[front cover]
NOVEMBER 30, 1999
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
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Arizona Intermediate-Term Municipal
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American
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[left margin]
ARIZONA INTERMEDIATE-TERM MUNICIPAL
(BEAMX)
---------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
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Our Message to You
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[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The past year demonstrated why investors should focus on long-term
investment strategies and maintain diversified portfolios. The consensus
expectation going into 1999 was that U.S. economic growth would slow, bonds
would perform well, and stocks would cool off. Instead, the reverse
happened--the economy accelerated, stocks posted excellent returns, and bonds
suffered their worst year since 1994.
Increasing inflation anxiety and rising interest rates set the tone for the
U.S. bond market and helped determine the six-month performance of the American
Century Arizona Intermediate-Term Municipal fund. But equally important, from a
longer-term perspective, the fund maintained low expenses and a competitive
yield, key factors that remain consistent no matter how bond market conditions
may change.
Turning to corporate matters, we are constantly looking for ways to lower
the costs of trading securities and generate better returns for shareholders. To
that end, we have made strategic investments in several companies that allow
buyers and sellers of securities to connect directly, efficiently, and
anonymously. Savings in this area directly affect the performance of your funds.
We're also pleased to announce that American Century has been named by
Fortune magazine as one of its "100 Best Companies to Work For." In
addition, American Century's investor account statement is the first fund
company statement to win the Communications Seal from DALBAR, Inc., an
independent financial services research firm.
We do not take this recognition lightly -- acknowledgements like these
enable us to attract and retain talented and dedicated people, from service
representatives to investment professionals. This "intellectual
capital" is our most valuable resource and one that is essential in our
effort to provide you with excellent investment management and service.
As always, we appreciate your continued confidence in 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 Vice Chairman of the Board and
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 .................................................... 6
Schedule of Investments ................................................ 7
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 9
Statement of Operations ................................................ 10
Statements of Changes
in Net Assets ....................................................... 11
Notes to Financial
Statements .......................................................... 12
Financial Highlights ................................................... 14
OTHER INFORMATION
Background Information
Investment Philosophy
and Policies ..................................................... 15
Comparative Indices ................................................. 15
Lipper Rankings ..................................................... 15
Credit Rating
Guidelines ....................................................... 15
Investment Team
Leaders .......................................................... 15
Glossary ............................................................... 16
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* Rising interest rates and weak demand eroded municipal bond prices and
returns during the six months ended November 30, 1999.
* The U.S. economy grew at a 5.7% annual rate in the third quarter of 1999,
and the U.S. unemployment rate hit a 29-year low.
* In response, the Federal Reserve (the U.S. central bank) raised short-term
interest rates three times, pushing municipal bond yields toward two-year
highs.
* The strong U.S. economy helped boost the tax collections and revenues of
municipal issuers around the country, improving the overall credit quality
of the municipal market.
MANAGEMENT Q&A
* Arizona Intermediate-Term Municipal continued to perform very well compared
with its Lipper peers, though returns were limited due to the difficult
investment environment.
* The fund's one- and three-year returns through November 30, 1999, ranked in
the top 10% of the Lipper group. (See page 4 for fund performance
comparisons.)
* Careful yield curve analysis, diligent credit research, and effective
duration management played an important role in performance.
* During the majority of the six months, the fund was essentially
"barbelled," or more heavily invested in two- to four-year and
10-to 12-year securities than in maturities in the middle.
* We kept the portfolio's sensitivity to interest rate changes fairly neutral
compared with the fund's Lipper peers, adding or subtracting a little as
conditions warranted.
[left margin]
ARIZONA INTERMEDIATE-TERM
MUNICIPAL (BEAMX)
TOTAL RETURNS: AS OF 11/30/99
6 Months -0.87%*
1 Year -0.09%
30-DAY SEC YIELD: 4.51%
INCEPTION DATE: 4/11/94
NET ASSETS: $39.5 million
* Not annualized.
See Total Returns on page 4.
Investment terms are defined in the Glossary on pages 16-17.
2 1-800-345-2021
Market Perspective from Randall W. Merk
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[photo of Randall W. Merk]
Randall W. Merk, chief investment officer of fixed income at American Century
MUNICIPAL BOND PERFORMANCE
Rising interest rates and weak demand eroded municipal bond prices and
returns during the six months ended November 30, 1999 (see the accompanying
return table).
Relatively high demand from individual investors helped intermediate-term
municipal securities maintain their value better than longer-term municipals,
which suffered from heavy selling by institutional investors.
ECONOMIC GROWTH FANS INFLATION FEARS
Continued strong U.S. economic growth fanned inflation fears and triggered
higher interest rates. The U.S. economy grew at a 5.7% annual rate in the third
quarter of 1999, and the U.S. unemployment rate hit a 29-year low. In response,
the Federal Reserve (the U.S. central bank) raised short-term interest rates
three times, pushing municipal bond yields toward two-year highs. These higher
yields were the silver lining to a gloomy bond environment in 1999. For an
investor in the top federal tax bracket (39.6%), a 30-year AAA municipal bond
that yielded 5.73% on November 30 (up from 5.08% on May 31) offered a
tax-equivalent yield of 9.49%. That compared very favorably with the 6.29% yield
of the 30-year U.S. Treasury bond at the end of November.
THE CORPORATE CONNECTION
Surprisingly, the fate of municipal bonds was tied closely to the
performance of corporate bonds. Corporate securities became extremely cheap
during the fall months as companies hurried to issue debt in advance of
potential Y2K problems and higher interest rates. Corporate securities offered
such attractive yields in the third quarter that institutional investors, such
as insurance companies, sold their municipal holdings and bought corporates
instead. Corporate bonds have subsequently rebounded in price (and their yields
have fallen) as issuance diminished. As a result, municipals look comparatively
more attractive again.
Municipal bonds are particularly attractive relative to U.S. Treasury
bonds. While municipal yields have historically been about 85% of comparable
U.S. Treasury yields, that ratio climbed to over 90% in November, a good
municipal value indicator.
SECTOR HIGHLIGHTS
The strong U.S. economy helped boost the tax collections and revenues of
municipal issuers around the country, improving the overall credit quality of
the municipal market. General obligation bonds were particularly strong.
Hospital bonds, on the other hand, were disappointing. They suffered from a
combination of heightened industry competition, reduced federal payments, and
the refusal of municipal bond insurers to insure lower-quality tiers of the
hospital sector.
[right margin]
"RISING INTEREST RATES AND WEAK DEMAND ERODED MUNICIPAL BOND PRICES AND
RETURNS DURING THE SIX MONTHS ENDED NOVEMBER 30, 1999."
MUNICIPAL BOND INDEX RETURNS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
MERRILL LYNCH 0- TO 3-YEAR
MUNICIPAL INDEX -1.14%
LEHMAN BROS. 5-YEAR
MUNICIPAL GO INDEX 0.06%
LEHMAN BROS. LONG-TERM
MUNICIPAL BOND INDEX -5.33%
Source: Lipper Inc. and Russell/Mellon Analytical Services
[line graph - data below]
RISING MUNICIPAL YIELD CURVE
5/31/99 11/30/99
YEARS TO
MATURITY
1 3.29% 3.89%
2 3.52% 4.12%
3 3.71% 4.30%
4 3.88% 4.44%
5 4.00% 4.55%
6 4.10% 4.64%
7 4.19% 4.72%
8 4.28% 4.80%
9 4.37% 4.88%
10 4.45% 4.96%
11 4.53% 5.06%
12 4.61% 5.14%
13 4.67% 5.22%
14 4.75% 5.30%
15 4.84% 5.38%
16 4.88% 5.44%
17 4.92% 5.50%
18 4.96% 5.56%
19 4.99% 5.62%
20 5.02% 5.68%
21 5.03% 5.68%
22 5.04% 5.69%
23 5.05% 5.69%
24 5.05% 5.70%
25 5.06% 5.71%
26 5.06% 5.71%
27 5.06% 5.71%
28 5.07% 5.72%
29 5.07% 5.72%
30 5.08% 5.73%
Source: Bloomberg Financial Markets
www.americancentury.com 3
Arizona Intermediate-Term Municipal--Performance
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TOTAL RETURNS AS OF NOVEMBER 30, 1999
ARIZONA OTHER STATES
INTERMEDIATE- LEHMAN 5-YEAR INTERM. MUNI. DEBT FUNDS(2)
TERM MUNICIPAL GO INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) -0.87% 0.06% -1.64% --
1 YEAR -0.09% 1.49% -1.28% 6 OUT OF 76
================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS(3) 3.88% 4.37% 3.36% 5 OUT OF 62
5 YEARS(3) 5.99% 6.05% 5.65% 14 OUT OF 52
LIFE OF FUND(3) 5.44% 5.39%(4) 4.71%(4) 1 OUT OF 43(4)
The fund's inception date was 4/11/94.
(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 15-16 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 11/30/1999
Lehman 5-Year GO Index $13,355
Arizona Intermediate-Term Municipal $13,340
Arizona
Intermediate-Term Lehman 5-Year
Municipal GO Index
DATE VALUE VALUE
4/30/1994 $10,000 $10,000
6/30/1994 $10,064 $9,996
9/30/1994 $10,202 $10,077
12/31/1994 $10,098 $10,044
3/31/1995 $10,562 $10,450
6/30/1995 $10,855 $10,717
9/30/1995 $11,131 $11,010
12/31/1995 $11,431 $11,211
3/31/1996 $11,371 $11,246
6/30/1996 $11,433 $11,295
9/30/1996 $11,619 $11,479
12/31/1996 $11,859 $11,730
3/31/1997 $11,816 $11,711
6/30/1997 $12,130 $12,002
9/30/1997 $12,414 $12,264
12/31/1997 $12,676 $12,490
3/31/1998 $12,764 $12,636
6/30/1998 $12,914 $12,764
9/30/1998 $13,325 $13,115
12/31/1998 $13,424 $13,218
3/31/1999 $13,504 $13,354
6/30/1999 $13,284 $13,199
9/30/1999 $13,307 $13,316
11/30/1999 $13,340 $13,355
$10,000 investment made 4/30/94(4)
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Lehman 5-Year GO Index is provided for comparison in each graph. Arizona
Intermediate-Term Municipal's total returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
returns of the index do not. 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 graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDING NOVEMBER 30)
Arizona
Intermediate-Term Lehman 5-Year
Municipal GO Index
DATE RETURN RETURN
11/30/1994* -0.27% -0.07%
11/30/1995 13.73% 11.99%
11/30/1996 4.91% 5.36%
11/30/1997 5.02% 5.38%
11/30/1998 6.83% 6.32%
11/30/1999 -0.09% 1.49%
* From 4/30/94 (the date nearest the fund's inception for which index data are
available) to 11/30/94.
4 1-800-345-2021
Arizona Intermediate-Term Municipal--Q&A
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[photo of Ken Salinger]
An interview with Ken Salinger, a portfolio manager on the Arizona
Intermediate-Term Municipal fund investment team.
HOW DID THE FUND PERFORM FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999?
Arizona Intermediate-Term Municipal continued to perform very well compared
with its Lipper peers, though returns were limited due to the difficult
investment environment (see page 3). The fund returned -0.87%, compared with the
-1.64% average return of the 78 funds in Lipper's "Other States
Intermediate Municipal Debt Funds" category. The fund's benchmark, the
Lehman 5-Year GO Index, was basically flat for the period, returning 0.06%.
(See page 4 for other fund performance comparisons.)
Arizona Intermediate-Term Municipal's longer-term performance was also
impressive: its one- and three-year returns for the periods ended November 30,
1999, ranked in the top 10% of the Lipper group.
HOW DID THE FUND'S YIELD STACK UP?
Arizona Intermediate-Term Municipal continued to provide a very competitive
yield. The fund's 30-day SEC yield of 4.51% at the end of November was notably
higher than the 4.03% average yield of its Lipper category.
WHAT WERE SOME OF THE MAIN FACTORS BEHIND ARIZONA INTERMEDIATE-TERM MUNICIPAL'S
SOLID RELATIVE PERFORMANCE?
As we've mentioned in previous reports, careful yield curve analysis and
effective duration management were partially responsible for the fund's ongoing
success.
Low expenses also continued to boost performance: fund expenses as of
November 30, 1999, were 0.51%, versus the 0.94% average for the fund's Lipper
group. Adjustments to the portfolio's maturity structure were another important
ingredient.
CAN YOU TALK ABOUT THOSE MATURITY ADJUSTMENTS IN A BIT MORE DETAIL?
Basically, we looked at yield spreads--the yield differences between bonds
with different credit ratings or maturities--to determine which bond maturities
looked the most attractive based on prices and yields. We then screened those
securities for ones that matched our strict credit criteria and selectively
added them to the portfolio.
When making these purchases, we periodically adjusted the portfolio's
maturity structure--the ratio of short- to long-term municipals. During the
majority of the six months, the fund was essentially "barbelled," or
more heavily invested in two- to four-year and 10- to 12-year securities than in
maturities in the middle. We employed the barbell structure to take advantage of
shifts in the municipal yield curve--a graphic representation of the
relationship between bond yields and maturities (see the graph on page 3).
[right margin]
"ARIZONA INTERMEDIATE-TERM MUNICIPAL'S LONGER-TERM PERFORMANCE WAS ALSO
IMPRESSIVE."
YIELDS AS OF NOVEMBER 30, 1999
30-DAY SEC YIELD 4.51%
30-DAY TAX-EQUIVALENT YIELDS
31.02% TAX BRACKET 6.54%
33.90% TAX BRACKET 6.82%
34.59% TAX BRACKET 6.89%
39.33% TAX BRACKET 7.43%
PORTFOLIO AT A GLANCE
11/30/99 5/31/99
NUMBER OF SECURITIES 41 53
WEIGHTED AVERAGE
MATURITY 8.6 YRS 9.7 YRS
AVERAGE DURATION 5.6 YRS 5.6 YRS
EXPENSE RATIO 0.51%* 0.51%
* Annualized
Investment terms are defined in the Glossary on pages 16-17.
www.americancentury.com 5
Arizona Intermediate-Term Municipal--Q&A
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(Continued)
In recent months, however, we've made some adjustments to that barbelled
position. The long end of the yield curve "steepened," signaling a
noticeable difference in the yields of bonds maturing between 10 and 20 years.
To capture some of that extra yield, we extended the long end of our barbell by
selling some of the 10- to 12-year municipals and buying a few securities in
the 15- to 20-year range. We balanced those longer-term municipals with
shorter-term bonds maturing between one and three years.
HOW DID YOU MANAGE THE PORTFOLIO'S DURATION?
We kept the portfolio's sensitivity to interest rate changes fairly neutral
compared with the fund's Lipper peers, adding or subtracting a little as
conditions warranted. Generally speaking, that meant keeping duration in a
conservative range around 5.4-5.8 years. That helped mitigate losses as bond
yields rose over the six months.
SPEAKING OF BOND YIELDS, WHAT'S YOUR OUTLOOK FOR THE ARIZONA MUNICIPAL MARKET?
On the credit quality front, conditions in Arizona remain generally sound.
Solid job growth, a low unemployment rate, and higher personal incomes, plus an
influx of retirees and migration from neighboring high-cost states, have all
helped the state's cause.
In spite of that favorable backdrop, it's difficult to accurately gauge
what Arizona's municipal market may look like in 2000. Municipal bond yields are
currently at highs not seen since before 1998's global economic crisis. Robust
U.S. economic growth, which surged ahead at a 5.7% annual pace during the third
quarter of 1999, helped convince the Federal Reserve to raise short-term
interest rates three times in 1999. If the U.S. economy keeps growing at that
rate, we may be in for further Fed intervention and more of the disappointing
municipal bond returns that we've seen during the last half of 1999.
By the same token, though, if growth moderates or slows as a result of
rising interest rates, and inflation remains well contained, the outlook for the
municipal market could begin looking brighter.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR THE PORTFOLIO?
We plan to keep duration conservatively positioned for now and will
probably maintain a basically barbelled maturity structure until market
conditions change.
In addition, we've recently been stocking up on municipals for the
portfolio, while reducing our cash position to a minimum. That's because the
fund typically receives an influx of cash each January--many of the Arizona
municipal securities make their semiannual interest payments in January and
July. By decreasing our cash position now, we should be able to wait until some
of the seasonal demand subsides and buy securities at prices that aren't so
inflated.
[left margin]
TOP FIVE SECTORS (AS OF 11/30/99)
% OF FUND INVESTMENTS
GO 48%
ELECTRIC REVENUE 9%
COPS/LEASES 9%
SPECIAL TAX REVENUE 8%
INDUSTRIAL DEVELOPMENT REVENUE 7%
TOP FIVE SECTORS (AS OF 5/31/99)
% OF FUND INVESTMENTS
GO 51%
SALES TAX REVENUE 7%
COPS/LEASES 7%
HIGHER EDUCATION 6%
SPECIAL TAX REVENUE 6%
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/99 5/31/99
AAA 64% 63%
AA 20% 22%
A 7% 10%
BBB 9% 5%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
15 for more information.
6 1-800-345-2021
Arizona Intermediate-Term Municipal--Schedule of Investments
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This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 93.9%
ARIZONA -- 86.3%
$1,000,000 Arizona Student Loan Acquisition
Auth. Student Loan Rev., Series
1999 A-1, 5.65%, 5/1/14
(Guaranteed: Student Loans) $ 991,880
900,000 Coconino & Yavapai Counties
Joint Unified School District
No. 9, Series 1994 C, (Sedona
Project of 1992), 5.60%,
7/1/06 (FGIC) 924,462
1,000,000 East Valley Institute of Technology
No. 401 GO, 5.00%, 7/1/03
(AMBAC) 1,015,850
545,000 Gilbert County GO, Series
1994 C, 6.00%, 7/1/02
(MBIA) 566,270
1,200,000 Glendale Industrial Development
Auth. Rev., Series 1998 A,
(Midwestern University),
5.375%, 5/15/28 1,061,832
705,000 Maricopa County COP, 5.625%,
6/1/00 710,125
500,000 Maricopa County GO, 6.25%,
7/1/03 (FGIC) 528,235
1,000,000 Maricopa County Hospital Rev.,
(Sun Health Corp.), 5.75%,
4/1/07 1,012,010
500,000 Maricopa County Industrial
Development Auth. Hospital
Facility Rev., (Samaritan Health
Services), 7.15%, 12/1/04
(MBIA) 548,500
1,000,000 Maricopa County Unified School
District No. 1 GO, (Phoenix
Elementary), 5.50%, 7/1/09
(MBIA) 1,031,340
500,000 Maricopa County Unified School
District No. 11 GO, Series
1999 D, (Peoria University),
4.50%, 7/1/03 (FGIC)(1) 499,735
1,000,000 Maricopa County Unified School
District No. 11 GO, Series
1999 D, (Peoria University),
5.50%, 7/1/14 (FGIC)(1) 996,470
800,000 Maricopa County Unified School
District No. 40 GO, Series
1994 C, (Glendale Project of
1994), 7.75%, 7/1/06 (FGIC) 926,728
1,000,000 Maricopa County Unified School
District No. 41 GO, Series
1988 F, (Gilbert Project of
1998), 6.20%, 7/1/02,
Prerefunded at 100% of Par
(FGIC)(2)(3) 1,044,370
Principal Amount Value
--------------------------------------------------------------------------------
$1,000,000 Maricopa County Unified School
District No. 48 GO, (Scottsdale),
6.60%, 7/1/12 $ 1,126,200
1,000,000 Maricopa County Unified School
District No. 90 GO, (Ruth Fisher
Elementary), 5.375%, 7/1/00 1,006,660
1,000,000 Maricopa County Unified School
District No. 97 GO, Series
1996 A, (Deer Valley), 6.25%,
7/1/06 (MBIA) 1,078,370
1,000,000 Maricopa County Unified School
District No. 201 GO, Series
1992 E, (Phoenix), 7.10%,
7/1/04(2) 1,100,180
1,000,000 Mesa Utility System Rev., 5.25%,
7/1/16 (FGIC) 953,630
300,000 Phoenix Airport Rev., Series
1994 C, 5.50%, 7/1/01
(MBIA) 305,013
1,000,000 Phoenix Civic Improvement Corp.
Rev., (Senior Lien), 5.00%,
7/1/03 1,012,220
550,000 Phoenix GO, 6.00%, 7/1/01 565,059
1,450,000 Phoenix GO, Series 1995 B,
5.25%, 7/1/15 1,399,816
2,090,000 Phoenix Industrial Development
Auth. Single Family Mortgage
Rev., Series 1998 A, 6.60%,
12/1/29
(GNMA/FNMA/FHLMC) 2,220,082
500,000 Phoenix Street and Highway Rev.,
5.95%, 7/1/00 505,850
1,500,000 Pima County COP, 5.50%,
1/1/13 (MBIA) 1,501,515
1,000,000 Pima County Sewer Rev., 6.20%,
7/1/00 (FGIC) 1,013,080
1,000,000 Pima County Unified School
District No. 10 GO,
(Amphitheater), 7.00%,
7/1/05 (MBIA) 1,107,920
1,000,000 Pima County Unified School
District No. 12 GO, (Sunnyside),
5.50%, 7/1/09 (MBIA) 1,023,490
1,000,000 Pima County Unified School
District No. 12 GO, (Sunnyside),
5.30%, 7/1/13 (FGIC)(1) 984,080
500,000 Pinal County Unified School
District No. 43 GO, Series
1999 D, (Apache Junction),
5.375%, 7/1/13 (FGIC) 496,170
1,000,000 Salt River Project Agricultural
Improvement and Power District
Rev., Series 1993 B, 6.50%,
1/1/04 1,068,650
480,000 Scottsdale GO, 7.50%, 7/1/02 516,336
1,000,000 Sedona COP, 5.75%, 7/1/20 935,340
1,275,000 Tempe GO, 6.25%, 7/1/05(2) 1,370,077
525,000 Tucson COP, 5.70%, 7/1/02 525,352
See Notes to Financial Statements www.americancentury.com 7
Arizona Intermediate-Term Municipal--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
$1,000,000 Tucson Street and Highway Rev.,
5.70%, 7/1/01 $ 1,022,050
500,000 Yavapai County Unified School
District No. 28 GO, (Camp
Verde), 6.10%, 7/1/04 (FGIC) 529,125
-----------
35,224,072
-----------
PUERTO RICO -- 5.2%
2,410,000 Puerto Rico Electric Power Auth.
Rev., Series 1998 DD, 5.00%,
7/1/28 (FSA) 2,117,402
-----------
VIRGIN ISLANDS -- 2.4%
1,000,000 Virgin Islands Public Finance Auth.
Rev., Series 1999 A, 5.00%,
10/1/04 998,230
-----------
TOTAL MUNICIPAL SECURITIES 38,339,704
-----------
(Cost $38,351,357)
SHORT-TERM MUNICIPAL SECURITIES -- 6.1%
ARIZONA
$2,500,000 Pinal County Industrial
Development Auth. Pollution
Control Rev., (Newmont), VRDN,
3.70%, 12/1/99 (LOC:
National Westminster Bank
PLC) $ 2,500,000
-----------
(Cost $2,500,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $40,839,704
===========
(Cost $40,851,357)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificate 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, 1999.
(1) When-issued security.
(2) Security, or portion thereof, has been segregated at the custodian bank
for a when-issued security.
(3) Escrowed to maturity in U.S. government securities or state and local
government securities.
8 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. The net assets divided by shares outstanding is the share price, or NET
ASSET VALUE PER SHARE. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
NOVEMBER 30, 1999 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $40,851,357)
(Note 3) .............................................. $ 40,839,704
Receivable for investments sold ......................... 1,939,610
Interest receivable ..................................... 824,665
------------
43,603,979
------------
LIABILITIES
Disbursements in excess
of demand deposit cash ................................ 1,589,982
Payable for investments purchased ....................... 2,492,974
Dividends payable ....................................... 20,174
Accrued management fees (Note 2) ........................ 16,514
Payable for trustees' fees
and expenses .......................................... 156
------------
4,119,800
------------
Net Assets .............................................. $ 39,484,179
============
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) ................................. 3,838,169
============
Net Asset Value Per Share ............................... $ 10.29
============
NET ASSETS CONSIST OF:
Capital paid in ......................................... $ 39,856,432
Accumulated net realized loss
on investment transactions ............................ (360,600)
Net unrealized depreciation
on investments (Note 3) ............................... (11,653)
------------
$ 39,484,179
============
See Notes to Financial Statements www.americancentury.com 9
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of interest income, fees and expenses,
and investment gains or losses.
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ................................................ $ 1,087,917
-----------
Expenses (Note 2):
Management fees ......................................... 108,415
Trustees' fees and expenses ............................. 1,345
-----------
109,760
-----------
Net investment income ................................... 978,157
-----------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS (NOTE 3)
Net realized loss on investments ........................ (479,489)
Change in net unrealized
appreciation on investments ........................... (936,276)
-----------
Net realized and unrealized
loss on investments ................................... (1,415,765)
-----------
Net Decrease in Net Assets
Resulting from Operations ............................. $ (437,608)
===========
10 1-800-345-2021 See Notes to Financial Statements
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows 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 (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED) AND YEAR ENDED MAY 31, 1999
Increase (Decrease) in Net Assets NOV. 30, 1999 MAY 31, 1999
OPERATIONS
Net investment income ...................... $ 978,157 $ 1,850,492
Net realized gain (loss) on investments .... (479,489) 303,577
Change in net unrealized appreciation
on investments ........................... (936,276) (307,941)
------------ ------------
Net increase (decrease) in net assets
resulting from operations ................ (437,608) 1,846,128
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................. (978,157) (1,850,492)
From net realized gains on
investment transactions .................. -- (268,298)
------------ ------------
Decrease in net assets
from distributions ....................... (978,157) (2,118,790)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................. 14,242,266 16,288,072
Proceeds from reinvestment
of distributions ......................... 733,539 1,608,799
Payments for shares redeemed ............... (19,485,500) (12,261,906)
------------ ------------
Net increase (decrease) in
net assets from capital
share transactions ....................... (4,509,695) 5,634,965
------------ ------------
Net increase (decrease)
in net assets ............................ (5,925,460) 5,362,303
NET ASSETS
Beginning of period ........................ 45,409,639 40,047,336
------------ ------------
End of period .............................. $ 39,484,179 $ 45,409,639
============ ============
TRANSACTIONS IN SHARES OF THE FUND
Sold ....................................... 1,381,566 1,512,103
Issued in reinvestment
of distributions ......................... 70,779 149,456
Redeemed ................................... (1,888,967) (1,140,362)
------------ ------------
Net increase (decrease) .................... (436,622) 521,197
============ ============
See Notes to Financial Statements www.americancentury.com 11
Notes to Financial Statements
--------------------------------------------------------------------------------
NOVEMBER 30, 1999 (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 (the 1940 Act) as an open-end
management investment company. 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; these
policies may require the use of estimates by fund management.
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 10, 1999, the fund declared and paid a dividend of $0.0230 per
share from short-term net realized gains on investments and $0.0086 per share
from long-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 realized 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 is 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, 1999.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the trust's
distributor. Certain officers of FDI are also officers of the trust.
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM), under which ACIM provides each fund with
investment advisory and management services in exchange for a single, unified
management fee. The Agreement provides that all expenses of the fund, except
brokerage, taxes, portfolio insurance, interest, fees and expenses of those
trustees who are not considered "interested persons" as defined in the
1940 Act (including counsel fees) and extraordinary expenses, will be paid by
ACIM. The fee is calculated daily and paid monthly. It consists of an Investment
Category Fee based on the average net assets of the funds in a specific fund's
investment category and a Complex Fee based on the average net assets of all the
funds managed by ACIM. The rates for the Investment Category Fee range from
0.1625% to 0.2800% and the rates for the Complex Fee range from 0.2900% to
0.3100%. For the six months ended November 30, 1999, the effective annual
management fee was 0.51%.
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.
12 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the six months ended November 30, 1999, were $31,396,915 and
$38,407,276, respectively.
At November 30, 1999, accumulated net unrealized depreciation was $11,653,
which consisted of unrealized appreciation of $394,799, and unrealized
depreciation of $406,452. The aggregate cost of investments for federal income
tax purposes was the same as the cost for financial reporting purposes.
--------------------------------------------------------------------------------
4. BANK LOANS
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 Bank.
Borrowings under the agreement bear interest at the Federal Funds rate plus
0.40%. Effective December 21, 1999, borrowings under the agreement bear interest
at the Federal Funds rate plus 0.50%. The fund may borrow money for temporary or
emergency purposes to fund shareholder redemptions. The fund did not borrow from
the line during the six months ended November 30, 1999.
www.americancentury.com 13
Arizona Intermediate-Term Municipal--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years. It also
includes several key statistics for each reporting period, including TOTAL
RETURN, INCOME RATIO (net income as a percentage of average net assets), EXPENSE
RATIO (operating expenses as a percentage of average net assets), and PORTFOLIO
TURNOVER (a gauge of the fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1999(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
Beginning of Period ............. $10.62 $10.67 $10.44 $10.31 $10.35 $10.13
-------- -------- -------- --------- -------- --------
Income From Investment
Operations
Net Investment Income ........... 0.24 0.46 0.46 0.45 0.51 0.51
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions ......... (0.33) 0.01 0.28 0.13 (0.03) 0.22
-------- -------- -------- --------- -------- --------
Total From Investment
Operations ...................... (0.09) 0.47 0.74 0.58 0.48 0.73
-------- -------- -------- --------- -------- --------
Distributions
From Net Investment Income ...... (0.24) (0.46) (0.46) (0.45) (0.51) (0.51)
From Net Realized Gains on
Investment Transactions ......... -- (0.06) (0.05) -- (0.01) --
-------- -------- -------- --------- -------- --------
Total Distributions ............. (0.24) (0.52) (0.51) (0.45) (0.52) (0.51)
-------- -------- -------- --------- -------- --------
Net Asset Value, End of Period .... $10.29 $10.62 $10.67 $10.44 $10.31 $10.35
======== ======== ======== ========= ======== ========
Total Return(2) ................. (0.87)% 4.51% 7.19% 5.77% 4.65% 7.52%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...........0.51%(3) 0.51% 0.54% 0.66% 0.14% --
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) .........0.51%(3) 0.51% 0.60% 0.79% 0.82% 1.01%
Ratio of Net Investment Income
to Average Net Assets ...........4.55%(3) 4.30% 4.33% 4.35% 4.85% 5.16%
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) .........4.55%(3) 4.30% 4.27% 4.22% 4.17% 4.15%
Portfolio Turnover Rate ........... 74% 70% 39% 81% 36% 33%
Net Assets, End of Period
(in thousands) .................. $39,484 $45,410 $40,047 $30,555 $25,789 $19,778
(1) Six months ended November 30, 1999 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
14 1-800-345-2021 See Notes to Financial Statements
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios 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 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 in that index 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. 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.
[right margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
KEN SALINGER
COLLEEN DENZLER
Municipal Credit Research Director
STEVEN PERMUT
www.americancentury.com 15
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 14.
