ANNUAL CERTIFIED SHAREHOLDER REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4025
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AMERICAN CENTURY MUNICIPAL TRUST
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(Exact name of registrant as specified in charter)
4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
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(Address of principal executive offices) (Zip code)
DAVID C. TUCKER, ESQ., 4500 MAIN STREET, 9TH FLOOR, KANSAS CITY, MISSOURI 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
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Date of fiscal year end: MAY 31, 2004
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Date of reporting period: MAY 31, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
[front cover]
MAY 31, 2004
American Century Investments
Annual Report
[graphic of market chart]
[graphic of starfish]
{graphic of bridge over river]
Tax-Free Money Market Fund
Tax-Free Bond Fund
[american century logo and text logo]
Table of Contents
Our Message to You ........................................................ 1
TAX-FREE MONEY MARKET
Performance ............................................................... 2
Portfolio Composition by Credit Rating ................................. 2
Portfolio Composition by Maturity ...................................... 2
Yields ................................................................. 2
Portfolio Commentary ...................................................... 3
Schedule of Investments ................................................... 4
TAX-FREE BOND
Performance ............................................................... 7
Portfolio Commentary ...................................................... 8
Yields ................................................................. 8
Portfolio Composition by Credit Rating ................................. 9
Top Five States ........................................................ 9
Schedule of Investments ...................................................10
FINANCIAL STATEMENTS
Statement of Assets and Liabilities .......................................19
Statement of Operations ...................................................20
Statement of Changes in Net Assets ........................................21
Notes to Financial Statements .............................................22
Financial Highlights ......................................................27
Report of Independent Registered Public Accounting Firm ...................30
OTHER INFORMATION
Management ................................................................31
Share Class Information ...................................................34
Additional Information ....................................................35
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the annual report for the American Century
Tax-Free Money Market and Tax-Free Bond funds for the year ended May 31, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, we provide quarterly commentaries on
all American Century portfolios, the views of our senior investment officers,
and other communications about investments, portfolio strategy, and the markets.
We also have many informative resources available in the Education & Planning
section of our site to help you with your investment strategy.
Your next shareholder report for these funds will be the semiannual report dated
November 30, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/signature/James E. Stowers
James E. Stowers, Jr.
FOUNDER AND CHAIRMAN
/signature/James E. Stowers III
James E. Stowers III
CO-CHAIRMAN OF THE BOARD
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1
Tax-Free Money Market - Performance
TOTAL RETURNS AS OF MAY 31, 2004
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AVERAGE ANNUAL RETURNS
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SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS(1) INCEPTION(1) DATE
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INVESTOR CLASS 0.64% 2.06% 2.62% 3.45% 7/31/84
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AVERAGE RETURN OF
LIPPER'S TAX-EXEMPT
MONEY MARKET FUNDS 0.38% 1.78% 2.41% 3.29%(2) --
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Fund's Lipper Ranking
as of May 31, 2004(3) 9 of 131 9 of 106 11 of 81 5 of 33(2) --
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Fund's Lipper Ranking
as of June 30, 2004(3) 9 of 130 9 of 105 11 of 81 5 of 33(2) --
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(1) Fund returns and rankings would have been lower if management fees had not
been waived from 8/1/97 to 7/31/98. Beginning on 8/1/98, management fees
were phased in at a rate of 0.10% each month until 12/1/98.
(2) Since 8/31/84, the date nearest the fund's inception for which data are
available.
(3) Lipper rankings are based on average annual total returns for the fund in
a given category for the periods indicated.
PORTFOLIO COMPOSITION BY CREDIT RATING
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
5/31/04 11/30/03
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A-1+ 73% 84%
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A-1 27% 16%
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Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
PORTFOLIO COMPOSITION BY MATURITY
--------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
5/31/04 11/30/03
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1-30 days 89% 80%
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31-90 days -- --
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91-180 days 5% 8%
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More than 180 days 6% 12%
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YIELDS AS OF MAY 31, 2004
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7-DAY CURRENT YIELD
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0.71%
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7-DAY EFFECTIVE YIELD
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0.72%
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7-DAY TAX-EQUIVALENT CURRENT YIELDS*
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25.0% Tax Bracket 0.95%
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28.0% Tax Bracket 0.99%
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33.0% Tax Bracket 1.06%
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35.0% Tax Bracket 1.09%
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*The tax brackets indicated are for federal taxes only.
Actual tax-equivalent yields may be lower, if alternative minimum tax is
applicable.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. To obtain performance data current to the most recent month end, please
call 1-800-345-2021 or visit americancentury.com.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
The 7-day current yield more closely reflects the current earnings of the fund
than the total return.
------
2
Tax-Free Money Market - Portfolio Commentary
BY ALAN KRUSS, PORTFOLIO MANAGER
PERFORMANCE SUMMARY
Tax-Free Money Market returned 0.64% for the year ended May 31, 2004. This
return compares very favorably with the 0.38% average return of the 131 funds in
Lipper's "Tax-Exempt Money Market Funds" category, ranking the fund in the top
10% of the Lipper peers. Tax-Free Money Market also ranks in the top 10% for the
5-year period, and in the top 14% for the 10-year period ended May 31 (see the
previous page for performance numbers).
ECONOMIC & MARKET REVIEW
After falling sharply early in the fiscal year, municipal money market yields
rose overall for the rest of the period. Later in the period, the economy picked
up steam, job growth surged, and inflation began to increase. The rate of U.S.
economic growth spiked to 8.2% in the third quarter of 2003, then ran at a very
average 4% rate during the next two quarters. With the economy finding its feet,
companies began hiring--an estimated 947,000 jobs were added from March through
May 2004. This spurt in job growth, plus a sharp rise in core consumer prices,
bolstered expectations that the Federal Reserve (The Fed) would raise interest
rates as early as June. (The Fed did, in fact, raise rates on June 30th.)
PORTFOLIO STRATEGY
Tax-Free Money Market's 7-day current yield averaged 0.64% during the fiscal
year, finishing at 0.71% on May 31. Tax-Free Money Market's WAM (weighted
average maturity) averaged 39 days during the period, ending at 35 days on May
31.
The majority of the portfolio's holdings remained in variable rate demand notes
(VRDNs)--very short-term, floating-rate municipal notes, whose yields in recent
years have been competitive with those on one-year muni notes. The advantage of
VRDNs is that when rates are rising, their short maturities allow us to move
quickly into higher-yielding securities, giving Tax-Free Money Market's yield a
boost.
We increased the portfolio's VRDNs from 79% in February to 86% in March, until
they reached 87% in April. We did this to take advantage of rising yields that
typically occur around tax time--as demand for muni money market securities
falls, rates rise. We were well positioned to take advantage of this situation.
We also kept an eye out for attractive deals on longer-term securities to boost
yields--for example, early in May we bought some North Carolina COPs
(Certificates of Participation) with attractive yields, maturing in June of
2005.
LOOKING AHEAD
With the economy picking up steam, the Federal Reserve is widely expected to
raise interest rates at least several more times before the end of the year.
Since the markets have already priced in the anticipation of at least 100 basis
points of higher rates by year's end, we will look to add some longer-term notes
or bonds to offset the floaters which are the portfolio's mainstay. We currently
plan to keep the bulk of assets in VRDNs, so Tax-Free Money Market should be
positioned to take swift advantage of rising interest rates looming on the
horizon.
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3
Tax-Free Money Market - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
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MUNICIPAL SECURITIES -- 100.0%
ALABAMA -- 2.6%
--------------------------------------------------------------------------------
$2,900 Anniston Industrial Development
Board Rev., (Hunjan Moulded
Products Ltd.), VRDN, 1.31%,
6/3/04 (LOC: AmSouth Bank) $ 2,900
--------------------------------------------------------------------------------
4,200 Brundidge Combined Utilities Rev.,
Series 2002 A, VRDN, 1.26%,
6/3/04 (LOC: SouthTrust Bank N.A.) 4,200
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7,100
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ARIZONA -- 1.3%
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3,500 Pinal County Industrial
Development Auth. Solid Waste
Disposal Rev., (S & T Dairy LLC),
VRDN, 1.31%, 6/3/04
(LOC: Wells Fargo Bank N.A.) 3,500
--------------------------------------------------------------------------------
CALIFORNIA -- 12.1%
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1,645 Alameda County Industrial
Development Auth. Rev.,
(Design Workshops), VRDN,
1.33%, 6/3/04 (LOC: Wells
Fargo Bank N.A.) 1,645
--------------------------------------------------------------------------------
4,000 California Rev. Anticipation Notes,
Series 2003 A1, 2.00%, 6/23/04
(LOC: HSH Nordbank AG) 4,002
--------------------------------------------------------------------------------
4,000 California Rev. Anticipation
Warrants, Series 2003 A, 2.00%,
6/16/04 (FWPA) 4,001
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9,165 Roaring Fork Municipal Products
LLC Rev., VRDN, 1.31%, 6/3/04
(SBBPA: Bank of New York)
(Acquired 9/19/02, Cost $9,165)(1) 9,165
--------------------------------------------------------------------------------
11,500 San Bernardino County Housing
Auth. Rev., Series 2002 C, VRDN,
1.11%, 6/1/04 (XLCA) 11,500
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3,000 San Bernardino County Multifamily
Housing Auth. Rev., Series 1990 A,
(Highland Hills), 1.625%, 8/11/04
(GIC: FHLB) (Acquired 4/23/04,
Cost $3,007)(1) 3,007
--------------------------------------------------------------------------------
33,320
--------------------------------------------------------------------------------
COLORADO -- 3.3%
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3,340 Arvada Water Enterprise Rev.,
VRDN, 1.25%, 6/1/04 (FSA)
(SBBPA: Dexia Credit Local) 3,340
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5,800 Colorado Housing & Finance Auth.
Rev., (Kroger Co.), VRDN, 1.21%,
6/3/04 (LOC: U.S. Bank Trust N.A.) 5,800
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9,140
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FLORIDA -- 12.7%
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1,550 Broward County Educational
Facilities Auth. Rev., Series 2004 A,
(Nova Southeastern), 2.00%,
4/1/05 (AMBAC) 1,559
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Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$ 800 Broward County Health Facilities
Auth. Rev., (John Knox Village),
VRDN, 1.15%, 6/1/04 (RADIAN)
(SBBPA: LaSalle Bank N.A.) $ 800
--------------------------------------------------------------------------------
2,200 Collier County Industrial
Development Auth. Rev., Series
1999 C, (Community Health Care),
VRDN, 1.15%, 6/3/04 (LOC:
Wachovia Bank N.A.) 2,200
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1,610 Duval County Housing Finance Auth.
Rev., (Camri Green Apartments),
VRDN, 1.11%, 6/3/04 (FNMA) 1,610
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500 Escambia County Health Facilities
Auth. Rev., Series 2003 A, (Azalea
Trace Inc.), VRDN, 1.20%,
6/1/04 (RADIAN) (SBBPA: Bank
of America N.A.) 500
--------------------------------------------------------------------------------
4,905 Florida Housing Finance Agency
Multifamily Rev., (Country Club),
VRDN, 1.12%, 6/3/04 (LOC: FHLMC) 4,905
--------------------------------------------------------------------------------
3,700 Florida Housing Finance Agency
Multifamily Rev., (Woodlands),
VRDN, 1.14%, 6/2/04 (LOC:
Northern Trust Company) 3,700
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4,975 Florida Housing Finance Agency
Rev., VRDN, 1.20%, 6/3/04 (SBBPA:
Merrill Lynch Capital Services)
(Acquired 2/6/04-4/19/04,
Cost $4,975)(1) 4,975
--------------------------------------------------------------------------------
1,900 Hillsborough County Industrial
Development Auth. Rev., (Seaboard
Tampa), VRDN, 1.28%, 6/2/04
(LOC: Wachovia Bank N.A.) 1,900
--------------------------------------------------------------------------------
1,050 Jacksonville Health Facilities
Auth. Rev., (Genesis Rehabilitation
Hospital), VRDN, 1.09%, 6/1/04
(LOC: Bank of America N.A.) 1,050
--------------------------------------------------------------------------------
2,920 Manatee County Housing Finance
Auth. Rev., Series 2003 A, (Village
at Cortez Apartments), VRDN, 1.12%,
6/3/04 (LOC: Bank of America N.A.) 2,920
--------------------------------------------------------------------------------
6,099 Miami Health Facilities Auth. Rev.,
VRDN, 1.16%, 6/3/04 (SBBPA:
Westdeutsche Landesbank AG)
(Acquired 1/29/04-4/19/04,
Cost $6,099)(1) 6,099
--------------------------------------------------------------------------------
1,650 Orange County Housing Finance
Auth. Multifamily Guaranteed
Mortgage Rev., Series 1989 A,
(Sundown Association II), VRDN,
1.16%, 6/2/04 (LOC: Northern
Trust Company) 1,650
--------------------------------------------------------------------------------
1,000 Seminole County Industrial
Development Auth. Rev., VRDN,
1.26%, 6/3/04 (LOC: Bank of
America N.A.) 1,000
--------------------------------------------------------------------------------
34,868
--------------------------------------------------------------------------------
GEORGIA -- 2.1%
--------------------------------------------------------------------------------
1,300 City of Atlanta Rev., Series 2002 C,
VRDN, 1.08%, 6/1/04 (FSA)
(SBBPA: Dexia Credit Local) 1,300
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
4
Tax-Free Money Market - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$2,725 Fulton County Development
Auth. Industrial Rev., VRDN,
1.20%, 6/15/04 (CRP: Automatic
Data Processing) $ 2,725
--------------------------------------------------------------------------------
765 Fulton County Development
Auth. Rev., (Darby Printing Co.),
VRDN, 1.42%, 6/2/04
(LOC: Wachovia Bank N.A.) 765
--------------------------------------------------------------------------------
1,000 Fulton Dekalb Hospital Auth.
