from their value at maturity.
(5) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at November 30, 1998, was $2,200,
which represented 1.8% of net assets.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the principal amount of each investment
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
www.americancentury.com 27
High-Yield Municipal--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1998
<TABLE>
INCEPTION 3/31/98
HIGH-YIELD LEHMAN LONG-TERM HIGH CURRENT YIELD MUNICIPAL FUNDS(2)
MUNICIPAL(3) MUNI BOND INDEX AVERAGE RETURN # OF FUNDS IN CATEGORY
- --------------------------------------------------------------------------------------
RETURNS
<S> <C> <C> <C> <C>
6 MONTHS(1) 4.20% 4.10% 2.57% 56
LIFE OF FUND 6.08% 5.56% 3.61% 56
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Management fees have been waived through April 30, 1999. Returns would have
been lower if fees had not been waived.
See pages 46-47 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain chart - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 11/30/98
High-Yield Municipal $10,608
Lehman Long-Term
Municipal Bond Index $10,557
High-Yield Lehman Long-Term
Municipal Municipal Bond Index
DATE VALUE VALUE
3/31/98 $10,000 $10,000
4/30/98 $9,994 $9,946
5/31/98 $10,181 $10,141
6/30/98 $10,276 $10,187
7/31/98 $10,300 $10,210
8/31/98 $10,469 $10,393
9/30/98 $10,607 $10,537
10/31/98 $10,563 $10,504
11/30/98 $10,608 $10,557
$10,000 investment made 3/31/98
The chart at left shows the growth of a $10,000 investment over the life of the
fund. The Lehman Long-Term Muni Bond Index is provided for comparison. 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.
28 1-800-345-2021
High-Yield Municipal--Q&A
- --------------------------------------------------------------------------------
/photo of Joel Silva and Steven Permut/
An interview with Joel Silva and Steven Permut, portfolio managers on the
High-Yield Municipal fund investment team.
HOW DID THE HIGH-YIELD MUNICIPAL FUND PERFORM DURING THE SIX MONTHS ENDED
NOVEMBER 30, 1998?
The fund performed very well. For the six months, High-Yield Municipal
returned 4.20%, while the average return of the 56 "High-Yield Municipal Funds"
tracked by Lipper Inc. was 2.57%. Since its inception on March 31, 1998, the
portfolio has returned 6.08%, compared with the 3.61% average return of the
Lipper group. (See the Total Returns table on the previous page for additional
performance comparisons.)
HOW DOES THE PORTFOLIO'S YIELD COMPARE WITH THE PEER GROUP?
High-Yield Municipal produced more federal tax-free income than the peer
group average. As of November 30, the portfolio had a 30-day SEC yield of 5.34%.
By comparison, the average municipal high-yield fund yielded 4.43%, according to
Lipper.
The fund's yield is even more impressive on an after-tax basis.
Tax-equivalent yields ranged from 7.42% for an investor in the 28% federal
income tax bracket to 8.84% for a taxpayer in the highest bracket (see the
Yields table at right for additional tax-equivalent yields). However, a portion
of fund income will be taxable for shareholders who file under the federal
alternative minimum tax (AMT). Investors should also keep in mind that capital
gains are not tax exempt.
WHAT'S BEHIND HIGH-YIELD MUNICIPAL'S EXCELLENT PERFORMANCE SO FAR?
First, we pulled together an experienced team of portfolio managers and
credit analysts who've had success in both the high-yield and investment-grade
portions of the market. Second, we've waived expenses for the fund's first year
of existence. Other things being equal, lower fees mean higher yields and
returns for our shareholders.
HOW DOES THE CREDIT TEAM HELP IN MANAGING THE FUND?
We put together the portfolio using a very credit-intensive approach to
security selection, trying to provide the best combination of yields and returns
while minimizing risk. To do that, we rely on our team of experienced municipal
credit analysts, who do extensive financial and demographic analysis and
frequently conduct site visits to determine a security's value. The team's
hands-on approach helps us sift through the universe of available credits to
find what we consider to be diamonds in the rough.
But our credit team doesn't work solely in a passive, analytical role.
Instead, our analysts roll up their sleeves and work directly with bond issuers
to structure deals to our liking. That means we're able to have some input on a
bond's creditworthiness, its maturity and call provisions, and its yield. The
key is that we're able to get in on some of these deals before the bonds are
issued to get more credit protection for our shareholders.
[right margin]
"WE'VE WAIVED MANAGEMENT FEES THROUGH APRIL 30, 1999. OTHER THINGS BEING EQUAL,
LOWER FEES MEAN HIGHER YIELDS AND RETURNS FOR OUR SHAREHOLDERS."
YIELDS AS OF NOVEMBER 30, 1998
30-DAY SEC YIELD
5.34%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 7.42%
31.0% TAX BRACKET 7.74%
36.0% TAX BRACKET 8.34%
39.6% TAX BRACKET 8.84%
Yields would have been 4.70%, 6.53%, 6.81%, 7.34%, and 7.78%, respectively, if
management fees had not been waived.
PORTFOLIO AT A GLANCE
11/30/98 5/31/98
NUMBER OF SECURITIES 41 35
WEIGHTED AVERAGE
MATURITY 17.0 YRS 19.4 YRS
AVERAGE DURATION 7.4 YRS 7.3 YRS
EXPENSE RATIO 0.00%* 0.00%*
* Fund expenses of approximately 0.64% are being waived through April 30, 1999.
Investment terms are defined in the Glossary on page 47.
www.americancentury.com 29
High-Yield Municipal--Q&A
- --------------------------------------------------------------------------------
(Continued)
YOU ALSO MENTIONED THE FEE WAIVER. CAN YOU EXPLAIN A LITTLE ABOUT THAT?
We've waived management fees through April 30, 1999. The waiver was a good
way for us to provide shareholders competitive yields and returns right out of
the gate. Many of our competitors hold bonds purchased in higher interest rate
environments, so their yields were likely to be higher than yields on new bonds
we can purchase today, when rates are relatively low. Over time, as our
competitors' higher-yielding bonds mature or are called away and we have an
opportunity to purchase higher-yielding bonds in the secondary market, any yield
advantage they have should disappear.
And we should point out that even without the fee waiver, High-Yield
Municipal's expense ratio of approximately 0.64% should be well below
average--according to Lipper, the average high-yield municipal fund charged
annual expenses of 1.15% as of November 30, 1998.