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 measure 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).
16 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive
yields, as well as a strong and stable foundation and generally lower volatility
levels than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that the fund's category may change over
time. Therefore, it is important that you read a fund's prospectus or fund
profile carefully before investing to ensure its objectives, policies, and risk
potential are consistent with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
www.americancentury.com 17
Notes
--------------------------------------------------------------------------------
18 1-800-345-2021
Notes
--------------------------------------------------------------------------------
www.americancentury.com 19
Notes
--------------------------------------------------------------------------------
20 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that a fund's category may change over time.
Therefore, it is important that you read a fund's prospectus or fund profile
carefully before investing to ensure its objectives, policies and risk potential
are consistent with your needs.For a definition of fund categories, see the
Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 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.
[back cover]
--------------------------------------------------------------------------------
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service
and innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo (reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
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1-800-634-4113 OR 816-444-3485
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1-800-345-3533
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FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
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.
--------------------------------------------------------------------------------
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
Funds Distributor, Inc.
0001 is the distributor for American Century funds
SH-SAN-19180 (c)2000 American Century Services Corporation
[front cover]
NOVEMBER 30, 1999
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
[graphic of runners]
Florida Municipal Money Market
[american century logo (reg.sm)]
American
Century
[inside front cover]
Investing with American Century Brokerage
--------------------------------------------------------------------------------
American Century Brokerage offers investors a broad range of account types,
investment choices, plus free online research and information services.
As a brokerage investor, you can choose from a Standard Account, Access
Account or IRA Account.
Each of these accounts offers a broad range of investment choices, many of
which are available online:
* American Century and J.P. Morgan mutual funds
* Mutual funds from more than 500 fund families, including more than 800
no-transaction fee (NTF) no-load funds
* Listed and over-the-counter stocks
* Equity and index options
* Precious metals
* ADRs (American Depository Receipts)
* Treasury, agency, corporate, and municipal bonds
* CDs (certificates of deposit)
* UITs (unit investment trusts)
Research from J.P. Morgan
J.P. Morgan's world-class global equity research is accessible online to all
brokerage investors initially for a 60-day free trial. After the free trial
period, you can continue to access the research with a minimum of $100,000 in
assets in an American Century brokerage or mutual fund account.
Online Research and Information Services
American Century Brokerage provides you with up-to-date information to help
you make informed decisions. Through American Century Brokerage, you have
unlimited free access to news, quotes, charting, and other research services,
such as Lipper, Inc. Mutual Fund Profile Reports and S&P Snapshot Reports.
Also, you can use Model Portfolio to track up to 20 securities.
Meet Your Goals with FundScan(tm)
American Century Brokerage offers an online mutual fund screening service --
FundScan(tm). By customizing a list of mutual funds to best meet your investment
goals, FundScan helps you narrow investment choices from thousands of available
funds.
For more information about how you can become an American Century Brokerage
investor, visit our Web site at www.americancentury.com or call a Product and
Service Specialist at 1-888-367-7755.
[left margin]
FLORIDA MUNICIPAL MONEY MARKET
(BEFXX)
---------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
Receive Your Annual Reports Online
--------------------------------------------------------------------------------
Manage Important Papers with Ease
American Century gives you the choice to manage your important documents such
as annual reports, prospectuses and newsletters online rather than via regular
mail. Your link to American Century documents is a click away with our
Electronic Communication option.
It's easy. It's convenient. It's paper free:
* Receive links to documents by email
* Download select documents and file electronically to save space in
your file cabinets
* Read documents at your convenience
It's easy to sign up for this program. Go to www.americancentury.com. Log in
with your OnePIN and select an account on your Account List.* Then simply select
the electronic communication link. Questions? Step through the online
demonstration or call 1-800-345-2021. LOG IN AND TAKE CONTROL TODAY!
* Electronic communication is not available for American Century Brokerage
accounts at this time.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The past year demonstrated why investors should focus on long-term
investment strategies and maintain diversified portfolios. The consensus
expectation going into 1999 was that U.S. economic growth would slow, bonds
would perform well, and stocks would cool off. Instead, the reverse happened --
the economy accelerated, stocks posted excellent returns, and bonds suffered
their worst year since 1994.
Increasing inflation anxiety led the Federal Reserve to raise interest
rates. That resulted in higher tax-free yields for the American Century Florida
Municipal Money Market fund. But equally important, from a longer-term
perspective, the fund maintained low expenses and competitive yields, key
factors that remain consistent no matter how market conditions may change.
Turning to corporate matters, we are constantly looking for ways to lower
the costs of trading securities and generate better returns for shareholders. To
that end, we have made strategic investments in several companies that allow
buyers and sellers of securities to connect directly, efficiently, and
anonymously. Savings in this area directly affect the performance of your funds.
We're also pleased to announce that American Century has been named by
Fortune magazine as one of its "100 Best Companies to Work For," and
that American Century's investor account statement is the first fund company
statement to win the Communications Seal from DALBAR, Inc., an independent
financial services research firm.
We do not take this recognition lightly -- acknowledgements like these
enable us to attract and retain talented and dedicated people, from service
representatives to investment professionals. This "intellectual
capital" is our most valuable resource and one that is essential in our
effort to provide you with excellent investment management and service.
As always, we appreciate your continued confidence in 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 Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Frequently Asked
Questions ........................................................... 2
FLORIDA MUNICIPAL MONEY MARKET
Performance Information ................................................ 3
Portfolio at a Glance .................................................. 3
Yields ................................................................. 3
Management Q&A ..................................................... 4
Portfolio Composition
by Credit Rating .................................................... 4
Types of Investments
in the Portfolio .................................................... 4
Schedule of Investments ................................................ 5
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 7
Statement of Operations ................................................ 8
Statements of Changes
in Net Assets ....................................................... 9
Notes to Financial
Statements .......................................................... 10
Financial Highlights ................................................... 11
OTHER INFORMATION
Background Information
Investment Philosophy
and Policies ..................................................... 12
Lipper Rankings ..................................................... 12
Credit Rating
Guidelines ....................................................... 12
Investment and Credit
Research Teams ................................................... 12
Glossary ............................................................... 13
www.americancentury.com 1
Money Market Funds--Frequently Asked Questions
--------------------------------------------------------------------------------
CAN I MAKE DIRECT DEPOSITS INTO MY MONEY MARKET FUND ACCOUNT?
Yes. You can arrange for direct deposit of your paycheck, Social Security
check, Treasury Direct interest payment, military allotment, or payments from
other government agencies. Give us a call, and we will send you the necessary
information to set it up.
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-business-day holding period for U.S. Treasury checks, money
orders, and travelers' checks.
IS THERE A LIMIT ON THE NUMBER OF CHECKS I CAN WRITE ON MY MONEY MARKET
ACCOUNT?
No. You can write as many checks as you like at no charge, as long as each
check is for $100 or more.
IS THERE AN EASY WAY TO MOVE MONEY FROM MY MONEY MARKET FUND INTO A STOCK OR
BOND FUND?
Yes. Moving money between funds is called an exchange, and there is no
limit on the number of exchanges you can make out of a money market fund
account. However, there is a limit of six exchanges per calendar year out of
stock and bond fund accounts.
Exchanges can be made by:
* visiting our Web site at
www.americancentury.com*
* using our Automated Information Line (1-800-345-8765)*
* calling an Investor Relations Representative at 1-800-345-2021*
* writing us a letter
HOW DO I DECIDE WHETHER A TAXABLE MONEY MARKET FUND OR A TAX-FREE MONEY MARKET
FUND IS RIGHT FOR ME?
The most important factor to consider is your tax bracket. Tax-free money
market funds typically offer lower yields than taxable funds, but you pay no
federal income taxes on the income from a tax-free fund.
If you are in one of the higher federal income tax brackets, taxes will eat
up a big part of your income from a taxable money market fund, so a tax-free
investment may be better for you. If you're in a lower tax bracket, then you can
usually earn more in a taxable fund even after taxes are deducted.
We can help you figure it out. If you give us a call and tell us what tax
bracket you're in, we can tell you whether you're likely to earn more after-tax
income in a tax-free or a taxable money market fund.
IF YOU HAVE ANY QUESTIONS ABOUT OUR MONEY MARKET FUNDS, CALL US TOLL FREE AT
1-800-345-2021 OR E-MAIL US AT OUR WEB SITE, WWW.AMERICANCENTURY.COM.
* Before you can make an exchange by calling an Investor Relations
Representative, using our Automated Information Line, or visiting our Web
site, you first must have provided us with written authorization to do so.
[left margin]
A FASTER AND EASIER WAY TO DEPOSIT MUTUAL FUND DISTRIBUTIONS
If you prefer to have your fund dividend or capital gains distributions sent to
you instead of reinvesting them, there are a couple of ways to get access to
this money faster than waiting for a check in the mail:
* YOU CAN HAVE DISTRIBUTIONS DEPOSITED DIRECTLY INTO YOUR MONEY MARKET
ACCOUNT. The money will be deposited the same day that the distributions
are paid.
* DISTRIBUTIONS CAN BE SENT ELECTRONICALLY TO YOUR BANK ACCOUNT. The money
will be available in your bank account within three days.
Contact our Investor Relations Representatives to set up either of these
options.
2 1-800-345-2021
Florida Municipal Money Market--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1999
FLORIDA MUNICIPAL OTHER STATES TAX-EXEMPT MONEY MARKET FUNDS(2)
MONEY MARKET AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) 1.50% 1.41% --
1 YEAR 2.89% 2.73% 11 OUT OF 40
================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS(3) 3.16% 3.02% 10 OUT OF 33
5 YEARS(3) 3.44% 3.17% 2 OUT OF 26
LIFE OF FUND(3) 3.41% 3.12%(4) 1 OUT OF 17(4)
The fund's inception date was 4/11/94.
(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 12-13 for more information about returns and Lipper fund rankings.
PORTFOLIO AT A GLANCE
AS OF 11/30/99
NET ASSETS $80.9 MILLION
11/30/99 5/31/99
NUMBER OF SECURITIES 40 42
WEIGHTED AVERAGE
MATURITY 69 DAYS 54 DAYS
EXPENSE RATIO 0.50%* 0.50%
* Annualized.
YIELDS AS OF NOVEMBER 30, 1999
7-DAY CURRENT YIELD 3.37%
7-DAY EFFECTIVE YIELD 3.43%
7-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 4.68%
31.0% TAX BRACKET 4.88%
36.0% TAX BRACKET 5.27%
39.6% TAX BRACKET 5.58%
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.
www.americancentury.com 3
Florida Municipal Money Market--Q&A
--------------------------------------------------------------------------------
[photo of Bryan Karcher]
An interview with Bryan Karcher, a portfolio manager on the Florida
Municipal Money Market fund investment team.
HOW DID FLORIDA MUNICIPAL MONEY MARKET PERFORM DURING THE SIX MONTHS ENDED
NOVEMBER 30, 1999?
The fund performed well, beating the average return of the 42 "Other
States Tax-Exempt Money Market Funds" tracked by Lipper Inc. (See the
previous page for fund returns and performance comparisons.)
Florida Municipal Money Market also continued to provide a higher level of
federal tax-free income than the average state tax-exempt money market fund. As
of November 30, 1999, Florida Municipal Money Market's 7-day current yield was
3.37%. That's good enough to rank in the top quarter of the Lipper group, whose
average yield was 3.24%.
WHY DID FLORIDA MUNICIPAL MONEY MARKET PERFORM SO WELL?
One reason is that the portfolio's expenses are lower than average. Other
things being equal, lower expenses mean higher yields and returns for our
shareholders.
Another reason the fund continues to do well is our experience working with
securities dealers who offer more attractive interest rates on variable-rate
demand notes, or "floaters." We believe this market knowledge is
instrumental in providing higher fund yields because, on average, floaters
represent the largest percentage of fund holdings.
DID YOU MAKE ANY OTHER CHANGES?
Yes, we also improved the portfolio's yield by adding some one-year notes
when yields rose in anticipation of rate increases by the Federal Reserve. Notes
offered attractive yields relative to floaters even taking into consideration
the possibility of higher rates. Buying notes lengthened our weighted average
maturity from about 55 days on May 31 to around 70 days by the end of November.
However, the fund's weighting in notes rose only modestly because the new
purchases were offset by some of our other notes maturing. As a result, we
believe the portfolio is well positioned for any future Fed rate hikes.
WHAT'S YOUR OUTLOOK FOR MUNICIPAL MONEY MARKET RATES AND THE FUND?
Many analysts expect the Federal Reserve to raise interest rates early in
2000. If that happens, we'd expect to see municipal money market yields rise
accordingly.
Supply and demand factors also have a big effect on Florida municipal
yields around the end of the year. Demand rises in late December and January,
when investors are looking to avoid the intangibles tax at year-end and reinvest
money from coupon payments and maturing securities in January. More demand often
means higher prices and lower yields for Florida municipal securities. As a
result, we'd be inclined to maintain our current average maturity or extend it a
little to lock in higher yields now until we get past January.
[left margin]
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/99 5/31/99
SP1+ 79% 94%
SP1 16% 6%
SP2 5% --
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
12 for more information.
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF NOVEMBER 30, 1999
VRDNs 73%
Bonds less than 1 Year 18%
Put Bonds 9%
AS OF MAY 31, 1999
VRDNs 81%
Bonds less than 1 Year 19%
Security types are defined on page 13.
4 1-800-345-2021
Florida Municipal Money Market--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES -- 100.0%
$ 500,000 Broward County Housing Finance
Auth. Multifamily Housing Rev.,
Series 1990 A, (Palm
Aire-Oxford), VRDN, 3.95%,
12/1/99 (Guaranteed:
Continental Casualty Co.) $ 500,000
2,135,000 Broward County Industrial
Development Rev., (Fast Real
Estate Partners), VRDN, 4.05%,
12/1/99 (LOC: Suntrust Bank
South Florida, N.A.) (Acquired
3/10/97-3/20/98, Cost
$2,135,000)(1) 2,135,000
2,040,000 Broward County Industrial
Development Rev., (MDR
Fitness Corp.), VRDN, 4.05%,
12/1/99 (LOC: Suntrust Bank,
Miami, N.A.) 2,040,000
1,600,000 Broward County Industrial
Development Rev., (W.R. Bonsal
Co.), VRDN, 4.05%, 12/2/99
(LOC: Bank of America N.A.)
(Acquired 3/18/98, Cost
$1,600,00)(1) 1,600,000
950,000 Collier County Water-Sewer
District Water Rev., Series
1999 B, 4.00%, 7/1/00
(FGIC) 953,871
2,000,000 Coral Springs Industrial
Development Rev., (Royal
Plastics Group), VRDN, 4.05%,
12/1/99 (LOC: Suntrust Bank
South Florida, N.A.) 2,000,000
1,430,000 Dade County Aviation Rev., Series
1996 C, 5.00%, 10/1/00
(MBIA) 1,444,594
1,155,000 Dade County Special Obligation
Trust Receipts, Series 1998
C-2, VRDN, 4.00%, 12/1/99
(LOC: Bank of America N.A.)
(Acquired 8/10/99, Cost
$1,155,000)(1) 1,155,000
3,240,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., VRDN, 4.03%,
12/2/99 (Liquidity: Merrill
Lynch & Co., Inc.) (Acquired
4/9/98, Cost $3,240,000)(1) 3,240,000
1,340,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., VRDN, 4.03%,
12/2/99 (Liquidity: Merrill
Lynch & Co., Inc.) (Acquired
12/3/96, Cost $1,340,000)(1) 1,340,000
1,000,000 Florida Board of Education Capital
Outlay GO, Series 1994 E,
4.55%, 6/1/00 1,003,020
Principal Amount Value
--------------------------------------------------------------------------------
$ 250,000 Florida Board of Education Capital
Outlay GO, Series 1994 E,
5.10%, 6/1/00 $ 251,941
500,000 Florida Board of Education Capital
Outlay GO Trust Receipts,
VRDN, 3.80%, 12/1/99
(SBBPA: Societe Generale)
(Acquired 11/26/99, Cost
$500,000)(1) 500,000
4,000,000 Florida Housing Finance Agency
Multifamily Housing Rev.,
(Country Club), VRDN, 3.80%,
12/1/99 (LOC: Bank of New
York) 4,000,000
2,000,000 Florida Housing Finance Agency
Multifamily Housing Rev., Series
1990 B, (Beville-Oxford),
VRDN, 3.95%, 12/1/99
(Guaranteed: Continental
Casualty Co.) 2,000,000
7,000,000 Florida Housing Finance Agency
Rev., Series 1996 F, (Caribbean
Key), VRDN, 3.90%, 12/1/99
(LOC: KeyBank, N.A.) 7,000,000
2,000,000 Florida Housing Finance Agency
Rev., Series 1996 P, (Tiffany
Club), VRDN, 3.90%, 12/1/99
(LOC: Bank of America, N.A.) 2,000,000
2,345,000 Florida Housing Finance Agency
Trust Receipts, VRDN, 3.90%,
12/1/99 (MBIA) (LOC: Bank
of New York) (Acquired
2/12/98-7/19/99, Cost
$2,345,000)(1) 2,345,000
4,095,000 Florida Housing Finance Corp.
Rev., (Heritage Pointe), VRDN,
3.90%, 12/1/99 (LOC:
Keybank, N.A.) 4,095,000
2,900,000 Florida Housing Finance Corp.
Rev., Series 1998 E, (Club at
Vero Apartments), VRDN,
3.80%, 12/1/99 (LOC: Bank
of America, N.A.) 2,900,000
2,635,000 Florida Housing Finance Corp.
Rev., Series 1999 P, (Timberline
Apartments), VRDN, 3.95%,
12/1/99 (LOC: Keybank, N.A.) 2,635,000
2,140,000 Florida Ports Financing
Commission Rev., 4.25%,
10/1/00 (FGIC) 2,149,000
2,500,000 Florida State GO, (Jacksonville
Transportation Auth.-Senior
Lien), 7.375%, 7/1/00,
Prerefunded at 102% of Par(2) 2,607,473
1,010,000 Gulf Breeze Rev., Series 1985 B,
(Local Govt. Loan), VRDN,
3.85%, 12/2/99 (FGIC)
(SBBPA: Credit Local de
France) 1,010,000
See Notes to Financial Statements www.americancentury.com 5
Florida Municipal Money Market--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
$ 800,000 Indian River County Industrial
Development Rev., (Florida
Convention Centers), VRDN,
3.80%, 12/1/99 (LOC:
Toronto-Dominion Bank) $ 800,000
1,500,000 Inland Financing Corp. Special
Obligation Rev., 5.00%, 7/1/00
(FSA) 1,510,473
3,150,000 Jacksonville Electric Auth. Rev.,
Series 1991-4-1-A, (Bulk
Power Supply-Scherer), 6.75%,
10/1/00, Prerefunded at
101.5% of Par(2) 3,273,126
1,500,000 Martin County Industrial
Development Auth. Rev.,
(Tampa Farm Service Inc.),
VRDN, 4.05%, 12/1/99 (LOC:
Suntrust Bank Central Florida,
N.A.) (Acquired
6/13/96-7/15/99, Cost
$1,500,000)(1) 1,500,000
4,000,000 Miami-Dade County Housing
Finance Auth. Rev., Series
1999 A-2, (Home Ownership
Mortgage), 3.55%, 8/1/00
(GIC: Trinity Funding Corp.) 4,000,000
2,800,000 Miami-Dade County Industrial
Development Auth. Rev., (Dutton
Press Inc.), VRDN, 4.05%,
12/1/99 (LOC: Suntrust Bank,
Miami, N.A.) (Acquired
2/27/98-2/17/99, Cost
$2,800,000)(1) 2,800,000
4,000,000 Miami-Dade County Industrial
Development Auth. Rev., Series
1999 A, (Airis Miami LLC),
VRDN, 4.00%, 12/1/99
(AMBAC) (SBBPA: Bayerische
Landesbank Girozentrale) 4,000,000
2,000,000 Miami-Dade County Industrial
Development Auth. Rev., Series
1999 A, (Edron Fixture Corp.),
VRDN, 4.05%, 12/1/99 (LOC:
Suntrust Bank, Miami, N.A.)
(Acquired 3/23/99, Cost
$2,000,000)(1) 2,000,000
Principal Amount Value
--------------------------------------------------------------------------------
$ 690,000 Miami-Dade County Stormwater
Utility Rev., 3.00%, 4/1/00
(AMBAC) $ 689,548
3,000,000 Orange County Health Facilities
Auth. Rev., VRDN, 3.85%,
12/9/99 (Liquidity: Merrill
Lynch & Co., Inc.) (Acquired
12/15/98, Cost $3,000,000)(1) 3,000,000
3,750,000 Orange County Housing Finance
Auth. Homeowner Rev., Series
1999 A-3, 3.40%, 6/1/00
(GIC: Trinity Funding Corp.) 3,750,000
1,150,000 Orange County Housing Finance
Auth. Multifamily Guaranteed
Mortgage Rev., Series 1989 A,
(Sundown Association II),
VRDN, 3.95%, 12/1/99 (LOC:
Fleet Bank, N.A.) 1,150,000
510,000 Osceola County Sales Tax Rev.,
3.25%, 4/1/00 (FSA) 510,000
2,200,000 Pinellas County Industrial Council
Development Rev., (Better
Business Forms Inc.), VRDN,
4.05%, 12/1/99 (LOC:
Suntrust Bank, Tampa Bay) 2,200,000
2,100,000 Pinellas County Industrial Council
Development Rev., (Hunter
Douglas Inc.), VRDN, 4.05%,
12/1/99 (LOC: ABN Amro
Bank N.V.) (Acquired 3/17/97,
Cost $2,100,000)(1) 2,100,000
1,470,000 Volusia County Industrial
Development Auth. Rev.,
(Daytona Plastix Inc.), VRDN,
4.05%, 12/1/99 (LOC:
Suntrust Bank Central Florida,
N.A.) (Acquired 7/17/96-
12/19/97, Cost $1,470,000)(1) 1,470,000
-----------
TOTAL INVESTMENT SECURITIES -- 100.0% $85,658,046
===========
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, 1999.
(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, 1999 was
$25,185,000 which represented 31.1% of net assets. None of these securities
are considered to be illiquid.
(2) Escrowed to maturity in U.S. government securities or state and local
government securities.
6 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. The net assets divided by shares outstanding is the share price, or NET
ASSET VALUE PER SHARE. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
NOVEMBER 30, 1999 (UNAUDITED)
ASSETS
Investment securities, at
value
(amortized cost and cost for
federal income tax purposes) ........................... $ 85,658,046
Interest receivable ...................................... 537,034
------------
86,195,080
------------
LIABILITIES
Disbursements in excess
of demand deposit cash ................................. 732,830
Payable for investments purchased ........................ 4,503,146
Accrued management fees (Note 2) ......................... 32,833
Payable for trustees' fees and expenses .................. 318
------------
5,269,127
------------
Net Assets ............................................... $ 80,925,953
============
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) .................................. 80,949,905
============
Net Asset Value Per Share ................................ $ 1.00
============
NET ASSETS CONSIST OF:
Capital paid in .......................................... 80,949,905
Accumulated net realized loss
on investment transactions ............................. (23,952)
------------
$ 80,925,953
============
See Notes to Financial Statements www.americancentury.com 7
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of interest income, fees and expenses,
and investment gains or losses.
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ................................................ $ 1,444,444
-----------
Expenses (Note 2):
Management fees ......................................... 205,188
Trustees' fees and expenses ............................. 2,522
-----------
207,710
-----------
Net investment income ................................... 1,236,734
-----------
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments ........................ (23,952)
-----------
Net Increase in Net Assets
Resulting from Operations ............................. $ 1,212,782
===========
8 1-800-345-2021 See Notes to Financial Statements
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows 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 (as detailed on the previous page for the most recent period), income
distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED) AND YEAR ENDED MAY 31, 1999
Decrease in Net Assets NOV. 30, 1999 MAY 31, 1999
OPERATIONS
Net investment income .................... $ 1,236,734 $ 2,948,374
Net realized loss on investments ......... (23,952) --
------------- -------------
Net increase in net assets
resulting from operations .............. 1,212,782 2,948,374
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............... (1,236,734) (2,948,374)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................ 23,121,723 136,641,148
Proceeds from reinvestment
of distributions ....................... 1,120,668 2,500,325
Payments for shares redeemed ............. (30,801,943) (161,316,337)
------------- -------------
Net decrease in net assets from
capital share transactions ............. (6,559,552) (22,174,864)
------------- -------------
Net decrease in net assets ............... (6,583,504) (22,174,864)
NET ASSETS
Beginning of period ...................... 87,509,457 109,684,321
------------- -------------
End of period ............................ $ 80,925,953 $ 87,509,457
============= =============
TRANSACTIONS IN SHARES OF THE FUND
Sold ..................................... 23,121,723 136,641,148
Issued in reinvestment
of distributions ....................... 1,120,668 2,500,325
Redeemed ................................. (30,801,943) (161,316,337)
------------- -------------
Net decrease ............................. (6,559,552) (22,174,864)
============= =============
See Notes to Financial Statements www.americancentury.com 9
Notes to Financial Statements
--------------------------------------------------------------------------------
NOVEMBER 30, 1999 (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 (the 1940 Act) as an open-end
management investment company. 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; these policies may require the use of estimates
by fund management.
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 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.
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM), under which ACIM provides each fund with
investment advisory and management services in exchange for a single, unified
management fee. The Agreement provides that all expenses of the funds, except
brokerage, taxes, portfolio insurance, interest, fees and expenses of those
trustees' who are not considered "interested persons" as defined in
the 1940 Act (including counsel fees) and extraordinary expenses, will be paid
by ACIM. The fee is calculated daily and paid monthly. It consists of an
Investment Category Fee based on the average net assets of the funds in a
specific fund's investment category and a Complex Fee based on the average net
assets of all the funds managed by ACIM. The rates for the Investment Category
Fee range from 0.1570% to 0.2700% and the rates for the Complex Fee range from
0.2900% to 0.3100%. For the six months ended November 30, 1999, the effective
annual management fee was 0.50%.
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.
10 1-800-345-2021
Florida Municipal Money Market--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), and EXPENSE RATIO (operating expenses as a
percentage of average net assets).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1999(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
Beginning of Period ............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- --------- -------- --------
Income From Investment Operations
Net Investment Income ........... 0.01 0.03 0.03 0.03 0.04 0.04
-------- -------- -------- --------- -------- --------
Distributions
From Net Investment Income ...... (0.01) (0.03) (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(2) ................. 1.50% 2.92% 3.31% 3.55% 3.86% 3.71%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...........0.50%(3) 0.50% 0.51% 0.12% 0.01% --
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) .........0.50%(3) 0.50% 0.53% 0.66% 0.71% 0.88%
Ratio of Net Investment Income
to Average Net Assets ...........2.96%(3) 2.88% 3.25% 3.48% 3.75% 3.93%
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) .........2.96%(3) 2.88% 3.23% 2.94% 3.05% 3.05%
Net Assets, End of Period
(in thousands) ..................$80,926 $87,509 $109,684 $112,129 $99,993 $45,147
(1) Six months ended November 30, 1999 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one
year are not annualized.
(3) Annualized.
See Notes to Financial Statements www.americancentury.com 11
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios 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 funds in Lipper's OTHER STATES TAX-EXEMPT MONEY MARKET FUNDS category
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.
[left margin]
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
12 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 11.
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 measure 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 13
Glossary
--------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive
yields, as well as a strong and stable foundation and generally lower volatility
levels than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that the fund's category may change over
time. Therefore, it is important that you read a fund's prospectus or fund
profile carefully before investing to ensure its objectives, policies, and risk
potential are consistent with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
14 1-800-345-2021
Notes
--------------------------------------------------------------------------------
www.americancentury.com 15
Notes
--------------------------------------------------------------------------------
16 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that a fund's category may change over time.
Therefore, it is important that you read a fund's prospectus or fund profile
carefully before investing to ensure its objectives, policies and risk potential
are consistent with your needs.For a definition of fund categories, see the
Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 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.
[back cover]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service
and innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo (reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
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.
--------------------------------------------------------------------------------
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
Funds Distributor, Inc.
0001 is the distributor for American Century funds
SH-SAN-19177 (c)2000 American Century Services Corporation
[front cover]
NOVEMBER 30, 1999
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
[graphic of runners]
Florida Intermediate-Term Municipal
[american century logo (reg.sm)]
American
Century
[inside front cover]
Investing with American Century Brokerage
--------------------------------------------------------------------------------
American Century Brokerage offers investors a broad range of account types,
investment choices, plus free online research and information services.
As a brokerage investor, you can choose from a Standard Account, Access
Account or IRA Account.
Each of these accounts offers a broad range of investment choices, many of
which are available online:
* American Century and J.P. Morgan mutual funds
* Mutual funds from more than 500 fund families, including more than 800
no-transaction fee (NTF) no-load funds
* Listed and over-the-counter stocks
* Equity and index options
* Precious metals
* ADRs (American Depository Receipts)
* Treasury, agency, corporate, and municipal bonds
* CDs (certificates of deposit)
* UITs (unit investment trusts)
Research from J.P. Morgan
J.P. Morgan's world-class global equity research is accessible online to all
brokerage investors initially for a 60-day free trial. After the free trial
period, you can continue to access the research with a minimum of $100,000 in
assets in an American Century brokerage or mutual fund account.
Online Research and Information Services
American Century Brokerage provides you with up-to-date information to help
you make informed decisions. Through American Century Brokerage, you have
unlimited free access to news, quotes, charting, and other research services,
such as Lipper, Inc. Mutual Fund Profile Reports and S&P Snapshot Reports.
Also, you can use Model Portfolio to track up to 20 securities.
Meet Your Goals with FundScan(tm)
American Century Brokerage offers an online mutual fund screening service --
FundScan(tm). By customizing a list of mutual funds to best meet your investment
goals, FundScan helps you narrow investment choices from thousands of available
funds.
For more information about how you can become an American Century Brokerage
investor, visit our Web site at www.americancentury.com or call a Product and
Service Specialist at 1-888-367-7755.
[left margin]
FLORIDA INTERMEDIATE-TERM MUNICIPAL
(ACBFX)
---------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
Receive Your Annual Reports Online
--------------------------------------------------------------------------------
Manage Important Papers with Ease
American Century gives you the choice to manage your important documents such
as annual reports, prospectuses and newsletters online rather than via regular
mail. Your link to American Century documents is a click away with our
Electronic Communication option.
It's easy. It's convenient. It's paper free:
* Receive links to documents by email
* Download select documents and file electronically to save space in
your file cabinets
* Read documents at your convenience
It's easy to sign up for this program. Go to www.americancentury.com. Log in
with your OnePIN and select an account on your Account List.* Then simply select
the electronic communication link. Questions? Step through the online
demonstration or call 1-800-345-2021. LOG IN AND TAKE CONTROL TODAY!