Rev., 4.00%, 1/1/05 1,016
--------------------------------------------------------------------------------
5,806
--------------------------------------------------------------------------------
IDAHO -- 1.1%
--------------------------------------------------------------------------------
3,000 Lincoln County Industrial
Development Corp. Rev.,
(Double A Dairy), VRDN,
1.31%, 6/3/04 (LOC: Bank
of America N.A.) 3,000
--------------------------------------------------------------------------------
INDIANA -- 10.2%
--------------------------------------------------------------------------------
2,800 Jasper County Industrial
Development Rev., (Newberry
Farms LLC), VRDN, 1.31%, 6/3/04
(LOC: Bank of the West) 2,800
--------------------------------------------------------------------------------
6,500 La Porte Industrial Development
Rev., (KKO Realty), VRDN, 1.31%,
6/3/04 (LOC: Bank of New York) 6,500
--------------------------------------------------------------------------------
1,655 Morgan County Rev., Series
2002 A, (Morgan Hospital &
Medical Center), VRDN, 1.19%,
6/3/04 (LOC: Fifth Third Bank) 1,655
--------------------------------------------------------------------------------
12,330 Morgan County Rev., Series
2002 B, (Morgan Hospital &
Medical Center), VRDN, 1.19%,
6/3/04 (LOC: Fifth Third Bank) 12,330
--------------------------------------------------------------------------------
4,750 Vincennes Economic Development
Rev., (Grandview Care Inc.),
VRDN, 1.30%, 6/3/04
(LOC: Bank One N.A.) 4,750
--------------------------------------------------------------------------------
28,035
--------------------------------------------------------------------------------
KENTUCKY -- 0.7%
--------------------------------------------------------------------------------
1,000 Murray Industrial Building Rev.,
(Kroger Co.), VRDN, 1.22%,
6/3/04 (LOC: U.S. Bank N.A.) 1,000
--------------------------------------------------------------------------------
1,000 Winchester Industrial Building Rev.,
(Kroger Co.), VRDN, 1.21%, 6/3/04
(LOC: U.S. Bank N.A.) 1,000
--------------------------------------------------------------------------------
2,000
--------------------------------------------------------------------------------
LOUISIANA -- 1.0%
--------------------------------------------------------------------------------
2,800 Louisiana Local Government
Environmental Facilities &
Community Development Auth.
Rev., (Trinity Episcopal School),
VRDN, 1.17%, 6/2/04
(LOC: SunTrust Bank) 2,800
--------------------------------------------------------------------------------
MAINE -- 0.7%
--------------------------------------------------------------------------------
2,000 Town of Gorham Obligation
Securities Rev., (Pettingill Group),
VRDN, 1.35%, 6/2/04
(LOC: Fleet National Bank) 2,000
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
MICHIGAN -- 1.1%
--------------------------------------------------------------------------------
$3,000 Michigan Municipal Bond Auth.
Rev., (Local Government Loan
Program-State Qualified),
3.00%, 5/1/05 (AMBAC) $ 3,045
--------------------------------------------------------------------------------
MINNESOTA -- 2.7%
--------------------------------------------------------------------------------
7,340 Dakota County Community
Development Agency Rev.,
(Catholic Finance Corp.),
VRDN, 1.21%, 6/2/04
(LOC: U.S. Bank N.A.) 7,340
--------------------------------------------------------------------------------
MISSOURI -- 6.6%
--------------------------------------------------------------------------------
7,355 Kansas City Tax Allocation Rev.,
Series 2003 A, (Chouteau I-35),
VRDN, 1.26%, 6/3/04 (MBIA)
(SBBPA: JPMorgan Chase Bank) 7,355
--------------------------------------------------------------------------------
9,700 Missouri State Health & Educational
Facilities Auth. Rev., (Pembroke
Hill School), VRDN, 1.22%, 6/3/04
(LOC: Commerce Bank N.A.) 9,700
--------------------------------------------------------------------------------
1,000 Platte County COP, 4.00%, 3/1/05 1,020
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18,075
--------------------------------------------------------------------------------
MULTI-STATE -- 8.4%
--------------------------------------------------------------------------------
17,395 Koch Floating Rate Trust Rev.,
Series 2000-1, VRDN, 1.31%,
6/3/04 (AMBAC) (SBBPA: State
Street Bank & Trust Co.)
(Acquired 5/2/00-3/25/04,
Cost $17,395)(1) 17,395
--------------------------------------------------------------------------------
5,709 Koch Floating Rate Trust Rev.,
Series 2001-1, VRDN, 1.31%,
6/3/04 (AMBAC) (SBBPA: State
Street Bank & Trust Co.)
(Acquired 11/4/02-6/16/03,
Cost $5,709)(1) 5,709
--------------------------------------------------------------------------------
23,104
--------------------------------------------------------------------------------
NEVADA -- 1.3%
--------------------------------------------------------------------------------
3,700 Clark County Economic
Development Rev., (Lutheran
Secondary School Association),
VRDN, 1.32%, 6/3/04
(LOC: Allied Irish Bank plc) 3,700
--------------------------------------------------------------------------------
NEW JERSEY -- 0.5%
--------------------------------------------------------------------------------
1,500 New Jersey Economic Development
Auth. Rev., (Erasteel Inc.), VRDN,
1.33%, 6/3/04 (LOC: Svenska
Handelsbanken) 1,500
--------------------------------------------------------------------------------
NEW MEXICO -- 1.0%
--------------------------------------------------------------------------------
1,200 Farmington Pollution Control Rev.,
Series 1994 B, (Arizona Public
Service Company), VRDN, 1.08%,
6/1/04 (LOC: Barclays Bank plc) 1,200
--------------------------------------------------------------------------------
1,500 New Mexico Finance Auth. Rev.,
Series 2004 A, (University of
New Mexico Health), 2.00%,
4/1/05 (MBIA) 1,512
--------------------------------------------------------------------------------
2,712
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See Notes to Financial Statements. (continued)
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5
Tax-Free Money Market - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
NORTH CAROLINA -- 2.2%
--------------------------------------------------------------------------------
$6,000 State of North Carolina COP, Series
2004 B, (Repair & Renovation),
2.00%, 6/1/05 $ 6,033
--------------------------------------------------------------------------------
OREGON -- 5.9%
--------------------------------------------------------------------------------
13,100 Port of Portland Public Grain
Elevator Rev., (Columbia Grain Inc.),
VRDN, 1.28%, 6/3/04
(LOC: Wachovia Bank, N.A.) 13,100
--------------------------------------------------------------------------------
3,000 State of Oregon GO Tax Anticipation
Notes, 2.25%, 11/15/04 3,016
--------------------------------------------------------------------------------
16,116
--------------------------------------------------------------------------------
TENNESSEE -- 7.3%
--------------------------------------------------------------------------------
7,880 Bradley County Industrial
Development Board Rev.,
(Kroger Co.), VRDN, 1.21%,
6/3/04 (LOC: U.S. Bank N.A.) 7,880
--------------------------------------------------------------------------------
1,000 Clarksville Public Building Auth.
Pooled Financing Rev., Series 2003,
(Tennessee Municipal Bond Fund),
VRDN, 1.09%, 6/1/04
(LOC: Bank of America N.A.) 1,000
--------------------------------------------------------------------------------
700 Cookeville Industrial Development
Board Rev., Series 2001 A,
(Advocacy & Resources Project),
VRDN, 1.21%, 6/3/04
(LOC: AmSouth Bank) 700
--------------------------------------------------------------------------------
2,300 Knox County Industrial Development
Board Rev., (Kroger Co.),
VRDN, 1.21%, 6/3/04
(LOC: U.S. Bank Trust N.A.) 2,300
--------------------------------------------------------------------------------
8,200 Shelby County Health
Educational & Housing Facilities
Board Rev., (Kings Daughter
& Sons), VRDN, 1.21%, 6/3/04
(LOC: AmSouth Bank) 8,200
--------------------------------------------------------------------------------
20,080
--------------------------------------------------------------------------------
TEXAS -- 12.7%
--------------------------------------------------------------------------------
5,090 Galveston County Housing
Finance Corp. Rev., (Village
by the Apartments), VRDN,
1.15%, 6/3/04 (FNMA) 5,090
--------------------------------------------------------------------------------
5,500 Gulf Coast Industrial Development
Auth. Rev., (Petrounited Term Inc.),
VRDN, 1.20%, 6/3/04
(LOC: Bank One Texas N.A.) 5,500
--------------------------------------------------------------------------------
9,835 Roaring Fork Municipal Products
LLC Rev., VRDN, 1.21%, 6/3/04
(SBBPA: Bank of New York)
(Acquired 9/19/02, Cost $9,835)(1) 9,835
--------------------------------------------------------------------------------
4,180 San Antonio Education Facilities
Corp. Rev., Series 2004 A,
(Phase 1 Dormitory), 1.17%,
6/3/04 (LOC: Allied Irish Bank plc) 4,180
--------------------------------------------------------------------------------
10,300 Texas Tax & Revenue Anticipation
Notes, 2.00%, 8/31/04 10,322
--------------------------------------------------------------------------------
34,927
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
VERMONT -- 0.7%
--------------------------------------------------------------------------------
$2,000 Vermont Industrial Development
Auth. Rev., (Central Public Service
Corp.), VRDN, 1.20%, 6/15/04
(LOC: Citizens Bank of MA) $ 2,000
--------------------------------------------------------------------------------
WASHINGTON -- 1.8%
--------------------------------------------------------------------------------
1,015 Pierce County Economic
Development Corporate Rev.,
(K & M Holdings II), VRDN,
1.40%, 6/2/04 (LOC: Wells Fargo
Bank, N.A.) (Acquired 11/17/97,
Cost $1,015)(1) 1,015
--------------------------------------------------------------------------------
1,400 Snohomish County Edmonds
School District No. 15 GO, Series
2003 B, 5.00%, 6/1/04 (FSA/
School Board Guaranteed) 1,400
--------------------------------------------------------------------------------
2,400 Washington Housing Finance
Commission Nonprofit Rev.,
(YMCA Columbia/Willamette),
VRDN, 1.14%, 6/3/04
(LOC: Wells Fargo Bank, N.A.) 2,400
--------------------------------------------------------------------------------
4,815
--------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0% $275,016
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
CRP = Corporate Guarantee
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance, Inc.
FWPA = Forward Warrant Purchase Agreement
GIC = Guaranteed Investment Contract
GO = General Obligation
LOC = Letter of Credit
MBIA = MBIA Insurance Corporation
RADIAN = Radian Asset Assurance, Inc.
SBBPA = Standby Bond Purchase Agreement
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective May 31, 2004.
XLCA = XL Capital Ltd.
(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 May 31, 2004, was $57,200
(in thousands), which represented 20.7% of net assets. As of May 31, 2004,
none of the restricted securities were considered illiquid.
See Notes to Financial Statements.
------
6
Tax-Free Bond - Performance
TOTAL RETURNS AS OF MAY 31, 2004
-----------------------------------
AVERAGE ANNUAL RETURNS
-----------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-----------------------------------------------------------------------------------------------
INVESTOR CLASS -0.79% 5.13% 5.47% 5.66% 3/2/87
-----------------------------------------------------------------------------------------------
LEHMAN BROTHERS MUNICIPAL
5-YEAR GO INDEX -0.22% 5.04% 5.48% 5.87%(1) --
-----------------------------------------------------------------------------------------------
AVERAGE RETURN OF
LIPPER'S INTERMEDIATE
MUNICIPAL DEBT FUNDS -0.70% 4.57% 5.23% 5.91%(2) --
-----------------------------------------------------------------------------------------------
Fund's Lipper Ranking
as of May 31, 2004(3) 74 of 149 12 of 96 16 of 67 8 of 11(2) --
-----------------------------------------------------------------------------------------------
Fund's Lipper Ranking
as of June 30, 2004(3) 77 of 150 15 of 96 17 of 67 8 of 11(2) --
-----------------------------------------------------------------------------------------------
Institutional Class -0.60%% -- -- 2.24% 4/15/03
-----------------------------------------------------------------------------------------------
(1) Since 2/28/87, the date nearest the Investor Class's inception
for which data are available.
(2) Since 3/31/87, the date nearest the Investor Class's inception
for which data are available.
(3) Lipper rankings are based on average annual total returns for the
fund in a given category for the periods indicated.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made May 31, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended May 31
------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
------------------------------------------------------------------------------------------------
Investor Class 7.04% 4.12% 6.29% 7.60% 4.07% 0.44% 10.77% 6.45% 9.31% -0.79%
------------------------------------------------------------------------------------------------
Lehman Bros.
Muni 5-Year
GO Index 6.89% 4.74% 6.08% 6.95% 4.90% 0.65% 10.17% 6.33% 8.72% -0.22%
------------------------------------------------------------------------------------------------
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund'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.
------
7
Tax-Free Bond - Portfolio Commentary
BY KENNETH SALINGER, PORTFOLIO MANAGER
PERFORMANCE SUMMARY
Tax-Free Bond returned -0.79%* for the 12 months ended May 31, 2004. By
comparison, the average return of the 149 Intermediate Municipal Debt Funds
tracked by Lipper Inc. was -0.70%. (See the previous page for additional
details.)