HOW DID YOU MANAGE DURATION OVER THE LAST SEVERAL MONTHS?
We generally expect to keep the duration--a measure of a bond fund's
sensitivity to changes in interest rates--in a range between six and eight
years. When interest rates were declining through about early October, we
boosted returns by keeping duration at the long end of that range. But when the
rally topped out, it seemed like a good idea to shorten duration. The timing of
that trade was good--we shortened duration to about 7.5 years before rates began
to rise in late October and November. Those adjustments to duration helped the
fund's performance relative to the peer group for the last six months.
THERE'S BEEN SOME DISCUSSION IN THE NEWS ABOUT MUNICIPAL CREDIT QUALITY. WHAT'S
YOUR VIEW OF CREDIT QUALITY?
Credit quality made the headlines in July when Allegheny Health, Education
and Research Foundation, or AHERF, a municipal high-yield bond issuer, filed for
bankruptcy. We had no exposure to AHERF bonds. It was a credit we'd looked at
but decided not to buy because it failed to meet our strict credit criteria.
The AHERF default aside, we think municipal credit quality in general
plateaued in 1998. There's some uncertainty heading into 1999 because economic
turmoil in Asia and Latin America has reduced foreign demand for U.S. goods. But
we think it's unlikely the U.S. economy will slow dramatically. That's because
consumer spending, which accounts for about two-thirds of economic growth,
remains strong.
But the default and worries about the economy did cause the spread, or
difference in yield, between lower-rated and AAA bonds to increase. When yield
spreads widen, lower-rated bonds typically underperform higher-quality
securities. Spread widening was most pronounced among tax-free corporate-backed
bonds, which tend to be more sensitive to changes in credit quality and the
economy. But again, we held relatively few of these bonds, so we held up well
when compared with some of our competitors.
[left margin]
". . .EVEN WITHOUT THE FEE WAIVER, HIGH-YIELD MUNICIPAL'S EXPENSE RATIO OF
APPROXIMATELY 0.64% SHOULD BE WELL BELOW AVERAGE."
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
AAA 19% 8%
AA 3% 11%
A 4% 16%
BBB 22% 26%
BB 6% 9%
UNRATED 46% 30%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page 46
for more information.
"WE THINK MUNICIPAL CREDIT QUALITY IN GENERAL PLATEAUED IN 1998."
30 1-800-345-2021
High-Yield Municipal--Q&A
- --------------------------------------------------------------------------------
(Continued)
HOW DID YOU MANAGE HIGH-YIELD MUNICIPAL'S CREDIT QUALITY?
We typically expect to keep around 40-60% of assets in lower-rated or
un-rated high-yield bonds--at the end of November, we were right in the middle
of that range. In addition, we diversified these holdings so we're not tied to a
single sector, economic trend, or geographic region. For example, we own
land-based bonds in Florida, a shopping mall bond in New Jersey, and an aquarium
bond in Oregon--bonds that are impacted by different economic factors and have a
very low correlation.
Within our investment-grade bonds (securities rated AAA, AA, A, or BBB),
we've traded up in credit quality, selling some of our more economically
sensitive issues and lower-rated bonds and buying more AAA debt. Here again, the
timing of that trade was pretty good, because yield spreads for BBB bonds
widened a little in the late summer and fall.
WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET FOR THE NEXT SIX MONTHS?
We like the outlook for municipal bonds in general for a number of reasons.
Inflation rose at the slowest annual pace in a dozen years for the year ended
November 30, 1998. With inflation so low and the economy facing pressure from
global economic turmoil, we believe the Federal Reserve probably has room to
lower interest rates even further.
Supply and demand factors also look positive going forward. As interest
rates declined this year, many municipalities refinanced their older debt at the
new lower rate. All that new supply limited municipal bonds' gains in 1998. But
bonds can only be refinanced a limited number of times, so we should see less
supply going forward. Meanwhile, demand for municipal bonds is likely to be
strong because municipals are very attractively valued relative to Treasurys.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR HIGH-YIELD MUNICIPAL FOR THE NEXT
SIX MONTHS?
We're going to continue to work to give investors more tax-exempt income
and potentially greater returns than they could earn with an investment in
higher-quality municipal bonds. To do that, we'll stick by our target of keeping
40-60% of assets in what we consider to be attractively valued high-yield bonds.
Central to that approach will be our use of careful credit analysis and security
selection to find what we think are the best bonds in the market. That's the
same strategy that's helped the fund to such a solid start.
[right margin]
"WE'RE GOING TO CONTINUE TO WORK TO GIVE INVESTORS MORE TAX-EXEMPT INCOME AND
POTENTIALLY GREATER RETURNS THAN THEY COULD EARN WITH AN INVESTMENT IN
HIGHER-QUALITY MUNICIPAL BONDS."
TOP FIVE SECTORS (AS OF 11/30/98)
% OF FUND INVESTMENTS
LAND-SECURED 21%
HOSPITAL REVENUE 20%
GO 11%
TRANSPORTATION REVENUE 9%
ELECTRIC REVENUE 7%
Security types are defined on page 47.
TOP FIVE STATES (AS OF 11/30/98)
% OF FUND INVESTMENTS
CALIFORNIA 22%
PENNSYLVANIA 10%
FLORIDA 8%
ALASKA 5%
OREGON 5%
www.americancentury.com 31
High-Yield Municipal--Schedule of Investments
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES--90.5%
ALASKA--6.0%
$ 660 Alaska Industrial Development &
Export Auth. Power Rev.,
(Upper Lynn Canal Regional
Power), 5.80%, 1/1/18 $ 664
1,800 Alaska Industrial Development &
Export Auth. Power Rev.,
(Upper Lynn Canal Regional
Power), 5.875%, 1/1/32 1,811
---------
2,475
---------
CALIFORNIA--14.5%
650 Poway Community Facilities
District Special Tax, (No. 88-1,
Parkway Business Center),
6.75%, 8/15/15 714
1,000 Riverside Unified School District
COP, (School Facility Boarding
Refunding Program), 3.85%,
9/1/01 (FSA)(SBBPA:
First Union National Bank)(1) 1,003
2,230 Sacramento County Improvement
Bond Act 1915 Special
Assessment, (Sunrise/Cordova
Reassessment), 5.20%, 9/2/08 2,263
1,000 Stockton Community Facilities
District Special Tax Rev., Series
1998 A, (Mello Roos-Weston
Ranch), 5.80%, 9/1/14 1,030
1,000 Student Education Loan
Marketing Corp. Rev., Series
1998 IV-D-1, 5.875%, 1/1/18
(Guaranteed: Student Loans) 972
---------
5,982
---------
COLORADO--3.1%
1,280 Colorado Health Facilities Auth.