* Electronic communication is not available for American Century Brokerage
accounts at this time.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The past year demonstrated why investors should focus on long-term
investment strategies and maintain diversified portfolios. The consensus
expectation going into 1999 was that U.S. economic growth would slow, bonds
would perform well, and stocks would cool off. Instead, the reverse
happened--the economy accelerated, stocks posted excellent returns, and bonds
suffered their worst year since 1994.
Increasing inflation anxiety and rising interest rates set the tone for the
U.S. bond market and helped determine the six-month performance of the American
Century Florida Intermediate-Term Municipal fund. But equally important, from a
longer-term perspective, the fund maintained low expenses and a competitive
yield, key factors that remain consistent no matter how bond market conditions
may change.
Turning to corporate matters, we are constantly looking for ways to lower
the costs of trading securities and generate better returns for shareholders. To
that end, we have made strategic investments in several companies that allow
buyers and sellers of securities to connect directly, efficiently, and
anonymously. Savings in this area directly affect the performance of your funds
We're also pleased to announce that American Century has been named by
Fortune magazine as one of its "100 Best Companies to Work For." In
addition, American Century's investor account statement is the first fund
company statement to win the Communications Seal from DALBAR, Inc., an
independent financial services research firm.
We do not take this recognition lightly -- acknowledgements like these
enable us to attract and retain talented and dedicated people, from service
representatives to investment professionals. This "intellectual
capital" is our most valuable resource and one that is essential in our
effort to provide you with excellent investment management and service.
As always, we appreciate your continued confidence in 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 Vice Chairman of the Board and
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 ..................................................... 6
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
Comparative Indices .................................................. 16
Lipper Rankings ...................................................... 16
Credit Rating
Guidelines ........................................................ 16
Investment Team
Leaders ........................................................... 16
Glossary ................................................................ 17
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* Rising interest rates and weak demand eroded municipal bond prices and
returns during the six months ended November 30, 1999.
* The U.S. economy grew at a 5.7% annual rate in the third quarter of 1999,
and the U.S. unemployment rate hit a 29-year low.
* In response, the Federal Reserve (the U.S. central bank) raised short-term
interest rates three times, pushing municipal bond yields toward two-year
highs.
* The strong U.S. economy helped boost the tax collections and revenues of
municipal issuers around the country, improving the overall credit quality
of the municipal market.
MANAGEMENT Q&A
* Florida Intermediate-Term Municipal continued to perform very well compared
with its Lipper peers, though returns were limited due to the difficult
investment environment.
* The fund ranked second in its Lipper group for the one-year period ended
November 30, 1999, and ranked first for the corresponding three- and
five-year periods. (See page 4 for fund performance comparisons.)
* Careful yield curve analysis, diligent credit research, and effective
duration management played an important role in performance.
* During the majority of the six months, the fund was essentially
"barbelled," or more heavily invested in two- to four-year and
10- to 12-year securities than in maturities in the middle.
* We kept the portfolio's sensitivity to interest rate changes fairly neutral
compared with the fund's Lipper peers, adding or subtracting a little as
conditions warranted.
[left margin]
FLORIDA INTERMEDIATE-TERM
MUNICIPAL (ACBFX)
TOTAL RETURNS: AS OF 11/30/99
6 Months -0.73%*
1 Year 0.00%
30-DAY SEC YIELD: 4.41%
INCEPTION DATE: 4/11/94
NET ASSETS: $49.0 million
* Not annualized.
See Total Returns on page 4.
Investment terms are defined in the Glossary on pages 17-18.
2 1-800-345-2021
Market Perspective from Randall W. Merk
--------------------------------------------------------------------------------
[photo of Randall W. Merk]
Randall W. Merk, chief investment officer of fixed income at American Century
MUNICIPAL BOND PERFORMANCE
Rising interest rates and weak demand eroded municipal bond prices and
returns during the six months ended November 30, 1999 (see the accompanying
return table).
Relatively high demand from individual investors helped intermediate-term
municipal securities maintain their value better than longer-term municipals,
which suffered from heavy selling by institutional investors.
ECONOMIC GROWTH FANS INFLATION FEARS
Continued strong U.S. economic growth fanned inflation fears and triggered
higher interest rates. The U.S. economy grew at a 5.7% annual rate in the third
quarter of 1999, and the U.S. unemployment rate hit a 29-year low. In response,
the Federal Reserve (the U.S. central bank) raised short-term interest rates
three times, pushing municipal bond yields toward two-year highs. These higher
yields were the silver lining to a gloomy bond environment in 1999. For an
investor in the top federal tax bracket (39.6%), a 30-year AAA municipal bond
that yielded 5.73% on November 30 (up from 5.08% on May 31) offered a
tax-equivalent yield of 9.49%. That compared very favorably with the 6.29% yield
of the 30-year U.S. Treasury bond at the end of November.
THE CORPORATE CONNECTION
Surprisingly, the fate of municipal bonds was tied closely to the
performance of corporate bonds. Corporate securities became extremely cheap
during the fall months as companies hurried to issue debt in advance of
potential Y2K problems and higher interest rates. Corporate securities offered
such attractive yields in the third quarter that institutional investors, such
as insurance companies, sold their municipal holdings and bought corporates
instead. Corporate bonds have subsequently rebounded in price (and their yields
have fallen) as issuance diminished. As a result, municipals look comparatively
more attractive again.
Municipal bonds are particularly attractive relative to U.S. Treasury
bonds. While municipal yields have historically been about 85% of comparable
U.S. Treasury yields, that ratio climbed to over 90% in November, a good
municipal value indicator.
SECTOR HIGHLIGHTS
The strong U.S. economy helped boost the tax collections and revenues of
municipal issuers around the country, improving the overall credit quality of
the municipal market. General obligation bonds were particularly strong.
Hospital bonds, on the other hand, were disappointing. They suffered from a
combination of heightened industry competition, reduced federal payments, and
the refusal of municipal bond insurers to insure lower-quality tiers of the
hospital sector.
[right margin]
"RISING INTEREST RATES AND WEAK DEMAND ERODED MUNICIPAL BOND PRICES AND
RETURNS DURING THE SIX MONTHS ENDED NOVEMBER 30, 1999."
MUNICIPAL BOND INDEX RETURNS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
MERRILL LYNCH 0- TO 3-YEAR
MUNICIPAL INDEX -1.14%
LEHMAN BROS. 5-YEAR
MUNICIPAL GO INDEX 0.06%
LEHMAN BROS. LONG-TERM
MUNICIPAL BOND INDEX -5.33%
Source: Lipper Inc. and Russell/Mellon Analytical Services
[line graph - data below]
RISING MUNICIPAL YIELD CURVE
5/31/99 11/30/99
YEARS TO
MATURITY
1 3.29% 3.89%
2 3.52% 4.12%
3 3.71% 4.30%
4 3.88% 4.44%
5 4.00% 4.55%
6 4.10% 4.64%
7 4.19% 4.72%
8 4.28% 4.80%
9 4.37% 4.88%
10 4.45% 4.96%
11 4.53% 5.06%
12 4.61% 5.14%
13 4.67% 5.22%
14 4.75% 5.30%
15 4.84% 5.38%
16 4.88% 5.44%
17 4.92% 5.50%
18 4.96% 5.56%
19 4.99% 5.62%
20 5.02% 5.68%
21 5.03% 5.68%
22 5.04% 5.69%
23 5.05% 5.69%
24 5.05% 5.70%
25 5.06% 5.71%
26 5.06% 5.71%
27 5.06% 5.71%
28 5.07% 5.72%
29 5.07% 5.72%
30 5.08% 5.73%
Source: Bloomberg Financial Markets
www.americancentury.com 3
Florida Intermediate-Term Municipal--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1999
FLORIDA FLORIDA INTERM.
INTERMEDIATE- LEHMAN 5-YEAR MUNICIPAL DEBT FUNDS(2)
TERM MUNICIPAL GO INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) -0.73% 0.06% -1.30% --
1 YEAR 0.00% 1.49% -0.92% 2 OUT OF 15
================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS(3) 4.67% 4.37% 3.36% 1 OUT OF 13
5 YEARS(3) 6.53% 6.05% 5.57% 1 OUT OF 11
LIFE OF FUND(3) 5.70% 5.39%(4) 4.61%(4) 1 OUT OF 10(4)
The fund's inception date was 4/11/94.
(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 graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 11/30/1999
Florida Intermediate-Term Municipal $13,551
Lehman 5-Year GO Index $13,355
Florida
Intermediate-Term Lehman 5-Year
Municipal GO Index
DATE VALUE VALUE
4/30/1994 $10,000 $10,000
6/30/1994 $10,054 $9,996
9/30/1994 $10,173 $10,077
12/31/1994 $10,031 $10,044
3/31/1995 $10,539 $10,450
6/30/1995 $10,811 $10,717
9/30/1995 $11,068 $11,010
12/31/1995 $11,396 $11,211
3/31/1996 $11,338 $11,246
6/30/1996 $11,361 $11,295
9/30/1996 $11,561 $11,479
12/31/1996 $11,812 $11,730
3/31/1997 $11,830 $11,711
6/30/1997 $12,205 $12,002
9/30/1997 $12,514 $12,264
12/31/1997 $12,784 $12,490
3/31/1998 $12,918 $12,636
6/30/1998 $13,094 $12,764
9/30/1998 $13,496 $13,115
12/31/1998 $13,613 $13,218
3/31/1999 $13,699 $13,354
6/30/1999 $13,476 $13,199
9/30/1999 $13,516 $13,316
11/30/1999 $13,551 $13,355
$10,000 investment made 4/30/94(4)
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Lehman 5-Year GO Index is provided for comparison in each graph. Florida
Intermediate-Term Municipal's total returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
returns of the index do not. 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 graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDING NOVEMBER 30)
Florida
Intermediate-Term Lehman 5-Year
Municipal GO Index
DATE RETURN RETURN
11/30/1994* -1.24% -0.07%
11/30/1995 14.39% 11.99%
11/30/1996 4.61% 5.36%
11/30/1997 6.78% 5.38%
11/30/1998 7.39% 6.32%
11/30/1999 0.00% 1.49%
* From 4/30/94 (the date nearest the fund's inception for which index data are
available) to 11/30/94.
4 1-800-345-2021
Florida Intermediate-Term Municipal--Q&A
--------------------------------------------------------------------------------
[photo of Ken Salinger]
An interview with Ken Salinger, a portfolio manager on the Florida
Intermediate-Term Municipal fund investment team.
HOW DID THE FUND PERFORM FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999?
Florida Intermediate-Term Municipal continued to perform very well compared
with its Lipper peers, though returns were limited due to the difficult
investment environment (see page 3). The fund returned -0.73%, compared with the
-1.30% average return of the 15 funds in Lipper's "Florida Intermediate
Municipal Debt Funds" category. The fund's benchmark, the Lehman 5-Year GO
Index, was basically flat for the period, returning 0.06%. (See page 4 for other
fund performance comparisons.)
Longer-term performance against the peer group was even more impressive.
Florida Intermediate-Term Municipal ranked second in its Lipper group for the
one-year period ended November 30, 1999, and ranked first for the corresponding
three- and five-year periods.
In addition, Florida Intermediate-Term Municipal's 30-day SEC yield of
4.41% as of the end of November compared favorably with the 4.06% average yield
of its Lipper category.
WHAT WERE SOME OF THE MAIN FACTORS BEHIND FLORIDA INTERMEDIATE-TERM MUNICIPAL'S
SOLID RELATIVE PERFORMANCE?
As we've mentioned in previous reports, careful yield curve analysis,
diligent credit research, and effective duration management were partially
responsible for the fund's ongoing success.
Low expenses also continued to boost performance: fund expenses as of
November 30, 1999, were 0.51%, versus the 0.91% average for the fund's Lipper
group. Adjustments to the portfolio's maturity structure were another important
ingredient.
CAN YOU TALK ABOUT THOSE MATURITY ADJUSTMENTS IN A BIT MORE DETAIL?
Basically, we looked at yield spreads--the yield differences between bonds
with different credit ratings or maturities--to determine which bond maturities
looked the most attractive based on prices and yields. We then screened those
securities for ones that matched our strict credit criteria and selectively
added them to the portfolio.
When making these purchases, we periodically adjusted the portfolio's
maturity structure--the ratio of short- to long-term municipals. During the
majority of the six months, the fund was essentially "barbelled," or
more heavily invested in two- to four-year and 10- to 12-year securities than in
maturities in the middle. We employed the barbell structure to take advantage of
shifts in the municipal yield curve--a graphic representation of the
relationship between bond yields and maturities (see the graph on page 3).
[right margin]
"FLORIDA INTERMEDIATE-TERM MUNICIPAL RANKED SECOND IN ITS LIPPER GROUP FOR
THE ONE-YEAR PERIOD ENDED NOVEMBER 30, 1999."
YIELDS AS OF NOVEMBER 30, 1999
30-DAY SEC YIELD 4.41%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 6.13%
31.0% TAX BRACKET 6.39%
36.0% TAX BRACKET 6.89%
39.6% TAX BRACKET 7.30%
PORTFOLIO AT A GLANCE
11/30/99 5/31/99
NUMBER OF SECURITIES 67 59
WEIGHTED AVERAGE
MATURITY 8.8 YRS 9.1 YRS
AVERAGE DURATION 5.4 YRS 5.6 YRS
EXPENSE RATIO 0.51%* 0.51%
* Annualized.
Investment terms are defined in the Glossary on pages 17-18.
www.americancentury.com 5
Florida Intermediate-Term Municipal--Q&A
--------------------------------------------------------------------------------
(Continued)
Generally speaking, a barbell structure performs well when short-term rates
rise faster than long-term ones, which was the case during the period.
YOU ALSO MADE SOME TRADES BASED ON SHIFTING DEMAND FOR DIFFERENT TYPES OF
MUNICIPAL SECURITIES. CAN YOU EXPLAIN THIS STRATEGY?
Discount, par, and premium securities appeal to different portions of the
market. (Discount bonds trade below face value, usually because their rates are
lower than the prevailing interest rate. Par bonds trade at face value. Premium
bonds trade at prices above face value, usually because their coupons are higher
than the prevailing market interest rate.)
Individual investors tend to buy par bonds, while institutional investors
often favor discount or premium bonds. But demand from both types of investors
fluctuates. We use those fluctuations as opportunities to boost returns. For
example, we'll sell par bonds to individual investors when demand is relatively
strong while buying bonds from institutions when demand is relatively weak.
HOW DID YOU MANAGE THE PORTFOLIO'S DURATION?
We kept the portfolio's sensitivity to interest rate changes fairly neutral
compared with the fund's Lipper peers, adding or subtracting a little as
conditions warranted. That meant keeping duration in a range around 5.4-5.8
years. That conservative choice helped mitigate losses as bond yields rose
throughout the six months.
SPEAKING OF BOND YIELDS, WHAT'S YOUR OUTLOOK FOR THE FLORIDA MUNICIPAL MARKET?
It's difficult to properly gauge what Florida's municipal market may look
like in the new year. On the credit quality front, conditions in Florida remain
generally sound. Tourism, real estate markets, and job growth are still strong,
while the state's unemployment rate remains low. And with Latin America
seemingly on the rebound, exports to that region could rise in the year ahead.
On the other hand, municipal bond yields are currently at highs not seen
since before 1998's global economic crisis. Robust U.S. economic growth, which
surged ahead at a 5.7% annual pace during the third quarter of 1999, helped
convince the Federal Reserve to raise short-term interest rates three times in
1999. If the U.S. economy keeps growing at that rate, we may be in for further
Fed intervention and more of the disappointing municipal bond returns that we've
seen during the last half of 1999.
By the same token, though, if growth moderates or slows as a result of
rising interest rates, and inflation remains well contained, the outlook for the
municipal market could begin looking brighter.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR THE PORTFOLIO?
We plan to keep duration conservatively positioned for now and will
probably maintain a basically barbelled maturity structure until market
conditions change. We will also continue to leverage our skilled credit analysis
team to locate securities that we believe are undervalued and have the chance to
enhance returns.
[left margin]
TOP FIVE SECTORS (AS OF 11/30/99)
% OF FUND INVESTMENTS
GO 19%
TRANSPORTATION REVENUE 14%
HOSPITAL REVENUE 10%
HOUSING REVENUE 8%
ELECTRIC REVENUE 8%
TOP FIVE SECTORS (AS OF 5/31/99)
% OF FUND INVESTMENTS
TRANSPORTATION REVENUE 20%
GO 19%
HOUSING REVENUE 10%
ELECTRIC REVENUE 9%
SALES TAX REVENUE 8%
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/99 5/31/99
AAA 63% 67%
AA 21% 21%
A 7% 5%
BBB 9% 7%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
16 for more information.
6 1-800-345-2021
Florida Intermediate-Term Municipal--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 96.2%
FLORIDA -- 82.8%
$ 505,000 Atlantic Beach Health Care
Facilities Rev., (Fleet Landing),
5.00%, 10/1/00 (ACA)(1) $ 507,409
300,000 Broward County School District
GO, 6.75%, 2/15/00 301,722
1,000,000 Cocoa Water and Sewer Rev.,
4.50%, 10/1/26 (FGIC) 796,040
250,000 Dade County Aviation Rev., Series
1995 E, 5.50%, 10/1/10
(AMBAC) 256,942
1,000,000 Dade County Aviation Rev., Series
1997 A, (Miami International
Airport), 5.50%, 10/1/02
(FSA) 1,025,080
500,000 Duval County School District GO,
6.25%, 8/1/05 (AMBAC) 526,155
500,000 East County Water Control District
Rev., 5.375%, 11/1/01 (Asset
Guaranty) 508,630
235,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., 6.00%, 4/1/02
(GNMA/FNMA) 240,962
215,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
4.80%, 4/1/06
(GNMA/FNMA) 212,297
340,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
4.85%, 4/1/07
(GNMA/FNMA) 333,710
1,650,000 Florida Board of Education
Capital Outlay GO, Series
1995 C, 5.50%, 6/1/12
(MBIA) 1,672,935
1,000,000 Florida Board of Education
Capital Outlay GO, Series
1998 A, 5.25%, 6/1/11 1,004,080
1,500,000 Florida Board of Education
Capital Outlay GO, Series
1998 D, 5.25%, 6/1/10 1,516,215
1,000,000 Florida Board of Education
Capital Outlay GO, Series
1999 B, 4.50%, 6/1/24
(MBIA) 802,730
750,000 Florida Board of Education
Capital Outlay Rev., Series
2000 D, 5.75%, 6/1/22(1) 727,365
Principal Amount Value
--------------------------------------------------------------------------------
$1,000,000 Florida Division Board Financial
Department of General Services
Rev., Series 1999 A,
(Department of Environmental
Protection - Preservation 2000),
5.25%, 7/1/12 (FGIC) $ 995,850
350,000 Florida Housing Finance Agency
Multifamily Housing Rev., 5.35%,
6/1/00 (GTEED) 351,533
450,000 Florida Housing Finance Agency
Rev., (Williamsburg Village
Apartments), 5.60%, 12/1/07
(AMBAC) 464,036
500,000 Florida Housing Finance Agency
Rev., (Windwood), 5.65%,
12/1/07 (AXA Insurance) 509,925
1,395,000 Florida Housing Finance Corp.
Rev., Series 1999-2,
(Homeowner Mortgage), 4.60%,
1/1/21 (FSA) 1,362,901
1,000,000 Florida Ports Financing
Commission Rev., 4.75%,
10/1/07 (FGIC) 984,840
1,000,000 Florida Turnpike Auth. Rev., Series
1993 A, (Department of
Transportation), 5.00%, 7/1/16
(FGIC) 918,950
350,000 Gainesville Utilities System Rev.,
Series 1996 A, 5.75%,
10/1/09 370,034
425,000 Gateway Services District Water
Management Benefit Tax Rev.
Special Assessment, (First
Assessment Area), 4.00%,
10/1/01 (MBIA) 423,606
1,260,000 Hillsborough County Industrial
Development Auth. Rev., Series
1999 A, (University Community
Hospital), 4.90%, 8/15/07 1,202,859
400,000 Hillsborough County Port District
Special Rev., 6.50%, 6/1/04
(FSA) 428,160
525,000 Indian Trace Community
Development District Water
Management Special Benefit
Assessment, 5.00%, 5/1/10
(MBIA) 520,564
400,000 Indian Trace Community
Development District Water
Management Special Benefit
Assessment, Series 1995 A,
5.25%, 5/1/03 (MBIA) 409,840
500,000 Jacksonville Electric Auth. Rev.,
Series 1995 6-C, (St. John's
River Power), 6.50%, 10/1/01 516,410
2,065,000 Jacksonville Electric Auth. Rev.,
Series 1997 A, (Water and
Sewer System), 4.10%,
10/1/00(2) 2,066,673
See Notes to Financial Statements www.americancentury.com 7
Florida Intermediate-Term Municipal--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
$1,250,000 Jacksonville Excise Tax Rev.,
5.20%, 10/1/04 (FGIC) $ 1,270,525
1,000,000 Jacksonville Health Facilities
Auth. Hospital Rev., Series
1999 C, (Charity Obligated
Group), 5.25%, 8/15/19 917,680
1,050,000 Jacksonville Sales Tax Rev., (River
City Renaissance), 6.00%,
10/1/02 (FGIC) 1,097,250
550,000 Lee County Industrial
Development Health Care
Facilities Auth. Rev., Series
1999 A, (Shell Point Village),
5.50%, 11/15/09 535,447
1,000,000 Lee County Rev., Series 1997 A,
5.75%, 10/1/11 (MBIA) 1,056,690
650,000 Miami Packing Facilities Rev.,
5.25%, 10/1/15 (MBIA) 627,920
1,000,000 Miami-Dade County Aviation Rev.,
Series 1998 A, 5.00%,
10/1/06 (FGIC) 1,000,220
1,000,000 Miami-Dade County Educational
Facilities Auth. Rev., Series
1999 A, 5.75%, 4/1/14
(AMBAC)(1) 1,028,870
1,015,000 Northern Palm Beach County
Improvement District Special
Assessment, (Unit Development
18), 4.90%, 8/1/13 (MBIA) 967,163
160,000 Orange County Health Facilities
Auth. Rev., Series 1996 A,
6.00%, 10/1/04 (MBIA) 168,998
390,000 Orange County Health Facilities
Auth. Rev., Series 1996 A,
6.00%, 10/1/04 (MBIA)(3) 412,971
1,000,000 Orlando and Orange County
Expressway Auth. Rev., 5.10%,
7/1/04 (FGIC)(2) 1,013,270
450,000 Orlando and Orange County
Expressway Auth. Rev., 6.50%,
7/1/11 (FGIC) 504,369
500,000 Orlando Utilities Commission
Water & Electric Rev.,
5.70%, 10/1/04 525,005
700,000 Pembroke Pines Capital
Improvement Rev., 4.625%,
12/1/13 (AMBAC) 638,491
500,000 Pensacola Airport Rev., Series
1997 B, 5.40%, 10/1/07
(MBIA) 512,050
300,000 Pensacola Airport Rev., Series
1998 A, 6.00%, 10/1/01
(MBIA) 308,652
360,000 Pinellas County Educational
Facilities Auth. Rev., (Barry
University), 4.45%, 10/1/01 358,276
430,000 Pinellas County Educational
Facilities Auth. Rev., (Barry
University), 4.75%, 10/1/05 418,863
Principal Amount Value
--------------------------------------------------------------------------------
$ 450,000 Pinellas County Educational
Facilities Auth. Rev., (Barry
University), 4.85%, 10/1/06 $ 436,824
300,000 Plantation Health Facilities Auth.
Rev., (Covenant Village of
Florida Inc.), 4.45%, 12/1/04 286,071
300,000 Plantation Health Facilities Auth.
Rev., (Covenant Village of
Florida Inc.), 4.55%, 12/1/05 283,878
300,000 Plantation Health Facilities Auth.
Rev., (Covenant Village of
Florida Inc.), 4.70%, 12/1/07 278,328
1,000,000 Polk County Housing Finance
Auth. Multifamily Housing Rev.,
Series 1997 A, (Winter Oaks
Apartments), 5.25%, 7/1/07
(FNMA) 1,002,710
300,000 Reedy Creek Improvement
District Utility Rev., Series
1991-1, 6.25%, 10/1/01,
Prerefunded at 101% of Par
(MBIA)(3) 313,437
400,000 St. Cloud Utility Rev., 6.40%,
8/1/06 (MBIA) 419,952
1,000,000 Tampa Tax Allocation, (H. Lee
Moffitt Cancer Center), 4.625%,
3/1/04 (AMBAC) 1,000,320
1,000,000 Tampa Utility Tax Rev., Series
1999 A, 4.75%, 10/1/11
(FSA) 956,690
500,000 Volusia County School District
GO, 6.20%, 8/1/03 (FGIC) 523,350
500,000 West Orange Healthcare District
Rev., Series 1999 A, 4.60%,
2/1/01 498,720
500,000 West Orange Healthcare District
Rev., Series 1999 A, 5.25%,
2/1/02 502,420
-----------
41,823,863
-----------
PUERTO RICO -- 10.4%
2,500,000 Puerto Rico Commonwealth
Aqueduct & Sewer Auth.
Rev., Series 1985 A, 9.00%,
7/1/05, Prerefunded at 100%
of Par (FSA)(3) 2,933,725
1,350,000 Puerto Rico Commonwealth GO,
5.00%, 7/1/04 1,368,428
1,000,000 Puerto Rico Electric Power Auth.
Rev., Series 1997 AA, 5.25%,
7/1/16 (MBIA) 966,120
-----------
5,268,273
-----------
VIRGIN ISLANDS -- 3.0%
1,500,000 Virgin Islands Public Finance Auth.
Rev., Series 1999 A, 5.00%,
10/1/03 1,503,015
-----------
TOTAL MUNICIPAL SECURITIES 48,595,151
-----------
(Cost $49,002,197)
8 1-800-345-2021 See Notes to Financial Statements
Florida Intermediate-Term Municipal--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES -- 3.8%
$ 900,000 Florida Board of Education Capital
Outlay GO Trust Receipts,
VRDN, 3.80%, 12/1/99
(SBBPA: Societe Generale)
(Acquired 11/29/99, Cost
$900,000)(4) $ 900,000
1,000,000 Palm Beach County Health
Facilities Auth. Rev., Series
1999 B, (Hospital Improvement),
VRDN, 3.85%, 12/1/99
(Guaranteed: Boca Raton
Community Hosp. &
Foundation) 1,000,000
-----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 1,900,000
-----------
(Cost $1,900,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $50,495,151
===========
(Cost $50,902,197)
NOTES TO SCHEDULE OF INVESTMENTS
ACA = American Capital Access
AMBAC = AMBAC Assurance Corporation
AXA = AXA Insurance Co.
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, 1999.
(1) When-issued security.
(2) Security, or a portion thereof, has been segregated at the custodian bank
or broker for a when-issued security.
(3) Escrowed to maturity in U.S. government securities 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, 1999 was $900,000
which represented 1.8% of net assets.
See Notes to Financial Statements www.americancentury.com 9
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. The net assets divided by shares outstanding is the share price, or NET
ASSET VALUE PER SHARE. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
NOVEMBER 30, 1999 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $50,902,197)
(Note 3) ................................................ $ 50,495,151
Cash ...................................................... 37,730
Interest receivable ....................................... 766,262
------------
51,299,143
------------
LIABILITIES
Payable for investments purchased ......................... 2,267,777
Dividends payable ......................................... 23,529
Accrued management fees (Note 2) .......................... 19,848
Payable for trustees' fees and expenses ................... 187
------------
2,311,341
------------
Net Assets ................................................ $ 48,987,802
============
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) ................................... 4,801,784
============
Net Asset Value Per Share ................................. $ 10.20
============
NET ASSETS CONSIST OF:
Capital paid in ........................................... $ 49,741,534
Accumulated net realized loss
on investments .......................................... (346,686)
Net unrealized depreciation
on investments (Note 3) ................................. (407,046)
------------
$ 48,987,802
============
10 1-800-345-2021 See Notes to Financial Statements
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of interest income, fees and expenses,
and investment gains or losses.
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ................................................. $ 1,092,067
-----------
Expenses (Note 2):
Management fees .......................................... 114,303
Trustees' fees and expenses .............................. 1,372
-----------
115,675
-----------
Net investment income .................................... 976,392
-----------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS (NOTE 3)
Net realized loss on investments ......................... (388,178)
Change in net unrealized
appreciation on investments ............................ (914,330)
-----------
Net realized and unrealized loss
on investments ......................................... (1,302,508)
-----------
Net Decrease in Net Assets
Resulting from Operations .............................. $ (326,116)
===========
See Notes to Financial Statements www.americancentury.com 11
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows 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 (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED) AND YEAR ENDED MAY 31, 1999
Increase in Net Assets NOV. 30, 1999 MAY 31, 1999
OPERATIONS
Net investment income ........................ $ 976,392 $ 1,457,298
Net realized gain (loss) on investments ...... (388,178) 290,688
Change in net unrealized
appreciation on investments ................ (914,330) (239,507)
------------ ------------
Net increase (decrease) in net
assets resulting from operations ........... (326,116) 1,508,479
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................... (976,392) (1,457,298)
From net realized gains on
investment transactions .................... -- (381,472)
------------ ------------
Decrease in net assets from
distributions to shareholders .............. (976,392) (1,838,770)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................... 18,842,754 36,435,233
Proceeds from reinvestment
of distributions ........................... 553,166 1,056,236
Payments for shares redeemed ................. (13,484,202) (22,387,798)
------------ ------------
Net increase in net assets
from capital share transactions ............ 5,911,718 15,103,671
------------ ------------
Net increase in net assets ................... 4,609,210 14,773,380
NET ASSETS
Beginning of period .......................... 44,378,592 29,605,212
------------ ------------
End of period ................................ $ 48,987,802 $ 44,378,592
============ ============
TRANSACTIONS IN SHARES
OF THE FUND
Sold ......................................... 1,844,263 3,423,113
Issued in reinvestment
of distributions ........................... 53,968 99,204
Redeemed ..................................... (1,321,668) (2,100,988)
------------ ------------
Net increase ................................. 576,563 1,421,329
============ ============
12 1-800-345-2021 See Notes to Financial Statements
Notes to Financial Statements
--------------------------------------------------------------------------------
NOVEMBER 30, 1999 (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 (the 1940 Act) as an open-end
management investment company. 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; these policies may require the
use of estimates by fund management.
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
gains are declared and paid annually.
On December 10, 1999, the fund declared and paid a dividend of $0.0081 per
share from short-term net realized gains on investments and $0.0008 per share
from long-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 realized 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 is 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, 1999.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the trust's
distributor. Certain officers of FDI are also officers of the trust.
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM), under which ACIM provides each fund with
investment advisory and management services in exchange for a single, unified
management fee. The Agreement provides that all expenses of the fund, except
brokerage, taxes, portfolio insurance, interest, fees and expenses of those
trustees who are not considered "interested persons" as defined in the
1940 Act (including counsel fees) and extraordinary expenses, will be paid by
ACIM. The fee is calculated daily and paid monthly. It consists of an Investment
Category Fee based on the average net assets of the funds in a specific fund's
investment category and a Complex Fee based on the average net assets of all the
funds managed by ACIM. The rates for the Investment Category Fee range from
0.1625% to 0.2800% and the rates for the Complex Fee range from 0.2900% to
0.3100%. For the six months ended November 30, 1999, the effective annual
management fee was 0.51%.