During the majority of the performance period, we emphasized strategies
that we believed would hold up well in light of our expectations for bond
yields to rise as the U.S. economy improved. Although we were right on the
money with regard to economic improvements, we weren't quite as accurate
when it came to forecasting when the rise in bond yields would occur.
Since we're after long-term results, however, we maintained Tax-Free Bond's
positioning and expect our employed strategies to pay off in the times ahead.
From a long-term results standpoint, Tax-Free Bond ranked among the top 25% or
better of its Lipper peer group for the five- and 10-year periods ended May 31,
2004.
ECONOMIC BACKDROP
Turning to the U.S. economy, growth (as measured by seasonally adjusted real
gross domestic product) surged to an 8.2% annualized pace during the third
quarter of 2003, marking the fastest three-month rate in almost two decades.
Activity moderated thereafter but nevertheless finished the first quarter of
2004 at 3.9%.
In addition, labor-market conditions improved, providing what had previously
been a key missing ingredient. Upbeat monthly employment reports, specifically
for March and April, helped to underscore that notion and drive up expectations
for better economic times ahead.
On the inflation front, prices rose from well-behaved levels. As measured by the
consumer price index for all urban consumers (and excluding food and energy
components), inflation increased at a 2.9% seasonally adjusted annual rate for
the first five months of 2004, compared with a very modest 1.1% for all of 2003
INTEREST RATE AND MARKET BACKDROP
As the economy and labor market improved, the outlook for short-term interest
rates switched directions. In June 2003, the Federal Reserve reduced its main
interest rate benchmark to a better than four-decade low of 1.0%. In subsequent
post-meeting statements, the Fed drummed up expectations that short-term
interest rates could be maintained at such levels for the near future, which
helped municipal bond yields to trend generally lower before bottoming in
mid-March 2004.
YIELDS AS OF MAY 31, 2004
--------------------------------------------------------------------------------
30-DAY SEC YIELD
--------------------------------------------------------------------------------
Investor Class 2.94%
--------------------------------------------------------------------------------
Institutional Class 3.13%
--------------------------------------------------------------------------------
INVESTOR CLASS 30-DAY TAX-EQUIVALENT YIELDS(1)
--------------------------------------------------------------------------------
25.0% Tax Bracket 3.92%
--------------------------------------------------------------------------------
28.0% Tax Bracket 4.08%
--------------------------------------------------------------------------------
33.0% Tax Bracket 4.39%
--------------------------------------------------------------------------------
35.0% Tax Bracket 4.52%
--------------------------------------------------------------------------------
(1) The tax brackets indicated are for federal taxes only.
Actual tax-equivalent yields may be lower, if alternative minimum tax is
applicable.
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
------
8
Tax-Free Bond - Portfolio Commentary
Bond prices fell and yields rose sharply after that, however, thanks in part to
Fed comments about the eventual need for higher interest rates in light of the
improved economic backdrop and job-producing labor market.
The net result for the 12 months was that municipal bond prices fell across
the board, with yields on bonds maturing in four and five years generally
increasing the most and by as much as 100 basis points (1.00%).
Falling prices and rising yields translated into a lackluster performance from a
return standpoint; the Lehman Brothers Municipal 5-Year GO Index returned -0.22%
for the fiscal year, compared with its 10-year average annual return of 5.48%
PORTFOLIO STRATEGIES
With that backdrop in mind, we employed several strategies that we felt would
boost performance. First, we occasionally established what we believed to be a
conservatively low sensitivity to interest rates. That generally helped to limit
losses when bond yields rose, but dampened gains when yields fell.
In addition, we continued to emphasize bonds rated AAA and AA. As shown in the
Portfolio Composition by Credit Rating table at top right, 85% of the portfolio
was in such securities both six months ago and at the end of May.
Lastly, we looked for what we believed were attractive opportunities based on
supply and demand fluctuations within and between the various states. Over the
last six months, part of the net effect of that strategy was to increase the
portfolio's exposure to Arizona bonds and to decrease its exposure to bonds from
states such as California and Washington.
PORTFOLIO COMPOSITION BY CREDIT RATING
--------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
5/31/04 11/30/03
--------------------------------------------------------------------------------
AAA 72% 72%
--------------------------------------------------------------------------------
AA 13% 13%
--------------------------------------------------------------------------------
A 8% 7%
--------------------------------------------------------------------------------
BBB 7% 8%
--------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
TOP FIVE STATES
AS OF MAY 31, 2004
--------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
5/31/04 11/30/03
--------------------------------------------------------------------------------
California 9.4% 11.6%
--------------------------------------------------------------------------------
Arizona 8.9% 5.7%
--------------------------------------------------------------------------------
Washington 8.4% 9.2%
--------------------------------------------------------------------------------
Texas 7.2% 6.3%
--------------------------------------------------------------------------------
New York 6.3% 6.6%
--------------------------------------------------------------------------------
------
9
Tax-Free Bond - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 97.0%
ALABAMA -- 1.6%
--------------------------------------------------------------------------------
$1,000 Alabama Board of Education Rev.,
(Shelton State Community College),
6.00%, 10/1/04, Prerefunded at
102% of Par (MBIA)(1) $ 1,036
--------------------------------------------------------------------------------
865 Alabama Water Pollution Control
Auth. Rev., 5.75%, 8/15/18 (AMBAC) 943
--------------------------------------------------------------------------------
1,000 East Central Industrial Development
Auth. Rev., 5.25%, 9/1/13 (AMBAC) 1,077
--------------------------------------------------------------------------------
1,875 Helena Utilities Board Water & Sewer
Rev., 5.75%, 4/1/20 (MBIA) 2,042
--------------------------------------------------------------------------------
1,435 Helena Utilities Board Water & Sewer
Rev., 5.75%, 4/1/22 (MBIA) 1,553
--------------------------------------------------------------------------------
1,250 Huntsville Health Care Auth. Rev.,
Series 2002 A, 3.80%, 6/1/06 (MBIA) 1,288
--------------------------------------------------------------------------------
1,500 Montgomery Waterworks & Sanitary
Sewer Board Rev., Series 2002 A,
5.00%, 9/1/04 (AMBAC) 1,514
--------------------------------------------------------------------------------
9,453
--------------------------------------------------------------------------------
ALASKA -- 0.5%
--------------------------------------------------------------------------------
1,670 Alaska Energy Auth. Power Rev.,
Series 2000-4, (Bradley Lake),
5.50%, 7/1/04 (FSA) 1,676
--------------------------------------------------------------------------------
1,000 Alaska Energy Auth. Power Rev.,
Series 2000-4, (Bradley Lake),
5.50%, 7/1/05 (FSA) 1,043
--------------------------------------------------------------------------------
2,719
--------------------------------------------------------------------------------
ARIZONA -- 8.9%
--------------------------------------------------------------------------------
1,000 Arizona Tourism & Sports Auth. Rev.,
(Baseball Training Facilities), 5.00%,
7/1/11 1,044
--------------------------------------------------------------------------------
1,000 Arizona Tourism & Sports Auth. Rev.,
(Baseball Training Facilities), 5.00%,
7/1/12 1,037
--------------------------------------------------------------------------------
2,925 Chandler Water & Sewer Rev.,
4.50%, 7/1/06 (FSA) 3,069
--------------------------------------------------------------------------------
2,130 Energy Management Services LLC
Rev., (Arizona State University -- Main
Campus), 4.50%, 7/1/12 (MBIA) 2,239
--------------------------------------------------------------------------------
1,000 Glendale Water & Sewer Rev.,
5.00%, 7/1/06 (FGIC) 1,059
--------------------------------------------------------------------------------
4,000 Maricopa County Community
College District GO, Series 1997 B,
5.00%, 7/1/12 4,277
--------------------------------------------------------------------------------
1,155 Maricopa County Gilbert Unified
School District No. 41 GO, 5.75%,
7/1/11 (FSA) 1,311
--------------------------------------------------------------------------------
2,415 Maricopa County Saddle Mountain
Unified School District No. 90 GO,
Series 2003 A, 5.25%, 7/1/11 2,571
--------------------------------------------------------------------------------
2,000 Maricopa County Saddle Mountain
Unified School District No. 90 GO,
Series 2003 A, 5.25%, 7/1/12 2,120
--------------------------------------------------------------------------------
1,000 Mohave County Community College
District Rev., (State Board of
Directors), 6.00%, 3/1/20 (MBIA) 1,102
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$5,890 Mohave County Industrial
Development Auth. Rev.,
Series 2004 A, (Mohave Prison),
5.00%, 4/1/13 (XLCA) $ 6,281
--------------------------------------------------------------------------------
4,155 Mohave County Industrial
Development Auth. Rev.,
Series 2004 A, (Mohave Prison),
5.00%, 4/1/14 (XLCA) 4,401
--------------------------------------------------------------------------------
1,200 Pima County Indian Oasis-Baboquivari
Unified School District No. 40 GO,
Series 2002 A, 4.60%, 7/1/13 (MBIA) 1,257
--------------------------------------------------------------------------------
1,885 Pima County Sunnyside Unified
School District No. 12 GO, 3.50%,
7/1/13 (AMBAC) 1,790
--------------------------------------------------------------------------------
2,600 Pima County Tucson Unified School
District No. 1 GO, 4.625%, 7/1/13 2,727
--------------------------------------------------------------------------------
2,000 Pima County Tucson Unified School
District No. 1 GO, Series 1993 E,
5.25%, 7/1/04 (FGIC) 2,027
--------------------------------------------------------------------------------
1,500 Salt River Project Agricultural
Improvement and Power District
Electrical System Rev., Series
2001 A, 5.00%, 1/1/05 1,532
--------------------------------------------------------------------------------
3,085 South Tucson Municipal Property
Corp. Rev., 5.50%, 6/1/24 3,102
--------------------------------------------------------------------------------
4,500 Tempe Union High School District
No. 213 GO, 3.00%, 7/1/10 (FSA) 4,319
--------------------------------------------------------------------------------
6,230 Tempe Union High School District
No. 213 GO, 3.00%, 7/1/11 (FSA) 5,850
--------------------------------------------------------------------------------
53,115
--------------------------------------------------------------------------------
ARKANSAS -- 0.7%
--------------------------------------------------------------------------------
2,000 Fort Smith Sales and Use Tax Rev.,
Series 2001 A, 4.375%, 12/1/11 2,087
--------------------------------------------------------------------------------
1,300 Sebastian County Health Facilities
Board Hospital Rev., Series 2001 A,
(Sparks Regional Medical Center),
4.00%, 11/1/04 1,312
--------------------------------------------------------------------------------