Rev., Series 1998 A,
(Volunteers), 5.00%, 7/1/03 1,278
---------
FLORIDA--6.7%
985 Arbor Greene Community
Development District Special
Assessment Rev., 5.75%,
5/1/06 996
1,500 Heritage Isles Community
Development District Special
Assessment Rev., Series
1998 A, 5.75%, 5/1/05(2) 1,520
210 Manatee County Housing Finance
Auth. Mortgage Rev., (Single
Family), 7.20%, 5/1/28
(GNMA/FNMA/FHLMC) 240
---------
2,756
---------
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
IDAHO--1.3%
$ 495 Idaho Housing Agency Rev.,
Series 1995 C-2, (Single Family
Mortgage), 6.35%, 7/1/15 $ 532
---------
ILLINOIS--2.2%
890 Illinois Educational Facilities Auth.
Rev., Series 1998 B,
(Midwestern University), 5.50%,
5/15/28 895
---------
INDIANA--4.4%
250 Indiana Health Facilities Financing
Auth. Hospital Rev., (Jackson
County Scheck Memorial),
5.125%, 2/15/17 244
500 Indiana Health Facilities Financing
Auth. Hospital Rev., (Jackson
County Scheck Memorial),
5.25%, 2/15/22 491
1,020 Indianapolis Airport Auth. Rev.,
Series 1995 A, (United Airlines),
6.50%, 11/15/31 1,097
---------
1,832
---------
KENTUCKY--0.4%
160 Kentucky Housing Corp. Rev.,
Series 1988 C, 7.90%, 1/1/21
(FHA/VA Mortgages) 168
---------
MISSISSIPPI--3.6%
1,500 Mississippi Business Finance Corp.
Health Facilities Rev., (Medical
Foundation Inc.), 5.375%,
7/1/15 1,482
---------
MISSOURI--1.8%
465 Hannibal Industrial Development
Auth. Educational Facilities Rev.,
(Hannibal-Lagrange College),
5.90%, 10/1/18 475
250 Raymore Special Obligation Rev.,
5.70%, 3/1/23(2) 249
---------
724
---------
NEW JERSEY--4.8%
2,000 New Jersey Economic
Development Auth. Rev., Series
1998 A, (Kapkowski Road
Landfill), 6.375%, 4/1/31 1,977
---------
NEW MEXICO--2.5%
1,000 Santa Fe Educational Facilities
Rev., (College of Santa Fe),
5.875%, 10/1/21 1,042
---------
See Notes to Financial Statements
32 1-800-345-2021
High-Yield Municipal--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
NORTH CAROLINA--3.8%
$ 595 North Carolina Medical Care
Community Hospital Rev.,
(Halifax Regional Medical
Center), 5.00%, 8/15/18 $ 572
1,050 North Carolina Medical Care
Community Hospital Rev.,
(Halifax Regional Medical
Center), 5.00%, 8/15/24 995
---------
1,567
---------
OHIO--1.3%
500 Erie County Franciscan Services
Corp. Rev., (Providence Hospital
Inc.), 6.00%, 1/1/13(2) 533
---------
OREGON--5.8%
1,415 Oregon Health Housing
Educational & Cultural Facilities
Auth. Rev., 4.50%, 10/1/06 1,403
1,000 Oregon Health Housing
Educational & Cultural Facilities
Auth. Rev., 5.25%, 10/1/16 968
---------
2,371
---------
PENNSYLVANIA--8.6%
2,500 Dauphin County General Auth.
Rev., (Hyatt Regency Hotel &
Conference Center), 6.20%,
1/1/29 2,495
1,055 Philadelphia GO, 4.25%,
3/15/00 (FSA)(1) 1,066
---------
3,561
---------
TENNESSEE--0.6%
230 Tennessee Housing Development
Agency Mortgage Finance Rev.,
Series 1995 C, 6.45%, 7/1/21 248
---------
UTAH--5.7%
2,350 Bountiful Hospital Rev., (South
Davis Community Hospital),
5.125%, 12/15/05 2,346
---------
WASHINGTON--6.9%
305 Kitsap County Housing Auth. Rev.,
Series 1998 A, (Pooled
Housing), 5.60%, 12/1/28 307
500 Port Anacortes Rev., Series
1998 A, 5.625%, 9/1/16 507
1,000 Spokane Downtown Foundation
Parking Rev., (River Park
Square), 5.60%, 8/1/19 1,008
1,000 Washington State GO, Series
1997 R-98A, 5.00%, 7/1/13 1,022
---------
2,844
---------
Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
WISCONSIN--2.5%
1,000 Wisconsin Transportation Rev.,
Series 1998 B, 5.00%,
7/1/15 (FGIC) $ 1,015
---------
WYOMING--4.0%
1,500 Teton County Hospital District
Rev., 5.80%, 12/1/17 1,521
130 Wyoming Community
Development Auth. Rev.,
Series 1990 B, (Single Family
Mortgage), 8.125%, 6/1/21
(FHA) 136
---------
1,657
---------
TOTAL MUNICIPAL SECURITIES 37,285
---------
(Cost $36,858)
SHORT-TERM MUNICIPAL SECURITIES--9.5%
CALIFORNIA--7.1%
1,900 Los Angeles County Public Works
Financing Auth. Lease Rev.
Floating Rate Trust Receipts,
Series 1998 A47, VRDN,
3.95%, 12/1/98 (Acquired
10/9/98, Cost $1,900)(3) 1,900
1,000 San Francisco City and County
Airport Commission International
Airport Rev., Series 1998 A-48,
VRDN, 4.00%, 12/1/98
(FGIC) (SBBPA: National
Westminster Bank PLC)
(Acquired 11/19/98,
Cost $1,000)(3) 1,000
---------
2,900
---------
FLORIDA--2.4%
1,000 Florida Board Education Capital
Outlay GO Trust Receipts,
VRDN, 3.45%, 12/1/98
(SBBPA: Societe Generale)
(Acquired 11/6/98,
Cost $1,000)(3) 1,000
---------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 3,900
---------
(Cost $3,900)
TOTAL INVESTMENT SECURITIES--100.0% $41,185
=========
(Cost $40,758)
See Notes to Financial Statements
www.americancentury.com 33
High-Yield Municipal--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FHA = Federal Housing Authority
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
GNMA = Government National Mortgage Corporation
GO = General Obligation
SBBPA = Standby Bond Purchase Agreement
VA = Veteran's Administration
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, 1998.