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.
www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the six months ended November 30, 1999 were $35,450,682 and
$28,504,197, respectively.
At November 30, 1999, accumulated net unrealized depreciation was $407,046,
which consisted of unrealized appreciation of $272,136 and unrealized
depreciation of $679,182. The aggregate cost of investments for federal income
tax purposes was the same as the cost for financial reporting purposes.
--------------------------------------------------------------------------------
4. BANK LOANS
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 Bank.
Borrowings under the agreement bear interest at the Federal Funds rate plus
0.40%. Effective December 21, 1999, borrowings under the agreement bear interest
at the Federal Funds rate plus 0.50%. The fund may borrow money for temporary or
emergency purposes to fund shareholder redemptions. The fund did not borrow from
the line during the six months ended November 30, 1999.
14 1-800-345-2021
Florida Intermediate-Term Municipal--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), EXPENSE RATIO (operating expenses as a
percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the fund's
trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1999(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
Beginning of Period ............... $10.50 $10.56 $10.34 $10.18 $10.30 $10.11
----------- ---------- --------- ---------- ---------- ---------
Income From Investment
Operations
Net Investment Income ............. 0.22 0.44 0.45 0.46 0.52 0.52
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions .......... (0.30) 0.05 0.38 0.20 (0.08) 0.19
----------- ---------- --------- ---------- ---------- ---------
Total From Investment Operations .. (0.08) 0.49 0.83 0.66 0.44 0.71
----------- ---------- --------- ---------- ---------- ---------
Distributions
From Net Investment Income ........ (0.22) (0.44) (0.45) (0.46) (0.52) (0.52)
From Net Realized Gains on
Investment Transactions ........... -- (0.11) (0.16) (0.04) (0.04) --
----------- ---------- --------- ---------- ---------- ---------
Total Distributions ............... (0.22) (0.55) (0.61) (0.50) (0.56) (0.52)
----------- ---------- --------- ---------- ---------- ---------
Net Asset Value, End of Period ...... $10.20 $10.50 $10.56 $10.34 $10.18 $10.30
=========== ========== ========= ========== ========== =========
Total Return(2) ................... (0.73)% 4.71% 8.20% 6.63% 4.34% 7.31%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .............0.51%(3) 0.51% 0.54% 0.65% 0.13% --
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) ...........0.51%(3) 0.51% 0.58% 0.86% 0.88% 1.09%
Ratio of Net Investment Income
to Average Net Assets .............4.31%(3) 4.13% 4.28% 4.42% 5.05% 5.23%
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) ..........4.31%(3) 4.13% 4.24% 4.21% 4.30% 4.14%
Portfolio Turnover Rate ............. 63% 174% 154% 82% 66% 37%
Net Assets, End of Period
(in thousands) ....................$48,988 $44,379 $29,605 $16,513 $10,319 $9,532
(1) Six months ended November 30, 1999 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements www.americancentury.com 15
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios 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:
FLORIDA INTERMEDIATE-TERM MUNICIPAL 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 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 in that index 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. 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.
[left margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
KEN SALINGER
DAVE MACEWEN
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 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%).
* 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 measure 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
Glossary
--------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive
yields, as well as a strong and stable foundation and generally lower volatility
levels than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that the fund's category may change over
time. Therefore, it is important that you read a fund's prospectus or fund
profile carefully before investing to ensure its objectives, policies, and risk
potential are consistent with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
18 1-800-345-2021
Notes
--------------------------------------------------------------------------------
www.americancentury.com 19
Notes
--------------------------------------------------------------------------------
20 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that a fund's category may change over time.
Therefore, it is important that you read a fund's prospectus or fund profile
carefully before investing to ensure its objectives, policies and risk potential
are consistent with your needs.For a definition of fund categories, see the
Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 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.
[back cover]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service
and innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo (reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
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.
--------------------------------------------------------------------------------
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
Funds Distributor, Inc.
0001 is the distributor for American Century funds
SH-SAN-19179 (c)2000 American Century Services Corporation
[front cover]
NOVEMBER 30, 1999
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
[graphic of runners]
Tax-Free Money Market
[american century logo (reg.sm)]
American
Century
[inside front cover]
Investing with American Century Brokerage
--------------------------------------------------------------------------------
American Century Brokerage offers investors a broad range of account types,
investment choices, plus free online research and information services.
As a brokerage investor, you can choose from a Standard Account, Access
Account or IRA Account.
Each of these accounts offers a broad range of investment choices, many of
which are available online:
* American Century and J.P. Morgan mutual funds
* Mutual funds from more than 500 fund families, including more than 800
no-transaction fee (NTF) no-load funds
* Listed and over-the-counter stocks
* Equity and index options
* Precious metals
* ADRs (American Depository Receipts)
* Treasury, agency, corporate, and municipal bonds
* CDs (certificates of deposit)
* UITs (unit investment trusts)
Research from J.P. Morgan
J.P. Morgan's world-class global equity research is accessible online to all
brokerage investors initially for a 60-day free trial. After the free trial
period, you can continue to access the research with a minimum of $100,000 in
assets in an American Century brokerage or mutual fund account.
Online Research and Information Services
American Century Brokerage provides you with up-to-date information to help
you make informed decisions. Through American Century Brokerage, you have
unlimited free access to news, quotes, charting, and other research services,
such as Lipper, Inc. Mutual Fund Profile Reports and S&P Snapshot Reports.
Also, you can use Model Portfolio to track up to 20 securities.
Meet Your Goals with FundScan(tm)
American Century Brokerage offers an online mutual fund screening service --
FundScan(tm). By customizing a list of mutual funds to best meet your investment
goals, FundScan helps you narrow investment choices from thousands of available
funds.
For more information about how you can become an American Century Brokerage
investor, visit our Web site at www.americancentury.com or call a Product and
Service Specialist at 1-888-367-7755.
[left margin]
TAX-FREE MONEY MARKET
(BNTXX)
---------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
Receive Your Annual Reports Online
--------------------------------------------------------------------------------
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American Century gives you the choice to manage your important documents such
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mail. Your link to American Century documents is a click away with our
Electronic Communication option.
It's easy. It's convenient. It's paper free:
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It's easy to sign up for this program. Go to www.americancentury.com. Log in
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* Electronic communication is not available for American Century Brokerage
accounts at this time.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The past year demonstrated why investors should focus on long-term
investment strategies and maintain diversified portfolios. The consensus
expectation going into 1999 was that U.S. economic growth would slow, bonds
would perform well, and stocks would cool off. Instead, the reverse happened --
the economy accelerated, stocks posted excellent returns, and bonds suffered
their worst year since 1994.
Increasing inflation anxiety led the Federal Reserve to raise interest
rates. That resulted in higher tax-free yields for the American Century Tax-Free
Money Market fund. But equally important, from a longer-term perspective, the
fund maintained low expenses and competitive yields, key factors that remain
consistent no matter how market conditions may change.
Turning to corporate matters, we are constantly looking for ways to lower
the costs of trading securities and generate better returns for shareholders. To
that end, we have made strategic investments in several companies that allow
buyers and sellers of securities to connect directly, efficiently, and
anonymously. Savings in this area directly affect the performance of your funds.
We're also pleased to announce that American Century has been named by
Fortune magazine as one of its "100 Best Companies to Work For," and
that American Century's investor account statement is the first fund company
statement to win the Communications Seal from DALBAR, Inc., an independent
financial services research firm.
We do not take this recognition lightly -- acknowledgements like these
enable us to attract and retain talented and dedicated people, from service
representatives to investment professionals. This "intellectual
capital" is our most valuable resource and one that is essential in our
effort to provide you with excellent investment management and service.
As always, we appreciate your continued confidence in 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 Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Frequently Asked
Questions ............................................................ 2
TAX-FREE MONEY MARKET
Performance Information ................................................. 3
Portfolio at a Glance ................................................... 3
Yields .................................................................. 3
Management Q&A ...................................................... 4
Portfolio Composition
by Credit Rating ..................................................... 4
Types of Investments
in the Portfolio ..................................................... 4
Schedule of Investments ................................................. 5
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities .......................................................... 9
Statement of Operations ................................................. 10
Statements of Changes
in Net Assets ........................................................ 11
Notes to Financial
Statements ........................................................... 12
Financial Highlights .................................................... 13
OTHER INFORMATION
Background Information
Investment Philosophy
and Policies ...................................................... 14
Lipper Rankings ...................................................... 14
Credit Rating
Guidelines ........................................................ 14
Investment and Credit
Research Teams .................................................... 14
Glossary ................................................................ 15
www.americancentury.com 1
Money Market Funds--Frequently Asked Questions
--------------------------------------------------------------------------------
CAN I MAKE DIRECT DEPOSITS INTO MY MONEY MARKET FUND ACCOUNT?
Yes. You can arrange for direct deposit of your paycheck, Social Security
check, Treasury Direct interest payment, military allotment, or payments from
other government agencies. Give us a call, and we will send you the necessary
information to set it up.
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-business-day holding period for U.S. Treasury checks, money
orders, and travelers' checks.
IS THERE A LIMIT ON THE NUMBER OF CHECKS I CAN WRITE ON MY MONEY MARKET
ACCOUNT?
No. You can write as many checks as you like at no charge, as long as each
check is for $100 or more.
IS THERE AN EASY WAY TO MOVE MONEY FROM MY MONEY MARKET FUND INTO A STOCK OR
BOND FUND?
Yes. Moving money between funds is called an exchange, and there is no
limit on the number of exchanges you can make out of a money market fund
account. However, there is a limit of six exchanges per calendar year out of
stock and bond fund accounts.
Exchanges can be made by:
* visiting our Web site at
www.americancentury.com*
* using our Automated Information Line (1-800-345-8765)*
* calling an Investor Relations Representative at 1-800-345-2021*
* writing us a letter
HOW DO I DECIDE WHETHER A TAXABLE MONEY MARKET FUND OR A TAX-FREE MONEY MARKET
FUND IS RIGHT FOR ME?
The most important factor to consider is your tax bracket. Tax-free money
market funds typically offer lower yields than taxable funds, but you pay no
federal income taxes on the income from a tax-free fund.
If you are in one of the higher federal income tax brackets, taxes will eat
up a big part of your income from a taxable money market fund, so a tax-free
investment may be better for you. If you're in a lower tax bracket, then you can
usually earn more in a taxable fund even after taxes are deducted.
We can help you figure it out. If you give us a call and tell us what tax
bracket you're in, we can tell you whether you're likely to earn more after-tax
income in a tax-free or a taxable money market fund.
IF YOU HAVE ANY QUESTIONS ABOUT OUR MONEY MARKET FUNDS, CALL US TOLL FREE AT
1-800-345-2021 OR E-MAIL US AT OUR WEB SITE, WWW.AMERICANCENTURY.COM.
* Before you can make an exchange by calling an Investor Relations
Representative, using our Automated Information Line, or visiting our Web
site, you first must have provided us with written authorization to do so.
[left margin]
A FASTER AND EASIER WAY TO DEPOSIT MUTUAL FUND DISTRIBUTIONS
If you prefer to have your fund dividend or capital gains distributions sent to
you instead of reinvesting them, there are a couple of ways to get access to
this money faster than waiting for a check in the mail:
* YOU CAN HAVE DISTRIBUTIONS DEPOSITED DIRECTLY INTO YOUR MONEY MARKET
ACCOUNT. The money will be deposited the same day that the distributions
are paid.
* DISTRIBUTIONS CAN BE SENT ELECTRONICALLY TO YOUR BANK ACCOUNT. The money
will be available in your bank account within three days.
Contact our Investor Relations Representatives to set up either of these
options.
2 1-800-345-2021
Tax-Free Money Market--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1999
TAX-FREE TAX-EXEMPT MONEY MARKET FUNDS(2)
MONEY MARKET AVERAGE RETURN FUND'S RANKING
===========================================================================
6 MONTHS(1) 1.51% 1.36% --
1 YEAR 2.93% 2.62% 12 OUT OF 134
===========================================================================
AVERAGE ANNUAL RETURNS
3 YEARS(3) 3.28% 2.90% 6 OUT OF 123
5 YEARS(3) 3.24% 3.02% 13 OUT OF 108
10 YEARS(3) 3.28% 2.84% 15 OUT OF 72
The fund's inception date was 7/31/84.
(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.(+)
See pages 14-15 for more information about returns and Lipper fund rankings.
PORTFOLIO AT A GLANCE
AS OF 11/30/99
NET ASSETS $263.1 MILLION
11/30/99 5/31/99
NUMBER OF SECURITIES 72 71
WEIGHTED AVERAGE
MATURITY 60 DAYS 49 DAYS
EXPENSE RATIO 0.50%* 0.31%(+)
* Annualized.
YIELDS AS OF NOVEMBER 30, 1999
7-DAY CURRENT YIELD 3.38%
7-DAY EFFECTIVE YIELD 3.43%
7-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 4.69%
31.0% TAX BRACKET 4.90%
36.0% TAX BRACKET 5.28%
39.6% TAX BRACKET 5.60%
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.
(+) American Century Investment Management, Inc. (ACIM) voluntarily waived its
management fee from August 1, 1997, through July 31, 1998. Effective August
1, 1998, ACIM began decreasing the waiver by 0.10% of fund net assets on a
monthly basis until the waiver expired in December 1998. In absence of the
waiver, the fund's expense ratio would have been 0.50% for the year ended
May 31, 1999.
www.americancentury.com 3
Tax-Free Money Market--Q&A
--------------------------------------------------------------------------------
[photo of Bryan Karcher]
An interview with Bryan Karcher, a portfolio manager on the Tax-Free Money
Market fund investment team.
HOW DID TAX-FREE MONEY MARKET PERFORM DURING THE SIX MONTHS ENDED NOVEMBER 30,
1999?
The fund performed well, beating the average return of the 133
"Tax-Exempt Money Market Funds" tracked by Lipper Inc. (See the
previous page for fund returns and performance comparisons.)
Tax-Free Money Market also provided more federal tax-free income than the
average tax-exempt money market fund. As of November 30, 1999, the fund's 7-day
current yield was 3.38%, compared with the 3.13% average yield of the Lipper
group.
WHY DID TAX-FREE MONEY MARKET PERFORM SO WELL?
One reason is that Tax-Free Money Market's expenses are lower than those of
most tax-exempt money funds. Other things being equal, lower expenses mean
higher yields for our shareholders.
Another reason the fund continues to do well is our experience working with
securities dealers who offer more attractive interest rates on variable-rate
demand notes, or "floaters." We believe this market knowledge is
instrumental in providing higher fund yields because, on average, floaters
represent the largest percentage of fund holdings.
DID YOU MAKE ANY OTHER CHANGES TO THE PORTFOLIO?
Yes, we also improved Tax-Free Money Market's yield by adding some one-year
notes when yields rose in anticipation of rate increases by the Federal Reserve.
Notes offered attractive yields relative to floaters even taking into
consideration the possibility of higher rates. Buying notes lengthened our
weighted average maturity from about 50 days on May 31 to around 60 days by the
end of November. However, the fund's weighting in notes rose only modestly
because the new purchases were offset by some of our other notes maturing. As a
result, we believe the portfolio is well positioned for any future Fed rate
hikes.
WHAT'S YOUR OUTLOOK FOR MUNICIPAL MONEY MARKET RATES AND THE FUND?
Many analysts expect the Federal Reserve to raise interest rates early in
2000. If that happens, we'd expect to see municipal money market yields rise
accordingly.
Supply and demand factors also often influence municipal yields early in
the year. Demand for tax-free securities typically increases in January, when
investors look to put money from coupon payments and maturing securities back to
work. More demand often means higher prices and lower yields for municipal
securities in January. As a result, we'd be inclined to maintain our current
average maturity or extend it a little to lock in higher yields now until we get
past January.
[left margin]
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/99 5/31/99
SP1+ 81% 75%
SP1 12% 18%
SP2 7% 7%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
14 for more information.
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF NOVEMBER 30, 1999
VRDNs 67%
Bonds less than 1 Year 21%
Put Bonds 9%
Municipal Notes 3%
AS OF MAY 31, 1999
VRDNs 79%
Bonds less than 1 Year 12%
Put Bonds 9%
Security types are defined on page 15.
4 1-800-345-2021
Tax-Free Money Market--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES -- 100.0%
ARIZONA -- 4.5%
$ 1,100,000 Maricopa County Pollution Control
Corp. Rev., Series 1994 D,
(Arizona Public Service Co.),
VRDN, 3.75%, 12/1/99 (LOC:
Bank of America, N.A.) $ 1,100,000
1,095,000 Maricopa County School District
No. 1 GO, (Phoenix Elementary),
4.75%, 7/1/00 (FSA) 1,101,817
5,400,000 Pinal County Industrial
Development Auth. Pollution
Control Rev., (Newmont), VRDN,
3.70%, 12/1/99 (LOC:
National Westminster Bank
PLC) 5,400,000
400,000 Prescott Valley Water District Rev.,
3.50%, 1/1/00 (MBIA) 400,097
2,520,000 Tempe Excise Tax Rev., Series
1999 A, 4.00%, 1/1/00 2,521,142
1,000,000 Tempe Excise Tax Rev., Series
1999 A, 3.75%, 7/1/00 1,002,136
------------
11,525,192
------------
CALIFORNIA -- 1.5%
4,000,000 Rialto Public Financing Auth. Tax
Allocation, Series 1998 A,
(Agua Mansa & Industrial),
VRDN, 4.35%, 12/2/99 (LOC:
Union Bank of California N.A.) 4,000,000
------------
COLORADO -- 1.4%
2,000,000 Arapahoe County Industrial
Development Rev., (Denver
Jetcenter), VRDN, 3.90%,
12/1/99 (LOC: U.S. Bank,
N.A.) 2,000,000
1,555,000 SBC Metropolitan GO, VRDN,
3.35%, 12/1/99 (LOC: U.S.
Bank, N.A.) 1,555,000
------------
3,555,000
------------
FLORIDA -- 23.7%
2,960,000 Broward County Housing Finance
Auth. Multifamily Housing Rev.,
Series 1990 A, (Palm
Aire-Oxford), VRDN, 3.95%,
12/1/99 (Guaranteed:
Continental Casualty Co.) 2,960,000
3,480,000 Dade County Special Obligation
Trust Receipts, Series
1998 C-2, VRDN, 4.00%,
12/1/99 (LOC: Bank of
America N.A.) (Acquired
1/5/99-4/12/99, Cost
$3,480,000)(1) 3,480,000
Principal Amount Value
--------------------------------------------------------------------------------
$11,505,000 Florida Housing Finance Agency
Multifamily Housing Rev.,
(Country Club), VRDN, 3.80%,
12/1/99 (LOC: Bank of
New York) $ 11,505,000
8,000,000 Florida Housing Finance Agency
Multifamily Housing Rev.,
(Woodlands), VRDN, 3.95%,
12/1/99 (LOC: Northern
Trust Company) 8,000,000
5,965,000 Florida Housing Finance Agency
Multifamily Housing Rev., Series
1990 B, (Beville-Oxford),
VRDN, 3.95%, 12/1/99
(Guaranteed: Continental
Casualty Co.) 5,965,000
2,000,000 Florida Housing Finance Agency
Trust Receipts, VRDN, 3.90%,
12/1/99, (MBIA) (LOC: Bank
of New York) (Acquired 8/5/99,
Cost $2,000,000)(1) 2,000,000
5,000,000 Jacksonville Capital Project Rev.,
Series 1998-1, VRDN, 3.85%,
12/1/99 (AMBAC) (SBBPA:
Bank One, N.A) 5,000,000
3,000,000 Jacksonville Electric Auth. Rev.,
VRDN, 4.00%, 12/1/99
(Jacksonville Electric Authority
(Electric)) (SBBPA: Societe
Generale) (Acquired
4/24/98-10/22/99, Cost
$3,000,000)(1) 3,000,000
2,000,000 Jacksonville Electric Auth. Rev.,
(Bulk Power Supply-Scherer
4-1-A), 6.70%, 10/1/00,
Prerefunded at 101.5% of Par(2) 2,077,115
3,000,000 Miami-Dade County Housing
Finance Auth. Rev., Series
1999 A-2, (Home Ownership
Mortgage), 3.55%, 8/1/00
(Guaranteed: Trinity Funding
Corporation) 3,000,000
2,300,000 Orange County Health Facilities
Auth. Rev., (Presbyterian
Retirement), VRDN, 3.95%,
12/2/99 (LOC: Bank of
America, N.A.) (Acquired
7/22/99, Cost $2,300,000)(1) 2,300,000
3,500,000 Orange County Housing Finance
Auth. Multifamily Rev., (Post
Lake Apartments), VRDN,
3.95%, 12/1/99 (FNMA
Collateral Agreement) 3,500,000
6,000,000 Palm Beach County Health
Facilities Auth. Rev., Series
1999 B, (Hospital
Improvement), VRDN, 3.85%,
12/1/99 (Guaranteed: Boca
Raton Community Hosp. &
Foundation) 6,000,000
See Notes to Financial Statements www.americancentury.com 5
Tax-Free Money Market--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
$ 2,690,000 Tallahassee-Leon County Civic
Center Auth. Capital
Improvement Rev., Series
1998 A, VRDN, 3.95%,
12/1/99 (LOC: Suntrust Bank,
Central Florida, N.A.) $ 2,690,000
------------
61,477,115
------------
GEORGIA -- 6.2%
5,000,000 Clayton County Hospital Auth.
Rev. Anticipation Certificates,
Series 1998 B, (Southern
Regional Medical Center),
VRDN, 3.95%, 12/1/99 (LOC:
Suntrust Bank, Atlanta GA) 5,000,000
1,800,000 Cobb County Multifamily Housing
Rev., (Terrell Mill), VRDN, 4.00%,
12/1/99 (LOC: General
Electric Capital Corp.) (Acquired
5/1/96, Cost $1,800,000)(1) 1,800,000
1,000,000 Municipal Electric Auth. Rev.,
Series 1997 B, (Project One),
5.00%, 1/1/00 (AMBAC) 1,001,361
5,000,000 Richmond County Hospital Auth.
Rev. Anticipation Certificates,
(University Health Services Inc.),
VRDN, 3.95%, 12/1/99 (LOC:
Suntrust Bank, Atlanta GA) 5,000,000
3,300,000 Thomasville Hospital Auth. Rev.
Anticipation Certificates, (J.D.
Archbold), VRDN, 3.95%,
12/1/99 (LOC: Suntrust Bank,
Atlanta GA) (Acquired
12/11/97-5/28/99, Cost
$3,300,000)(1) 3,300,000
------------
16,101,361
------------
HAWAII -- 2.4%
1,500,000 Hawaii Department of Budget
& Finance Special Purpose
Meeting Rev., Series 1999 A,
(Palama Meat Co.), VRDN,
4.35%, 12/2/99 (LOC: Bank
of Hawaii) 1,500,000
1,000,000 Hawaii Highway Rev., 4.00%,
7/1/00 (FGIC) 1,003,988
3,550,000 Honolulu City and County GO,
Series 1991 A, 10.00%,
8/1/00(2) 3,689,304
------------
6,193,292
------------
ILLINOIS -- 4.2%
2,000,000 Chicago Park District GO, 5.50%,
1/1/00 (FGIC) 2,003,458
3,500,000 Chicago School Financing Auth.
GO, Series 1993 A, 4.70%,
6/1/00 (FGIC) 3,516,186
1,170,000 Cook County Community School
District No. 54 GO, Series
1992 B, (Schaumburg), 5.60%,
1/1/00 (FGIC) 1,171,337
Principal Amount Value
--------------------------------------------------------------------------------
$ 4,140,000 Illinois Sports Facilities Auth. Rev.,
Series 1999 A, 4.00%,
6/15/00 (MBIA) $ 4,154,214
------------
10,845,195
------------
INDIANA -- 1.3%
855,000 Center Grove High School
Building Corp., 3.25%, 1/5/00
(FSA) 855,000
450,000 Eagle-Union Community School
Building Corp. Industrial Rev.,
3.25%, 1/5/00 (FSA) 450,000
1,000,000 Gary Industrial Development Rev.,
(Tinplate Partners International,
Inc.), VRDN, 4.05%, 12/2/99
(LOC: LaSalle National Bank) 1,000,000
1,045,000 Lake County GO, 4.125%,
1/15/00 (FSA) 1,046,175
------------
3,351,175
------------
KANSAS -- 1.9%
5,000,000 Burlington Pollution Control
Floating Rate Trust Receipts,
Series A7, 3.95%, 12/1/99
(MBIA) (SBBPA: Bank of New
York) (Acquired 5/11/99, Cost
$5,000,000)(1) 5,000,000
------------
KENTUCKY -- 7.7%
12,000,000 Kentucky Economic Development
Finance Auth. Rev., (Pooled
Hospital Loan Program), VRDN,
4.00%, 12/1/99 (Capital
Reinsurance Company)
(SBBPA: Chase Manhattan
Bank) 12,000,000
7,100,000 Kentucky Turnpike Auth. Resource
Recovery Road Floating Rate
Trust Receipts, Series 1997-17,
3.95%, 12/1/99 (FSA)
(SBBPA: Commerzbank AG)
(Acquired 10/8/97-12/12/97,
Cost $7,100,000)(1)(3) 7,100,000
905,000 Mayfield Multi-City Lease Rev.,
VRDN, 3.95%, 12/1/99 (LOC:
PNC Bank N.A.) 905,000
------------
20,005,000
------------
LOUISIANA -- 3.3%
4,000,000 Jefferson Parish Home Mortgage
Auth. Single Family Rev., Series
1999 B-2, 3.65%, 6/30/00
(GIC: AIG Matched Funding
Corp.) 4,000,000
3,565,000 Louisiana Local Government
Environmental Facilities
Community Development Auth.
Rev., (Uno-Avondale Maritime),
4.50%, 10/1/00 (AMBAC) 3,586,590
1,065,000 Orleans Parish School Board GO,
6.625%, 3/1/00 (AMBAC) 1,073,971
------------
8,660,561
------------
6 1-800-345-2021 See Notes to Financial Statements
Tax-Free Money Market--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
MASSACHUSETTS -- 2.4%
$ 6,000,000 Massachusetts State GO, Series
1996 A, 5.25%, 11/1/00 $ 6,080,261
------------
MISSOURI -- 5.1%
2,200,000 Fenton Industrial Development
Auth. Rev., (Clayton Corp.),
VRDN, 4.25%, 12/2/99 (LOC:
Commerce Bank, N.A.
(Missouri)) 2,200,000
1,910,000 Missouri Development Finance
Board Industrial Development
Rev., (J & J Enterprises),
VRDN, 4.10%, 12/1/99 (LOC:
Commerce Bank, N.A.
(Missouri)) 1,910,000
5,900,000 Missouri Health and Educational
Facilities Auth. Rev., (Pembroke
Hill School), VRDN, 3.95%,
12/2/99 (LOC: Commerce
Bank, N.A. (Missouri)) 5,900,000
1,675,000 North Kansas City School District
GO, 5.00%, 3/1/00 1,680,316
1,500,000 Phelps County Hospital Rev.,
(Phelps County Regional
Medical Center), 8.30%,
3/1/00, Prerefunded at 102%
of Par(2) 1,548,926
------------
13,239,242
------------
NEVADA -- 2.3%
6,000,000 ABN Amro Munitops Certificates
Trust Receipts, Series 1998-1,
VRDN, 4.10%, 12/1/99
(MBIA) (SBBPA: ABN Amro
Bank N.V.) (Acquired 6/3/98,
Cost $6,000,000)(1) 6,000,000
------------
NORTH DAKOTA -- 3.7%
1,655,000 Hebron Industrial Development
Rev., (Dacco Inc.), VRDN,
4.05%, 12/2/99 (LOC: U.S.
Bank, N.A.) (Acquired 2/26/98,
Cost $1,655,000)(1) 1,655,000
8,000,000 North Dakota State Housing
Finance Agency Rev., Series
1999 C, (Housing Finance
Program), 3.20%, 4/1/00 8,000,000
------------
9,655,000
------------
OHIO -- 3.2%
3,260,000 Butler County Healthcare
Facilities Rev., (Knolls of Oxford),
VRDN, 4.00%, 12/2/99 (LOC:
Firstar Bank N.A.) 3,260,000
5,000,000 Clinton County Hospital Rev.,
(Ohio Hospital Capital Inc.),
VRDN, 3.95%, 12/1/99 (LOC:
Fifth Third Bank) 5,000,000
------------
8,260,000
------------
Principal Amount Value
--------------------------------------------------------------------------------
OKLAHOMA -- 0.4%
$ 1,000,000 Oklahoma County Independent
School District No. 1 GO,
Series 1998 A, (Putnam),
7.125%, 1/1/00 (FGIC) $ 1,002,974
------------
OREGON -- 1.2%
3,000,000 Oregon State Housing and
Community Services
Department Mortgage Rev.,
Series 1999 C, (Single Family
Mortgage), 3.15%, 4/13/00 3,000,000
------------
SOUTH CAROLINA -- 0.4%
1,000,000 South Carolina Public Service
Auth. Rev., Series 1996 B,
5.00%, 1/1/00 (AMBAC) 1,000,792
------------
TENNESSEE -- 2.1%
5,140,000 Maury County Health and
Educational Facilities Board
Rev., Series 1990 E, (Southern
Healthcare), 10.50%, 3/1/00,
Prerefunded at 102% of Par(2) 5,336,387
------------
TEXAS -- 7.3%
2,277,000 ABN Amro Munitops Certificates
Trust Receipts, Series 1998-22,
VRDN, 4.10%, 12/1/99 (FSA)
(SBBPA: ABN Amro Bank N.V.)