905 Sebastian County Health Facilities
Board Hospital Rev., Series 2001 B,
(Sparks Regional Medical Center),
4.00%, 11/1/04 913
--------------------------------------------------------------------------------
4,312
--------------------------------------------------------------------------------
CALIFORNIA -- 7.0%
--------------------------------------------------------------------------------
5,000 California GO, 5.625%, 5/1/20 5,279
--------------------------------------------------------------------------------
1,000 California Public Works Board
Lease Rev., Series 1994 A,
(Various California State University
Projects), 6.20%, 10/1/08 1,033
--------------------------------------------------------------------------------
1,100 California Public Works Board
Lease Rev., Series 1994 A,
(Various University of California
Projects), 6.15%, 11/1/04 1,142
--------------------------------------------------------------------------------
1,000 California Statewide Communities
Development Auth. Rev.,
Series 2002 E, (Kaiser Permanente),
4.70%, 6/1/09 1,036
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
Tax-Free Bond - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$1,000 California Statewide Communities
Development Auth. Water &
Waste Rev., Series 2004 A,
(Pooled Financing Program),
5.00%, 10/1/11 (FSA)(2) $ 1,082
--------------------------------------------------------------------------------
1,075 California Statewide Communities
Development Auth. Water &
Waste Rev., Series 2004 A,
(Pooled Financing Program),
5.00%, 10/1/12 (FSA)(2) 1,162
--------------------------------------------------------------------------------
2,000 California Statewide Communities
Development Auth. Water &
Waste Rev., Series 2004 A,
(Pooled Financing Program),
5.25%, 10/1/19 (FSA)(2) 2,108
--------------------------------------------------------------------------------
1,615 Campbell COP, (Civic Center),
5.83%, 10/1/31 (AMBAC)(3) 337
--------------------------------------------------------------------------------
1,615 Campbell COP, (Civic Center),
5.83%, 10/1/32 (AMBAC)(3) 318
--------------------------------------------------------------------------------
520 City of Salinas COP, Series
2004 A, (Monterey Street Parking
Structure), 4.25%, 9/1/18 (AMBAC) 497
--------------------------------------------------------------------------------
595 City of Salinas COP, Series
2004 A, (Monterey Street Parking
Structure), 4.50%, 9/1/21 (AMBAC) 565
--------------------------------------------------------------------------------
4,000 Golden State Tobacco Securitization
Corp. Rev., Series 2003 A1,
5.00%, 6/1/21 3,900
--------------------------------------------------------------------------------
3,000 Imperial Irrigation District COP,
(Water Systems), 5.50%,
7/1/29 (AMBAC) 3,109
--------------------------------------------------------------------------------
2,145 San Francisco Uptown Parking
Corporation Rev., (Union Square),
5.50%, 7/1/15 (MBIA) 2,328
--------------------------------------------------------------------------------
1,000 San Francisco Uptown Parking
Corporation Rev., (Union Square),
6.00%, 7/1/20 (MBIA) 1,112
--------------------------------------------------------------------------------
2,000 San Francisco Uptown Parking
Corporation Rev., (Union Square),
6.00%, 7/1/31 (MBIA) 2,166
--------------------------------------------------------------------------------
4,475 San Jose Redevelopment Agency
Tax Allocation Rev., Series 2004 A,
(Merged Area Redevelopment),
5.00%, 8/1/09 (MBIA) 4,833
--------------------------------------------------------------------------------
3,400 Santa Barbara Redevelopment
Agency Tax Allocation Rev.,
Series 1995 A, (Central City
Redevelopment), 6.00%,
3/1/08 (AMBAC) 3,729
--------------------------------------------------------------------------------
1,500 Saratoga Union School District
GO, (Capital Appreciation),
5.70%, 9/1/28 (FSA)(3) 385
--------------------------------------------------------------------------------
5,000 University of California Rev.,
Series 2002 O, (Multiple Purpose
Projects), 4.50%, 9/1/15 (FGIC) 5,092
--------------------------------------------------------------------------------
41,213
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
COLORADO -- 3.3%
--------------------------------------------------------------------------------
$1,100 Arapahoe County Water &
Wastewater Public Improvement
District GO, Series 2002 B, 5.75%,
12/1/17 (MBIA) $ 1,227
--------------------------------------------------------------------------------
500 Colorado Water Resources & Power
Development Auth. Clean Water Rev.,
Series 2000 A, 6.25%, 9/1/16 565
--------------------------------------------------------------------------------
2,835 Douglas County School District
No. RE-1 GO, (Douglas & Elbert
Counties Building), Series
2002 B, 5.75%, 12/15/17 (FSA/State
Aid Withholding) 3,162
--------------------------------------------------------------------------------
490 Eagle Bend Metropolitan District
No. 2 GO, 4.00%, 12/1/10 (RADIAN) 494
--------------------------------------------------------------------------------
535 Eagle Bend Metropolitan District
No. 2 GO, 4.50%, 12/1/12 (RADIAN) 546
--------------------------------------------------------------------------------
560 Eagle Bend Metropolitan District
No. 2 GO, 4.50%, 12/1/13 (RADIAN) 565
--------------------------------------------------------------------------------
1,100 Eagle Bend Metropolitan District
No. 2 GO, 5.25%, 12/1/23 (RADIAN) 1,107
--------------------------------------------------------------------------------
1,950 Superior Metropolitan District No. 1
Water & Sewer Rev., Series 2000 A,
5.45%, 12/1/04 (LOC: Banque
Nationale de Paris SA) 1,983
--------------------------------------------------------------------------------
3,925 Superior Metropolitan District
No. 1 Water & Sewer Rev., Series
2000 B, 5.45%, 12/1/20
(LOC: Allied Irish Bank plc) 3,992
--------------------------------------------------------------------------------
5,000 University of Colorado Regents
COP, 6.00%, 12/1/22 (MBIA-IBC) 5,593
--------------------------------------------------------------------------------
19,234
--------------------------------------------------------------------------------
CONNECTICUT -- 0.7%
--------------------------------------------------------------------------------
1,880 Connecticut Development Auth. Rev.,
Series 1994 A, 6.375%, 10/15/24 1,948
--------------------------------------------------------------------------------
2,215 New Haven Air Rights Package
Facility Rev., 5.00%, 12/1/10
(AMBAC) 2,400
--------------------------------------------------------------------------------
4,348
--------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 1.4%
--------------------------------------------------------------------------------
1,385 District of Columbia GO, Series
1999 B, 5.50%, 6/1/09 (FSA) 1,524
--------------------------------------------------------------------------------
1,155 District of Columbia Rev.,
(Gonzaga College High School),
5.20%, 7/1/12 (FSA) 1,243
--------------------------------------------------------------------------------
6,170 District of Columbia Tobacco
Settlement Financing Corporation
Rev., 6.25%, 5/15/24 5,636
--------------------------------------------------------------------------------
8,403
--------------------------------------------------------------------------------
FLORIDA -- 1.2%
--------------------------------------------------------------------------------
2,585 Greater Orlando Aviation Auth. Rev.,
Series 2003 A, 5.00%, 10/1/13 (FSA) 2,785
--------------------------------------------------------------------------------
1,465 Martin County Health Facilities
Auth. Rev., Series 2002 A,
(Martin Memorial Medical Center),
3.60%, 11/15/05 1,489
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
11
Tax-Free Bond - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$1,500 Martin County Health Facilities
Auth. Rev., Series 2002 A,
(Martin Memorial Medical Center),
4.00%, 11/15/06 $ 1,541
--------------------------------------------------------------------------------
1,000 Orlando Utilities Commission
Water & Electric Rev., Series
1989 D, 6.75%, 10/1/17 1,207
--------------------------------------------------------------------------------
7,022
--------------------------------------------------------------------------------
GEORGIA -- 1.1%
--------------------------------------------------------------------------------
3,150 Atlanta Airport Rev., Series 2003
RF-A, 4.50%, 1/1/05 (MBIA) 3,207
--------------------------------------------------------------------------------
255 Georgia Municipal Electric Power
Auth. Rev., Series 1991 V, 6.50%,
1/1/09, Prerefunded at 100%
of Par (MBIA-IBC)(1) 288
--------------------------------------------------------------------------------
635 Georgia Municipal Electric Power
Auth. Rev., Series 1991 V, 6.50%,
1/1/12 (MBIA-IBC) 732
--------------------------------------------------------------------------------
110 Georgia Municipal Electric Power
Auth. Rev., Series 1991 V, 6.50%,
1/1/12 (MBIA-IBC)(1) 128
--------------------------------------------------------------------------------
2,030 La Grange Water & Sewer Rev.,
3.00%, 1/1/06 (AMBAC) 2,061
--------------------------------------------------------------------------------
6,416
--------------------------------------------------------------------------------
HAWAII -- 1.9%
--------------------------------------------------------------------------------
10,000 Hawaii GO, Series 1997 CN,
6.25%, 3/1/06 (FGIC) 10,723
--------------------------------------------------------------------------------
500 Maui County GO, Series 2000 A,
6.50%, 3/1/10, Prerefunded at
101% of Par (FGIC)(1) 587
--------------------------------------------------------------------------------
11,310
--------------------------------------------------------------------------------
IDAHO -- 0.2%
--------------------------------------------------------------------------------
1,000 Blaine County Hailey School District
No. 61 GO, 5.00%, 7/30/10 (AMBAC) 1,086
--------------------------------------------------------------------------------
ILLINOIS -- 6.1%
--------------------------------------------------------------------------------
2,000 Bedford Park GO, Series 2004 A,
5.25%, 12/15/20 (FSA) 2,098
--------------------------------------------------------------------------------
13,355 Chicago Board of Education GO,
5.50%, 12/1/10, Prerefunded at
100% of Par (FGIC)(1)(4) 14,948
--------------------------------------------------------------------------------
170 Chicago O'Hare International Airport
Rev., Series 1993 A, (Senior Lien),
4.80%, 1/1/05 173
--------------------------------------------------------------------------------
4,000 Chicago O'Hare International Airport
Rev., Series 1993 A, (Senior Lien),
5.00%, 1/1/12 (MBIA-IBC) 4,296
--------------------------------------------------------------------------------
2,170 Du Page Airport Auth. Rev., Series
2002 A, 3.00%, 2/1/06 (FGIC) 2,203
--------------------------------------------------------------------------------
2,000 Illinois Dedicated Tax Rev., (Civic
Center), 6.25%, 12/15/20 (AMBAC) 2,353
--------------------------------------------------------------------------------
595 Illinois Development Finance Auth.
Rev., Series 2001 B, (Midwestern
University), 5.00%, 5/15/08 623
--------------------------------------------------------------------------------
655 Illinois Development Finance Auth.
Rev., Series 2001 B, (Midwestern
University), 5.125%, 5/15/10 685
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$ 400 Illinois Development Finance Auth.
Rev., Series 2001 B, (Midwestern
University), 5.75%, 5/15/16 $ 418
--------------------------------------------------------------------------------
1,140 Illinois Health Facilities Auth.
Rev., Series 1992 C, (Evangelical
Hospital), 6.75%, 4/15/12(1) 1,329
--------------------------------------------------------------------------------
1,100 Illinois Health Facilities Auth. Rev.,
Series 2002 A, (Lake Forest
Hospital), 5.00%, 7/1/05 1,137
--------------------------------------------------------------------------------
1,000 Illinois Regional Transportation Auth.