(1) When-issued security.
(2) Security, or a portion thereof, has been segregated at the custodion bank
for when-issued securities.
(3) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at November 30, 1998, was $3,900,
which represented 9.9% of net assets.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* principal amount of each investment
* the market value of each investment
* the percentage of investments in each state
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
34 1-800-345-2021
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (UNAUDITED)
INTERMEDIATE-
LIMITED-TERM TERM LONG-TERM HIGH-YIELD
TAX-FREE TAX-FREE TAX-FREE MUNICIPAL
ASSETS (In Thousands Except Per-Share Amounts)
<S> <C> <C> <C> <C>
Investment securities, at value
(identified cost of $39,215,
$141,836, $121,412 and $40,758,
respectively)(Note 3) ......... $ 40,101 $ 148,844 $ 130,186 $ 41,185
Cash ............................ 166 127 513 17
Investment in affiliated money
market fund (Note 2) .......... -- 2 6 --
Receivable for investments sold . -- 589 1,983 --
Interest receivable ............. 561 2,327 1,938 615
------------- ------------- ------------- -------------
40,828 151,889 134,626 41,817
------------- ------------- ------------- -------------
LIABILITIES
Disbursements in excess
of demand deposit cash ........ 253 123 69 206
Payable for investments
purchased ..................... -- 4,041 9,249 2,069
Payable for capital shares
redeemed ...................... 2 68 37 10
Dividends payable ............... 13 54 48 16
Accrued management fees
(Note 2) ...................... 17 61 51 --
------------- ------------- ------------- -------------
285 4,347 9,454 2,301
------------- ------------- ------------- -------------
Net Assets ...................... $ 40,543 $ 147,542 $ 125,172 $ 39,516
============= ============= ============= =============
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) ......... 3,957 13,854 11,401 3,862
============= ============= ============= =============
Net Asset Value Per Share ....... $ 10.25 $ 10.65 $ 10.98 $ 10.23
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital paid-in ................. $ 39,482 $ 139,467 $ 114,398 $ 38,954
Undistributed net investment
income ........................ -- -- 24 --
Accumulated undistributed
net realized gain
from investment transactions .. 175 1,067 1,975 136
Net unrealized appreciation
on investments (Note 3) ....... 886 7,008 8,775 426
------------- ------------- ------------- -------------
$ 40,543 $ 147,542 $ 125,172 $ 39,516
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. The net assets divided by the total number
of fund shares outstanding gives you the price of an individual share, or the
net asset value per share.
NET ASSETS are also broken out by capital (money invested by shareholders); net
investment income not yet paid to shareholders or net investment losses, if any;
net gains earned on investments but not yet paid to shareholders or net losses
on investments (known as realized gains or losses); and finally, gains or losses
on securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakout tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
See Notes to Financial Statements
www.americancentury.com 35
<TABLE>
<CAPTION>
Statements of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
INTERMEDIATE-
LIMITED-TERM TERM LONG-TERM HIGH-YIELD
TAX-FREE TAX-FREE TAX-FREE MUNICIPAL
INVESTMENT INCOME (In Thousands)
Income:
<S> <C> <C> <C> <C>
Interest ....................... $ 897 $ 3,571 $ 3,174 $ 840
------------- ------------- ------------- -------------
Expenses (Note 2):
Management fees ................ 101 359 299 101
Trustees' fees and expenses .... 2 3 3 1
------------- ------------- ------------- -------------
Total expenses ............... 103 362 302 102
Amount waived .................. -- -- -- (102)
------------- ------------- ------------- -------------
Net expenses ................. 103 362 302 --
------------- ------------- ------------- -------------
Net investment income .......... 794 3,209 2,872 840
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
(NOTE 3)
Net realized gain on investments 123 416 684 153
Change in net unrealized
appreciation on investments .. 227 1,216 1,116 264
------------- ------------- ------------- -------------
Net realized and unrealized
gain on investments .......... 350 1,632 1,800 417
------------- ------------- ------------- -------------
Net Increase in Net Assets
Resulting from Operations .... $ 1,144 $ 4,841 $ 4,672 $ 1,257
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF OPERATIONS--This statement breaks out how each
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* interest income earned from investments
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)
See Notes to Financial Statements
36 1-800-345-2021
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED), PERIOD ENDED MAY 31, 1998(1) AND
YEAR ENDED OCTOBER 31, 1997
LIMITED-TERM TAX-FREE INTERMEDIATE-TERM TAX-FREE
Increase (Decrease) NOV. 30, MAY 31, OCT. 31, NOV. 30, MAY 31, OCT. 31,
in Net Assets 1998 1998 1997 1998 1998 1997
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS (In Thousands)
Net investment income ........ $ 794 $ 878 $ 1,796 $ 3,209 $ 3,630 $ 3,978
Net realized gain (loss)
on investments ............. 123 34 283 416 652 758
Change in net unrealized
appreciation on investments 227 102 164 1,216 400 1,119
--------- --------- --------- --------- --------- ---------
Net increase in net assets
resulting from operations .. 1,144 1,014 2,243 4,841 4,682 5,855
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income ... (794) (878) (1,796) (3,209) (3,630) (3,978)
From net realized gains
from investment transactions -- -- (281) -- (257) (686)
--------- --------- --------- --------- --------- ---------
Decrease in net assets
from distributions ......... (794) (878) (2,077) (3,209) (3,887) (4,664)
--------- --------- --------- --------- --------- ---------
CAPITAL SHARE
TRANSACTIONS
Proceeds from shares sold .... 8,987 12,276 25,373 23,731 22,424 24,839
Proceeds from shares issued
in connection with
acquisition (Note 5) ....... -- -- -- -- -- 60,519
Proceeds from reinvestment
of distributions ........... 706 780 1,901 2,616 3,161 3,963
Payments for shares
redeemed ................... (7,910) (11,219) (40,869) (18,344) (20,889) (38,664)
--------- --------- --------- --------- --------- ---------
Net increase (decrease)
in net assets from capital
share transactions ......... 1,783 1,837 (13,595) 8,003 4,696 50,657
--------- --------- --------- --------- --------- ---------
Net increase (decrease)
in net assets .............. 2,133 1,973 (13,429) 9,635 5,491 51,848
NET ASSETS
Beginning of period .......... 38,410 36,437 49,866 137,907 132,416 80,568
--------- --------- --------- --------- --------- ---------
End of period ................ $ 40,543 $ 38,410 $ 36,437 $ 147,542 $ 137,907 $ 132,416
========= ========= ========= ========= ========= =========
TRANSACTIONS IN SHARES
OF THE FUNDS
Sold ......................... 881 1,208 2,515 2,239 2,127 2,387
Shares issued in connection
with acquisition (Note 5) .. -- -- -- -- -- 5,830
Issued in reinvestment
of distributions ........... 69 77 189 247 301 381
Redeemed ..................... (775) (1,106) (4,050) (1,735) (1,986) (3,725)
--------- --------- --------- --------- --------- ---------
Net increase (decrease) ...... 175 179 (1,346) 751 442 4,873
========= ========= ========= ========= ========= =========
</TABLE>
(1) The fiscal year end was changed from October 31 to May 31 for Limited-Term
Tax-Free and Intermediate-Term Tax-Free, resulting in a seven month
reporting period.