(Acquired 12/3/98, Cost
$2,277,000)(1) 2,277,000
4,000,000 ABN Amro Munitops Certificates
Trust Receipts, Series 1999-5,
VRDN, 3.60%, 5/17/00
(MBIA) (SBBPA: ABN Amro
Bank N.V.) (Acquired 8/10/99,
Cost $4,000,000)(1) 4,000,000
5,500,000 Gulf Coast Industrial Development
Auth. Rev., (Petrounited Term
Inc.), VRDN, 4.00%, 12/2/99
(LOC: Bank of America, N.A.) 5,500,000
7,000,000 Texas Tax & Revenue
Anticipation Notes, Series
1999 A, 4.50%, 8/31/00 7,040,515
------------
18,817,515
------------
VIRGINIA -- 2.5%
6,500,000 Halifax County Industrial
Development Auth. Rev.,
(O'Sullivan Industries), VRDN,
4.25%, 12/2/99 (LOC: Bank
of America, N.A.) (Acquired
2/1/99, Cost $6,500,000)(1) 6,500,000
------------
WASHINGTON -- 6.9%
1,610,000 Pierce County Economic
Development Corporate Rev.,
(K & M Holdings II), VRDN,
4.00%, 12/1/99 (LOC: Wells
Fargo Bank, N.A.) (Acquired
11/17/97, Cost $1,610,000)(1) 1,610,000
See Notes to Financial Statements www.americancentury.com 7
Tax-Free Money Market--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
$ 2,600,000 Washington Housing Finance
Commission Nonprofit Rev.,
(YMCA Columbia/Willamette),
VRDN, 3.95%, 12/2/99 (LOC:
Wells Fargo Bank, N.A.) $ 2,600,000
2,000,000 Washington Public Power Supply
System Nuclear Project No. 1
Rev., Series 1990 C, 7.25%,
7/1/00 (FGIC) 2,044,204
5,000,000 Washington Public Power Supply
System Nuclear Project No. 3
Rev., Series 1989 B, 7.40%,
1/1/00, Prerefunded at 102%
of Par(2) 5,119,916
Principal Amount Value
--------------------------------------------------------------------------------
$ 6,600,000 Washington State Housing
Finance Commission Multifamily
Mortgage Rev., (Mill Plain
Crossing), VRDN, 3.70%,
12/7/99 (LOC: Harris Trust
& Savings Bank) $ 6,600,000
------------
17,974,120
------------
WISCONSIN -- 4.4%
11,500,000 Ladysmith Solid Waste Disposal
Facility Rev., (City Forest Corp.),
VRDN, 4.30%, 12/1/99 (LOC:
Union Bank of California N.A.) 11,500,000
------------
TOTAL INVESTMENT SECURITIES -- 100.0% $259,080,182
============
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
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, 1999.
(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, 1999, was
$50,022,000, which represented 19.0% of net assets. None of these
securities are considered to be illiquid.
(2) Escrowed to maturity in U.S. government securities or state and local
government securities.
(3) Interest reset date is indicated and used in calculating the weighted
average portfolio maturity. Rate shown is effective November 30, 1999.
8 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. The net assets divided by shares outstanding is the share price, or NET
ASSET VALUE PER SHARE. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
NOVEMBER 30, 1999 (UNAUDITED)
ASSETS
Investment securities, at value
(amortized cost and cost for
federal income tax purposes) ............................. $259,080,182
Cash ....................................................... 1,870,625
Interest receivable ........................................ 2,279,368
------------
263,230,175
------------
LIABILITIES
Accrued management fees (Note 2) ........................... 104,751
Payable for trustees' fees and expenses .................... 1,013
------------
105,764
------------
Net Assets ................................................. $263,124,411
============
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) .................................... 263,124,184
============
Net Asset Value Per Share .................................. $ 1.00
============
NET ASSETS CONSIST OF:
Capital paid in ............................................ $263,124,184
Accumulated undistributed net
realized gain on investments ............................. 227
------------
$263,124,411
============
See Notes to Financial Statements www.americancentury.com 9
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ................................................. $ 4,553,784
-----------
Expenses (Note 2):
Management fees .......................................... 646,408
Trustees' fees and expenses .............................. 6,669
-----------
Total expenses ......................................... 653,077
-----------
Net investment income .................................... 3,900,707
-----------
NET REALIZED LOSS ON INVESTMENTS
Net realized loss on investments ......................... (22,748)
-----------
Net Increase in Net Assets
Resulting from Operations .............................. $ 3,877,959
===========
10 1-800-345-2021 See Notes to Financial Statements
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows 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 (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED) AND YEAR ENDED MAY 31, 1999
Decrease in Net Assets NOV. 30, 1999 MAY 31, 1999
OPERATIONS
Net investment income ...................... $ 3,900,707 $ 12,496,571
Net realized gain (loss)
on investments ........................... (22,748) 22,974
------------- -------------
Net increase in net assets
resulting from operations ............... 3,877,959 12,519,545
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................. (3,920,357) (12,496,571)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................. 116,506,888 564,457,327
Proceeds from reinvestment
of distributions ......................... 3,784,122 11,355,619
Payments for shares redeemed ............... (140,170,046) (737,066,946)
------------- -------------
Net decrease in net assets
from capital share transactions .......... (19,879,036) (161,254,000)
------------- -------------
Net decrease in net assets ................. (19,921,434) (161,231,026)
NET ASSETS
Beginning of period ........................ 283,045,845 444,276,871
------------- -------------
End of period .............................. $ 263,124,411 $ 283,045,845
============= =============
Undistributed net
investment income ........................ -- $ 19,650
============= =============
TRANSACTIONS IN SHARES OF THE FUND
Sold ....................................... 116,506,888 564,457,327
Issued in reinvestment
of distributions ......................... 3,784,122 11,355,619
Redeemed ................................... (140,170,046) (737,066,946)
------------- -------------
Net decrease ............................... (19,879,036) (161,254,000)
------------- -------------
See Notes to Financial Statements www.americancentury.com 11
Notes to Financial Statements
--------------------------------------------------------------------------------
NOVEMBER 30, 1999 (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. 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; these policies may
require the use of estimates by fund management.
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 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 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.
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM), under which ACIM provides each fund with
investment advisory and management services in exchange for a single unified
management fee. The Agreement provides that all expenses of the funds, except
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 will be paid by ACIM. The fee is calculated daily and paid monthly. It
consists of an Investment Category Fee based on the average net assets of the
funds in a specific fund's investment category and a Complex Fee based on the
average net assets of all the funds managed by ACIM. The rates for the
Investment Category Fee range from 0.1570% to 0.2700% and the rates for the
Complex Fee range from 0.2900% to 0.3100%. For the six months ended November 30,
1999, the effective annual management fee was 0.50%.
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.
12 1-800-345-2021
Tax-Free Money Market--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), and EXPENSE RATIO (operating expenses as a
percentage of average net assets).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1999(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
Beginning of Period ............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- --------- -------- --------- -------- --------
Income From
Investment Operations
Net Investment Income .......... 0.01 0.03 0.04 0.03 0.03 0.03
-------- --------- -------- --------- -------- --------
Distributions
From Net Investment Income ..... (0.01) (0.03) (0.04) (0.03) (0.03) (0.03)
-------- --------- -------- --------- -------- --------
Net Asset Value, End of Period ... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ========= ======== ========= ======== ========
Total Return(2) ................ 1.51% 3.10% 3.70% 2.98% 3.19% 2.95%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..........0.50%(3) 0.31%(4) 0.04%(4) 0.67% 0.65% 0.66%
Ratio of Net Investment Income
to Average Net Assets ..........2.97%(3) 3.10%(4) 3.68%(4) 2.93% 3.12% 2.88%
Net Assets, End of Period
(in thousands) .................$263,124 $283,046 $444,277 $85,730 $91,118 $92,034
(1) Six months ended November 30, 1999 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
(4) ACIM voluntarily waived its management fee from August 1, 1997 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, until the waiver expired
in December 1998. In absence of the waiver, the ratio of expenses to
average net assets and annualized ratio of net investment income to average
net assets would have been 0.50% and 2.91% for 1999 and 0.52% and 3.10% for
1998, respectively.
See Notes to Financial Statements www.americancentury.com 13
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios 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 seeks to provide interest income exempt from federal
income taxes by investing in short-term municipal securities.
An investment in Tax-Free Money Market is 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 funds in Lipper's TAX-EXEMPT MONEY MARKET FUNDS category 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.
[left margin]
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
14 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 13.
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 measure 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 15
Glossary
--------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive
yields, as well as a strong and stable foundation and generally lower volatility
levels than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that the fund's category may change over
time. Therefore, it is important that you read a fund's prospectus or fund
profile carefully before investing to ensure its objectives, policies, and risk
potential are consistent with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
16 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that a fund's category may change over time.
Therefore, it is important that you read a fund's prospectus or fund profile
carefully before investing to ensure its objectives, policies and risk potential
are consistent with your needs.For a definition of fund categories, see the
Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 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.
[back cover]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service
and innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo (reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
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.
--------------------------------------------------------------------------------
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
Funds Distributor, Inc.
0001 is the distributor for American Century funds
SH-SAN-19176 (c)2000 American Century Services Corporation
[front cover]
NOVEMBER 30, 1999
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
[graphic of runners]
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]
Investing with American Century Brokerage
--------------------------------------------------------------------------------
American Century Brokerage offers investors a broad range of account types,
investment choices, plus free online research and information services.
As a brokerage investor, you can choose from a Standard Account, Access
Account or IRA Account.
Each of these accounts offers a broad range of investment choices, many of
which are available online:
* American Century and J.P. Morgan mutual funds
* Mutual funds from more than 500 fund families, including more than 800
no-transaction fee (NTF) no-load funds
* Listed and over-the-counter stocks
* Equity and index options
* Precious metals
* ADRs (American Depository Receipts)
* Treasury, agency, corporate, and municipal bonds
* CDs (certificates of deposit)
* UITs (unit investment trusts)
Research from J.P. Morgan
J.P. Morgan's world-class global equity research is accessible online to all
brokerage investors initially for a 60-day free trial. After the free trial
period, you can continue to access the research with a minimum of $100,000 in
assets in an American Century brokerage or mutual fund account.
Online Research and Information Services
American Century Brokerage provides you with up-to-date information to help
you make informed decisions. Through American Century Brokerage, you have
unlimited free access to news, quotes, charting, and other research services,
such as Lipper, Inc. Mutual Fund Profile Reports and S&P Snapshot Reports.
Also, you can use Model Portfolio to track up to 20 securities.
Meet Your Goals with FundScan(tm)
American Century Brokerage offers an online mutual fund screening service --
FundScan(tm). By customizing a list of mutual funds to best meet your investment
goals, FundScan helps you narrow investment choices from thousands of available
funds.
For more information about how you can become an American Century Brokerage
investor, visit our Web site at www.americancentury.com or call a Product and
Service Specialist at 1-888-367-7755.
[left margin]
LIMITED-TERM TAX-FREE
(TWTSX)
---------------------------------------
INTERMEDIATE-TERM TAX-FREE
(TWTIX)
---------------------------------------
LONG-TERM TAX-FREE
(TWTLX)
---------------------------------------
HIGH-YIELD MUNICIPAL
(ABHYX)
---------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
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Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The past year demonstrated why investors should focus on long-term
investment strategies and maintain diversified portfolios. The consensus
expectation going into 1999 was that U.S. economic growth would slow, bonds
would perform well, and stocks would cool off. Instead, the reverse happened
--the economy accelerated, stocks posted excellent returns, and bonds suffered
their worst year since 1994.
Increasing inflation anxiety and rising interest rates set the tone for the
U.S. bond market and helped determine the six-month performance of the American
Century Limited-, Intermediate-, and Long-Term Tax-Free funds, and American
Century High-Yield Municipal.
Equally important, from a longer-term perspective, these funds maintained
low expenses and competitive yields, key factors that remain consistent no
matter how bond market conditions may change.
Turning to corporate matters, we are constantly looking for ways to lower
the costs of trading securities and generate better returns for shareholders. To
that end, we have made strategic investments in several companies that allow
buyers and sellers of securities to connect directly, efficiently, and
anonymously. Savings in this area directly affect the performance of your funds.
We're also pleased to announce that American Century has been named by
Fortune magazine as one of its "100 Best Companies to Work For."
We do not take this recognition lightly--acknowledgements like this enable
us to attract and retain talented and dedicated people, from service
representatives to investment professionals. This "intellectual
capital" is our most valuable resource and one that is essential in our
effort to provide you with excellent investment management and service.
As always, we appreciate your continued confidence in 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 Vice Chairman of the Board and
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 ................................................. 8
INTERMEDIATE-TERM TAX-FREE
Performance Information ................................................. 10
Management Q&A ...................................................... 11
Schedule of Investments ................................................. 13
LONG-TERM TAX-FREE
Performance Information ................................................. 18
Management Q&A ...................................................... 19
Schedule of Investments ................................................. 21
HIGH-YIELD MUNICIPAL
Performance Information ................................................. 25
Management Q&A ...................................................... 26
Schedule of Investments ................................................. 28
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities .......................................................... 30
Statements of Operations ................................................ 31
Statements of Changes
in Net Assets ........................................................ 32
Notes to Financial
Statements ........................................................... 34
Financial Highlights .................................................... 36
OTHER INFORMATION
Background Information
Investment Philosophy
and Policies ...................................................... 40
Credit Rating
Guidelines ........................................................ 40
Investment and Credit
Research Teams .................................................... 40
Comparative Indices .................................................. 41
Lipper Rankings ...................................................... 41
Glossary ................................................................ 42
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* Rising interest rates and weak demand eroded municipal bond prices and
returns during the six months ended November 30, 1999.
* Continued strong U.S. economic growth fanned inflation fears and triggered
higher interest rates.
* In response, the Federal Reserve raised short-term interest rates three
times, pushing municipal bond yields toward two-year highs.
* Higher municipal yields compared favorably with corporate and Treasury
yields by the end of the period. Earlier in the year, high corporate
yields drew institutional investors away from municipals.
* Relatively high demand from individual investors helped intermediate-term
municipal securities maintain their value better than long-term municipals.
* Short-term municipals also lagged intermediates as short-term yields rose
with the Federal Reserve's interest rate hikes.
* The strong U.S. economy boosted tax collections and revenues of municipal
issuers, helping to improve credit quality. General obligation bonds were
particularly strong.
* Hospital bonds suffered from heightened competition, reduced federal
payments, and declining support from bond insurers.
LIMITED-TERM TAX-FREE
* The portfolio performed well, providing more federal tax-free income and a
better return than the average short/intermediate municipal fund.
* Limited-Term Tax-Free's yield on November 30 was in the top third of the
Lipper group, while its one-year return ranked in the top 10%. The fund
ranked #1 out of 33 funds in the Lipper group for the three-year period
ended November 30, 1999. For complete performance information, see page 5.
* Our below-average expenses and value-oriented management approach are key
to the fund's solid long-term performance.
* We managed Limited-Term Tax-Free's interest rate sensitivity (duration)
conservatively, which helped performance.
* Though our outlook for interest rates is somewhat cautious in the near term,
we think there are several reasons to be positive about the municipal
market going forward.
INTERMEDIATE-TERM TAX-FREE
* The fund performed well compared with its Lipper peers, but the difficult
investment environment limited overall returns.
* Key factors that contributed to strong relative performance included careful
maturity selection, effective management of the portfolio's interest rate
sensitivity (duration), and the fund's low expense ratio.
* We kept the portfolio's interest rate sensitivity in a relatively short to
neutral range compared with the fund's Lipper peers. This helped mitigate
losses as interest rates rose.
[left margin]
LIMITED-TERM TAX-FREE
(TWTSX)
TOTAL RETURNS: AS OF 11/30/99
6 Months 0.46%*
1 Year 1.68%
30-DAY SEC YIELD: 4.15%
INCEPTION DATE: 3/1/93
NET ASSETS: $38.8 million
INTERMEDIATE-TERM TAX-FREE
(TWTIX)
TOTAL RETURNS: AS OF 11/30/99
6 Months -0.73%*
1 Year -0.24%
30-DAY SEC YIELD: 4.40%
INCEPTION DATE: 3/2/87
NET ASSETS: $170.1 million
* Not annualized.
See Total Returns on pages 5 and 10.
Investment terms are defined in the Glossary on pages 42-43.
2 1-800-345-2021
Report Highlights
--------------------------------------------------------------------------------
* We also established a somewhat "barbelled" structure with the
portfolio, concentrating holdings at the shorter and longer ends of the
fund's maturity spectrum.
* In the near term, we plan to maintain Intermediate-Term Tax-Free's reduced
interest rate sensitivity and barbell structure.
LONG-TERM TAX-FREE
* Higher interest rates and weak demand weighed on the fund's recent returns.
Longer-term results remained solid.
* Long-Term Tax-Free's below-average expenses and above-average yield have
consistently bolstered fund performance.
* As of November 30, the fund's annualized expense ratio was less than half
the average of its Lipper peer group, and its yield was 0.35 of a
percentage point higher than the Lipper peer average.
* We sought to reduce the amount of taxable capital gains by executing
"tax swaps"--selling poor-performing bonds at a loss to offset
capital gains incurred elsewhere.
* We slightly shortened the portfolio's interest rate sensitivity (duration),
but it remained a bit longer than the peer group average. This dampened
performance as interest rates rose.
* Our duration position is consistent with our moderately bullish long-term
outlook. We'll likely keep duration a little long while continuing to
emphasize the same value-oriented approach that's helped the fund to such
solid long-term performance.
HIGH-YIELD MUNICIPAL
* High-Yield Municipal continued to perform well against its peers. Its
one-year performance put it in the top 11% of its Lipper peer group. For
complete performance information, see page 25.
* However, like most other U.S. bond funds, its six-month and one-year returns
were low. Rising interest rates put downward pressure on bond prices.
* The portfolio performed well versus similar funds for three main reasons.
First, its sensitivity to rising interest rates was less than that of its
peers. Second, it held a relatively large position in unrated bonds, which
benefited from the strong economy. And third, we avoided defaults that
other investors experienced.
* We used the rising-interest-rate environment as an opportunity to replace
lower-yielding bonds with higher-yielding securities at attractive prices.
* We looked for high-yielding bonds, such as land-secured and project-finance
bonds, that we believed would benefit from strong economic growth. And we
cut back on our healthcare holdings.
* This fund typically focuses on adding value through security
selection--picking bonds we think have good credit fundamentals and
appealing yields. We plan to continue this successful long-term value
strategy, and our focus on land-secured and project-finance bonds, as long
as the economy remains strong.
[right margin]
LONG-TERM TAX-FREE
(TWTLX)
TOTAL RETURNS: AS OF 11/30/99
6 Months -3.65%*
1 Year -4.23%
30-DAY SEC YIELD: 4.98%
INCEPTION DATE: 3/2/87
NET ASSETS: $110.1 million
HIGH-YIELD MUNICIPAL
(ABHYX)
TOTAL RETURNS: AS OF 11/30/99
6 Months -2.55%*
1 Year -0.70%
30-DAY SEC YIELD: 5.24%
INCEPTION DATE: 3/31/98
NET ASSETS: $34.6 million
* Not annualized.
See Total Returns on pages 18 and 25.
Investment terms are defined in the Glossary on pages 42-43.
www.americancentury.com 3
Market Perspective from Randall W. Merk
--------------------------------------------------------------------------------
[photo of Randall W. Merk]
Randall W. Merk, chief investment officer of fixed income at American Century
MUNICIPAL BOND PERFORMANCE
Rising interest rates and weak demand eroded municipal bond prices and
returns during the six months ended November 30, 1999 (see the index returns
table at left).
Relatively high demand from individual investors helped intermediate-term
municipal securities maintain their value better than longer-term municipals,
which suffered from heavy selling by institutional investors.
ECONOMIC GROWTH FANS INFLATION FEARS
Continued strong U.S. economic growth fanned inflation fears and triggered
higher interest rates. The U.S. economy grew at a 5.7% annual rate in the third
quarter of 1999, and U.S. unemployment hit 29-year lows. In response, the
Federal Reserve (the U.S. central bank) raised short-term interest rates three
times, pushing municipal bond yields toward two-year highs. These higher yields
were the silver lining to a gloomy bond environment in 1999. For an investor in
the top federal tax bracket (39.6%), a 30-year AAA municipal bond that yielded
5.73% on November 30 (up from 5.08% on May 31) offered a tax-equivalent yield
of 9.49%. That compared very favorably with the 6.29% yield of the 30-year U.S.
Treasury bond on November 30.
THE CORPORATE CONNECTION
Surprisingly, the fate of municipal bonds was tied closely to the
performance of corporate bonds. Corporate securities became extremely cheap
during the fall months as companies hurried to issue debt in advance of
potential Y2K problems and higher interest rates.
Corporate securities offered such attractive yields in the third quarter
that institutional investors, such as insurance companies, sold their municipal
holdings and bought corporates instead. Corporate bonds have subsequently
rebounded in price (and their yields have fallen) as issuance diminished. As a
result, municipals look comparatively more attractive again.
Municipal bonds are particularly attractive relative to U.S. Treasury
bonds. While municipal yields have historically been about 85% of comparable
U.S. Treasury yields, that ratio climbed to over 90% in November, a good
municipal value indicator.
SECTOR HIGHLIGHTS
The strong U.S. economy helped boost the tax collections and revenues of
municipal issuers around the country, improving the overall credit quality of
the municipal market. General obligation bonds were particularly strong.
Hospital bonds, on the other hand, were disappointing. They suffered from a
combination of heightened industry competition, reduced federal payments, and
the refusal of municipal bond insurers to insure lower-quality tiers of the
hospital sector.
[left margin]
"RISING INTEREST RATES AND WEAK DEMAND ERODED MUNICIPAL BOND PRICES AND
RETURNS."
MUNICIPAL BOND INDEX RETURNS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
MERRILL LYNCH 0- TO 3-YEAR
MUNICIPAL INDEX 1.14%
LEHMAN BROS. 5-YEAR
MUNICIPAL GO INDEX 0.06%
LEHMAN BROS. LONG-TERM
MUNICIPAL BOND INDEX -5.33%
Source: Lipper Inc. and Russell/Mellon Analytical Services
[line graph - data below]
RISING MUNICIPAL YIELD CURVE
5/31/99 11/30/99
YEARS TO
MATURITY
1 3.29% 3.89%
2 3.52% 4.12%
3 3.71% 4.30%
4 3.88% 4.44%
5 4.00% 4.55%
6 4.10% 4.64%
7 4.19% 4.72%
8 4.28% 4.80%
9 4.37% 4.88%
10 4.45% 4.96%
11 4.53% 5.06%
12 4.61% 5.14%
13 4.67% 5.22%
14 4.75% 5.30%
15 4.84% 5.38%
16 4.88% 5.44%
17 4.92% 5.50%
18 4.96% 5.56%
19 4.99% 5.62%
20 5.02% 5.68%
21 5.03% 5.68%
22 5.04% 5.69%
23 5.05% 5.69%
24 5.05% 5.70%
25 5.06% 5.71%
26 5.06% 5.71%
27 5.06% 5.71%
28 5.07% 5.72%
29 5.07% 5.72%
30 5.08% 5.73%
Source: Bloomberg Financial Markets
4 1-800-345-2021
Limited-Term Tax-Free--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1999
MERRILL LYNCH SHORT/INTERMEDIATE
LIMITED-TERM 0- TO 3-YEAR MUNICIPAL DEBT FUNDS(2)
TAX-FREE MUNICIPAL INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) 0.46% 1.14% -0.05% --
1 YEAR 1.68% 2.91% 0.89% 3 OUT OF 37
================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 4.02% 4.14% 3.38% 1 OUT OF 33
5 YEARS 4.55% 4.75% 4.61% 15 OUT OF 22
LIFE OF FUND 4.18% 4.13% 4.09%(3) 6 OUT OF 14(3)
The fund's inception date was 3/1/93.
(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 40-42 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 11/30/99
Limited-Term Tax-Free $13,183
Merrill Lynch 0- to 3-Year
Municipal Index $13,144
Merrill Lynch
Limited-Term 0- to 3-Year
Tax-Free Municipal Index
DATE VALUE VALUE
3/1/1993 $10,000 $10,000
3/31/1993 $10,014 $9,991
6/30/1993 $10,132 $10,110
9/30/1993 $10,227 $10,149
12/31/1993 $10,337 $10,321
3/31/1994 $10,322 $10,318
6/30/1994 $10,426 $10,395
9/30/1994 $10,524 $10,498
12/31/1994 $10,591 $10,457
3/31/1995 $10,790 $10,693
6/30/1995 $10,964 $10,903
9/30/1995 $11,110 $11,063
12/31/1995 $11,305 $11,212
3/31/1996 $11,364 $11,324
6/30/1996 $11,434 $11,402
9/30/1996 $11,564 $11,534
12/31/1996 $11,721 $11,672
3/31/1997 $11,768 $11,728
6/30/1997 $12,007 $11,906
9/30/1997 $12,204 $12,072
12/31/1997 $12,378 $12,220
3/31/1998 $12,501 $12,355
6/30/1998 $12,627 $12,474
9/30/1998 $12,892 $12,678
12/31/1998 $13,012 $12,832
3/31/1999 $13,112 $12,950
6/30/1999 $13,006 $12,973
9/30/1999 $13,116 $13,081
11/30/1999 $13,183 $13,144
$10,000 investment made 3/1/93
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Merrill Lynch 0- to 3-Year Municipal Index is provided for comparison in each
graph. Limited-Term Tax-Free's total returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
returns of the index do not. 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 graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDING NOVEMBER 30)
Merrill Lynch
Limited-Term 0- to 3-Year
Tax-Free Municipal Index
DATE RETURN RETURN
11/30/1993* 2.65% 2.54%
11/30/1994 2.80% 1.67%
11/30/1995 6.62% 7.19%
11/30/1996 4.11% 4.15%
11/30/1997 4.91% 4.42%
11/30/1998 5.51% 5.12%
11/30/1999 1.68% 2.19%
* From 3/1/93 (the fund's inception date) to 11/30/93.
www.americancentury.com 5
Limited-Term Tax-Free--Q&A
--------------------------------------------------------------------------------
[photo of Bryan Karcher]
An interview with Bryan Karcher, a portfolio manager on the Limited-Term
Tax-Free fund investment team.
HOW DID LIMITED-TERM TAX-FREE PERFORM FOR THE SIX MONTHS ENDED NOVEMBER 30,
1999?
Despite the difficult investment climate for bonds in 1999 (see page 4),
the portfolio performed well relative to other short-term municipal funds. For
the six months, Limited-Term Tax-Free's return was 0.46%. That compares well
with the -0.05% average return of the 37 "Short/Intermediate Municipal
Debt Funds" tracked by Lipper Inc.
The fund's longer-term relative returns are even better. For the 12 months
ended November 30, Limited-Term Tax-Free's return ranked in the top 10% of the
Lipper group. What's more, the portfolio's three-year return ranked #1 out of
33 funds. (See the previous page for complete return and ranking information.)
WHAT ABOUT THE PORTFOLIO'S YIELD? HOW DID IT COMPARE?
On November 30, the portfolio had a 30-day SEC yield of 4.15%, while the
average short/intermediate municipal fund tracked by Lipper had a yield of
3.87%. Limited-Term Tax-Free's yield was good enough to rank in the top third
of the Lipper group.
So even though 1999 was a difficult year for bond investors, the silver
lining is that we were able to offer shareholders very attractive tax-free
yields. For example, the portfolio's tax-equivalent yield for an investor in the
highest federal tax bracket was 6.87% (see the yields table at left). That
compares very favorably with the 6.29% fully taxable yield on the 30-year
Treasury bond at the end of November.
WHY HAS LIMITED-TERM TAX-FREE PERFORMED SO WELL?
One big reason for the portfolio's solid relative performance is that our
expenses are below the Lipper group average. That gives us a head start when
comparing our fund with the Lipper group. Other things being equal, lower
expenses mean higher yields and returns for our shareholders.
The other big reason for the fund's outperformance is our value-oriented
management approach. Instead of making big bets on duration, we try to improve
yields and returns by finding undervalued bonds and by carefully structuring the
portfolio's bond maturities.
LET'S START WITH DURATION. WHY IS IT IMPORTANT, AND HOW DID YOU MANAGE IT?
Duration measures the price sensitivity of a bond or bond fund to changes
in interest rates. The longer a bond fund's duration, the more its share price
will move when interest rates change. And because bond prices and interest rates
move in opposite directions, you want to have a longer duration when interest
rates are falling and a shorter duration when rates are rising.
[left margin]
YIELDS AS OF NOVEMBER 30, 1999
30-DAY SEC YIELD 4.15%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 5.76%
31.0% TAX BRACKET 6.01%
36.0% TAX BRACKET 6.48%
39.6% TAX BRACKET 6.87%
PORTFOLIO AT A GLANCE
11/30/99 5/31/99
NUMBER OF SECURITIES 37 40
WEIGHTED AVERAGE
MATURITY 3.8 YRS 3.5 YRS
AVERAGE DURATION 3.1 YRS 3.0 YRS
EXPENSE RATIO 0.51%* 0.51%
* Annualized.
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/99 5/31/99
AAA 66% 62%
AA 10% 21%
A 10% 6%
BBB 14% 11%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
40 for more information.
Investment terms are defined in the Glossary on pages 42-43.
6 1-800-345-2021
Limited-Term Tax-Free--Q&A
--------------------------------------------------------------------------------
(Continued)
But it can be difficult to accurately predict the direction of interest
rates, so we tend to manage duration conservatively. The last six months are a
good example--we kept duration close to three years throughout the period
despite a lot of interest rate volatility.
WHAT ABOUT MATURITY STRUCTURE? HOW DOES THAT RELATE TO FUND PERFORMANCE?
We think changes to maturity structure can be a more predictable way to add
performance. That's because different maturity structures perform better for a
given municipal yield curve (you can see examples of municipal yield curves on
page 4). For example, a "bulleted" maturity structure--when the
maturities of the bonds in the portfolio are grouped around a single
maturity--tends to perform best when the municipal yield curve moves from flat
to steep.
A "barbelled" portfolio, on the other hand, concentrates the
portfolio around two maturities--one shorter and one longer. The longer-term
securities enhance returns when the yield curve moves from steep to flat, while
the short-term securities help keep duration in check.
We maintained more of a bullet early in the period, which helped returns
because the short-end of the municipal yield curve steepened. Because the yield
curve had steepened somewhat by mid-October, we began to move the portfolio
toward more of a barbell. We expect that more-barbelled position to help returns
going forward.
WHAT ABOUT RELATIVE VALUES? DID YOU FIND ANY APPEALING, LOWER-VALUED BONDS?
Yes we did. For example, we added some attractively valued Texas bonds.
Changes to tax laws reduced the appeal of these bonds for institutional
investors in Texas. Less demand meant lower prices and higher yields for many of
these securities. We sold other bonds that had performed relatively well and
bought these higher-yielding Texas securities (see the table at right).
WHAT'S YOUR OUTLOOK FOR THE MARKET AND INTEREST RATES?
Our outlook for interest rates is guarded, but we think there's reason to
be positive about the municipal market. Municipal bonds look attractive when
measured against yields on fully taxable investments, such as Treasury bonds. We
also think broad supply and demand trends should improve in 2000.
In the near-term, however, rates could head a little higher. Even though
inflation remains low, the economy continues to grow at a blistering pace.
What's more, personal incomes and spending just keep climbing. When you add it
all up, we think the Federal Reserve could raise interest rates again.
GIVEN THAT OUTLOOK, HOW DO YOU EXPECT TO MANAGE LIMITED-TERM TAX-FREE GOING
FORWARD?
It's business as usual--we'll continue to manage duration conservatively,
looking to improve performance instead by finding what we think are the best
relative values in the market. That's the same approach that has helped the fund
to such solid long-term performance.
[right margin]
"FOR EXAMPLE, WE ADDED SOME ATTRACTIVELY VALUED TEXAS BONDS. CHANGES TO TAX
LAWS REDUCED THE APPEAL OF THESE BONDS FOR INSTITUTIONAL INVESTORS IN TEXAS.