Rev., Series 1990 A, 7.20%,
11/1/20 (AMBAC) 1,270
--------------------------------------------------------------------------------
930 Kane County Geneva Community
Unit School District No. 304 GO,
6.20%, 1/1/24 (FSA)(2) 1,050
--------------------------------------------------------------------------------
1,105 Ogle Lee & De Kalb Counties
Township High School District
No. 212 GO, 6.00%, 12/1/17 (MBIA) 1,245
--------------------------------------------------------------------------------
1,220 Ogle Lee & De Kalb Counties
Township High School District
No. 212 GO, 6.00%, 12/1/18 (MBIA) 1,374
--------------------------------------------------------------------------------
1,000 University of Illinois COP,
(Utility Infrastructure), 5.75%,
8/15/08 (MBIA) 1,106
--------------------------------------------------------------------------------
36,308
--------------------------------------------------------------------------------
INDIANA -- 1.5%
--------------------------------------------------------------------------------
1,005 Hamilton County Public Building
Corp. Rev., (First Mortgage), 4.00%,
1/20/05 (AMBAC) 1,022
--------------------------------------------------------------------------------
1,900 Indiana Health Facilities Financing
Auth. Hospital Rev., (Holy Cross
Health System Corp.), 5.375%,
12/2/12 (MBIA) 2,051
--------------------------------------------------------------------------------
220 Indiana Transportation Finance Auth.
Rev., Series 1990 A, 7.25%, 6/1/15(1) 263
--------------------------------------------------------------------------------
780 Indiana Transportation Finance Auth.
Rev., Series 1990 A, 7.25%, 6/1/15 969
--------------------------------------------------------------------------------
1,500 Mount Vernon of Hancock County
Multi-School Building Corp. Rev.,
Series 2001 B, (First Mortgage),
5.75%, 7/15/15 (AMBAC) 1,651
--------------------------------------------------------------------------------
1,650 Valparaiso Middle Schools Building
Corp. Rev., (First Mortgage),
5.75%, 7/15/11, Prerefunded at
100% of Par (FGIC)(1) 1,872
--------------------------------------------------------------------------------
1,000 Zionsville Community Schools
Building Corp. Rev., (First Mortgage),
5.75%, 7/15/15 (FGIC/State
Aid Withholding) 1,096
--------------------------------------------------------------------------------
8,924
--------------------------------------------------------------------------------
KANSAS -- 0.6%
--------------------------------------------------------------------------------
325 Kansas City Utility System Rev.,
6.375%, 9/1/04, Prerefunded at
102% of Par (FGIC)(1) 336
--------------------------------------------------------------------------------
675 Kansas City Utility System Rev.,
6.375%, 9/1/23 (FGIC) 696
--------------------------------------------------------------------------------
1,280 Wichita Hospital Facilities Rev.,
Series 2001 III, 5.25%, 11/15/13 1,350
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
12
Tax-Free Bond - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$1,195 Wichita Hospital Facilities Rev.,
Series 2001 III, 5.50%, 11/15/16 $ 1,252
--------------------------------------------------------------------------------
3,634
--------------------------------------------------------------------------------
LOUISIANA -- 1.0%
--------------------------------------------------------------------------------
2,000 Louisiana Public Facilities Auth. Rev.,
(University Hospital Facilities),
3.00%, 10/15/04 (FGIC) 2,012
--------------------------------------------------------------------------------
3,800 Louisiana Public Facilities Auth. Rev.,
(University Hospital Facilities),
3.00%, 10/15/05 (FGIC) 3,866
--------------------------------------------------------------------------------
5,878
--------------------------------------------------------------------------------
MARYLAND -- 2.9%
--------------------------------------------------------------------------------
4,180 Howard County GO, Series 2003 A,
(Consolidated Public Improvement),
4.00%, 8/15/07 4,376
--------------------------------------------------------------------------------
10,000 Maryland GO, (State and Local
Facilities Loan of 2003, Second
Series), 5.00%, 8/1/07 10,770
--------------------------------------------------------------------------------
1,795 Prince Georges County GO, Series
2003 B, (Consolidated Public
Improvement), 5.00%, 10/1/12 1,960
--------------------------------------------------------------------------------
17,106
--------------------------------------------------------------------------------
MASSACHUSSETTS -- 4.7%
--------------------------------------------------------------------------------
10,000 Commonwealth of Massachusetts
GO, Series 1996 A, 5.25%,
1/1/06, Prerefunded at 101% of
Par (MBIA)(1) 10,607
--------------------------------------------------------------------------------
10,000 Commonwealth of Massachusetts
GO, Series 2003 C, 5.00%,
12/1/07 (XLCA) 10,776
--------------------------------------------------------------------------------
5,000 Commonwealth of Massachusetts
GO, Series 2004 A, 5.00%, 8/1/07 5,346
--------------------------------------------------------------------------------
1,000 Massachusetts Health & Educational
Facilities Auth. Rev., Series 1992 F,
6.25%, 7/1/12 (AMBAC) 1,133
--------------------------------------------------------------------------------
27,862
--------------------------------------------------------------------------------
MICHIGAN -- 2.1%
--------------------------------------------------------------------------------
1,485 Grand Valley State University Rev.,
5.75%, 12/1/15 (FGIC) 1,636
--------------------------------------------------------------------------------
1,000 Michigan Hospital Finance Auth. Rev.,
Series 1999 A, (Ascension Health
Credit), 5.25%, 11/15/05 (MBIA) 1,051
--------------------------------------------------------------------------------
2,440 Michigan State Building Auth. Rev.,
(State Police Communications
System), 2.50%, 10/1/05 2,465
--------------------------------------------------------------------------------
2,010 Wayne Charter County Airport
Rev., Series 2002 C, 5.00%,
12/1/11 (FGIC) 2,175
--------------------------------------------------------------------------------
2,215 Wayne Charter County Airport
Rev., Series 2002 C, 5.375%,
12/1/13 (FGIC) 2,433
--------------------------------------------------------------------------------
2,335 Wayne Charter County Airport
Rev., Series 2002 C, 5.375%,
12/1/14 (FGIC) 2,548
--------------------------------------------------------------------------------
12,308
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
MISSOURI -- 1.6%
--------------------------------------------------------------------------------
$1,145 Jackson County Public Building
Corp. Rev., Series 2000 A, 6.00%,
11/1/18 $ 1,244
--------------------------------------------------------------------------------
1,775 Missouri Development Finance
Board Rev., Series 2000 A,
(Midtown Redevelopment),
5.75%, 4/1/22 (MBIA) 1,926
--------------------------------------------------------------------------------
3,000 Missouri Health & Educational
Facilities Auth. Rev., Series 1998 A,
(Park Lane Medical Center), 5.60%,
1/1/15 (MBIA) 3,277
--------------------------------------------------------------------------------
3,210 Springfield COP, (Greene County
Park), 3.50%, 12/1/04 3,244
--------------------------------------------------------------------------------
9,691
--------------------------------------------------------------------------------
NEVADA -- 2.0%
--------------------------------------------------------------------------------
1,000 Clark County School District GO,
Series 1997 B, (Building &
Renovation), 5.25%, 6/15/07,
Prerefunded at 101% of Par (FGIC)(1) 1,088
--------------------------------------------------------------------------------
3,295 Las Vegas Redevelopment Agency
Tax Increment Rev., Series 2003 A,
(Fremont Street), 4.50%, 6/15/10 3,297
--------------------------------------------------------------------------------
3,785 Las Vegas Redevelopment Agency
Tax Increment Rev., Series 2003 A,
(Fremont Street), 5.00%, 6/15/13 3,784
--------------------------------------------------------------------------------
1,550 Reno Senior Lien Sales and Room
Tax Rev., (ReTrac-Reno Transportation
Rail Access Corridor), 5.50%,
6/1/19 (AMBAC) 1,672
--------------------------------------------------------------------------------
1,865 Reno Senior Lien Sales and Room
Tax Rev., (ReTrac-Reno Transportation
Rail Access Corridor), 5.50%,
6/1/20 (AMBAC) 2,006
--------------------------------------------------------------------------------
11,847
--------------------------------------------------------------------------------
NEW JERSEY -- 1.8%
--------------------------------------------------------------------------------
4,335 New Jersey Transit Corporation
COP, 5.00%, 10/1/12 (FSA) 4,691
--------------------------------------------------------------------------------
5,595 New Jersey Transit Corporation
COP, 5.00%, 10/1/13 (FSA) 6,035
--------------------------------------------------------------------------------
10,726
--------------------------------------------------------------------------------
NEW MEXICO -- 0.3%
--------------------------------------------------------------------------------
1,415 San Juan County Gross Receipts
Tax Rev., Series 2001 A, 5.75%,
9/15/21 (AMBAC) 1,556
--------------------------------------------------------------------------------
NEW YORK -- 6.3%
--------------------------------------------------------------------------------
2,100 City of New York GO, Series 2002 B,
5.00%, 8/1/04 2,113
--------------------------------------------------------------------------------
2,975 City of New York GO, Series 2002 B,
5.25%, 8/1/09 (CIFG) 3,249
--------------------------------------------------------------------------------
2,885 City of New York GO, Series 2002 C,
5.25%, 8/1/09 (CIFG) 3,151
--------------------------------------------------------------------------------
4,000 City of New York GO, Series 2002 C,
5.25%, 8/1/10 4,323
--------------------------------------------------------------------------------
5,000 City of New York GO, Series 2003 I,
5.75%, 3/1/20 5,360
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
13
Tax-Free Bond - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$5,790 Long Island Power Auth. Rev., Series
2003 B, 5.00%, 12/1/06 (XLCA) $ 6,168
--------------------------------------------------------------------------------
1,000 New York Dormitory Auth.
Rev., Series 1995 A, (State
University Educational Facilities),
6.50%, 5/15/06 1,081
--------------------------------------------------------------------------------
1,000 New York Dormitory Auth. Rev., Series
1996 E, (Mental Health Service
Facility), 6.00%, 8/15/04 (AMBAC) 1,010
--------------------------------------------------------------------------------
2,000 New York Dormitory Auth. Rev.,
Series 2002 A, (School Districts
Financing Program), 5.25%,
10/1/11 (MBIA) 2,211
--------------------------------------------------------------------------------
3,250 New York Dormitory Auth. Rev.,
Series 2002 A, (School Districts
Financing Program), 5.25%,
10/1/12 (MBIA) 3,589
--------------------------------------------------------------------------------
1,100 New York Dormitory Auth. Rev.,
Series 2002 A, (United Cerebral
Palsy Affiliate No. 1), 5.75%,
7/1/18 (AMBAC) 1,207
--------------------------------------------------------------------------------
1,105 New York Dormitory Auth. Rev.,
Series 2002 H, (School District
Financing Program), 5.00%,
10/1/11 (MBIA) 1,204
--------------------------------------------------------------------------------
1,160 New York State Thruway Auth.
Service Contract Rev., 5.50%, 4/1/06 1,228
--------------------------------------------------------------------------------
1,000 Niagara Falls Bridge Commission
Toll Rev., Series 1993 B, 5.25%,
10/1/15 (FGIC) 1,090
--------------------------------------------------------------------------------
36,984
--------------------------------------------------------------------------------
NORTH CAROLINA -- 1.2%
--------------------------------------------------------------------------------
2,000 North Carolina Eastern Municipal
Power Agency System Rev., Series
1993 B, 6.00%, 1/1/06 (FSA) 2,123
--------------------------------------------------------------------------------
1,000 North Carolina Municipal Power
Agency No. 1 Catawba Electric Rev.,
6.00%, 1/1/10 (MBIA) 1,129
--------------------------------------------------------------------------------
1,500 North Carolina Municipal Power
Agency No. 1 Catawba Electric Rev.,
Series 2003 A, 3.00%, 1/1/05 1,511
--------------------------------------------------------------------------------
2,000 North Carolina Municipal Power
Agency No. 1 Catawba Electric Rev.,
Series 2003 A, 5.50%, 1/1/13 2,172
--------------------------------------------------------------------------------
6,935
--------------------------------------------------------------------------------
NORTH DAKOTA -- 0.3%
--------------------------------------------------------------------------------
1,500 Grand Forks Health Care System
Rev., (Altru Health System Obligation
Group), 7.125%, 8/15/24 1,614
--------------------------------------------------------------------------------
OHIO -- 2.4%
--------------------------------------------------------------------------------
1,500 Bowling Green State University
General Receipts Rev., 4.75%,
6/1/09 (FGIC) 1,607
--------------------------------------------------------------------------------
500 Erie County Hospital Facilities Rev.,
Series 2002 A, (Firelands Regional
Medical Center), 4.50%, 8/15/07 525
--------------------------------------------------------------------------------
1,150 Mad River Local School District GO,
(Classroom Facilities), 5.75%,
12/1/19 (FGIC) 1,274
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$1,700 Milford Exempt Village School
District GO, (School Improvement),
6.00%, 12/1/18 (FSA) $ 1,920
--------------------------------------------------------------------------------
1,200 Ohio Higher Educational Facility
Commission Rev., (University of
Dayton), 5.55%, 12/1/07 (FGIC) 1,247
--------------------------------------------------------------------------------
750 Ohio Higher Educational Facility
Commission Rev., Series 1990 B,
(Case Western Reserve University),
6.50%, 10/1/20 908
--------------------------------------------------------------------------------
3,320 Ohio Water Development Auth.
Pollution Control Facilities Rev.,
6.00%, 12/1/05, Prerefunded at
101% of Par (MBIA)(1) 3,503
--------------------------------------------------------------------------------
1,505 Summit County GO, 5.75%,
12/1/19, Prerefunded at 101%
of Par (FGIC)(1) 1,740
--------------------------------------------------------------------------------
1,550 Tri Valley Local School District GO,
5.75%, 12/1/21 (FGIC) 1,706
--------------------------------------------------------------------------------
14,430
--------------------------------------------------------------------------------
OKLAHOMA -- 1.5%
--------------------------------------------------------------------------------
6,000 Oklahoma County Independent
School District No. 89 GO,
5.00%, 2/1/06 (FGIC) 6,296
--------------------------------------------------------------------------------
2,500 Oklahoma Industrial Auth. Health
System Rev., Series 1995 C,
7.00%, 8/15/04 (AMBAC)(1) 2,530
--------------------------------------------------------------------------------
8,826
--------------------------------------------------------------------------------
OREGON -- 2.6%
--------------------------------------------------------------------------------
2,215 Deschutes & Jefferson Counties
Redmond School District No. 2J GO,
5.50%, 6/1/09 (FGIC) 2,452
--------------------------------------------------------------------------------
2,335 Josephine County Grants Pass
School District No. 7 GO,
5.00%, 6/15/09 (FSA/School
Board Guaranteed) 2,531
--------------------------------------------------------------------------------
1,805 Lane County Springfield School
District No. 19 GO, 6.375%, 10/15/04,
Prerefunded at 101% of Par (MBIA)(1) 1,858
--------------------------------------------------------------------------------
8,200 Portland Rev., Series 2003 A,
(Second Lien), 4.00%, 6/1/08 (FSA) 8,539
--------------------------------------------------------------------------------
15,380
--------------------------------------------------------------------------------
PENNSYLVANIA -- 1.9%
--------------------------------------------------------------------------------
1,000 Oxford Area School District GO,
Series 2001 A, 5.50%, 2/15/17
(FGIC/State Aid Withholding) 1,085
--------------------------------------------------------------------------------
2,975 Philadelphia School District GO,
Series 2002 A, 5.25%, 2/1/11
(FSA/State Aid Withholding) 3,269
--------------------------------------------------------------------------------
2,500 Philadelphia Water and Wastewater
Rev., 5.15%, 6/15/04 (FGIC) 2,504
--------------------------------------------------------------------------------
2,495 Pittsburgh School District GO,
4.50%, 3/1/06 (FSA State
Aid Withholding) 2,598
--------------------------------------------------------------------------------
1,500 Pittsburgh School District GO,
5.25%, 9/1/09 (FSA) 1,635
--------------------------------------------------------------------------------
11,091
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
14
Tax-Free Bond - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
PUERTO RICO -- 1.4%
--------------------------------------------------------------------------------
$ 500 Puerto Rico Commonwealth GO,
6.45%, 7/1/04, Prerefunded at
101.5% of Par(1) $ 510
--------------------------------------------------------------------------------
2,835 Puerto Rico Commonwealth GO,
Series 2003 A, 4.00%, 7/1/05 2,908
--------------------------------------------------------------------------------
2,000 Puerto Rico Commonwealth GO,
Series 2003 C, 5.00%, 7/1/08 (FSA) 2,147
--------------------------------------------------------------------------------
2,500 Puerto Rico Highway &
Transportation Auth. Rev.,
5.00%, 7/1/08 (CIFG) 2,711