See Notes to Financial Statements
www.americancentury.com 37
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
(Continued)
SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED), PERIOD ENDED MAY 31, 1998(1) AND
YEAR ENDED OCTOBER 31, 1997
LONG-TERM TAX-FREE HIGH-YIELD MUNICIPAL
Increase (Decrease) NOV. 30, MAY 31, OCT. 31, NOV. 30, MAY 31,
in Net Assets 1998 1998 1997 1998 1998
<S> <C> <C> <C> <C> <C>
OPERATIONS (In Thousands)
Net investment income ....... $ 2,872 $ 3,216 $ 3,377 $ 840 $ 106
Net realized gain (loss)
on investments ............ 684 1,317 1,546 153 (17)
Change in net unrealized
appreciation on investments 1,116 93 853 264 162
--------- --------- --------- --------- ---------
Net increase in net assets
resulting from operations . 4,672 4,626 5,776 1,257 251
--------- --------- --------- --------- ---------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income .. (2,872) (3,216) (3,377) (840) (106)
From net realized gains from
iinvestment transactions .. -- (725) (823) -- --
--------- --------- --------- --------- ---------
Decrease in net assets from
distributions ............. (2,872) (3,941) (4,200) (840) (106)
--------- --------- --------- --------- ---------
CAPITAL SHARE
TRANSACTIONS
Proceeds from shares sold ... 39,175 36,917 29,116 26,057 19,646
Proceeds from shares issued
in connection with
acquisition (Note 5) ...... -- -- 52,028 -- --
Proceeds from reinvestment
of distributions .......... 2,247 3,148 3,588 673 90
Payments for shares redeemed (34,665) (33,003) (38,212) (6,419) (1,093)
--------- --------- --------- --------- ---------
Net increase (decrease) in
net assets from capital
share transactions ........ 6,757 7,062 46,520 20,311 18,643
--------- --------- --------- --------- ---------
Net increase (decrease)
in net assets ............. 8,557 7,747 48,096 20,728 18,788
NET ASSETS
Beginning of period ......... 116,615 108,868 60,772 18,788 --
--------- --------- --------- --------- ---------
End of period ............... $ 125,172 $ 116,615 $ 108,868 $ 39,516 $ 18,788
========= ========= ========= ========= =========
TRANSACTIONS IN SHARES
OF THE FUNDS
Sold ........................ 3,591 3,424 2,730 2,561 1,964
Shares issued in connection
with acquisition (Note 5) . -- -- 4,905 -- --
Issued in reinvestment
of distributions .......... 206 292 337 66 9
Redeemed .................... (3,180) (3,057) (3,591) (629) (109)
--------- --------- --------- --------- ---------
Net increase (decrease) ..... 617 659 4,381 1,998 1,864
========= ========= ========= ========= =========
</TABLE>
(1) The fiscal year end was changed from October 31 to May 31 for Long-Term
Tax-Free, resulting in a seven month reporting period. For High-Yield
Municipal, the period shown is March 31, 1998 (commencement of operations)
through May 31, 1998.
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
each fund's net assets changed over the past three reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* capital share transactions--shareholders' purchases, reinvestments, and
redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions and capital share transactions result in net assets at the end of
the period.
See Notes to Financial Statements
38 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998 (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 Limited-Term Tax-Free Fund (Limited-Term),
American Century - Benham Intermediate-Term Tax-Free Fund (Intermediate-Term),
American Century - Benham Long-Term Tax-Free Fund (Long-Term) and American
Century - Benham High-Yield Municipal (High-Yield) (the Funds) are four of the
eight funds issued by the Trust. The Funds, except High-Yield, are diversified
under the 1940 Act. The objective of Limited-Term, Intermediate-Term and
Long-Term 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. High-Yield's objective is to seek high
current income exempt from federal income taxes as is consistent with its
investment policies, which permit investment in lower-rated and unrated
securities. High-Yield invests primarily in lower-rated debt securities, which
are subject to greater credit risk and consequently offer higher yield.
Securities of this type are subject to substantial risks including price
volatility, liquidity risk and default risk. The Funds invest primarily in
municipal obligations with maturities based on each Fund's investment objective.
The Funds may concentrate their investments in certain states and therefore may
have more exposure to credit risk related to those states than funds that have
broader geographical diversification. The following significant accounting
policies are in accordance with generally accepted accounting principles.
SECURITY VALUATIONS--Portfolio securities are valued at current market
value as provided by a commercial pricing service or at the mean of the most
recent bid and asked prices. When valuations are not readily available,
securities are valued at fair value as determined in accordance with procedures
adopted by the Board of Trustees.
SECURITY TRANSACTIONS--Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME--Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
INCOME TAX STATUS--It is the policy of the Funds to distribute all net
investment income and net realized 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
income 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.
High-Yield has elected to treat $17,496 of net capital losses incurred in
the two-month period ended May 31, 1998, as having incurred in the following
fiscal year.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net capital gains and losses for financial statement
and tax purposes and may result in reclassification among certain capital
accounts.