LESS DEMAND MEANT LOWER PRICES AND HIGHER YIELDS."
TOP FIVE STATES (AS OF 11/30/99)
% OF FUND INVESTMENTS
TEXAS 9.7%
MICHIGAN 8.9%
FLORIDA 6.6%
ILLINOIS 6.4%
PUERTO RICO 5.8%
TOP FIVE STATES (AS OF 5/31/99)
% OF FUND INVESTMENTS
MICHIGAN 10.6%
OHIO 9.9%
ARIZONA 9.9%
TEXAS 6.6%
MISSOURI 6.4%
www.americancentury.com 7
Limited-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 100.0%
ALASKA -- 4.8%
$ 850 Alaska Industrial Development &
Export Auth. Power Rev., Series
1998-1, (Snettisham
Hydroelectric), 4.50%, 1/1/00 $ 850
1,000 Alaska Industrial Development &
Export Auth. Rev., Series
1998 A, 4.50%, 4/1/01
(MBIA) 1,000
-------
1,850
-------
ARIZONA -- 4.0%
525 Maricopa County COP, 5.625%,
6/1/00 529
1,000 Salt River Project Agriculture
Improvement and Power District
Rev. GO, 5.40%, 1/1/00(1) 1,002
-------
1,531
-------
CALIFORNIA -- 3.2%
1,225 Garden Grove Agency Community
Development Tax Allocation,
(Garden Grove Community),
5.20%, 10/1/01 1,244
-------
COLORADO -- 5.4%
1,000 Denver City & County Airport
Rev., Series 1996 B, 5.25%,
11/15/02 (MBIA) 1,022
1,000 Highlands Ranch Metropolitan
District #2 GO, 6.00%,
6/15/02 (FSA) 1,039
-------
2,061
-------
FLORIDA -- 6.6%
705 Atlantic Beach Health Care
Facilities Rev., (Fleet Landing),
5.00%, 10/1/02 (ACA)(2) 709
205 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
(Multi-County Program), 4.70%,
10/1/05 (GNMA/FNMA) 203
1,550 Jacksonville Electric Auth. Rev.,
(St. John's River), 6.00%,
10/1/04 1,645
-------
2,557
-------
HAWAII -- 2.6%
1,000 Hawaii GO, Series 1993 CD,
4.70%, 2/1/01 1,004
-------
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
ILLINOIS -- 6.4%
$2,500 Chicago Public Building
Commission Rev., Series
1999 C, 4.75%, 2/1/06
(FGIC) $ 2,477
-------
INDIANA -- 2.7%
1,000 Central High School Building
Corp. Rev., 5.25%, 2/1/04
(AMBAC)(3) 1,021
-------
MICHIGAN -- 8.9%
880 Detroit GO, Series 1995 A,
5.40%, 5/1/00 884
500 Detroit GO, Series 1995 B,
6.50%, 4/1/02 518
1,000 Michigan Hospital Finance Auth.
Rev., Series 1999 A,
(Ascension Health Credit),
5.25%, 11/15/05 (MBIA) 1,019
1,045 Michigan Hospital Financing Auth.
Rev., Series 1999 A, (Charity
Obligation Group), 4.25%,
11/1/06 999
-------
3,420
-------
MISSISSIPPI -- 3.9%
1,490 Walnut Grove Correctional Auth.
COP, 5.25%, 11/1/04
(AMBAC) 1,519
-------
MONTANA -- 2.6%
1,000 Forsyth Pollution Control Rev.,
Series 1998 B, 4.75%, 5/1/03 993
-------
NEBRASKA -- 5.2%
1,000 American Public Energy Agency
Nebraska Gas Supply Rev.,
Series 1999 A, (Nebraska
Public Gas Agency), 3.35%,
6/1/00 (AMBAC) 996
1,000 Douglas County School District
No. 17 GO, Series 1994 A,
(Millard), 5.05%, 5/15/01
(MBIA) 1,003
-------
1,999
-------
NEVADA -- 2.6%
1,000 Clark County School District GO,
Series 1999 A, 5.25%,
6/15/07 (FGIC) 1,016
-------
NEW JERSEY -- 1.3%
500 New Jersey Educational Facilities
Auth. Rev., Series 1998 B, (St.
Peters College), 4.60%, 7/1/01 499
-------
8 1-800-345-2021 See Notes to Financial Statements
Limited-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
NEW YORK -- 1.3%
$ 500 New York State Dormitory Auth.
Rev., Series 1998 I, (New York
Downtown Hospital), 4.80%,
2/15/06 $ 489
-------
OHIO -- 2.8%
1,070 Ohio Building Auth. Rev., Series
1997 A, (Highway Safety
Building), 5.00%, 10/1/03
(AMBAC) 1,088
-------
OREGON -- 2.6%
1,000 Port of Portland Airport Rev.,
Series 1999 B, (Portland
International Airport), 5.00%,
7/1/06 (AMBAC) 1,000
-------
PUERTO RICO -- 5.8%
1,905 Puerto Rico Commonwealth
Aqueduct & Sewer Auth. Rev.,
Series 1985 A, 9.00%, 7/1/05,
Prerefunded at 100% of Par
(FSA)(1) 2,236
-------
RHODE ISLAND -- 1.5%
570 Rhode Island Economic
Development Corp. Airport Rev.,
Series 1998 A, 5.00%, 7/1/03
(FSA) 576
-------
SOUTH CAROLINA -- 2.3%
855 Piedmont Municipal Power
Agency Rev., Series 1991 A,
6.00%, 1/1/02 (FGIC) 880
-------
TENNESSEE -- 5.6%
1,165 Jackson Hospital Rev., (Madison
County General Hospital),
4.50%, 4/1/01 (AMBAC) 1,167
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,000 Knox County Health, Educational
& Housing Facilities Board
Rev., (University Health System
Inc.), 5.10%, 4/1/07 $ 973
-------
2,140
-------
TEXAS -- 9.7%
1,000 Colorado River Municipal Water
District Rev., Series 1991 A,
8.50%, 1/1/01, Prerefunded
at 100% of Par (AMBAC)(1) 1,045
685 Denison Hospital Auth. Rev.,
(Texoma Medical Center),
5.00%, 8/15/00 685
2,000 Travis County Health Facilities
Development Corp. Rev., Series
1999 A, (Ascension Health
Credit), 5.00%, 11/15/05
(MBIA) 2,011
-------
3,741
-------
WASHINGTON -- 2.7%
1,000 Snohomish County Public Utility
District No. 1 Electric Rev.,
5.50%, 12/1/08 (FSA) 1,030
-------
WISCONSIN -- 5.5%
1,100 Milwaukee GO, Series 1999 O,
4.75%, 6/15/03 1,109
1,000 Wisconsin Rural Water
Construction Loan Program
Community Rev., 4.25%,
9/15/00 (GIC: FGIC) 1,002
-------
2,111
-------
TOTAL INVESTMENT SECURITIES -- 100.0% $38,482
=======
(Cost $38,499)
NOTES TO SCHEDULE OF INVESTMENTS
ACA = American Capital Access
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
GIC = Guaranteed Investment Contract
GNMA = Government National Mortgage Association
GO = General Obligation
MBIA = MBIA Insurance Corp.
(1) Escrowed to maturity in U.S. government securities or state and local
government securities.
(2) When-issued security.
(3) Security, or a portion thereof, has been segregated at the custodian bank
for a when-issued security.
See Notes to Financial Statements www.americancentury.com 9
Intermediate-Term Tax-Free--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1999
INTERMEDIATE
INTERMEDIATE-TERM LEHMAN 5-YEAR MUNICIPAL DEBT FUNDS(2)
TAX-FREE GO INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) -0.73% 0.06% -1.34% --
1 YEAR -0.24% 1.49% -0.84% 37 OUT OF 133
================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 4.02% 4.37% 3.71% 31 OUT OF 117
5 YEARS 5.91% 6.05% 6.00% 56 OUT OF 95
10 YEARS 5.88% 6.29% 6.05% 17 OUT OF 25
The fund's inception date was 3/2/87.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 40-42 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 11/30/99
Lehman 5-Year GO Index $18,399
Intermediate-Term Tax-Free $17,704
Intermediate-Term Lehman 5-Year
Tax-Free GO Index
DATE VALUE VALUE
11/30/1989 $10,000 $10,000
11/30/1990 $10,655 $10,773
11/30/1991 $11,540 $11,765
11/30/1992 $12,528 $12,833
11/30/1993 $13,541 $13,838
11/30/1994 $13,283 $13,714
11/30/1995 $14,984 $15,358
11/30/1996 $15,731 $16,181
11/30/1997 $16,622 $17,052
11/30/1998 $17,747 $18,129
11/30/1999 $17,704 $18,399
$10,000 investment made 11/30/89
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The
Lehman 5-Year GO Index is provided for comparison in each graph.
Intermediate-Term Tax-Free's total returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
returns of the index do not. 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 graph - data below]
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDING NOVEMBER 30)
Intermediate-Term Lehman 5-Year
Tax-Free GO Index
DATE RETURN RETURN
11/30/1990 6.55% 7.73%
11/30/1991 8.31% 9.21%
11/30/1992 8.56% 9.08%
11/30/1993 8.08% 7.83%
11/30/1994 -1.90% -0.90%
11/30/1995 12.80% 11.99%
11/30/1996 4.99% 5.36%
11/30/1997 5.66% 5.38%
11/30/1998 6.77% 6.32%
11/30/1999 -0.24% 1.49%
10 1-800-345-2021
Intermediate-Term Tax-Free--Q&A
--------------------------------------------------------------------------------
[photo of Ken Salinger]
An interview with Ken Salinger, a portfolio manager on the
Intermediate-Term Tax-Free fund investment team.
HOW DID THE FUND PERFORM FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999?
Intermediate-Term Tax-Free performed well compared with its Lipper peers,
though the difficult investment environment (see page 4) limited overall
performance. The fund returned -0.73%, compared with the -1.34% average return
of the 134 funds in Lipper Inc.'s "Intermediate Municipal Debt Funds"
category. The fund's benchmark, the Lehman 5-Year GO Index, was virtually flat
for the period, returning 0.06%. (See Total Returns on page 10 for other fund
performance comparisons.)
In addition, Intermediate-Term Tax-Free's 30-day SEC yield of 4.40% on
November 30, 1999 compared favorably with the 4.22% average SEC yield of
Lipper's Intermediate Municipal Debt Funds category.
WHAT WERE SOME OF THE REASONS BEHIND INTERMEDIATE-TERM TAX-FREE'S SOLID RELATIVE
PERFORMANCE?
We think that several techniques, such as careful yield curve analysis,
diligent credit research, effective duration management, and adjusting the
portfolio's maturity structure, helped boost returns. And, as has typically been
the case for this fund, low expenses contributed to performance. As of November
30, 1999, fund expenses were 0.51%, compared with the 0.93% average expenses
charged by the fund's Lipper peers.
HOW DID ANALYZING THE MUNICIPAL YIELD CURVE HELP?
Our careful analysis of the municipal yield curve--the graphed curve that
represents the relationship between municipal bond yields and maturities (see
page 4 for an example)--helped us target maturities that seemed to offer the
most attractive relative values and yields. Then, with the help of our seasoned
municipal credit team, we screened that maturity range for what we believed were
undervalued securities that still met our credit quality standards, and we
selectively added them to the portfolio.
YOU ALSO TOOK ADVANTAGE OF DIFFERENCES IN SUPPLY AND DEMAND FROM STATE TO STATE.
HOW DO YOU IMPLEMENT THIS STRATEGY?
Generally speaking, when a lot of debt is issued within a state, the
additional supply tends to lower prices and increase yields on outstanding
municipal securities. But prices and yields tend to bounce back when the supply
dries up. We capitalized on that by buying when supply was relatively heavy and
selling when supply was low. Arizona and California are good examples of states
whose municipal bonds are affected by seasonal fluctuations in supply and
demand.
DID YOU MAKE ANY SIGNIFICANT ADJUSTMENTS TO THE PORTFOLIO'S CREDIT QUALITY?
No. The slight changes in credit quality were mostly a byproduct of the
securities that we bought and sold, rather than a conscious effort to modify
overall credit quality.
[right margin]
YIELDS AS OF NOVEMBER 30, 1999
30-DAY SEC YIELD 4.40%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 6.11%
31.0% TAX BRACKET 6.38%
36.0% TAX BRACKET 6.88%
39.6% TAX BRACKET 7.28%
PORTFOLIO AT A GLANCE
11/30/99 5/31/99
NUMBER OF SECURITIES 120 109
WEIGHTED AVERAGE
MATURITY 8.2 YRS 8.7 YRS
AVERAGE DURATION 5.4 YRS 5.5 YRS
EXPENSE RATIO 0.51%* 0.51%
* Annualized.
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/99 5/31/99
AAA 80% 79%
AA 12% 10%
A 5% 8%
BBB 3% 3%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
40 for more information.
Investment terms are defined in the Glossary on pages 42-43.
www.americancentury.com 11
Intermediate-Term Tax-Free--Q&A
--------------------------------------------------------------------------------
(Continued)
Investors searching for higher yields continued to pursue lower-rated
municipal securities. This demand kept the yield advantage of lower-rated
municipals fairly low, so it made sense to keep the majority of the portfolio in
bonds rated AAA and AA.
HOW DID DURATION MANAGEMENT FACTOR INTO INTERMEDIATE-TERM TAX-FREE'S
PERFORMANCE?
We generally kept the portfolio's duration--its sensitivity to interest
rate changes--fairly neutral to short of the fund's Lipper peers and in a range
of approximately 5.1-5.5 years. The main reason for the portfolio's conservative
positioning was uncertainty about interest rates.
Overall, keeping duration comparatively low helped mitigate losses as
interest rates rose and the prices of existing municipal bonds fell.
DO YOU EXPECT TO MAINTAIN THAT SOMEWHAT CONSERVATIVE DURATION POSITION GOING
FORWARD?
For the immediate future, we probably will, but beyond that our strategy
depends largely on the outlook for the municipal market and the Federal Reserve.
Bond yields have risen to mid-1998 levels, and future Federal Reserve actions
are always tough to gauge.
In spite of the Fed's three rate hikes in 1999, the U.S. economy has
remained surprisingly robust. U.S. economic growth in the third quarter of this
year stormed ahead at a 5.7% annual pace and early evidence indicates that the
fourth quarter was strong, too. This has raised concern that the Fed may
continue to increase short-term rates in 2000 to moderate economic expansion and
keep inflation in check.
If economic growth remains robust, the municipal market may face more of
the disappointing returns that we saw in 1999. On the other hand, if growth
slows because of rising interest rates and inflation remains well contained, the
outlook for the municipal market could begin to look brighter.
WHAT ARE YOUR PLANS FOR THE PORTFOLIO GOING FORWARD?
Besides keeping the fund's duration conservatively positioned, we plan to
continue managing the maturity structure of the portfolio, which bolstered
Intermediate-Term Tax-Free's performance in 1999.
In the near term, we will probably continue to concentrate the portfolio's
holdings near either end of the fund's investment maturity spectrum--the two to
four, and 10-year-plus areas.
This somewhat "barbelled" position tends to perform best when the
yield curve is moving from steep to flat (short-term rates are rising faster
than long-term rates), which has been the case recently.
[left margin]
"IN THE NEAR TERM, WE WILL PROBABLY CONTINUE TO CONCENTRATE THE PORTFOLIO'S
HOLDINGS NEAR EITHER END OF THE FUND'S INVESTMENT MATURITY SPECTRUM."
TOP FIVE STATES (AS OF 11/30/99)
% OF FUND INVESTMENTS
NEW YORK 11.2%
WASHINGTON 9.7%
TEXAS 6.6%
MASSACHUSETTS 5.8%
GEORGIA 4.7%
TOP FIVE STATES (AS OF 5/31/99)
% OF FUND INVESTMENTS
NEW YORK 13.1%
TEXAS 13.1%
WASHINGTON 11.9%
MASSACHUSETTS 7.7%
PENNSYLVANIA 5.6%
12 1-800-345-2021
Intermediate-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 100.0%
ALABAMA -- 1.8%
$1,165 Lauderdale County and Florence
Healthcare Auth. Rev. GO,
Series 1999 A, (Coffee Health
Group), 4.50%, 7/1/02 (MBIA) $ 1,165
1,905 Lauderdale County and Florence
Healthcare Auth. Rev. GO,
Series 1999 A, (Coffee Health
Group), 4.50%, 7/1/03 (MBIA) 1,897
--------
3,062
--------
ALASKA -- 0.7%
1,130 Alaska Industrial Development &
Export Auth. Power Rev.,
(Snettisham Hydroelectric),
5.25%, 1/1/04 (AMBAC) 1,144
--------
ARIZONA -- 4.0%
1,000 Arizona Transportation Board
Excise Tax Rev., (Maricopa
County Regional Area), 5.00%,
7/1/03 (AMBAC) 1,016
1,000 Maricopa County Unified School
District No. 11 GO, Series
1999 D, (Peoria University),
5.50%, 7/1/14 (FGIC)(1) 996
1,000 Mesa Utility System Rev., 5.25%,
7/1/16 (FGIC) 954
995 Phoenix Industrial Development
Auth. Single Family Mortgage
Rev., Series 1998 A, 6.60%,
12/1/29
(GNMA/FNMA/FHLMC) 1,057
2,750 Pima County Unified School
District No. 1 GO, Series
1993 E, (Tucson), 5.25%,
7/1/08 (FGIC) 2,784
--------
6,807
--------
CALIFORNIA -- 4.1%
2,000 California Housing Finance
Agency Rev., 5.60%, 8/1/09
(MBIA) 2,030
1,100 California Public Works Board
Lease Rev. COP, Series
1994 A, (Various University of
California Projects), 6.15%,
11/1/04, Prerefunded at
102% of Par(2) 1,197
2,000 Pacific Housing & Finance
Agency Lease Rev., Series
1999 A, (Pass Thru
Obligation-Lease Purchase),
4.625%, 12/1/04 (MBIA)(1) 1,989
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,100 Sacramento Regional
Transportation COP, Series
1992 A, 6.20%, 3/1/00 $ 1,106
2,295 Santa Ana Unified School District
Rev. COP, 6.05%, 4/1/19
(FSA)(3) 724
--------
7,046
--------
COLORADO -- 2.3%
1,000 Denver Sales Tax Rev., Series
1991 A, (Major League
Baseball Stadium District),
6.10%, 10/1/01 (FGIC) 1,033
3,000 Interlocken Metropolitan District,
Series 1999 A, 5.75%,
12/15/19 (Asset Guaranty) 2,901
--------
3,934
--------
DISTRICT OF COLUMBIA -- 2.0%
1,000 District of Columbia Hospital Rev.,
Series 1993 A, (Medlantic
Health Care Group), 5.25%,
8/15/02 (MBIA)(2) 1,020
1,155 District of Columbia Rev.,
(Gonzaga College High School),
5.20%, 7/1/12 (FSA) 1,128
1,275 Metropolitan Washington D.C.
Airports Auth. Rev., Series
1992 A, 6.30%, 10/1/03
(MBIA) 1,349
--------
3,497
--------
FLORIDA -- 2.8%
700 Broward County School District
GO, 6.75%, 2/15/00 704
240 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
(Multi-County Program), 4.85%,
10/1/07 (GNMA/FNMA) 235
750 Florida Board of Education
Capital Outlay Rev., Series
2000 D, 5.75%, 6/1/22(1) 727
1,000 Florida Turnpike Auth. Rev., Series
1993 A, (Department of
Transportation), 5.00%, 7/1/16
(FGIC) 919
1,775 Lakeland Electric and Water Rev.,
Series 1999 C, 6.05%,
10/1/09 (FSA) 1,920
345 Pinellas County Educational
Facilities Auth. Rev., (Barry
University), 4.35%, 10/1/00 345
--------
4,850
--------
See Notes to Financial Statements www.americancentury.com 13
Intermediate-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
GEORGIA -- 4.7%
$1,000 Atlanta Airport Facilities Rev.,
7.00%, 1/1/01 $ 1,026
1,000 Atlanta Water and Sewer Rev.,
(Second Lien), 6.00%, 1/1/05
(FGIC)(2) 1,058
2,495 Fulton County Water and Sewer
Rev., 6.25%, 1/1/09 (FGIC) 2,710
2,000 Georgia State GO, Series
1992 B, 6.10%, 3/1/05 2,136
1,000 Metropolitan Atlanta Rapid Transit
Auth. Sales Tax Rev., Series
1991 M, 6.05%, 7/1/01 1,026
--------
7,956
--------
HAWAII -- 1.2%
2,000 Hawaii State GO, Series 1999 CT,
5.75%, 9/1/14 (FSA) 2,025
--------
ILLINOIS -- 2.0%
2,250 Illinois GO, 6.00%, 10/1/01 2,316
1,015 Northern Illinois University Rev.,
5.60%, 4/1/14 (AMBAC) 1,014
--------
3,330
--------
INDIANA -- 1.7%
1,000 Center Grove High School
Building Corp. Rev., 3.90%,
1/5/03 (FSA) 976
1,900 Indiana Health Facility Financing
Auth. Rev., (Holy Cross Health
System Corp.), 5.375%,
12/1/12 (MBIA) 1,876
--------
2,852
--------
KANSAS -- 1.0%
350 Butler & Sedgwick Counties
Unified School District No. 385
GO, (Andover), 5.05%, 9/1/10
(FSA) 348
900 Butler & Sedgwick Counties
Unified School District No. 385
GO, (Andover), 5.15%, 9/1/11
(FSA) 895
500 Kansas Department of
Transportation Highway Rev.,
5.375%, 3/1/13 498
--------
1,741
--------
LOUISIANA -- 1.2%
2,160 New Orleans Aviation Board Rev.,
Series 1999 A-1, (Passenger
Facility Charge), 5.50%,
9/1/14 (FSA) 2,076
--------
MARYLAND -- 2.7%
3,000 Prince Georges County GO,
5.50%, 10/1/08 (FSA) 3,124
1,500 Prince Georges County GO,
5.50%, 10/1/10 (FSA) 1,554
--------
4,678
--------
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
MASSACHUSETTS -- 5.8%
$5,000 Haverhill GO, Series 1992 A,
6.70%, 9/1/10 (AMBAC) $ 5,268
2,605 Massachusetts Bay Transportation
Auth. Rev., Series 1992 C,
5.40%, 3/1/00 2,615
2,500 Massachusetts Water Resource
Auth. Rev., Series 1998 B,
4.50%, 8/1/22 (FSA) 2,019
--------
9,902
--------
MICHIGAN -- 3.4%
1,090 Boyne City Public School District
GO, 5.60%, 5/1/14 (FGIC) 1,094
1,500 Detroit Water Supply System Rev.,
Series 1995 A, 5.30%,
7/1/09 (MBIA) 1,526
875 Genesee County Building Auth
GO, 5.00%, 5/1/12 (AMBAC) 845
400 Howell Public Schools GO,
5.50%, 5/1/13 (MBIA) 401
1,400 Madison District Public Schools
GO, 5.80%, 5/1/12 (FGIC) 1,446
560 Manistee Area Public Schools
GO, 5.65%, 5/1/15 (FGIC) 559
--------
5,871
--------
MINNESOTA -- 1.2%
2,000 Minnesota State GO, 4.75%,
6/1/03 2,023
--------
MISSISSIPPI -- 2.3%
1,250 Mississippi Development Special
Obligation GO, (Gulfport
Combination Water & Sewer),
5.625%, 7/1/24 (FSA)(1) 1,197
1,200 Mississippi Development Special
Obligation Rev., (Natural Gas),
4.125%, 1/1/06 (MBIA) 1,135
1,510 Walnut Grove Correctional Auth.
COP, 5.25%, 11/1/03
(AMBAC) 1,541
--------
3,873
--------
MISSOURI -- 0.6%
1,000 Missouri Board of Public
Buildings State Office Buildings
Special Obligation Rev., 6.30%,
12/1/05 1,034
--------
NEVADA -- 1.2%
1,000 Clark County Airport Rev., Series
1998 A, 5.50%, 7/1/07
(MBIA) 1,032
1,000 Las Vegas New Convention &
Visitors Auth. Rev., 5.75%,
7/1/15 (AMBAC) 1,004
--------
2,036
--------
14 1-800-345-2021 See Notes to Financial Statements
Intermediate-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
NEW JERSEY -- 2.6%
$1,030 Atlantic City Board of Education
GO, 6.00%, 12/1/02,
Prerefunded at 102% of Par
(AMBAC)(2) $ 1,095
1,410 New Jersey Educational Facility
Auth. Rev., Series 1994 A,
(New Jersey Institute of
Technology), 5.90%, 7/1/08
(MBIA) 1,483
1,800 New Jersey Health Care Facilities
Financing Auth. Rev., (Rahway
Hospital Obligation Group),
5.00%, 7/1/05 (ACA) 1,796
--------
4,374
--------
NEW MEXICO -- 0.6%
1,000 New Mexico Mortgage Finance
Auth. Rev., Series 1999 D-2,
(Single Family Mortgage),
6.75%, 9/1/29 (GNMA,
FNMA, FHLMC) 1,066
--------
NEW YORK -- 11.2%
1,950 City University of New York COP,
(John Jay College), 5.00%,
8/15/09 (AMBAC) 1,930
2,500 Nassau County GO, Series
1996 T, 5.20%, 9/1/05 (FGIC) 2,553
1,700 New York City GO, Series
1998 F, 5.25%, 8/1/14
(AMBAC) 1,642
1,500 New York State Dormitory Auth.
Rev., Series 1995 A, (State
University Educational Facilities),
6.50%, 5/15/04 1,598
1,000 New York State Dormitory Auth.
Rev., Series 1995 A, (State
University Educational Facilities),
6.50%, 5/15/06 1,078
1,000 New York State Dormitory Auth.
Rev., Series 1996 E, (Mental
Health Service Facility), 6.00%,
8/15/04 (AMBAC) 1,054
635 New York State Dormitory Auth.
Rev., Series 1998 I, (New York
Downtown Hospital), 4.80%,
2/15/06 621
1,175 New York State GO, Series
1997 D, 5.25%, 8/1/03 1,197
1,000 New York State GO, Series
1997 D, 5.25%, 8/1/06 (FGIC) 1,022
1,200 New York State Local
Government Assistance Corp.
Rev., Series 1997 B, 5.25%,
4/1/04 (MBIA) 1,229
1,000 New York State Thruway Auth.
Service Contract Rev., 5.30%,
4/1/04 1,016
1,000 New York State Thruway Auth.
Service Contract Rev., 5.50%,
4/1/04 1,024
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,160 New York State Thruway Auth.
Service Contract Rev., 5.50%,
4/1/06 $ 1,183
1,000 New York State Urban
Development Corp. Rev., Series
1996 A, 6.25%, 4/1/05
(MBIA) 1,068
1,000 Niagara Falls Bridge Commission
Toll Rev., Series 1993 B, 5.25%,
10/1/15 (FGIC) 970
--------
19,185
--------
NORTH CAROLINA -- 1.2%
2,000 North Carolina Eastern Municipal
Power Agency System Rev.,
Series 1993 B, 6.00%,
1/1/06 (FSA) 2,113
--------
OHIO -- 3.4%
1,200 Ohio Higher Educational Facility
Commission Rev., (University of
Dayton), 5.55%, 12/1/07
(FGIC) 1,245
1,000 Ohio Water Development Auth.
Pollution Control Facilities Rev.,
5.625%, 12/1/06 (MBIA) 1,047
3,320 Ohio Water Development Auth.
Pollution Control Facilities Rev.,
6.00%, 12/1/05 (MBIA)(4) 3,543
--------
5,835
--------
OKLAHOMA -- 1.6%
2,500 Oklahoma Industrial Auth. Health
System Rev., Series 1995 C,
7.00%, 8/15/04 (AMBAC) 2,727
--------
OREGON -- 1.7%
1,805 Lane County School District
No. 19 GO, (Springfield),
6.375%, 10/15/04,
Prerefunded at 101% of Par
(MBIA)(2) 1,957
1,000 Port of Portland Airport Rev.,
Series 1999 B, (Portland
International Airport), 5.00%,
7/1/06 (AMBAC) 1,000
--------
2,957
--------
PENNSYLVANIA -- 3.9%
1,500 Pennsylvania Turnpike
Commission Rev., Series
1991 L, 6.25%, 6/1/01
(AMBAC) 1,543
2,000 Philadelphia Gas Works Rev.,
14th Series, 5.70%, 7/1/00
(FSA) 2,020
1,000 Philadelphia Parking Auth. Rev.,
5.50%, 9/1/04 (AMBAC) 1,035
2,000 Philadelphia Water and
Wastewater Rev., 5.15%,
6/15/04 (FGIC) 2,026
--------
6,624
--------
See Notes to Financial Statements www.americancentury.com 15
Intermediate-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
PUERTO RICO -- 1.7%
$2,500 Puerto Rico Commonwealth
Aqueduct & Sewer Auth. Rev.,
Series 1985 A, 9.00%, 7/1/09,
Prerefunded at 100% of Par
(FSA)(2) $ 2,934
--------
RHODE ISLAND -- 0.6%
1,000 Cranston GO, 6.375%,
11/15/17 (FGIC) 1,046
--------
SOUTH CAROLINA -- 1.2%
1,970 South Carolina Transportation
Infrastructure Rev., Series
1999 A, 5.25%, 10/1/06
(AMBAC) 2,018
--------
TENNESSEE -- 0.6%
1,200 Knox County Health, Educational
& Housing Facilities Board Rev.,
(University Health System Inc.),
5.625%, 4/1/29 1,056
--------
TEXAS -- 6.6%
1,875 Brownsville Utility System Rev.,
6.00%, 9/1/08 (AMBAC) 1,999
1,000 Dallas-Fort Worth Regional Airport
Rev., Series 1994 A, 5.90%,
11/1/08 (MBIA) 1,042
1,000 Denison Hospital Auth. Rev.,
(Texoma Medical Center),
5.90%, 8/15/07 (ACA) 1,028
1,000 North East Independent School
District Texas GO, 4.50%,
2/1/16 (PSF) 852
500 North Texas Higher Education
Student Loan Rev., 6.875%,
4/1/02 (AMBAC) 513
1,325 Spring Independent School
District GO, Series 1998 A,
4.60%, 8/15/13 (PSF) 1,204
1,000 Tarrant County Health Facility
Development Corporation
Health System Rev., (Harris
Methodist Health System),
5.00%, 9/1/07 (AMBAC)(2) 1,006
2,000 Texas Municipal Power Agency
Rev., 5.75%, 9/1/02 (MBIA) 2,069
1,500 Texas Public Finance Auth.