--------------------------------------------------------------------------------
8,276
--------------------------------------------------------------------------------
RHODE ISLAND -- 1.0%
--------------------------------------------------------------------------------
1,000 Cranston GO, 6.375%,
11/15/17 (FGIC) 1,142
--------------------------------------------------------------------------------
1,100 Rhode Island Clean Water Finance
Agency Rev., Series 1994 A,
(Safe Drinking Water-Providence),
6.70%, 1/1/15 (AMBAC) 1,151
--------------------------------------------------------------------------------
2,000 Rhode Island Depositors Economic
Protection Corp. Special Obligation
Rev., Series 1993 A, 6.25%,
8/1/16 (MBIA)(1) 2,380
--------------------------------------------------------------------------------
1,300 Rhode Island Depositors Economic
Protection Corp. Special Obligation
Rev., Series 1993 B, 6.00%,
8/1/17 (MBIA)(1) 1,330
--------------------------------------------------------------------------------
6,003
--------------------------------------------------------------------------------
SOUTH CAROLINA -- 3.9%
--------------------------------------------------------------------------------
1,700 Florence Water & Sewer Rev.,
7.50%, 3/1/18 (AMBAC) 2,036
--------------------------------------------------------------------------------
1,495 Greenwood County Hospital Facilities
Rev., Series 2004 A, (Self Regional
Healthcare), 4.00%, 10/1/10 (FSA) 1,534
--------------------------------------------------------------------------------
1,565 Greenwood County Hospital Facilities
Rev., Series 2004 A, (Self Regional
Healthcare), 4.00%, 10/1/11 (FSA) 1,600
--------------------------------------------------------------------------------
1,500 Piedmont Municipal Power Agency
Electric Rev., 6.75%, 1/1/19 (FGIC) 1,825
--------------------------------------------------------------------------------
860 Piedmont Municipal Power Agency
Electric Rev., Series 1991 A, 6.50%,
1/1/16 (FGIC) 1,016
--------------------------------------------------------------------------------
140 Piedmont Municipal Power Agency
Electric Rev., Series 1991 A, 6.50%,
1/1/16 (FGIC)(1) 168
--------------------------------------------------------------------------------
6,035 Piedmont Municipal Power Agency
Electric Rev., Series 2002 A, 4.00%,
1/1/07 (FGIC) 6,083
--------------------------------------------------------------------------------
1,000 South Carolina GO, Series 2003 B,
(State Capital Improvement),
3.00%, 3/1/08 1,009
--------------------------------------------------------------------------------
3,035 South Carolina Jobs Economic
Development Auth. Hospital Facilities
Rev., Series 2003 C, (Palmetto
Health), 5.00%, 8/1/08 (ACA) 3,194
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$3,195 South Carolina Jobs Economic
Development Auth. Hospital Facilities
Rev., Series 2003 C, (Palmetto
Health), 5.50%, 8/1/09 (ACA) $ 3,423
--------------------------------------------------------------------------------
1,095 Spartanburg County Health Services
District Inc. Hospital Rev., 5.50%,
4/15/16 (FSA) 1,176
--------------------------------------------------------------------------------
23,064
--------------------------------------------------------------------------------
TENNESSEE -- 0.5%
--------------------------------------------------------------------------------
1,050 Clarksville Water Sewer & Gas Rev.,
4.25%, 2/1/07 (FSA) 1,098
--------------------------------------------------------------------------------
1,685 Clarksville Water Sewer & Gas Rev.,
4.85%, 2/1/15 (FSA) 1,742
--------------------------------------------------------------------------------
2,840
--------------------------------------------------------------------------------
TEXAS -- 7.2%
--------------------------------------------------------------------------------
1,815 Clint Independent School District GO,
6.00%, 2/15/17 (PSF) 2,021
--------------------------------------------------------------------------------
1,000 Corpus Christi Utility System Rev.,
5.50%, 7/15/07 (FSA) 1,087
--------------------------------------------------------------------------------
5,690 Dallas County Community College
District GO Maintenance Tax Notes,
3.00%, 2/15/12 5,250
--------------------------------------------------------------------------------
1,000 Dallas-Fort Worth Regional Airport
Rev., Series 1994 A, 5.90%,
11/1/08 (MBIA) 1,017
--------------------------------------------------------------------------------
1,000 Denison Hospital Auth. Rev.,
(Texoma Medical Center), 5.90%,
8/15/07 (ACA) 1,074
--------------------------------------------------------------------------------
1,000 Denton Utility System Rev., Series
1996 A, 5.95%, 12/1/14 (MBIA) 1,083
--------------------------------------------------------------------------------
1,310 Harris County Housing Finance
Corporation Rev., (Las Americas
Apartments), 4.90%, 3/1/11 (FNMA) 1,376
--------------------------------------------------------------------------------
3,000 Hays Consolidated Independent
School District GO, (Capital
Appreciation), 5.20%,
8/15/11 (PSF)(3) 2,222
--------------------------------------------------------------------------------
1,295 Hidalgo County GO, 5.50%,
8/15/19 (FGIC) 1,389
--------------------------------------------------------------------------------
1,750 Hidalgo County GO, 5.50%,
8/15/21 (FGIC) 1,863
--------------------------------------------------------------------------------
574 Houston Participation Interest
COP, 6.40%, 6/1/27 623
--------------------------------------------------------------------------------
500 Houston Water & Sewer System
Rev., Series 1992 C, (Junior Lien),
5.90%, 12/1/05 (MBIA) 531
--------------------------------------------------------------------------------
1,500 Houston Water & Sewer System
Rev., Series 1997 C, (Junior Lien),
5.375%, 12/1/27 (FGIC) 1,648
--------------------------------------------------------------------------------
1,000 Lubbock Health Facilities
Development Corp. Rev.,
(Lutheran Retirement), 6.00%,
3/20/29 (GNMA) 1,042
--------------------------------------------------------------------------------
550 Pasadena Independent School
District GO, Series 2001 A, 6.05%,
2/15/16 (PSF) 632
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
15
Tax-Free Bond - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$1,500 Pearland Independent School
District GO, 6.00%, 2/15/15 (PSF) $ 1,645
--------------------------------------------------------------------------------
2,000 San Antonio Electric and Gas Rev.,
7.10%, 2/1/09 (FGIC)(1)(3) 1,699
--------------------------------------------------------------------------------
1,000 Tarrant County Health Facility
Development Corp. Health System
Rev., (Ft. Worth Osteopathic),
6.00%, 5/15/11 (MBIA) 1,109
--------------------------------------------------------------------------------
3,645 Texas GO, Series 2003 C,
(Water Financial Assistance),
5.00%, 8/1/07 3,911
--------------------------------------------------------------------------------
4,250 Texas Municipal Power Agency Rev.,
(Sub-Lien), 4.00%, 9/1/09 (FGIC)(2) 4,339
--------------------------------------------------------------------------------
1,500 Texas Public Finance Auth. Building
Rev., (Technical College), 6.25%,
8/1/09 (MBIA) 1,663
--------------------------------------------------------------------------------
1,000 Texas Technical University Rev.,
5.00%, 8/15/08 (MBIA) 1,080
--------------------------------------------------------------------------------
1,000 Travis County Health Facilities
Development Corp. Rev., Series
1999 A, (Ascension Health Credit),
5.875%, 11/15/09, Prerefunded
at 101% of Par (AMBAC)(1) 1,135
--------------------------------------------------------------------------------
1,000 Tyler Health Facilities Development
Corp. Rev., (Mother Frances Hospital),
4.50%, 7/1/06 1,034
--------------------------------------------------------------------------------
2,000 Tyler Health Facilities Development
Corp. Rev., (Mother Frances Hospital),
5.00%, 7/1/08 2,102
--------------------------------------------------------------------------------
42,575
--------------------------------------------------------------------------------
U.S. VIRGIN ISLANDS -- 0.8%
--------------------------------------------------------------------------------
2,000 Virgin Islands Public Finance Auth.
Rev., Series 1998 A, (Senior Lien),
5.20%, 10/1/09 2,133
--------------------------------------------------------------------------------
2,355 Virgin Islands Public Finance Auth.
Rev., Series 1999 A, (Gross Receipts
Taxes), 5.00%, 10/1/04 2,380
--------------------------------------------------------------------------------
4,513
--------------------------------------------------------------------------------
UTAH -- 2.2%
--------------------------------------------------------------------------------
355 Intermountain Agency Power Supply
Rev., Series 1993 A, 5.40%, 7/1/08
(MBIA-IBC)(1) 363
--------------------------------------------------------------------------------
1,000 Salt Lake City Hospital Rev., Series
1988 A, (Intermountain Health
Corporation), 8.125%, 5/15/15(1) 1,248
--------------------------------------------------------------------------------
1,000 Salt Lake County Municipal Building
Auth. Lease Rev., Series 1994 A,
6.00%, 10/1/04, Prerefunded at
101% of Par (MBIA)(1) 1,026
--------------------------------------------------------------------------------
1,000 Utah County Municipal Building
Auth. Lease Rev., 4.00%,
11/1/05 (AMBAC) 1,031
--------------------------------------------------------------------------------
1,495 Utah County Municipal Building
Auth. Lease Rev., 5.00%,
11/1/09 (AMBAC) 1,612
--------------------------------------------------------------------------------
1,820 Utah County Municipal Building
Auth. Lease Rev., 5.25%,
11/1/13 (AMBAC) 1,980
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$1,915 Utah County Municipal Building
Auth. Lease Rev., 5.25%,
11/1/14 (AMBAC) $ 2,073
--------------------------------------------------------------------------------
1,000 Utah County Municipal Building
Auth. Lease Rev., 5.50%,
11/1/16 (AMBAC) 1,081
--------------------------------------------------------------------------------
25 Utah Housing Finance Agency
Single Family Mortgage Rev.,
5.65%, 7/1/06 26
--------------------------------------------------------------------------------
1,130 West Valley City Municipal
Building Auth. Rev., Series 2002 A,
5.00%, 8/1/10 (AMBAC) 1,222
--------------------------------------------------------------------------------
1,305 West Valley City Utility Sales
Tax Rev., Series 2001 A, 5.50%,
7/15/16 (MBIA) 1,409
--------------------------------------------------------------------------------
13,071
--------------------------------------------------------------------------------
VIRGINIA -- 0.7%
--------------------------------------------------------------------------------
1,500 Fairfax County COP, 5.30%, 4/15/23 1,536
--------------------------------------------------------------------------------
1,000 Hampton Industrial Development
Auth. Rev., Series 1994 A, (Sentara
General Hospital), 6.50%, 11/1/06,
Prerefunded at 100% of Par(1) 1,101
--------------------------------------------------------------------------------
1,115 Pittsylvania County GO, Series
2001 B, 5.75%, 3/1/18 (MBIA) 1,231
--------------------------------------------------------------------------------
3,868
--------------------------------------------------------------------------------
WASHINGTON -- 8.4%
--------------------------------------------------------------------------------
1,000 Benton County Public Utility
District No. 1 Rev., Series 2001 A,
5.625%, 11/1/19 (FSA) 1,087
--------------------------------------------------------------------------------
1,000 Cowlitz County Kelso School
District No. 458 GO, 5.75%,
12/1/18 (FSA) 1,108
--------------------------------------------------------------------------------
2,150 Douglas County Public Utilities
District No. 1 Wells Hydroelectric
Rev., Series 2003 B, 3.00%,
9/1/06 (MBIA) 2,189
--------------------------------------------------------------------------------
3,500 Energy Northwest Electrical Rev.,
Series 2002 A, (Columbia
Generating), 5.75%, 7/1/18 (MBIA) 3,839
--------------------------------------------------------------------------------
9,000 Energy Northwest Electrical Rev.,
Series 2002 B, (Columbia
Generating), 6.00%, 7/1/18 (AMBAC) 10,089
--------------------------------------------------------------------------------
7,145 King County GO, 5.50%, 12/1/12 8,006
--------------------------------------------------------------------------------
2,000 King County GO, Series 1997 D,
5.75%, 12/1/11 2,219
--------------------------------------------------------------------------------
1,555 King County Lake Washington School
District No. 414 GO, 5.75%, 12/1/15 1,738
--------------------------------------------------------------------------------
1,260 Mason County Shelton School District
No. 309 GO, 5.625%, 12/1/17 (FGIC) 1,375
--------------------------------------------------------------------------------
1,120 Metropolitan Park District of Tacoma
GO, 6.00%, 12/1/16 (AMBAC) 1,260
--------------------------------------------------------------------------------
1,000 Metropolitan Park District of Tacoma
GO, 6.00%, 12/1/18 (AMBAC) 1,125
--------------------------------------------------------------------------------
1,435 Snohomish & Island Counties
Stanwood School District
No. 401 GO, 3.25%, 6/15/11
(FSA School Board Guaranteed) 1,382
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
16
Tax-Free Bond - Schedule of Investments
MAY 31, 2004
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
$ 305 Tacoma Electrical Systems Rev.,
6.10%, 1/1/07 (FGIC) $ 312
--------------------------------------------------------------------------------
1,720 University of Washington Rev.,
(Student Facilities Fee),
5.875%, 6/1/18 (FSA) 1,906
--------------------------------------------------------------------------------
1,000 Washington GO, Series 1990 A,
6.75%, 2/1/15 1,203
--------------------------------------------------------------------------------
3,000 Washington GO, Series 1997 E,
6.00%, 7/1/04 3,013
--------------------------------------------------------------------------------
1,000 Washington Public Power Supply
System Rev., Series 1996 A,
(Nuclear Project No. 1), 5.75%,
7/1/12 (MBIA) 1,087
--------------------------------------------------------------------------------
4,570 Washington Public Power Supply
System Rev., Series 1998 A,
(Nuclear Project No. 2), 5.00%,
7/1/12 (FSA-CR) 4,872
--------------------------------------------------------------------------------
1,500 Whitman County Pullman School
District No. 267 GO, 5.625%,
12/1/16 (FSA) 1,652
--------------------------------------------------------------------------------
49,462
--------------------------------------------------------------------------------
WISCONSIN -- 1.6%
--------------------------------------------------------------------------------
1,180 Winneconne Community School
District GO, 6.75%, 4/1/06,
Prerefunded at 100% of Par (FGIC)(1) 1,280
--------------------------------------------------------------------------------
1,990 Wisconsin Clean Water Rev.,
6.875%, 6/1/11 2,345
--------------------------------------------------------------------------------
2,590 Wisconsin Health & Educational
Facilities Auth. Rev., (Aurora
Medical Group), 6.00%,
11/15/10 (FSA) 2,939
--------------------------------------------------------------------------------
400 Wisconsin Health & Educational
Facilities Auth. Rev., (Froedert &
Community Health Obligation),
5.00%, 10/1/04 404
--------------------------------------------------------------------------------
1,100 Wisconsin Health & Educational
Facilities Auth. Rev.,
(Wheaton Franciscan Services),
4.00%, 8/15/04 1,106
--------------------------------------------------------------------------------
1,225 Wisconsin Health & Educational
Facilities Auth. Rev.,
(Wheaton Franciscan Services),
4.00%, 8/15/06 1,270
--------------------------------------------------------------------------------
9,344
--------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES
(Cost $558,313) 572,747
--------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
--------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL
SECURITIES -- 3.0%
CALIFORNIA -- 2.4%
--------------------------------------------------------------------------------
$1,200 California Department of Water
Resources Rev., Series 2002 B2,
VRDN, 1.10%, 6/1/04
(LOC: BNP Paribas) $ 1,200
--------------------------------------------------------------------------------
2,430 California Housing Finance Agency
Rev., Series 2000 D, VRDN, 1.10%,
6/1/04 (SBBPA: California
State Teachers Retirement System,
Landesbank Hessen-Thuringen) 2,430
--------------------------------------------------------------------------------
2,125 California Housing Finance Agency
Rev., Series 2001 B, (Multifamily
Housing III), VRDN, 1.10%, 6/1/04 2,125
--------------------------------------------------------------------------------
2,000 Irvine Ranch Water District GO,
Series 1998 A, (Improvement District
No. 284), VRDN, 1.09%, 6/1/04
(LOC: Landesbank Hessen-Thuringen) 2,000
--------------------------------------------------------------------------------
900 Los Angeles Department of Water &
Power Rev., Series 2001 B2, VRDN,
1.07%, 6/1/04 900
--------------------------------------------------------------------------------
1,000 Los Angeles Water & Power Rev.,
Subseries 2002 A-8, VRDN,
1.07%, 6/3/04 1,000
--------------------------------------------------------------------------------
2,400 Orange County Improvement Bond
Act 1915 Special Assessment, Series
2003 A, (Assessment District
No. 01-1), VRDN, 1.07%, 6/1/04
(LOC: KBC Bank N.V.) 2,400
--------------------------------------------------------------------------------
1,900 Orange County Sanitation Districts
COP, Series 2000 B, VRDN, 1.07%,
6/1/04 (SBBPA: Dexia Public
Finance Bank SA) 1,900
--------------------------------------------------------------------------------
13,955
--------------------------------------------------------------------------------
GEORGIA -- 0.5%
--------------------------------------------------------------------------------
3,000 Macon-Bibb County Hospital Auth.