On December 11, 1998 the Funds declared and paid a distribution to
shareholders of record on that date. The distributions from net realized gains
on investments were $0.0349, $0.0765, $0.1772 and $0.0347 for Limited-Term,
Intermediate-Term, Long-Term and High-Yield respectively.
FUTURES CONTRACTS--The Funds may buy and sell interest rate futures
contracts relating to debt securities and write and buy put and call options
relating to interest rate futures contracts. The Funds 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, 1998.
ADDITIONAL INFORMATION--Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.
www.americancentury.com 39
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The Trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM) that provides each Fund with investment
advisory and management services in exchange for a single, unified management
fee. Expenses excluded from this 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. 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 net 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 Funds are included in the Bond Fund
Category. Second, a separate fee rate schedule is applied to the net 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 Limited-Term,
Intermediate-Term and Long-Term 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 Investment Category Fee schedule for High-Yield is as
follows:
0.4100% of the first $1 billion
0.3580% of the next $1 billion
0.3280% of the next $3 billion
0.3080% of the next $5 billion
0.2950% of the next $15 billion
0.2930% of the next $25 billion
0.2925% 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
ACIM has agreed to waive all expenses for High-Yield from March 31, 1998
(inception) through April 30, 1999.
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, and the
Trust's transfer agent, American Century Services, Inc.
As of November 30, 1998, Intermediate-Term had invested $1,817, and
Long-Term had invested $5,807 in shares of American Century - Benham Tax-Free
Money Market Fund (Tax-Free Money Market). The terms of such transactions were
identical to those with non-related entities except that, to avoid duplicate
management fees, Intermediate-Term and Long-Term did not pay ACIM management
fees with respect to assets invested in Tax-Free Money Market.
40 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, were as follows:
<TABLE>
LIMITED-TERM INTERMEDIATE-TERM LONG-TERM HIGH-YIELD
TAX-FREE TAX-FREE TAX-FREE MUNICIPAL
PURCHASES (In Thousands)
<S> <C> <C> <C> <C>
Municipal Debt Obligations ........... $11,067 $30,552 $41,498 $37,905
PROCEEDS FROM SALES (In Thousands)
Municipal Debt Obligations ........... $10,660 $22,493 $33,803 $17,142
On November 30, 1998, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal income tax purposes was as follows:
LIMITED-TERM INTERMEDIATE-TERM LONG-TERM HIGH-YIELD
TAX-FREE TAX-FREE TAX-FREE MUNICIPAL
(In Thousands)
Appreciation ......................... $889 $7,060 $8,830 $457
Depreciation ......................... (3) (52) (55) (31)
--------- ---------- --------- --------
Net .................................. $886 $7,008 $8,775 $426
========= ========== ========= ========
</TABLE>
The aggregate cost of investments for federal income tax purposes was the same
as the cost for financial reporting purposes for the Funds.
- --------------------------------------------------------------------------------
4. BANK LOANS
Effective December 18, 1998, the Funds, along with certain other funds
managed by ACIM, entered into an unsecured $570,000,000 bank line of credit
agreement with Chase Manhattan. Borrowings under the agreement bear interest at
the Federal Funds rate plus 0.40%.
- --------------------------------------------------------------------------------
5. REORGANIZATION PLAN
On August 29, 1997, Limited-Term, Intermediate-Term, and Long-Term acquired
all of the net assets of the American Century - Benham Limited-Term Tax-Exempt
Fund (Limited-Term Tax-Exempt), American Century - Benham Intermediate-Term
Tax-Exempt Fund (Intermediate-Term Tax-Exempt), and American Century - Benham
Long-Term Tax-Exempt Fund (Long-Term Tax-Exempt), respectively, pursuant to a
plan of reorganization approved by the acquired funds' shareholders on July 30,
1997. The surviving funds for the purposes of maintaining the financial
statements and performance history in the post-reorganization are Limited-Term
Tax-Exempt, Intermediate-Term Tax-Exempt, and Long-Term Tax-Exempt. These funds
were also reorganized as funds issued by American Century Municipal Trust.
The acquisition was accomplished by a tax-free exchange of shares of
Limited-Term, Intermediate-Term, and Long-Term of 3,729,594, 5,588,194, and
4,402,660, respectively, for 3,729,594, 5,830,457, and 4,904,754 shares of
Limited-Term Tax-Exempt, Intermediate-Term Tax-Exempt, and Long-Term Tax-Exempt,
respectively, outstanding on August 29, 1997. The net assets of
Intermediate-Term, and Long-Term immediately before the acquisitions were
$60,519,330 and $52,028,294, respectively. Since Limited-Term was not a legal
entity prior to the merger, there were no assets prior to the reorganization.
Unrealized appreciation of $2,290,179 and $3,743,216 for Intermediate-Term and
Long-Term, respectively, was combined with that of Intermediate-Term Tax-Exempt
and Long-Term Tax-Exempt. Immediately after the acquisition, the combined net
assets of Limited-Term, Intermediate-Term, and Long-Term were $37,556,857,
$133,562,791, and $106,095,509, respectively.
www.americancentury.com 41
<TABLE>
<CAPTION>
Limited-Term Tax-Free--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
1998(1) 1998(2) 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .......... $ 10.16 $ 10.11 $ 10.08 $ 10.09 $ 9.95 $ 10.04
---------- ---------- ---------- ---------- ---------- ----------
Income From Investment
Operations
Net Investment Income ...... 0.20 0.24 0.41 0.43 0.44 0.36
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ............... 0.09 0.05 0.10 (0.01) 0.14 (0.09)
---------- ---------- ---------- ---------- ---------- ----------
Total From Investment
Operations ................. 0.29 0.29 0.51 0.42 0.58 0.27
---------- ---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income . (0.20) (0.24) (0.41) (0.43) (0.44) (0.36)
From Net Realized Gains on
Investment Transactions .... -- -- (0.07) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ........ (0.20) (0.24) (0.48) (0.43) (0.44) (0.36)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 10.25 $ 10.16 $ 10.11 $ 10.08 $ 10.09 $ 9.95
========== ========== ========== ========== ========== ==========
Total Return(3) ............ 2.90% 2.87% 5.22% 4.26% 5.95% 2.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........ 0.51%(4) 0.52%(4) 0.59% 0.38%(5) --(5) --(5)
Ratio of Net Investment Income
to Average Net Assets ........ 3.96%(4) 4.04%(4) 4.05% 4.28% 4.38% 3.62%
Portfolio Turnover Rate ...... 27% 28% 74% 68% 78% 42%
Net Assets, End of Period
(in thousands) ............... $ 40,543 $ 38,410 $ 36,437 $ 49,866 $ 58,837 $ 60,857
</TABLE>
(1) Six months ended November 30, 1998 (unaudited).