Building Rev., (Technical
College), 6.25%, 8/1/09
(MBIA) 1,617
--------
11,330
--------
UTAH -- 3.3%
1,000 Intermountain Power Agency
Power Supply Rev., Series
1993 A, 5.40%, 7/1/08
(MBIA) 1,019
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,800 Salt Lake City Municipal Building
Auth. Lease Rev., Series
1999 B, 5.50%, 10/15/14
(AMBAC) $ 1,785
1,000 Salt Lake County Municipal
Building Auth. Lease Rev.,
Series 1994 A, 6.00%,
10/1/07 (MBIA) 1,049
695 Utah Housing Finance Agency
Single Family Mortgage Rev.,
5.65%, 7/1/06 705
1,000 Utah Municipal Finance Co-op
Local Government Rev.,
(University of Utah/University
Hospital), 6.60%, 5/15/00(2) 1,012
--------
5,570
--------
WASHINGTON -- 9.7%
1,000 Pierce County School District
No. 320 GO, 5.75%, 12/1/02 1,031
1,000 Port of Seattle Passenger Facility
Charge Rev., Series 1998 B,
5.00%, 12/1/05 (AMBAC) 1,005
1,000 Port of Seattle Rev., Series
1997 B, 5.10%, 10/1/03
(FGIC) 1,015
2,000 Snohomish County Public Utility
District Rev., 5.625%, 1/1/05
(FGIC) 2,073
1,000 Snohomish County School District
No. 15 GO, 6.125%, 12/1/03 1,032
1,000 Spokane County School District
No. 356 GO, 6.00%, 12/1/06
(FGIC) 1,067
1,730 Tacoma Electric System Rev.,
6.00%, 1/1/07 (AMBAC) 1,847
1,000 Tacoma Electric System Rev.,
6.10%, 1/1/07 (FGIC) 1,054
1,000 Washington Public Power Supply
System Rev., Series 1990 B,
(Nuclear Project No. 1), 7.10%,
7/1/01 (FGIC) 1,035
500 Washington Public Power Supply
System Rev., Series 1990 C,
(Nuclear Project No. 2), 7.00%,
7/1/01 (FGIC) 520
1,000 Washington Public Power Supply
System Rev., Series 1990 C,
(Nuclear Project No. 2), 7.30%,
7/1/00 1,018
1,000 Washington Public Power Supply
System Rev., Series 1993 A,
(Nuclear Project No. 1), 5.50%,
7/1/04 1,029
3,000 Washington State COP,
(Convention and Trade Center),
5.125%, 7/1/12 (MBIA) 2,906
--------
16,632
--------
16 1-800-345-2021 See Notes to Financial Statements
Intermediate-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
WISCONSIN -- 3.4%
$2,000 Milwaukee GO, Series 1999 O,
5.50%, 6/15/12 $ 2,025
2,590 Wisconsin Health and Educational
Facility Rev., (Aurora Medical
Group), 6.00%, 11/15/10
(FSA)(4) 2,784
1,060 Wisconsin Health and Educational
Facility Rev., Series 1991 B,
(Wausau Hospital), 6.30%,
8/15/00 (AMBAC) 1,076
--------
5,885
--------
TOTAL INVESTMENT SECURITIES -- 100.0% $171,089
========
(Cost $170,319)
NOTES TO SCHEDULE OF INVESTMENTS
ACA = American Capital Access
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
GNMA = Government National Mortgage Association
GO = General Obligation
MBIA = MBIA Insurance Corp.
PSF = Permanent School Fund
(1) When-issued security.
(2) Escrowed to maturity in U.S. government securities or state and local
government securities.
(3) 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.
(4) Security, or a portion thereof, has been segregated at the custodian bank
for a when-issued security.
See Notes to Financial Statements www.americancentury.com 17
Long-Term Tax-Free--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1999
LONG-TERM LEHMAN LONG-TERM GENERAL MUNICIPAL DEBT FUNDS(2)
TAX-FREE MUNICIPAL BOND INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) -3.65% -5.33% -3.59% --
1 YEAR -4.23% -5.10% -3.51% 192 OUT OF 264
================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 3.39% 3.89% 3.29% 98 OUT OF 218
5 YEARS 6.79% 8.50% 6.50% 61 OUT OF 171
10 YEARS 6.34% 7.43% 6.37% 40 OUT OF 78
The fund's inception date was 3/2/87.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 40-42 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 11/30/99
Lehman Long-Term
Municipal Bond Index $20,473
Long-Term Tax-Free $18,483
Long-Term Lehman Long-Term
Tax-Free Municipal Bond Index
DATE VALUE VALUE
11/30/1989 $10,000 $10,000
11/30/1990 $10,606 $10,754
11/30/1991 $11,605 $11,979
11/30/1992 $12,712 $13,343
11/30/1993 $14,094 $15,121
11/30/1994 $13,306 $13,618
11/30/1995 $15,884 $17,116
11/30/1996 $16,725 $18,259
11/30/1997 $17,908 $19,839
11/30/1998 $19,299 $21,573
11/30/1999 $18,483 $20,473
$10,000 investment made 11/30/89
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The
Lehman Long-Term Municipal Bond Index is provided for comparison in each graph.
Long-Term Tax-Free's total returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
returns of the index do not. 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 graph - data below]
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDING NOVEMBER 30)
Long-Term Lehman Long-Term
Tax-Free Municipal Bond Index
DATE RETURN RETURN
11/30/1990 6.06% 7.54%
11/30/1991 9.42% 11.39%
11/30/1992 9.54% 11.39%
11/30/1993 10.87% 13.32%
11/30/1994 -5.59% -9.94%
11/30/1995 19.37% 25.69%
11/30/1996 5.30% 6.68%
11/30/1997 7.07% 8.65%
11/30/1998 7.77% 8.74%
11/30/1999 -4.23% -5.10%
18 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 LONG-TERM TAX-FREE PERFORM DURING THE SIX MONTHS ENDED NOVEMBER 30,
1999?
Rising interest rates and weak demand muted the performance of the
municipal bond market and the fund. Long-Term Tax-Free posted a total return of
-3.65%, a shade below the -3.59% average total return of the 278 "General
Municipal Debt Funds" tracked by Lipper Inc.
The fund's longer-term results remain solid. For the three- and five-year
periods ended November 30, 1999, the fund ranked in the top half of its peer
group. The portfolio's below-average expenses and above-average yield helped
build this track record.
HOW LOW WERE THE FUND'S EXPENSES AND HOW HIGH WAS ITS YIELD?
On November 30, 1999, the fund had an annualized expense ratio of 0.51%,
about half the 1.10% average expense ratio for its Lipper category. Helped by
these low expenses, Long-Term Tax-Free produced more federal tax-free income
than the peer-group average. As of November 30, the portfolio had a 30-day SEC
yield of 4.98%, while the average general municipal fund yielded 4.63%,
according to Lipper. The fund's yield translated to an 8.25% tax-equivalent
yield for investors in the highest (39.6%) federal tax bracket.
WHAT STEPS DID YOU TAKE TO GUARD AGAINST RISING INTEREST RATES?
We slightly shortened the portfolio's duration--a measure of its interest
rate sensitivity. (The shorter the duration, the less the share price will rise
or fall when interest rates change). Using a portfolio structure called a
"barbell," we shortened duration by offsetting long maturity bonds
with short-term investments such as money market securities.
However, the fund's duration remained slightly longer than the average of
the Lipper peer group. This is consistent with our moderately bullish outlook,
but it detracted from fund performance as interest rates rose.
Rising interest rates and weak municipal bond prices also gave us the
opportunity to do some "tax swapping." To enhance the fund's tax
efficiency, we sold some of our worst-performing bonds at a loss to offset
capital gains incurred elsewhere in the portfolio.
WHEN EXECUTING THOSE TAX SWAPS, WHAT DID YOU SELL AND WHAT DID YOU BUY?
Strong individual investor demand for certain types of municipal bonds
dictated most of our sales. Individual demand for straightforward, high-quality
general obligation bonds was reasonably good, so we were able to lock in higher
prices by selling some of those holdings. The proceeds from tax swaps were used
to purchase higher-yielding, newly issued bonds, which helped boost the fund's
yield.
[right margin]
YIELDS AS OF NOVEMBER 30, 1999
30-DAY SEC YIELD 4.98%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 6.92%
31.0% TAX BRACKET 7.22%
36.0% TAX BRACKET 7.78%
39.6% TAX BRACKET 8.25%
PORTFOLIO AT A GLANCE
11/30/99 5/31/99
NUMBER OF SECURITIES 80 76
WEIGHTED AVERAGE
MATURITY 17.0 YRS 17.7 YRS
AVERAGE DURATION 8.6 YRS 8.6 YRS
EXPENSE RATIO 0.51%* 0.51%
* Annualized.
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/99 5/31/99
AAA 65% 69%
AA 28% 23%
A 5% 7%
BBB 2% 1%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
40 for more information.
Investment terms are defined in the Glossary on pages 42-43.
www.americancentury.com 19
Long-Term Tax-Free--Q&A
--------------------------------------------------------------------------------
(Continued)
BONDS WITH BBB CREDIT RATINGS OFFERED INCREASINGLY MORE YIELD THAN HIGHER-RATED
BONDS. DID THAT PRESENT ANY BUYING OPPORTUNITIES?
Not many, in our view. It's true that the spread, or yield gap, between the
higher- and lower-quality securities widened. This was due largely to concerns
about lower-rated hospital bonds and much-publicized, but scattered, problems
with BBB bonds. But despite their growing yield advantage and lower prices, we
did not believe that BBB bonds offered much value since the spread remained
relatively narrow from a historical perspective. In other words, we generally
didn't feel that BBB securities offered enough compensation for their additional
credit risk. That's why the fund's stake in bonds rated A or higher remained at
roughly 97% of net assets.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES AND THE BOND MARKET?
We're moderately bullish. Even though U.S. economic growth keeps ripping
along at a surprisingly strong pace, inflation has remained pretty much in
check. The broad U.S. inflation gauges haven't changed much recently and the
three interest rate hikes in 1999 may help put the brakes on potential
inflationary pressures.
It's quite feasible, however, that the tug-of-war-between "good"
(low inflation) and "evil" (tight labor markets and wage pressures)
will continue well into 2000. That would likely mean more bond market volatility
over the short term. Ultimately, we think that non-inflationary, moderate
economic growth will win, providing a more favorable backdrop for bonds.
There are other reasons why we're optimistic over the long term. When
viewed on a historical basis, "real" yields--the difference between
nominal, or stated bond yields, and inflation--are quite high. The yield on a
30-year Treasury bond was 6.29% on November 30 and core inflation (without food
and energy prices) was running at about a 2% annual rate. To us, that real yield
of about 4%, compared with historic real yields of 2-3%, indicates that interest
rates have room to decline.
Furthermore, municipal bonds are currently priced attractively relative to
Treasury and other fixed-income investments. That, coupled with anticipated
favorable supply and demand trends, sets the stage for municipals to be
beneficiaries of more favorable market sentiment. The past year has been
difficult for municipal funds, but we're putting the portfolio in a position to
rebound when the market comes back our way.
GIVEN YOUR OUTLOOK, WHAT ARE YOUR PLANS FOR THE FUND OVER THE NEXT SIX MONTHS?
We're likely to maintain our current duration position as long as our
outlook remains somewhat bullish. Additionally, we'll keep looking for
opportunities to buy new issues, and sell bonds that have incurred losses, to
improve the fund's tax efficiency. We'll also continue working with our credit
research staff to uncover attractively valued securities that have the potential
to enhance returns. We plan to stick with the same value-orientation that has
contributed to our long-term success.
[left margin]
"MUNICIPAL BONDS ARE CURRENTLY PRICED ATTRACTIVELY RELATIVE TO TREASURY
AND OTHER FIXED-INCOME INVESTMENTS."
TOP FIVE STATES (AS OF 11/30/99)
% OF FUND INVESTMENTS
TEXAS 15.1%
MASSACHUSETTS 11.2%
ILLINOIS 10.2%
CALIFORNIA 7.9%
NEW YORK 6.8%
TOP FIVE STATES (AS OF 5/31/99)
% OF FUND INVESTMENTS
TEXAS 16.4%
NEW YORK 13.9%
MASSACHUSETTS 11.7%
ILLINOIS 10.3%
FLORIDA 7.8%
20 1-800-345-2021
Long-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 97.3%
ALABAMA -- 2.5%
$3,000 Jefferson County Sewer Rev.
Warrants, Series 1997 A,
5.375%, 2/1/27 (FGIC) $ 2,759
--------
CALIFORNIA -- 7.9%
1,000 California Public Works Board
Lease Rev., Series 1994 A,
(Various California State
University Projects), 6.20%,
10/1/08 1,071
1,500 Los Angeles Community
Redevelopment Agency Tax
Allocation, Series 1993 H,
(Bunker Hill), 6.50%,
12/1/14 (FSA) 1,619
1,500 Metropolitan Water District of
Southern California Waterworks
Rev., Series 1993 A, 5.75%,
7/1/21 1,505
2,000 Metropolitan Water District of
Southern California Waterworks
Rev., Series 1996 B, 4.75%,
7/1/21 (MBIA) 1,707
1,850 Northern California Power Agency
Rev., Series 1992 A,
(Hydroelectric Project #1),
6.25%, 7/1/12 (MBIA) 1,958
1,000 San Jose Redevelopment Agency
Tax Allocation, Series 1993 D,
(Merged Area Redevelopment),
5.75%, 8/1/24 951
--------
8,811
--------
CONNECTICUT -- 1.7%
1,880 Connecticut Development Auth.
Rev., Series 1994 A, 6.375%,
10/15/24(1) 1,964
--------
DISTRICT OF COLUMBIA -- 0.9%
1,000 District of Columbia Metropolitan
Area Transportation Auth. Rev.,
6.00%, 7/1/10 (FGIC) 1,071
--------
FLORIDA -- 5.4%
780 Broward County Resource
Recovery Facility Rev., (South),
7.95%, 12/1/08 805
1,000 Florida Board of Education Capital
Outlay Rev., Series 2000 D,
5.75%, 6/1/22(2) 970
2,585 Florida Board Regent University
System Improvement Rev.,
4.50%, 7/1/23 (AMBAC) 2,095
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,000 Orlando Utilities Commission
Water & Electric Rev., Series
1989 D, 6.75%, 10/1/17 $ 1,120
1,000 St. Petersburg Health Auth. Rev.,
(Allegany Health), 7.00%,
12/1/01, Prerefunded at
102% of Par (MBIA)(3) 1,068
--------
6,058
--------
GEORGIA -- 1.0%
745 Georgia Municipal Electric Power
Auth. Rev., Series 1991 V,
6.50%, 1/1/12 (MBIA) 823
255 Georgia Municipal Electric Power
Auth. Rev., Series 1991 V,
6.50%, 1/1/12 (MBIA)(3) 284
--------
1,107
--------
ILLINOIS -- 10.2%
1,000 Chicago Gas Supply Rev., Series
1985 B, (Peoples Gas), 7.50%,
3/1/15 1,026
1,000 Cook County GO, 7.00%,
11/1/00, Prerefunded at
102% of Par (MBIA)(3) 1,047
2,000 Illinois Dedicated Tax Rev., (Civic
Center), 6.25%, 12/15/20
(AMBAC) 2,085
1,500 Illinois Development Finance Auth.
Pollution Control Rev., Series
1990 A, (Central Illinois Public
Service), 7.60%, 3/1/14 1,540
1,000 Illinois Development Finance Auth.
Waste Disposal Rev.,
(Armstrong World Industries),
5.95%, 12/1/24 952
1,500 Illinois GO, 6.25%, 10/1/06 1,589
700 Illinois Health Facilities Auth. Rev.,
Series 1992 C, (Evangelical
Hospital), 6.75%, 4/15/02,
Prerefunded at 102% of Par(3) 748
1,140 Illinois Health Facilities Auth. Rev.,
Series 1992 C, (Evangelical
Hospital), 6.75%, 4/15/12(3) 1,268
1,000 Illinois Regional Transportation
Auth. Rev., Series 1990 A,
7.20%, 11/1/20 (AMBAC) 1,156
--------
11,411
--------
INDIANA -- 2.0%
1,000 Indiana Municipal Power Agency
Rev., Series 1990 A, 7.10%,
1/1/00, Prerefunded at 102%
of Par (AMBAC)(3) 1,023
1,000 Indiana Transportation Financing
Auth. Highway Rev., Series
1990 A, 7.25%, 6/1/15 1,171
--------
2,194
--------
See Notes to Financial Statements www.americancentury.com 21
Long-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
KANSAS -- 0.9%
$ 325 Kansas City Utility System Rev.,
6.375%, 9/1/04, Prerefunded
at 102% of Par (FGIC)(3) $ 355
675 Kansas City Utility System Rev.,
6.375%, 9/1/23 (FGIC) 691
--------
1,046
--------
KENTUCKY -- 1.0%
1,000 Carroll County Pollution Control
Rev., Series 1992 A, (Kentucky
Utilities Company), 7.45%,
9/15/16 1,083
--------
MASSACHUSETTS -- 11.2%
1,000 Massachusetts Health and
Education Auth. Rev., Series
1992 F, 6.25%, 7/1/12
(AMBAC)(1) 1,088
1,690 Massachusetts Housing Finance
Agency Rev., Series 1993 H,
6.75%, 11/15/12 (FNMA) 1,764
2,000 Massachusetts Water Pollution
Abatement Rev., Series 1998 A,
(New Bedford), 4.75%, 2/1/26
(FGIC) 1,652
2,800 Massachusetts Water Resource
Auth. Rev., Series 1993 C,
4.75%, 12/1/23 (MBIA) 2,341
7,000 Massachusetts Water Resource
Auth. Rev., Series 1998 B,
4.50%, 8/1/22 (FSA) 5,652
--------
12,497
--------
MICHIGAN -- 3.2%
2,000 Detroit City School District GO,
Series 1998 C, 5.25%,
5/1/25 (FGIC) 1,819
1,000 Michigan Hospital Finance Auth.
Rev., Series 1998 A, (Botsford
Obligated Group), 5.00%,
2/15/18 880
1,020 Paw Paw Public School District
GO, 5.00%, 5/1/25 (FGIC) 894
--------
3,593
--------
MISSISSIPPI -- 1.1%
1,250 Mississippi Development Special
Obligation GO, (Gulfport
Combination Water & Sewer),
5.625%, 7/1/24 (FSA)(2) 1,197
--------
NEVADA -- 2.5%
2,045 Clark County Passenger Facility
Charge Rev., (Las Vegas
McCarran International), 5.00%,
7/1/18 (MBIA) 1,831
1,000 Las Vegas New Convention &
Visitors Auth. Rev., 5.75%,
7/1/15 (AMBAC) 1,004
--------
2,835
--------
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
NEW YORK -- 6.8%
$2,000 New York City Transitional
Finance Auth. Rev., Series
1998 B, 4.50%, 11/15/27 $ 1,570
1,000 New York City Transitional
Finance Auth. Rev., Series
1999 A, 5.75%, 8/15/24 970
3,000 New York State Dormitory Auth
Rev., (City University System),
5.50%, 7/1/16 (AMBAC) 2,941
1,000 New York State Environmental
Facilities Corp. Pollution Control
Rev., Series 1991 E, 6.30%,
6/15/01, Prerefunded at
102% of Par(3) 1,049
1,000 New York State Local
Government Assistance Corp.
Rev., Series 1991 D, 6.75%,
4/1/02, Prerefunded at 102%
of Par(3) 1,070
--------
7,600
--------
NORTH CAROLINA -- 2.3%
1,490 Charlotte Water and Sewer
System Rev., 5.75%, 6/1/17 1,494
1,000 North Carolina Municipal Power
Agency #1 Rev., (Catawba
Electric), 6.00%, 1/1/10
(MBIA) 1,061
--------
2,555
--------
OHIO -- 0.7%
750 Ohio Higher Educational Facility
Rev., Series 1990 B, (Case
Western Reserve University),
6.50%, 10/1/20 814
--------
PENNSYLVANIA -- 2.4%
3,000 Pennsylvania Higher Educational
Facilities Auth. Rev., Series
1998 P, 5.00%, 6/15/19
(AMBAC) 2,681
--------
PUERTO RICO -- 1.9%
2,050 Puerto Rico Commonwealth GO,
4.50%, 7/1/23 1,637
500 Puerto Rico Commonwealth GO,
6.45%, 7/1/04, Prerefunded at
101.5% of Par(3) 547
--------
2,184
--------
RHODE ISLAND -- 4.2%
1,100 Rhode Island Clean Water Safe
Drinking Rev., 6.70%, 1/1/15
(AMBAC) 1,196
2,000 Rhode Island Depositors
Economic Protection Corp.
Special Obligation Rev., Series
1993 A, 6.25%, 8/1/16
(MBIA)(3) 2,132
22 1-800-345-2021 See Notes to Financial Statements
Long-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,300 Rhode Island Depositors
Economic Protection Corp.
Special Obligation Rev., Series
1993 B, 6.00%, 8/1/17
(MBIA)(3) $ 1,321
--------
4,649
--------
SOUTH CAROLINA -- 2.5%
1,500 Piedmont Municipal Power
Agency Electric Rev., 6.75%,
1/1/19 (FGIC) 1,664
860 Piedmont Municipal Power
Agency Electric Rev., Series
1991 A, 6.50%, 1/1/16 (FGIC) 931
140 Piedmont Municipal Power
Agency Electric Rev., Series
1991 A, 6.50%, 1/1/16
(FGIC)(3) 153
--------
2,748
--------
TENNESSEE -- 1.5%
1,815 Knox County Health, Educational
& Housing Facilities Board Rev.,
(University Health System Inc.),
5.625%, 4/1/24 1,622
--------
TEXAS -- 15.1%
1,000 Alliance Airport Auth. Special
Facilities Rev., (American
Airlines), 7.00%, 12/1/11 1,068
1,000 Denton Utility System Rev., Series
1996 A, 5.95%, 12/1/14
(MBIA) 1,021
1,000 Frisco Independent School District
GO, Series 1998 A, 4.50%,
8/15/29 (Guaranteed:
Permanent School Fund) 778
1,860 Lubbock GO, 5.25%, 2/15/19 1,723
1,400 Lubbock Health Facilities
Development Corp. Rev., (St.
Joseph Health System), 5.25%,
7/1/13 1,349
2,000 San Antonio Electric and Gas
System Rev., 7.10%, 2/1/09
(FGIC)(4) 1,236
1,000 Tarrant County Health Facility Rev.,
6.00%, 5/15/11 (MBIA) 1,053
2,500 Texas Municipal Power Agency
Rev., Series 1991 A, 6.75%,
9/1/12 (AMBAC) 2,639
2,000 Texas Southern University Rev.,
Series 1998 B, 4.50%,
11/1/23 (AMBAC) 1,607
1,765 Travis County GO, 4.50%, 3/1/19 1,461
2,000 Travis County Health Facilities
Development Corp. Rev., Series
1999 A, (Ascension Health
Credit), 5.875%, 11/15/24 1,944
1,000 Weatherford Utility System Rev.,
5.25%, 9/1/14 (FSA) 962
--------
16,841
--------
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
UTAH -- 1.1%
$1,000 Salt Lake City Hospital Rev.,
Series 1988 A, (Intermountain
Health Corporation), 8.125%,
5/15/15(3) $ 1,224
--------
VIRGINIA -- 1.0%
1,000 Hampton Industrial Development
Auth. Rev., Series 1994 A,
(Sentara General Hospital),
6.50%, 11/1/12 1,069
--------
WASHINGTON -- 3.2%
1,405 Port of Seattle Rev., 7.50%,
12/1/00, Prerefunded at
102% of Par (AMBAC)(3) 1,480
1,000 Washington GO, Series 1990 A,
6.75%, 2/1/15 1,120
1,000 Washington Public Power Supply
Rev., Series 1996 A, (Nuclear
Project #1), 5.75%, 7/1/12
(MBIA) 1,024
--------
3,624
--------
WISCONSIN -- 3.1%
1,180 Winneconne Community School
District GO, 6.75%, 4/1/06,
Prerefunded at 100% of Par
(FGIC)(3) 1,304
1,900 Wisconsin Clean Water Rev.,
6.875%, 6/1/11 2,170
--------
3,474
--------
TOTAL MUNICIPAL SECURITIES 108,711
--------
(Cost $109,179)
SHORT-TERM MUNICIPAL SECURITIES -- 2.7%
GEORGIA -- 1.8%
2,000 Thomasville Hospital Auth. Rev.
Anticipation Certificates, (J.D.
Archbold), VRDN, 3.95%,
12/1/99 (LOC: Suntrust Bank,
Atlanta GA) (Acquired 10/1/99,
Cost $2,000)(5) 2,000
--------
WASHINGTON -- 0.9%
1,000 Washington Housing Finance
Community Nonprofit Housing
Rev., (Panorama City), VRDN,
4.00%, 12/1/99 1,000
--------
TOTAL SHORT-TERM MUNICIPAL
SECURITIES 3,000
--------
(Cost $3,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $111,711
========
(Cost $112,179)
See Notes to Financial Statements www.americancentury.com 23
Long-Term Tax-Free--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
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, 1999.
(1) Security, or a portion thereof, has been segregated at the custodian bank
for a when-issued security.
(2) When-issued security.
(3) Escrowed to maturity in U.S. government securities or state and local
government securities.
(4) Security is a zero-coupon municipal bond. The yield at purchase is
indicated. Zero-coupon securities are purchased at a substantial discount
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 these securities at November 30, 1999 was $2,000 which
represented 1.8% of net assets.
24 1-800-345-2021 See Notes to Financial Statements
High-Yield Municipal--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1999
LEHMAN LONG-TERM
HIGH-YIELD MUNICIPAL HIGH YIELD MUNICIPAL DEBT FUNDS(2)
MUNICIPAL BOND INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) -2.55% -5.33% -3.52% --
1 YEAR -0.70%(2) -5.10% -2.55% 6 OUT OF 56(2)
================================================================================
AVERAGE ANNUAL RETURNS
LIFE OF FUND 3.16%(2) 0.11% 0.55% 2 OUT OF 54(2)
The fund's inception date was 3/31/98.
(1) Returns for periods less than one year are not annualized.
(2) Management fees were waived through 4/30/99. Returns and rankings would
have been lower if fees had not been waived.
(3) According to Lipper Inc., an independent mutual fund ranking service.
See pages 40-42 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 11/30/99
High-Yield Municipal $10,534
Lehman Long-Term
Municipal Bond Index $10,018
High-Yield Lehman Long-Term
Municipal Municipal Bond Index
DATE VALUE VALUE
3/31/1998 $10,000 $10,000
4/30/1998 $9,994 $9,946
5/31/1998 $10,181 $10,141
6/30/1998 $10,276 $10,187
7/31/1998 $10,300 $10,210
8/31/1998 $10,469 $10,393
9/30/1998 $10,607 $10,537
10/31/1998 $10,563 $10,503
11/30/1998 $10,608 $10,556
12/31/1998 $10,660 $10,567
1/31/1999 $10,760 $10,670
2/28/1999 $10,741 $10,625
3/31/1999 $10,757 $10,656
4/30/1999 $10,826 $10,666
5/31/1999 $10,810 $10,582
6/30/1999 $10,685 $10,389
7/31/1999 $10,700 $10,384
8/31/1999 $10,574 $10,170
9/30/1999 $10,542 $10,117
10/31/1999 $10,435 $9,880
11/30/1999 $10,534 $10,018
$10,000 investment made 3/31/98
The graph at left shows the growth of a $10,000 investment over the life of the
fund. The Lehman Long-Term Municipal Bond Index is provided for comparison.
High-Yield Municipal's total returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
returns of the index do not. 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.
PORTFOLIO AT A GLANCE
11/30/99 5/31/99
NUMBER OF SECURITIES 31 39
WEIGHTED AVERAGE
MATURITY 15.0 YRS 15.9 YRS
AVERAGE DURATION 6.7 YRS 6.3 YRS
EXPENSE RATIO 0.43%(1)(2) 0.01%(2)
(1) Annualized.
(2) The manager waived fund expenses through 4/30/99. Expenses were added
monthly at a rate of 0.10% of average daily closing net assets until
10/31/99. Expenses net of the waiver would have been 0.64%.
YIELDS AS OF NOVEMBER 30, 1999
30-DAY SEC YIELD 5.24%
30-DAY TAX-EQUIVALENT YIELDS
28.0% TAX BRACKET 7.28%
31.0% TAX BRACKET 7.59%
36.0% TAX BRACKET 8.19%
39.6% TAX BRACKET 8.68%
www.americancentury.com 25
High-Yield Municipal--Q&A
--------------------------------------------------------------------------------
[photo of Steven Permut]
An interview with Steven Permut, a portfolio manager on the High-Yield
Municipal fund investment team.
HOW DID HIGH-YIELD MUNICIPAL PERFORM DURING THE SIX MONTHS ENDED NOVEMBER 30,
1999?
High-Yield Municipal continued to perform well against its peers. The fund
returned -2.55%, compared with the -3.52% average total return of the 59
"High Yield Municipal Funds" tracked by Lipper Inc.
These negative returns show what a difficult year 1999 was for bonds and
bond funds. Rising interest rates made positive performance very difficult to
achieve for just about all but the shortest-maturity debt securities and funds.
But on the bright side, the portfolio provided an attractive 30-day SEC yield.
As of November 30, 1999, the SEC yield was 5.24%, which translates to a
tax-equivalent yield of 8.68% for investors in the highest (39.6%) federal tax
bracket.
The fund's performance and yield were helped by its below-average expenses,
which are roughly half of the average for the Lipper peer group.
WHAT ELSE HELPED HIGH-YIELD MUNICIPAL OUTPACE ITS PEERS DURING THIS DIFFICULT
PERIOD?
There were three main factors. First, the portfolio's duration--a measure
of its sensitivity to changes in interest rates--was shorter than the average
duration of its peers. That meant that High-Yield Municipal's share price fell
less as interest rates rose. As a rule, we make only modest adjustments to the
fund's duration, generally keeping it within 10% of the duration of the fund's
peer group. Throughout the past six months, the fund's duration was neutral to
the benchmark, a position we take when we don't have a clear indication about
the direction of interest rates.
WHAT WERE THE TWO OTHER FACTORS THAT HELPED THE FUND BEAT ITS PEERS?
The fund held a larger weighting in higher-yielding unrated bonds than most
of its competitors. Thanks to the ongoing strength of the national economy,
these bonds enjoyed improved credit ratings and provided superior performance.
Finally, avoiding credit pitfalls aided performance as the period witnessed some
defaults among selected issuers. Thanks to our experienced credit team, we were
able to avoid such problems.
MARKET DOWNTURNS OFTEN PRESENT OPPORTUNITIES. WHAT OPPORTUNITIES DID YOU FIND
OVER THE PAST SIX MONTHS?
Probably the most compelling one for us was the chance to replace
lower-yielding bonds with much higher-yielding securities at very attractive
prices. When the fund opened in the first half of 1998, interest rates and bond
yields were significantly lower than they are today. In 1999, we looked for
high-yielding bonds that we believed would benefit from continued strong
economic growth. For example, we bought land-secured bonds, which typically are
issued to support residential or commercial real estate development, and
[left margin]
"HIGH-YIELD MUNICIPAL CONTINUED TO PERFORM WELL AGAINST ITS PEERS."