Anticipation Certificates Rev.,
(Central Georgia Health), VRDN,
1.08%, 6/1/04 (LOC: SunTrust Bank) 3,000
--------------------------------------------------------------------------------
PENNSYLVANIA -- 0.1%
--------------------------------------------------------------------------------
750 Allegheny County Industrial
Development Auth. Rev.,
Series 2001 A, (Longwood),
VRDN, 1.10%, 6/1/04 (RADIAN) 750
--------------------------------------------------------------------------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES
(Cost $17,705) 17,705
--------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $576,018) $590,452
================================================================================
See Notes to Financial Statements. (continued)
------
17
Tax-Free Bond - Schedule of Investments
MAY 31, 2004
NOTES TO SCHEDULE OF INVESTMENTS
ACA = American Capital Access
AMBAC = AMBAC Assurance Corporation
CIFG = CIFG IXIS Financial Guaranty North America
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance, Inc.
FSA-CR = Financial Security Assurance, Inc. Custody Receipts
GNMA = Government National Mortgage Association
GO = General Obligation
LOC = Letter of Credit
MBIA = MBIA Insurance Corporation
MBIA-IBC = MBIA Insured Bond Certificates
PSF = Permanent School Fund
RADIAN = Radian Asset Assurance, Inc.
SBBPA = Standby Bond Purchase Agreement
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective May 31, 2004.
XLCA = XL Capital Ltd.
(1) Escrowed to maturity in U.S. government securities or state and local
government securities.
(2) When-issued security.
(3) Security is a zero-coupon municipal bond. The rate indicated is the yield
to maturity at purchase. Zero-coupon securities are issued at a substantial
discount from their value at maturity.
(4) Security, or a portion thereof, has been segregated for a when-issued
security.
See Notes to Financial Statements.
------
18
Statement of Assets and Liabilities
MAY 31, 2004
--------------------------------------------------------------------------------
TAX-FREE
(AMOUNTS IN THOUSANDS EXCEPT PER-SHARE AMOUNTS) MONEY MARKET TAX-FREE
BOND
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
Investment securities, at value
(cost of $275,016 and $576,018, respectively) $275,016 $590,452
-----------------------------------------------
Cash 578 281
-----------------------------------------------
Receivable for investments sold -- 6,702
-----------------------------------------------
Receivable for capital shares sold 348 334
-----------------------------------------------
Interest receivable 729 9,182
-----------------------------------------------
Prepaid portfolio insurance 30 --
--------------------------------------------------------------------------------
276,701 606,951
--------------------------------------------------------------------------------
LIABILITIES
-----------------------------------------------
Payable for investments purchased -- 14,031
-----------------------------------------------
Payable for capital shares redeemed 337 905
-----------------------------------------------
Accrued management fees 116 251
-----------------------------------------------
Dividends payable 3 364
--------------------------------------------------------------------------------
456 15,551
--------------------------------------------------------------------------------
NET ASSETS $276,245 $591,400
================================================================================
NET ASSETS CONSIST OF:
--------------------------------------------------------------------------------
Capital paid in $276,303 $577,950
-----------------------------------------------
Undistributed net investment income -- 3
-----------------------------------------------
Accumulated net realized loss
on investment transactions (58) (987)
-----------------------------------------------
Net unrealized appreciation on investments -- 14,434
--------------------------------------------------------------------------------
$276,245 $591,400
================================================================================
INVESTOR CLASS ($ AND SHARES IN FULL)
--------------------------------------------------------------------------------
Net assets $276,245,279 $583,689,404
-----------------------------------------------
Shares outstanding 276,302,839 54,521,252
-----------------------------------------------
Net asset value per share $1.00 $10.71
--------------------------------------------------------------------------------
INSTITUTIONAL CLASS ($ AND SHARES IN FULL)
--------------------------------------------------------------------------------
Net assets N/A $7,710,863
-----------------------------------------------
Shares outstanding N/A 720,256
-----------------------------------------------
Net asset value per share N/A $10.71
--------------------------------------------------------------------------------
See Notes to Financial Statements.
------
19
Statement of Operations
YEAR ENDED MAY 31, 2004
--------------------------------------------------------------------------------
TAX-FREE
(AMOUNTS IN THOUSANDS) MONEY MARKET TAX-FREE
BOND
--------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------
INCOME:
-----------------------------------------------------
Interest $3,033 $ 23,762
--------------------------------------------------------------------------------
EXPENSES:
-----------------------------------------------------
Management fees 1,300 3,080
-----------------------------------------------------
Trustees' fees and expenses 14 34
-----------------------------------------------------
Portfolio insurance 35 --
-----------------------------------------------------
Other expenses -- 2
--------------------------------------------------------------------------------
1,349 3,116
--------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,684 20,646
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS
--------------------------------------------------------------------------------
Net realized loss on
investment transactions (4) (1,078)
-----------------------------------------------------
Change in net unrealized
appreciation on investments -- (26,026)
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS (4) (27,104)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $1,680 $ (6,458)
================================================================================
See Notes to Financial Statements.
------
20
Statement of Changes in Net Assets
YEARS ENDED MAY 31, 2004 AND MAY 31, 2003
--------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS) TAX-FREE MONEY MARKET TAX-FREE BOND
--------------------------------------------------------------------------------
INCREASE
(DECREASE)
IN NET ASSETS 2004 2003 2004 2003
--------------------------------------------------------------------------------
OPERATIONS
--------------------------------------------------------------------------------
Net investment income $ 1,684 $ 2,764 $ 20,646 $ 18,845
-----------------------------
Net realized gain (loss) (4) 7 (1,078) 2,640
-----------------------------
Change in net
unrealized appreciation -- -- (26,026) 24,257
--------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 1,680 2,771 (6,458) 45,742
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------------------------------------------------
From net
investment income:
-----------------------------
Investor Class (1,684) (2,764) (20,395) (18,836)
-----------------------------
Institutional Class -- -- (251) (17)
-----------------------------
From net realized gains:
-----------------------------
Investor Class -- -- (1,450) (859)
-----------------------------
Institutional Class -- -- (16) --
--------------------------------------------------------------------------------
Decrease in net assets
from distributions (1,684) (2,764) (22,112) (19,712)
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
--------------------------------------------------------------------------------
Net increase (decrease)
in net assets from capital
share transactions 3,993 22,214 (7,639) 219,132
--------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS 3,989 22,221 (36,209) 245,162
--------------------------------------------------------------------------------
NET ASSETS
--------------------------------------------------------------------------------
Beginning of period 272,256 250,035 627,609 382,447
--------------------------------------------------------------------------------
End of period $276,245 $272,256 $591,400 $627,609
================================================================================
Undistributed net
investment income -- -- $3 --
================================================================================
See Notes to Financial Statements.
------
21
Notes to Financial Statements
MAY 31, 2004 (AMOUNTS IN THOUSANDS)
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. Tax-Free Money Market Fund (Tax-Free Money
Market) and Tax-Free Bond Fund (Tax-Free Bond) (collectively, the funds) are two
funds in a series issued by the trust. The funds are diversified under the 1940
Act. The funds' investment objective is to seek safety of principal and high
current income that is exempt from federal income tax. Tax-Free Money Market
invests primarily in cash-equivalent, high-quality municipal obligations.
Tax-Free Bond invests primarily in high-quality municipal obligations. The
following is a summary of the funds' significant accounting policies.
MULTIPLE CLASS -- Tax-Free Money Market is authorized to issue the Investor
Class. Tax-Free Bond is authorized to issue the Investor Class and the
Institutional Class. The share classes differ principally in their respective
shareholder servicing and distribution expenses and arrangements. All shares of
each fund represent an equal pro rata interest in the assets of the class to
which such shares belong, and have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except for class specific
expenses and exclusive rights to vote on matters affecting only individual
classes. Income, non-class specific expenses, and realized and unrealized
capital gains and losses of the funds are allocated to each class of shares
based on their relative net assets.
SECURITY VALUATIONS -- Securities of Tax-Free Money Market are valued at
amortized cost, which approximates current market value. Securities of Tax-Free
Bond 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. Debt securities
maturing within 60 days may be valued at cost, plus or minus any amortized
discount or premium. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
Board of Trustees if such fair value determination would materially impact a
fund's net asset value. Valuations may not be readily available if, for example:
an event occurred after the close of the exchange on which a portfolio security
principally trades (but before the close of the New York Stock Exchange) that
was likely to have changed the value of the security; a security has been
declared in default; trading in a security has been halted during the trading
day; or the demand for the security (as reflected by its trading volume) is
insufficient for quoted prices to be reliable.
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.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The funds may engage in securities
transactions on a when-issued or forward commitment basis. Under these
arrangements, the securities' prices and yields are fixed on the date of the
commitment, but payment and delivery are scheduled for a future date. During
this period, securities are subject to market fluctuations. The funds will
segregate cash, cash equivalents or other appropriate liquid securities on their
records in amounts sufficient to meet the purchase price.
FUTURES CONTRACTS -- Tax-Free Bond may enter into futures contracts in order to
manage the fund's exposure to changes in market conditions. One of the risks of
entering into futures contracts is the possibility that the change in value of
the contract may not correlate with the changes in value of the underlying
securities. Upon entering into a futures contract, the fund is required to
deposit either cash or securities in an amount equal to a certain percentage of
the contract value (initial margin). Subsequent payments (variation margin) are
made or received daily, in cash, by the fund. The variation margin is equal to
the daily change in the contract value and is recorded as unrealized gains and
losses. The fund recognizes a realized gain or loss when the contract is closed
or expires. Net realized and unrealized gains or losses occurring during the
holding period of futures contracts are a component of realized gain (loss) on
investment transactions and unrealized appreciation (depreciation) on
investments, respectively.
INCOME TAX STATUS -- It is each fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under 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 paid monthly. Distributions from net realized gains, if any,
are generally declared and paid annually. Tax-Free Money Market does not expect
to realize any long-term capital gains, and accordingly, does not expect to pay
any capital gains distributions.
(continued)
------
22
Notes to Financial Statements
MAY 31, 2004 (AMOUNTS IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
American Century Investment Management, Inc. (ACIM), under which ACIM provides
the funds with investment advisory and management services in exchange for a
single, unified management fee per class. The Agreement provides that all
expenses of the funds, except brokerage commissions, 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 computed daily and paid monthly in
arrears. 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% for Tax-Free Money
Market. The rates for the Investment Category Fee range from 0.1625% to 0.2800%
for Tax-Free Bond. Rates for the Complex Fee range from 0.2900% to 0.3100% for
the Investor Class. The Institutional Class is 0.2000% less at each point within
the Complex Fee Range. For the year ended May 31, 2004, the effective annual
management fee for the Investor Class of Tax-Free Money Market and Tax-Free Bond
was 0.49% and 0.50%, respectively. For the year ended May 31, 2004, the
effective annual management fee for the Institutional Class of Tax-Free Bond was
0.30%.
MONEY MARKET INSURANCE -- Tax-Free Money Market, along with other money market
funds managed by ACIM, has entered into an insurance agreement with MBIA
Insurance Corporation (MBIA). MBIA provides limited coverage for certain loss
events including issuer defaults as to payment of principal or interest and
insolvency of a credit enhancement provider. Tax-Free Money Market pays annual
premiums equal to 0.018% to MBIA based on participating money market funds'
market value at January 31, 2004. The premiums are amortized daily over one
year.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment manager, ACIM, the
distributor of the trust, American Century Investment Services, Inc., and the
trust's transfer agent, American Century Services Corporation.
Tax-Free Bond has a bank line of credit agreement with JPMorgan Chase Bank
(JPMCB). JPMCB is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM).
JPM is an equity investor in ACC.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities for Tax-Free Bond, excluding
short-term investments, for the year ended May 31, 2004, were $366,055 and
$357,249, respectively. All investment transactions for Tax-Free Money Market
were considered short-term during the year ended May 31, 2004.