(2) Seven months ended May 31, 1998. The Fund's fiscal year end was changed from
October 31 to May 31 resulting in a seven month reporting period.
(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.
(5) ACIM had voluntarily waived its management fee through February 29, 1996. In
absence of the waiver, the ratio of operating expenses to average net assets
would have been 0.60%.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years.
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
42 1-800-345-2021
<TABLE>
<CAPTION>
Intermediate-Term Tax-Free--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
1998(1) 1998(2) 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .......... $ 10.52 $ 10.46 $ 10.35 $ 10.45 $ 10.01 $ 10.75
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income ...... 0.24 0.28 0.49 0.48 0.49 0.48
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ............... 0.13 0.08 0.21 (0.03) 0.52 (0.61)
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ................. 0.37 0.36 0.70 0.45 1.01 (0.13)
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income . (0.24) (0.28) (0.49) (0.48) (0.49) (0.48)
From Net Realized Gains on
Investment Transactions .... -- (0.02) (0.10) (0.07) (0.08) (0.13)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ........ (0.24) (0.30) (0.59) (0.55) (0.57) (0.61)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 10.65 $ 10.52 $ 10.46 $ 10.35 $ 10.45 $ 10.01
=========== =========== =========== =========== =========== ===========
Total Return(3) ............ 3.56% 3.50% 6.88% 4.47% 10.41% (1.25)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........ 0.51%(4) 0.51%(4) 0.58% 0.60% 0.60% 0.60%
Ratio of Net Investment Income
to Average Net Assets ........ 4.53%(4) 4.62%(4) 4.71% 4.66% 4.77% 4.59%
Portfolio Turnover Rate ...... 16% 17% 35%(5) 39% 32% 74%
Net Assets, End of Period
(in thousands) ............... $ 147,542 $ 137,907 $ 132,416 $ 80,568 $ 80,248 $ 81,400
</TABLE>
(1) Six months ended November 30, 1998 (unaudited).
(2) Seven months ended May 31, 1998. The Fund's fiscal year end was changed from
October 31 to May 31 resulting in a seven month reporting period.
(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.
(5) Purchases, sales, and market value amounts for Benham Intermediate-Term
Tax-Free Fund prior to the merger were excluded from the portfolio turnover
calculation.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years.
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
www.americancentury.com 43
<TABLE>
<CAPTION>
Long-Term Tax-Free--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
1998(1) 1998(2) 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .......... $ 10.81 $ 10.75 $ 10.58 $ 10.54 $ 9.75 $ 11.10
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income ...... 0.26 0.31 0.55 0.53 0.53 0.52
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ............... 0.17 0.13 0.33 0.04 0.83 (1.01)
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ................. 0.43 0.44 0.88 0.57 1.36 (0.49)
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income . (0.26) (0.31) (0.55) (0.53) (0.53) (0.52)
From Net Realized Gains on
Investment Transactions .... -- (0.07) (0.16) -- (0.04) (0.34)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ........ (0.26) (0.38) (0.71) (0.53) (0.57) (0.86)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 10.98 $ 10.81 $ 10.75 $ 10.58 $ 10.54 $ 9.75
=========== =========== =========== =========== =========== ===========
Total Return(3) ............ 4.07% 4.18% 8.59% 5.60% 14.45% (4.70)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........ 0.51%(4) 0.51%(4) 0.58% 0.59% 0.59% 0.60%
Ratio of Net Investment Income
to Average Net Assets ........ 4.85%(4) 4.96%(4) 5.16% 5.06% 5.24% 5.00%
Portfolio Turnover Rate ...... 29% 47% 65%(5) 60% 61% 66%
Net Assets, End of Period
(in thousands) ............... $ 125,172 $ 116,615 $ 108,868 $ 60,772 $ 57,997 $ 50,964
</TABLE>
(1) Six months ended November 30, 1998 (unaudited).
(2) Seven months ended May 31, 1998. The Fund's fiscal year end was changed from
October 31 to May 31 resulting in a seven month reporting period.
(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.
(5) Purchases, sales, and market value amounts for Benham Long-Term Tax-Free
Fund prior to the merger were excluded from the portfolio turnover
calculation.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years.
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
44 1-800-345-2021
High-Yield Municipal--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
1998(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ......... $ 10.08 $ 9.99
---------- ----------
Income From Investment Operations
Net Investment Income ...................... 0.27 0.09
Net Realized and Unrealized Gain
on Investment Transactions ................. 0.15 0.09
---------- ----------
Total From Investment Operations ........... 0.42 0.18
---------- ----------
Distributions
From Net Investment Income ................. (0.27) (0.09)
---------- ----------
Net Asset Value, End of Period ............... $ 10.23 $ 10.08
========== ==========
Total Return(3) ............................ 4.20% 1.81%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets(4) ........................ -- --
Ratio of Net Investment Income to
Average Net Assets(4) ........................ 5.29% 5.38%
Portfolio Turnover Rate ...................... 60% 44%
Net Assets, End of Period
(in thousands) ............................... $ 39,516 $ 18,788
(1) Six months ended November 30, 1998 (unaudited).
(2) March 31, 1998 (inception) through May 31, 1998.
(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. ACIM has voluntarily agreed to pay all expenses of the Fund from
March 31, 1998 (inception) through April 30, 1999. In absence of the waiver,
the annualized ratio of operating expenses to average net assets would have
been 0.64% for both periods and the annualized ratio of net investment
income to average net assets would have been 4.65% and 4.74%, for the
periods ending November 30, 1998 and May 31, 1998, respectively.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years (or less, if the class is not five years old).
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
www.americancentury.com 45
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND 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
LIMITED-TERM TAX-FREE seeks interest income exempt from federal income
taxes by investing in municipal securities. The fund maintains a weighted
average maturity of five years or less.
INTERMEDIATE-TERM TAX-FREE seeks interest income exempt from federal income
taxes by investing in municipal securities. The fund maintains a weighted
average maturity of 5-10 years.
LONG-TERM TAX-FREE seeks interest income exempt from federal income taxes
by investing in municipal securities. The fund maintains a weighted average
maturity of 10 or more years.