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
11/30/99 5/31/99
AAA 28% 19%
A -- 1%
BBB 10% 24%
BB 5% 1%
UNRATED 57% 55%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
40 for more information.
Investment terms are defined in the Glossary on pages 42-43.
26 1-800-345-2021
High-Yield Municipal--Q&A
--------------------------------------------------------------------------------
(Continued)
project-finance bonds, which are issued to fund specific projects such as air
cargo facilities, hotels, aquariums or other buildings.
CAN YOU GIVE A MORE SPECIFIC EXAMPLE?
We recently purchased bonds that are being used to finance the construction
of a shopping mall. Not only do these bonds offer attractive yields, but they
also offer the potential for appreciation after the mall is completed and the
bonds become eligible for an investment grade rating. We specifically looked for
projects scheduled to be completed in 18 to 24 months, a period in which we
think the economy will remain strong.
WHY DID YOU REDUCE THE FUND'S HOLDINGS IN HEALTH CARE BONDS?
Concerns about cutbacks in federal Medicare and Medicaid payments in
response to the Balanced Budget Act of 1997 spread like a virus through the
health care sector, raising questions about the industry's long-term
profitability. The health care industry remained in reasonably good shape from
an operating standpoint, but perceptions overwhelmed reality and health care
bond performance suffered.
Among our remaining health care holdings, we emphasized hospitals and other
providers who face little or no competition within their immediate geographic
region. We also concentrated on those who receive limited federal payment, have
a history of good financial performance, and a strong management team. As with
all our holdings, our credit research team keeps close watch on our holdings and
recent developments within the health care sector.
WHAT IS YOUR MARKET OUTLOOK AND HOW WILL IT AFFECT YOUR STRATEGY?
We think the outlook remains rather murky--interest rates could continue
to rise as investors react to economic reports perceived as potentially
inflationary, or to saber-rattling by the Federal Reserve. That said, inflation
appears to be under control, and there's conjecture that rising interest rates
could cause the U.S. economy to slow down from its torrid 1999 pace.
Turning to portfolio strategy, we intend to keep High-Yield Municipal's
duration neutral, avoiding a significant bet on the direction of interest rates.
Instead, we'll aim to add value through our security selection process, picking
the bonds we think have the best long-term credit fundamentals and offer the
most appealing yields. This is the same strategy that has been successful for us
since the fund's inception.
As long as economic growth remains solid, we're likely to continue our
emphasis on land-secured and project-finance bonds. If, however, the economy
appears headed toward a sustained period of weakness, we would try to reduce our
holdings in these bonds. At the same time, we'd likely increase our holdings in
essential service revenue bonds--such as water and sewer bonds --which are
typically affected less by the ebbs and flows of the economy.
[right margin]
"AS LONG AS ECONOMIC GROWTH REMAINS SOLID, WE'RE LIKELY TO CONTINUE OUR
EMPHASIS ON LAND-SECURED AND PROJECT-FINANCE BONDS."
TOP FIVE STATES (AS OF 11/30/99)
% OF FUND INVESTMENTS
FLORIDA 17.7%
PENNSYLVANIA 13.9%
NEW JERSEY 13.8%
ARIZONA 8.9%
WASHINGTON 7.9%
TOP FIVE STATES (AS OF 5/31/99)
% OF FUND INVESTMENTS
FLORIDA 15.2%
PENNSYLVANIA 14.7%
CALIFORNIA 9.5%
ARIZONA 7.4%
NEW YORK 6.0%
www.americancentury.com 27
High-Yield Municipal--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 96.1%
ALASKA -- 1.6%
$ 660 Alaska Industrial Development &
Export Auth. Power Rev., (Upper
Lynn Canal Regional Power),
5.80%, 1/1/18 $ 580
-------
ARIZONA -- 8.9%
2,245 Gilbert Industrial Development
Nonprofit Auth. Rev., Series
1999 A, (Southwest Student
Services), 5.25%, 2/1/10 2,099
990 Phoenix Industrial Development
Auth. Single Family Mortgage
Rev., Series 1998 A, 6.60%,
12/1/29
(GNMA/FNMA/FHLMC) 1,052
-------
3,151
-------
CALIFORNIA -- 5.4%
1,000 California Statewide Communities
Development Auth. COP Rev.,
Series 1999 A, (Windsor
Terrace Healthcare), 7.875%,
10/1/29 (Acquired 10/26/99,
Cost $1,000)(1) 1,007
1,000 Student Education Loan
Marketing Corp. Rev., Series
1998 IV-D-1, 5.875%, 1/1/18
(Guaranteed: Student Loans) 903
-------
1,910
-------
COLORADO -- 4.9%
1,280 Colorado Health Facilities Auth.
Rev., Series 1998 A,
(Volunteers), 5.00%, 7/1/03 1,236
500 Denver Health & Hospital Rev.,
Series 1998 A, 4.75%,
12/1/01 499
-------
1,735
-------
FLORIDA -- 17.7%
710 Arbor Greene Community
Development District Special
Assessment Rev., 5.75%,
5/1/06 691
1,395 Florida Housing Finance Corp.
Rev., Series 1999-2,
(Homeowner Mortgage), 4.60%,
1/1/21 (FSA) 1,363
1,500 Heritage Isles Community
Development District Special
Assessment Rev., Series
1998 A, 5.75%, 5/1/05(2) 1,472
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,000 Heritage Isles Community
Development District Special
Assessment Rev., Series
1998 B, 6.00%, 5/1/20 $ 916
1,685 Herons Glen Recreational District
Special Assessment, 5.50%,
5/1/05 1,633
210 Manatee County Housing Finance
Auth. Mortgage Rev., (Single
Family), 7.20%, 5/1/28
(GNMA/FNMA/FHLMC) 226
-------
6,301
-------
MAINE -- 2.9%
1,000 Maine Municipal Bond Bank Rev.,
Series 1999 E, 5.875%,
11/1/12 (FSA) 1,048
-------
MARYLAND -- 3.5%
1,250 Anne Arundel County Special
Obligation Rev., (Arundel Mills),
7.10%, 7/1/29(3) 1,249
-------
MASSACHUSETTS -- 2.7%
1,000 Massachusetts Health &
Educational Facilities Auth. Rev.,
Series 1999 A, 5.25%, 7/1/07 974
-------
NEW JERSEY -- 13.8%
2,500 New Jersey Economic
Development Auth. Rev., Series
1998 A, (Kapkowski Road
Landfill), 6.375%, 4/1/31 2,429
1,000 New Jersey Economic
Development Auth. Rev., Series
1999 A, (Transportation
Sublease), 6.00%, 5/1/16
(FSA) 1,026
1,500 New Jersey Economic
Development Auth. Special
Facility Rev., (Continental
Airlines), 6.25%, 9/15/19 1,437
-------
4,892
-------
OREGON -- 3.8%
1,415 Oregon Health Housing
Educational & Cultural Facilities
Auth. Rev., 4.50%, 10/1/06 1,337
-------
PENNSYLVANIA -- 13.9%
2,200 Dauphin County General Auth.
Rev., (Hyatt Regency Hotel &
Conference Center), 6.20%,
1/1/29 2,049
1,360 New Morgan Municipal Auth.
Office Rev., Series 1999 A,
(Commonwealth Office),
5.375%, 6/1/08 1,287
28 1-800-345-2021 See Notes to Financial Statements
High-Yield Municipal--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,695 Susquehanna Area Regional
Airport Auth. Rev., (Aero
Harrisburg LLC), 5.25%, 1/1/09 $ 1,603
-------
4,939
-------
TEXAS -- 2.8%
1,000 Fort Bend Independent School
District GO, 5.375%, 2/15/11
(Guaranteed: Permanent School
Fund) 1,009
-------
UTAH -- 7.2%
1,980 Bountiful Hospital Rev., (South
Davis Community Hospital),
5.125%, 12/15/05 1,911
630 Utah Water Financing Agency
Rev., Series 1999 A, (Pooled
Loan Financing), 5.25%,
10/1/10 (AMBAC) 632
-------
2,543
-------
VIRGIN ISLANDS -- 2.8%
1,000 Virgin Islands Public Finance Auth.
Rev., Series 1999 A, 6.50%,
10/1/24 1,005
-------
WASHINGTON -- 4.0%
500 Port Anacortes Rev., Series
1998 A, 5.625%, 9/1/16 464
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,000 Washington State COP,
(Convention and Trade Center),
5.125%, 7/1/12 (MBIA) $ 968
-------
1,432
-------
WYOMING -- 0.2%
55 Wyoming Community
Development Auth. Rev., Series
1990 B, (Single Family
Mortgage), 8.125%, 6/1/21
(FHA) 56
-------
TOTAL MUNICIPAL SECURITIES 34,161
-------
(Cost $35,142)
SHORT-TERM MUNICIPAL SECURITIES -- 3.9%
WASHINGTON
1,400 Washington Housing Finance
Community Nonprofit Housing
Rev., (Panorama City), VRDN,
4.00%, 12/1/99 (LOC:
KeyBank, N.A.) 1,400
-------
(Cost $1,400)
TOTAL INVESTMENT SECURITIES -- 100.0% $35,561
=======
(Cost $36,542)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
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
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, 1999.
(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, 1999, was $1,007
which represented 2.9% of net assets.
(2) Security, or a portion thereof, has been segregated at the custodian bank
for when-issued securities.
(3) When-issued security.
See Notes to Financial Statements www.americancentury.com 29
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. The net assets divided by shares outstanding is the share price, or NET
ASSET VALUE PER SHARE. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
NOVEMBER 30, 1999 (UNAUDITED)
LIMITED-TERM INTERMEDIATE-TERM LONG-TERM HIGH-YIELD
TAX-FREE TAX-FREE TAX-FREE MUNICIPAL
ASSETS (In Thousands Except Per-Share Amounts)
Investment securities, at value
(identified cost of $38,499,
$170,319, $112,179 and
$36,542, respectively) (Note 3) ... $38,482 $171,089 $111,711 $35,561
Cash ................................ 480 -- -- --
Receivable for investments sold ..... -- 5,350 -- 94
Interest receivable ................. 540 2,960 2,039 588
------------ ------------- ------------- ------------
39,502 179,399 113,750 36,243
------------ ------------- ------------- ------------
LIABILITIES
Disbursements in excess of
demand deposit cash ............... -- 4,230 1,329 367
Payable for investments purchased ... 708 4,914 2,169 1,252
Dividends payable ................... 17 89 63 20
Accrued management fees (Note 2) .... 16 70 47 18
------------ ------------- ------------- ------------
741 9,303 3,608 1,657
------------ ------------- ------------- ------------
Net Assets .......................... $38,761 $170,096 $110,142 $34,586
============ ============= ============= ============
CAPITAL SHARES
Outstanding (unlimited number of
shares authorized) ................ 3,885 16,867 11,189 3,598
============ ============= ============= ============
Net Asset Value Per Share ........... $9.98 $10.08 $9.84 $9.61
============ ============= ============= ============
NET ASSETS CONSIST OF
Capital paid in ..................... $38,788 $170,368 $112,077 $36,484
Accumulated net realized loss on
investment transactions ........... (10) (1,042) (1,467) (917)
Net unrealized appreciation
(depreciation)
on investments (Note 3) ........... (17) 770 (468) (981)
------------ ------------- ------------- ------------
$38,761 $170,096 $110,142 $34,586
============ ============= ============= ============
30 1-800-345-2021 See Notes to Financial Statements
Statements of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of interest income, fees and expenses,
and investment gains or losses.
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
LIMITED-TERM INTERMEDIATE-TERM LONG-TERM HIGH-YIELD
TAX-FREE TAX-FREE TAX-FREE MUNICIPAL
INVESTMENT INCOME (In Thousands)
Income:
Interest ........................... $906 $4,093 $3,177 $1,057
----------- -------------- ------------- -------------
Expenses (Note 2):
Management fees .................... 101 406 283 120
Trustees' fees and expenses ........ 1 5 4 1
----------- -------------- ------------- -------------
Total expenses ................... 102 411 287 121
Amount waived ...................... -- -- -- (40)
----------- -------------- ------------- -------------
Net expenses ..................... 102 411 287 81
----------- -------------- ------------- -------------
Net investment income .............. 804 3,682 2,890 976
----------- -------------- ------------- -------------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS (NOTE 3)
Net realized loss on investments ... (94) (1,401) (1,189) (933)
Change in net unrealized
appreciation on investments ...... (537) (3,235) (5,870) (1,060)
----------- -------------- ------------- -------------
Net realized and unrealized
loss on investments .............. (631) (4,636) (7,059) (1,993)
----------- -------------- ------------- -------------
Net Increase (Decrease) in
Net Assets Resulting
from Operations .................. $173 $(954) $(4,169) $(1,017)
=========== ============== ============= =============
See Notes to Financial Statements www.americancentury.com 31
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows 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 (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED) AND YEAR ENDED MAY 31, 1999
Increase (Decrease) LIMITED-TERM TAX-FREE INTERMEDIATE-TERM TAX-FREE
in Net Assets NOV. 30, 1999 MAY 31, 1999 NOV. 30, 1999 MAY 31, 1999
OPERATIONS (In Thousands)
Net investment income ........... $804 $1,584 $3,682 $6,575
Net realized gain (loss)
on investments ................. (94) 188 (1,401) 765
Change in net unrealized
appreciation on investments .... (537) (139) (3,235) (1,787)
---------- ----------- ----------- -----------
Net increase (decrease) in
net assets resulting
from operations ................ 173 1,633 (954) 5,553
---------- ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income ...... (822) (1,584) (3,682) (6,575)
From net realized gains on
investment transactions ........ -- (138) -- (1,057)
---------- ----------- ----------- -----------
Decrease in net assets
from distributions ............. (822) (1,722) (3,682) (7,632)
---------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ....... 5,696 20,609 60,560 50,409
Proceeds from reinvestment
of distributions ............... 688 1,504 3,056 6,300
Payments for shares redeemed .... (8,091) (19,317) (38,562) (42,859)
---------- ----------- ----------- -----------
Net increase (decrease) in
net assets from capital
share transactions ............. (1,707) 2,796 25,054 13,850
---------- ----------- ----------- -----------
Net increase (decrease)
in net assets .................. (2,356) 2,707 20,418 11,771
NET ASSETS
Beginning of period ............. 41,117 38,410 149,678 137,907
---------- ----------- ----------- -----------
End of period ................... $38,761 $41,117 $170,096 $149,678
========== =========== =========== ===========
Undistributed net
investment income .............. -- $18 -- --
========== =========== =========== ===========
TRANSACTIONS IN SHARES
OF THE FUNDS
Sold ............................ 568 2,019 5,974 4,768
Issued in reinvestment
of distributions ............... 69 147 301 595
Redeemed ........................ (808) (1,892) (3,814) (4,060)
---------- ----------- ----------- -----------
Net increase (decrease) ......... (171) 274 2,461 1,303
========== =========== =========== ===========
32 1-800-345-2021 See Notes to Financial Statements
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
(Continued)
SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED) AND YEAR ENDED MAY 31, 1999
Increase (Decrease) LONG-TERM TAX-FREE HIGH-YIELD MUNICIPAL
in Net Assets NOV. 30, 1999 MAY 31, 1999 NOV. 30, 1999 MAY 31, 1999
OPERATIONS (In Thousands)
Net investment income ........... $2,890 $5,808 $976 $1,955
Net realized gain (loss)
on investments ................ (1,189) 411 (933) 169
Change in net unrealized
appreciation on investments ... (5,870) (2,257) (1,060) (83)
----------- ------------ ------------ -----------
Net increase (decrease) in
net assets resulting
from operations ............... (4,169) 3,962 (1,017) 2,041
----------- ------------ ------------ -----------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income ...... (2,890) (5,832) (976) (1,955)
From net realized gains on
investment transactions ....... -- (1,702) -- (136)
In excess of net realized
gains on investment
transactions .................. -- (278) -- --
----------- ------------ ------------ -----------
Decrease in net assets
from distributions ............ (2,890) (7,812) (976) (2,091)
----------- ------------ ------------ -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ....... 29,902 75,568 8,996 42,114
Proceeds from reinvestment
of distributions .............. 2,272 6,209 756 1,678
Payments for shares redeemed .... (32,557) (76,958) (15,241) (20,462)
----------- ------------ ------------ -----------
Net increase (decrease) in
net assets from capital
share transactions ............ (383) 4,819 (5,489) 23,330
----------- ------------ ------------ -----------
Net increase (decrease)
in net assets ................. (7,442) 969 (7,482) 23,280
NET ASSETS
Beginning of period ............. 117,584 116,615 42,068 18,788
----------- ------------ ------------ -----------
End of period ................... $110,142 $117,584 $34,586 $42,068
=========== ============ ============ ==========
TRANSACTIONS IN SHARES
OF THE FUNDS
Sold ............................ 2,994 6,983 913 4,137
Issued in reinvestment
of distributions .............. 227 574 77 164
Redeemed ........................ (3,254) (7,119) (1,550) (2,007)
----------- ------------ ------------ -----------
Net increase (decrease) ......... (33) 438 (560) 2,294
=========== ============ ============ ===========
See Notes to Financial Statements www.americancentury.com 33
Notes to Financial Statements
--------------------------------------------------------------------------------
NOVEMBER 30, 1999 (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 (the 1940 Act) as an open-end
management investment company. Limited-Term Tax-Free Fund (Limited-Term),
Intermediate-Term Tax-Free Fund (Intermediate-Term), Long-Term Tax-Free Fund
(Long-Term) and High-Yield Municipal Fund (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; these
policies may require the use of estimates by fund management.
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 funds' 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.
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 realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
On December 10, 1999 the funds declared and paid a distribution to
shareholders of record on that date. The per-share distributions from net
realized gains on investments were $0.0220, $0.0216 and $0.0050 for
Limited-Term, Intermediate-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 is 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, 1999.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the trust's
distributor. Certain officers of FDI are also officers of the trust.
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM), under which ACIM provides each fund with
investment advisory and management services in exchange for a single, unified
management fee. The Agreement provides that all expenses of the funds, except
for brokerage, taxes, portfolio insurance, interest, fees and expenses of the
trustees who are not considered "interested persons" as defined in the
1940 Act (including counsel fees) and extraordinary expenses will be paid by
ACIM. The fee is calculated daily and paid monthly. It consists of an Investment
Category Fee based on the average net assets of the funds in a specific fund's
investment category and a Complex Fee based on the average net assets of all the
funds managed by ACIM. The rates for the Investment Category fee range from
0.1625% to 0.2800% for Limited-Term, Intermediate-Term, and Long-Term and the
rates for High-Yield range from 0.2925% to 0.4100%. Rates for the Complex
34 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1999 (UNAUDITED)
Fee range from 0.2900% to 0.3100%. For the six months ended November 30, 1999,
the effective annual management fee was 0.51% for Limited-Term,
Intermediate-Term and Long-Term. ACIM voluntarily agreed to pay all expenses of
High-Yield through April 30, 1999. In May 1999, High-Yield began adding expenses
at a rate of 0.10% of average daily closing net assets per month until October
31, 1999. As a result, the effective annual management fee for the six months
ended November 30, 1999 was 0.43%. The effective annual management fee would
have been 0.64% without the waiver.
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.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six
months ended November 30, 1999 were as follows:
LIMITED-TERM INTERMEDIATE-TERM LONG-TERM HIGH-YIELD
TAX-FREE TAX-FREE TAX-FREE MUNICIPAL
PURCHASES (In Thousands)
Municipal Debt Obligations ...... $21,882 $92,640 $32,955 $10,937
PROCEEDS FROM SALES (In Thousands)
Municipal Debt Obligations ...... $25,014 $65,781 $33,622 $18,294
On November 30, 1999, 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 .................... $127 $ 2,055 $ 3,320 $ 23
Depreciation .................... (144) (1,285) (3,788) (1,004)
--------------- --------------- --------------- --------------
Net ............................. $ (17) $ 770 $ (468) $ (981)
=============== =============== =============== ==============
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
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 Bank.
Borrowings under the agreement bear interest at the Federal Funds rate plus
0.40%. Effective December 21, 1999, borrowings under the agreement bear interest
at the Federal Funds rate plus 0.50%. The funds may borrow money for temporary
or emergency purposes to fund shareholder redemptions. The funds did not borrow
from the line during the six months ended November 30, 1999.
www.americancentury.com 35
Limited-Term Tax-Free--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), EXPENSE RATIO (operating expenses as a
percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the fund's
trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1999(1) 1999 1998(2) 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
Beginning of Period ............ $10.14 $10.16 $10.11 $10.08 $10.09 $9.95 $10.04
-------- --------- -------- -------- --------- -------- --------
Income From Investment
Operations
Net Investment Income ........ 0.20 0.40 0.24 0.41 0.43 0.44 0.36
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ................. (0.16) 0.01 0.05 0.10 (0.01) 0.14 (0.09)
-------- --------- -------- -------- --------- -------- --------
Total From Investment
Operations ................... 0.04 0.41 0.29 0.51 0.42 0.58 0.27
-------- --------- -------- -------- --------- -------- --------
Distributions
From Net Investment Income ... (0.20) (0.40) (0.24) (0.41) (0.43) (0.44) (0.36)
From Net Realized Gains on
Investment Transactions ...... -- (0.03) -- (0.07) -- -- --
-------- --------- -------- -------- --------- -------- --------
Total Distributions .......... (0.20) (0.43) (0.24) (0.48) (0.43) (0.44) (0.36)
-------- --------- -------- -------- --------- -------- --------
Net Asset Value,
End of Period .................. $9.98 $10.14 $10.16 $10.11 $10.08 $10.09 $9.95
======== ========= ======== ======== ========= ======== ========
Total Return(3) .............. 0.46% 4.15% 2.87% 5.22% 4.26% 5.95% 2.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .......... 0.51%(4) 0.51% 0.52%(4) 0.59% 0.38%(5) --(5) --(5)
Ratio of Net Investment Income
to Average Net Assets .......... 4.00%(4) 3.93% 4.04%(4) 4.05% 4.28% 4.38% 3.62%
Portfolio Turnover Rate ........ 55% 41% 28% 74% 68% 78% 42%
Net Assets, End of Period
(in thousands) ................. $38,761 $41,117 $38,410 $36,437 $49,866 $58,837 $60,857
(1) Six months ended November 30, 1999 (unaudited).
(2) The period ended May 31, 1998 represents a seven month reporting period.
The fund's fiscal year end was changed from October 31 to May 31 during
the period. Periods prior to 1998 are based on a fiscal year ended October
31.
(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%.
36 1-800-345-2021 See Notes to Financial Statements
Intermediate-Term Tax-Free--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), EXPENSE RATIO (operating expenses as a
percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the fund's
trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1999(1) 1999 1998(2) 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
Beginning of Period ............ $10.39 $10.52 $10.46 $10.35 $10.45 $10.01 $10.75
--------- --------- --------- --------- -------- --------- --------
Income From Investment
Operations
Net Investment Income ........ 0.23 0.48 0.28 0.49 0.48 0.49 0.48
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ................. (0.31) (0.05) 0.08 0.21 (0.03) 0.52 (0.61)
--------- --------- --------- --------- -------- --------- --------
Total From Investment
Operations ................... (0.08) 0.43 0.36 0.70 0.45 1.01 (0.13)
--------- --------- --------- --------- -------- --------- --------
Distributions
From Net Investment Income ... (0.23) (0.48) (0.28) (0.49) (0.48) (0.49) (0.48)
From Net Realized Gains on
Investment Transactions ...... -- (0.08) (0.02) (0.10) (0.07) (0.08) (0.13)
--------- --------- --------- --------- -------- --------- --------
Total Distributions .......... (0.23) (0.56) (0.30) (0.59) (0.55) (0.57) (0.61)
--------- --------- --------- --------- -------- --------- --------
Net Asset Value,
End of Period .................. $10.08 $10.39 $10.52 $10.46 $10.35 $10.45 $10.01
========= ========= ========= ========= ======== ========= ========
Total Return(3) .............. (0.73)% 4.07% 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% 0.51%(4) 0.58% 0.60% 0.60% 0.60%
Ratio of Net Investment Income
to Average Net Assets ..........4.58%(4) 4.52% 4.62%(4) 4.71% 4.66% 4.77% 4.59%
Portfolio Turnover Rate ........ 42% 32% 17% 35% 39% 32% 74%
Net Assets, End of Period
(in thousands) .................$170,096 $149,678 $137,907 $132,416 $80,568 $80,248 $81,400
(1) Six months ended November 30, 1999 (unaudited).
(2) The period ended May 31, 1998 represents a seven month reporting period.
The fund's fiscal year end was changed from October 31 to May 31 during
the period. Periods prior to 1998 are based on a fiscal year ended October
31.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 37
Long-Term Tax-Free--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), EXPENSE RATIO (operating expenses as a
percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the fund's
trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1999(1) 1999 1998(2) 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
Beginning of Period ............ $10.48 $10.81 $10.75 $10.58 $10.54 $9.75 $11.10
--------- --------- --------- --------- -------- --------- -------
Income From Investment
Operations
Net Investment Income ........ 0.26 0.52 0.31 0.55 0.53 0.53 0.52
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ................. (0.64) (0.15) 0.13 0.33 0.04 0.83 (1.01)
--------- --------- --------- --------- -------- --------- -------
Total From Investment
Operations ................... (0.38) 0.37 0.44 0.88 0.57 1.36 (0.49)
--------- --------- --------- --------- -------- --------- -------
Distributions
From Net Investment Income ... (0.26) (0.52) (0.31) (0.55) (0.53) (0.53) (0.52)
From Net Realized Gains on
Investment Transactions ...... -- (0.18) (0.07) (0.16) -- (0.04) (0.34)
--------- --------- --------- --------- -------- --------- -------
Total Distributions .......... (0.26) (0.70) (0.38) (0.71) (0.53) (0.57) (0.86)
--------- --------- --------- --------- -------- --------- -------
Net Asset Value,
End of Period .................. $9.84 $10.48 $10.81 $10.75 $10.58 $10.54 $9.75
========= ========= ========= ========= ======== ========= =======
Total Return(3) .............. (3.65)% 3.44% 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% 0.51%(4) 0.58% 0.59% 0.59% 0.60%
Ratio of Net Investment Income
to Average Net Assets ..........5.14%(4) 4.86% 4.96%(4) 5.16% 5.06% 5.24% 5.00%
Portfolio Turnover Rate ........ 30% 83% 47% 65% 60% 61% 66%
Net Assets, End of Period
(in thousands) .................$110,142 $117,584 $116,615 $108,868 $60,772 $57,997 $50,964
(1) Six months ended November 30, 1999 (unaudited).
(2) The period ended May 31, 1998 represents a seven month reporting period.
The fund's fiscal year end was changed from October 31 to May 31 during
the period. Periods prior to 1998 are based on a fiscal year ended October
31.
(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.
38 1-800-345-2021 See Notes to Financial Statements
High-Yield Municipal--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), EXPENSE RATIO (operating expenses as a
percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the fund's
trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
1999(1) 1999 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ... $10.12 $10.08 $9.99
----------- ---------- ----------
Income From Investment Operations
Net Investment Income ................ 0.25 0.54 0.09
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .... (0.51) 0.07 0.09
----------- ---------- ----------
Total From Investment Operations ..... (0.26) 0.61 0.18
----------- ---------- ----------
Distributions
From Net Investment Income ........... (0.25) (0.54) (0.09)
From Net Realized Gains on
Investment Transactions .............. -- (0.03) --
----------- ---------- ----------
Total Distributions .................. (0.25) (0.57) (0.09)
----------- ---------- ----------
Net Asset Value, End of Period ......... $9.61 $10.12 $10.08
=========== ========== ==========
Total Return(3) ...................... (2.55)% 6.18% 1.81%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(4) ............... 0.43%(5) 0.01% --
Ratio of Net Investment Income
to Average Net Assets(4) ............... 5.15%(5) 5.29% 5.38%(5)
Portfolio Turnover Rate ................ 30% 115% 44%
Net Assets, End of Period
(in thousands) ........................ $34,586 $42,068 $18,788
(1) Six months ended November 30, 1999 (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) ACIM voluntarily agreed to pay all expenses of the fund from March 31, 1998
(inception) through April 30, 1999. Beginning May 1, 1999, ACIM began
adding expenses at a rate of 0.10% of average daily closing net assets per
month until October 31, 1999. In absence of the waiver, the annualized
ratio of operating expenses to average net assets would have been 0.64% for
all three periods and the annualized ratio of net investment income to
average net assets would have been 4.66%, 4.74% and 4.94%, for the six
months ended November 30, 1999, the year ended May 31, 1999 and the period
March 31, 1998 through May 31, 1998, respectively.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 39
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios 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 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 a weighted 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.
CREDIT RATING GUIDELINES
Credit ratings are issued by independent research companies such as
Standard & Poor's and Moody's. They are based on an issuer's financial
strength and ability to pay interest and principal in a timely manner.
Securities rated AAA, AA, A, or BBB are considered "investment-
grade" securities, meaning they are relatively safe from default.
High-Yield Municipal may invest more than 50% of its portfolio in securities
that are below investment grade or not rated. Here are the most common credit
ratings and their definitions:
* 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.
It's important to note that credit ratings are subjective, reflecting the
opinions of the rating agencies; they are not absolute standards of quality.
[left margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
BRYAN KARCHER
DAVE MACEWEN
STEVEN PERMUT
KEN SALINGER
MUNICIPAL CREDIT RESEARCH TEAM
Manager
STEVEN PERMUT
Municipal Credit Analysts
DAVID MOORE
ROBERT MILLER
BILL MCCLINTOCK
TIM BENHAM
BRAD BODE
40 1-800-345-2021
Background Information
--------------------------------------------------------------------------------
(Continued)
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 (High-Yield Municipal) -- funds that invest
at least 50% of assets in lower-rated municipal debt issues.
www.americancentury.com 41
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 36-39.
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%).
* COUPON -- the stated interest rate of a security.
* YIELD CURVE -- a graphic representation of the relationship between maturity
and yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical axis.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES -- the number of different securities held by a fund on
a given date.
* WEIGHTED AVERAGE MATURITY (WAM) -- a measure 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).
42 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive
yields, as well as a strong and stable foundation and generally lower volatility
levels than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that the fund's category may change over
time. Therefore, it is important that you read a fund's prospectus or fund
profile carefully before investing to ensure its objectives, policies, and risk
potential are consistent with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price-fluctuation risk.
www.americancentury.com 43
Notes
--------------------------------------------------------------------------------
44 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that a fund's category may change over time.
Therefore, it is important that you read a fund's prospectus or fund profile
carefully before investing to ensure its objectives, policies and risk potential
are consistent with your needs.For a definition of fund categories, see the
Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 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.
[back cover]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service
and innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo (reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
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.
--------------------------------------------------------------------------------
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
Funds Distributor, Inc.
0001 is the distributor for American Century funds
SH-SAN-19178 (c)2000 American Century Services Corporation