HIGH-YIELD MUNICIPAL seeks to provide a high level of interest income
exempt from federal income taxes by investing in high-yielding municipal
securities. As a secondary objective, the fund seeks capital appreciation. The
fund invests primarily in lower-rated or unrated municipal bonds, which are
subject to greater credit and liquidity risk. The fund has no average maturity
restrictions but is expected to maintain an average maturity of 10 years or
more.
Investment income may be subject to state and local taxes and, depending on
your tax status, the federal alternative minimum tax. Capital gains are not
exempt from federal income taxes.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The MERRILL LYNCH 0- TO 3-YEAR MUNICIPAL INDEX has an average maturity of
approximately two years. The bonds in the index have an average rating of AA1.
The LEHMAN BROTHERS FIVE-YEAR MUNICIPAL GENERAL OBLIGATION INDEX has an
average maturity of five years. The bonds are rated BBB or higher by Standard &
Poor's, with an average rating of AA.
The LEHMAN BROTHERS LONG-TERM MUNICIPAL BOND INDEX is composed of
investment-grade municipal bonds with maturities greater than 22 years.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated. Rankings
are not included for periods less than one year.
The Lipper categories for the funds are:
SHORT/INTERMEDIATE MUNICIPAL DEBT FUNDS (Limited-Term Tax-Free)--funds that
invest in municipal debt issues with dollar-weighted average maturities of 1-5
years.
INTERMEDIATE MUNICIPAL DEBT FUNDS (Intermediate-Term Tax-Free)--funds that
invest in municipal debt issues with dollar-weighted average maturities of 5-10
years.
GENERAL MUNICIPAL DEBT FUNDS (Long-Term Tax-Free)--funds that invest at
least 65% of their assets in municipal debt issues in the top four credit
ratings (AAA, AA, A, and BBB).
HIGH-YIELD MUNICIPAL DEBT FUNDS--funds that invest at least 50% of assets
in lower-rated municipal debt issues.
[left margin]
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGERS
DAVE MACEWEN
STEVEN PERMUT
JOEL SILVA
MUNICIPAL CREDIT RESEARCH TEAM
MANAGER
STEVEN PERMUT
MUNICIPAL CREDIT ANALYSTS
DAVID MOORE
ROBERT MILLER
BILL MCCLINTOCK
TIM BENHAM
BRAD BODE
CREDIT RATING GUIDELINES
CREDIT RATINGS ARE ISSUED BY INDEPENDENT RESEARCH COMPANIES SUCH AS STANDARD
& POOR'S AND MOODY'S. RATINGS ARE BASED ON AN ISSUER'S FINANCIAL STRENGTH AND
ABILITY TO PAY INTEREST AND PRINCIPAL IN A TIMELY MANNER.
IT'S IMPORTANT TO NOTE THAT CREDIT RATINGS ARE SUBJECTIVE, REFLECTING THE
OPINIONS OF THE RATING AGENCIES; THEY ARE NOT ABSOLUTE STANDARDS OF QUALITY.
* AAA, AA, A, AND BBB ARE STANDARD & POOR'S HIGHEST LONG-TERM CREDIT
RATINGS. BONDS IN THESE RATING CATEGORIES ARE CONSIDERED "INVESTMENT
GRADE," MEANING THEY'RE RELATIVELY SAFE FROM DEFAULT.
* AAA--EXTREMELY STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* AA--VERY STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* A--STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* BBB--GOOD ABILITY TO MEET FINANCIAL OBLIGATIONS.
* BB--LESS VULNERABLE TO DEFAULT THAN OTHER LOWER-QUALITY ISSUES BUT DO NOT
QUITE MEET INVESTMENT-GRADE STANDARDS.
46 1-800-345-2021
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 42-45.
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 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
* AMT PAPER--instruments with income subject to the federal alternative minimum
tax.
* COPS/LEASES--securities issued to finance public property improvements (such
as city halls and police stations) and equipment purchases.
* 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).
www.americancentury.com 47
Notes
- --------------------------------------------------------------------------------
48 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
- -------------------------------------------------------------------------------
BENHAM GROUP(reg.sm)
TAXABLE BOND FUNDS
U.S. TREASURY & GOVERNMENT
Short-Term Treasury
Short-Term Government
GNMA
Intermediate-Term Treasury
Long-Term Treasury
Inflation-Adjusted Treasury
Target Maturities Trust: 2000
Target Maturities Trust: 2005
Target Maturities Trust: 2010
Target Maturities Trust: 2015
Target Maturities Trust: 2020
Target Maturities Trust: 2025
CORPORATE & DIVERSIFIED
Limited-Term Bond
Intermediate-Term Bond
Bond
Premium Bond
High-Yield Bond
INTERNATIONAL
International Bond
TAX-FREE & MUNICIPAL BOND FUNDS
MULTIPLE-STATE
Limited-Term Tax-Free
Intermediate-Term Tax-Free
Long-Term Tax-Free
High-Yield Municipal
SINGLE-STATE
Arizona Intermediate-Term Municipal
California High-Yield Municipal
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
Florida Intermediate-Term Municipal
MONEY MARKET FUNDS
TAXABLE
Capital Preservation
Government Agency Money Market
Premium Capital Reserve
Premium Government Reserve
Prime Money Market
TAX-FREE & MUNICIPAL
California Municipal Money Market
California Tax-Free Money Market
Florida Municipal Money Market
Tax-Free Money Market
AMERICAN CENTURY(reg.sm) GROUP
ASSET ALLOCATION
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
BALANCED
Balanced
CONSERVATIVE EQUITY
Income and Growth
Equity Income
Value
Equity Growth
SPECIALTY
Utilities
Real Estate
Global Natural Resources
Global Gold
SMALL CAP
Small Cap Quantitative
Small Cap Value
TWENTIETH CENTURY GROUP
GROWTH
Select
Heritage Growth
Ultra
AGGRESSIVE GROWTH
Vista
Giftrust
New Opportunities
INTERNATIONAL GROWTH
International Growth
International Discovery
Emerging Markets
GLOBAL
Global Growth
Please call for a prospectus or profile on any American Century fund. These
documents contain important information including charges and expenses, and you
should read them carefully before you invest or send money.
[right margin]
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American
Century
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.
FUNDS DISTRIBUTOR, INC.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION
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Recycled
[back cover]
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9901 Funds Distributor, Inc.
SH-BKT-15064 (c)1998 American Century Services Corporation