(continued)
------
23
Notes to Financial Statements
MAY 31, 2004 (AMOUNTS IN THOUSANDS)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows (unlimited number of shares
authorized):
--------------------------------------------------------------------------------
TAX-FREE MONEY MARKET TAX-FREE BOND
--------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
INVESTOR CLASS
--------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2004
----------------------------
Sold 218,652 $218,652 20,630 $226,578
----------------------------
Issued in reinvestment
of distributions 1,634 1,634 1,525 16,643
----------------------------
Redeemed (216,293) (216,293) (23,030) (251,285)
--------------------------------------------------------------------------------
Net increase (decrease) 3,993 $3,993 (875) $(8,064)
================================================================================
YEAR ENDED MAY 31, 2003
----------------------------
Sold 210,319 $210,319 30,403 $331,080
----------------------------
Issued in connection
with acquisition -- -- 4,690 51,094
----------------------------
Issued in reinvestment
of distributions 2,622 2,622 1,491 16,276
----------------------------
Redeemed (190,727) (190,727) (17,153) (186,832)
--------------------------------------------------------------------------------
Net increase 22,214 $ 22,214 19,431 $211,618
================================================================================
INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2004
----------------------------
Sold N/A N/A 138 $1,492
----------------------------
Issued in reinvestment
of distributions 24 267
----------------------------
Redeemed (122) (1,334)
--------------------------------------------------------------------------------
Net increase 40 $425
================================================================================
PERIOD ENDED MAY 31, 2003(1)
----------------------------
Sold N/A N/A 703 $7,768
----------------------------
Issued in reinvestment
of distributions 1 16
----------------------------
Redeemed (24) (270)
--------------------------------------------------------------------------------
Net increase 680 $7,514
================================================================================
(1) April 15, 2003 (commencement of sale) through May 31, 2003 for Tax-Free
Bond.
5. BANK LINE OF CREDIT
Tax-Free Bond, along with certain other funds managed by ACIM, has a $650
million unsecured bank line of credit agreement with JPMCB. The fund may borrow
money for temporary or emergency purposes to fund shareholder redemptions.
Borrowings under the agreement bear interest at the Federal Funds rate plus
0.50%. The fund did not borrow from the line during the year ended May 31, 2004.
6. RISK FACTORS
The funds may concentrate their investments in certain states and therefore may
have more exposure to credit risk related to those states than a fund with a
broader geographical diversification. Income may be subject to state and local
taxes and, if applicable, the alternative minimum tax.
(continued)
------
24
Notes to Financial Statements
MAY 31, 2004 (AMOUNTS IN THOUSANDS)
7. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended May 31, 2004 and
May 31, 2003 were as follows:
--------------------------------------------------------------------------------
TAX-FREE MONEY MARKET TAX-FREE BOND
--------------------------------------------------------------------------------
2004 2003 2004 2003
--------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
--------------------------------------------------------------------------------
Ordinary income $1,684 $2,764 $21,503 $18,853
--------------------------------------------------------------------------------
Long-term capital gains -- -- $609 $859
--------------------------------------------------------------------------------
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 the financial statements.
As of May 31, 2004, the components of distributable earnings on a tax-basis and
the federal tax cost of investments were as follows:
--------------------------------------------------------------------------------
TAX-FREE
MONEY MARKET TAX-FREE
BOND
--------------------------------------------------------------------------------
Federal tax cost of investments $275,016 $576,018
================================================================================
Gross tax appreciation of investments -- $17,772
--------------------------------------------------
Gross tax depreciation of investments -- (3,338)
--------------------------------------------------------------------------------
Net tax appreciation of investments -- $14,434
================================================================================
Undistributed taxable ordinary income -- $3
--------------------------------------------------
Undistributed tax-exempt ordinary income -- --
--------------------------------------------------
Accumulated capital losses $(58) $(663)
--------------------------------------------------
Capital loss deferral -- $(324)
--------------------------------------------------------------------------------
The cost of investments for federal income tax purposes was the same as the cost
for financial reporting purposes.
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for federal
income tax purposes. The capital loss carryovers expire as follows:
2008 2009 2010 2011
-------------------------------------------------------------------------------
Tax-Free Money Market $(6) $(39) $(9) $(4)
-------------------------------------------------------------------------------
Tax-Free Bond -- -- -- $(663)
-------------------------------------------------------------------------------
The capital loss deferrals listed above represent net capital losses incurred in
the seven-month period ended May 31, 2004. Tax-Free Bond has elected to treat
such losses as having been incurred in the following fiscal year for federal
income tax purposes.
(continued)
------
25
Notes to Financial Statements
MAY 31, 2004 (AMOUNTS IN THOUSANDS)
8. REORGANIZATION PLAN
On September 3, 2002 Tax-Free Bond acquired all of the net assets of
Limited-Term Tax-Free Fund (Limited-Term), another fund previously issued by the
trust, pursuant to a plan of reorganization approved by the acquired fund's
shareholders on August 2, 2002. Tax-Free Bond is the surviving fund for the
purposes of maintaining the financial statements and performance history in the
post-reorganization. The acquisition was accomplished by a tax-free exchange of
4,690 shares of Tax-Free Bond for 4,892 shares of Limited-Term, outstanding on
September 3, 2002. The net assets of Tax-Free Bond and Limited-Term immediately
before the acquisition were $454,253 and $51,094, respectively. Limited-Term
unrealized appreciation of $1,699 was combined with that of Tax-Free Bond.
Immediately after the acquisition, the combined net assets were $505,347.
9. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The funds designate exempt interest and capital gain dividends for the fiscal
year ended May 31, 2004, as follows:
-------------------------------------------------------------------------------
TAX-FREE TAX-FREE
MONEY MARKET BOND
-------------------------------------------------------------------------------
Exempt interest
dividends $1,681 $20,578
-------------------------------------------------------------------------------
Long-term capital gains -- $609
-------------------------------------------------------------------------------
------
26
Tax-Free Money Market - Financial Highlights
For a Share Outstanding Throughout the Years Ended May 31
--------------------------------------------------------------------------------
INVESTOR CLASS
--------------------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------
Income From
Investment Operations
----------------------------
Net Investment
Income 0.01 0.01 0.02 0.04 0.03
--------------------------------------------------------------------------------
Distributions
----------------------------
From Net
Investment Income (0.01) (0.01) (0.02) (0.04) (0.03)
--------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
================================================================================
TOTAL RETURN(1) 0.64% 1.05% 1.64% 3.71% 3.30%
--------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating
Expenses To Average
Net Assets 0.51% 0.51% 0.51% 0.50% 0.50%
----------------------------
Ratio of Net
Investment Income
to Average
Net Assets 0.65% 1.04% 1.62% 3.64% 3.23%
----------------------------
Net Assets,
End of Period
(in thousands) $276,245 $272,256 $250,035 $249,461 $233,852
--------------------------------------------------------------------------------
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any.
See Notes to Financial Statements.
------
27
Tax-Free Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended May 31
-------------------------------------------------------------------------------
INVESTOR CLASS
-------------------------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------
PER-SHARE DATA
-------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $11.19 $10.63 $10.50 $9.93 $10.39
-------------------------------------------------------------------------------
Income From
Investment Operations
--------------------------
Net Investment
Income 0.37 0.39 0.44 0.48 0.48
--------------------------
Net Realized and
Unrealized Gain (Loss) (0.45) 0.58 0.22 0.57 (0.44)
-------------------------------------------------------------------------------
Total From
Investment Operations (0.08) 0.97 0.66 1.05 0.04
-------------------------------------------------------------------------------
Distributions
--------------------------
From Net
Investment Income (0.37) (0.39) (0.44) (0.48) (0.48)
--------------------------
From Net
Realized Gains (0.03) (0.02) (0.09) -- (0.02)
-------------------------------------------------------------------------------
Total Distributions (0.40) (0.41) (0.53) (0.48) (0.50)
-------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.71 $11.19 $10.63 $10.50 $9.93
===============================================================================
TOTAL RETURN(1) (0.79)% 9.31% 6.45% 10.77% 0.44%
-------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------
Ratio of Operating
Expenses to
Average Net Assets 0.51% 0.51% 0.51% 0.51% 0.51%
--------------------------
Ratio of Net
Investment Income to
Average Net Assets 3.34% 3.62% 4.14% 4.65% 4.75%
--------------------------
Portfolio
Turnover Rate 60% 57% 86% 106% 107%
--------------------------
Net Assets,
End of Period
(in thousands) $583,689 $620,000 $382,447 $188,186 $149,511
-------------------------------------------------------------------------------
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
------
28
Tax-Free Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended May 31 (except as noted)
--------------------------------------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
2004 2003(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.19 $10.90
--------------------------------------------------------------------------------
Income From Investment Operations
--------------------------------------------
Net Investment Income 0.39 0.05
--------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.45) 0.29
--------------------------------------------------------------------------------
Total From Investment Operations (0.06) 0.34
--------------------------------------------------------------------------------
Distributions
--------------------------------------------
From Net Investment Income (0.39) (0.05)
--------------------------------------------
From Net Realized Gains (0.03) --
--------------------------------------------------------------------------------
Total Distributions (0.42) (0.05)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.71 $11.19
================================================================================
TOTAL RETURN(2) (0.60)% 3.14%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.31% 0.30%(3)
--------------------------------------------
Ratio of Net Investment
Income to Average Net Assets 3.54% 3.68%(3)
--------------------------------------------
Portfolio Turnover Rate 60% 57%(4)
--------------------------------------------
Net Assets, End of Period (in thousands) $7,711 $7,609
--------------------------------------------------------------------------------
(1) April 15, 2003 (commencement of sale) through May 31, 2003.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not
result in any gain or loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2003.
See Notes to Financial Statements.
------
29
Report of Independent Registered Public Accounting Firm
To the Trustees of the American Century Municipal Trust and Shareholders of the
American Century Tax-Free Money Market Fund and the American Century Tax-Free
Bond Fund:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the American Century Tax-Free Money
Market Fund and the American Century Tax-Free Bond Fund (two of the five funds
in the American Century Municipal Trust hereafter referred to as the "Funds") at
May 31, 2004, the results of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
July 12, 2004
------
30
Management
The individuals listed below serve as trustees or officers of the funds. Each
trustee serves until his or her successor is duly elected and qualified or until
he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the remaining
independent trustees. The independent trustees have extended the mandatory
retirement age of Mr. Eisenstat to 75. Mr. Scott may serve until age 77, based
on an extension granted under retirement guidelines in effect prior to March
2004. Those listed as interested trustees are "interested" primarily by virtue
of their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly-owned subsidiaries, including the funds' investment advisor, American
Century Investment Management, Inc. (ACIM); the funds' principal underwriter,
American Century Investment Services, Inc. (ACIS); and the funds' transfer
agent, American Century Services Corporation (ACSC).
The other trustees (more than three-fourths of the total number) are
independent; that is, they are not employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM, ACIS, and ACSC. The trustees serve in this capacity for eight registered
investment companies in the American Century family of funds.
All persons named as officers of the funds also serve in similar capacities for
the other 12 investment companies advised by ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated for
his or her service as an officer of the funds. The listed officers are
interested persons of the funds and are appointed or re-appointed on an annual
basis.
--------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
--------------------------------------------------------------------------------
ALBERT EISENSTAT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1930
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, General Partner, Discovery
Ventures (Venture capital firm, 1996 to 1998)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Independent Director, Sungard Data Systems
(1991 to present); Independent Director, Business Objects S/A (1994 to present);
Independent Director, Commercial Metals (1983 to 2001)
--------------------------------------------------------------------------------
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Lead Trustee
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of Law
and Business, Stanford Law School (1979 to present); Mark and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present); Counsel, Marron, Reid & Sheehy (a San Francisco law firm, 1984 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
(continued)
------
31
Management
--------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
--------------------------------------------------------------------------------
KATHRYN A. HALL, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Investment
Officer, Offit Hall Capital Management, LLC (April 2002 to present); President
and Managing Director, Laurel Management Company, L.L.C. (1996 to April 2002)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Princeton University Investment
Company (1997 to present); Director, Stanford Management Company (2001 to
present); Director, UCSF Foundation (2000 to present); Director, San Francisco
Day School (1999 to present)
--------------------------------------------------------------------------------
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 23
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Partner, Oak Hill Capital
Management (1999 to present); Frank E. Buck Professor of Finance, Stanford
Graduate School of Business (1981 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Smith Breeden Family of Funds
(1992 to present)
--------------------------------------------------------------------------------
KENNETH E. SCOTT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1928
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 32
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Ralph M. Parsons Professor of Law
and Business, Stanford Law School (1972 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 1
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1977 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present); Director, Watson Wyatt Worldwide (2002 to present); Director,
Palmsource Inc. (2002 to present)
--------------------------------------------------------------------------------
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 19
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Director and Partner,
Windy Hill Productions, LP (educational software, 1994 to 1998)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Indus International (software
solutions, January 1999 to present); Director, Quintus Corporation (automation
solutions, 1995 to present)
--------------------------------------------------------------------------------
INTERESTED TRUSTEE
--------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Trustee, Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC and
other ACC subsidiaries (September 2000 to present); President, ACC (June 1997 to
present); President, ACIM (September 2002 to present); President, ACIS (July
2003 to present); Chief Operating Officer, ACC (June 1996 to September 2000);
Also serves as: Executive Vice President, ACSC and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
(continued)
------
32
Management
--------------------------------------------------------------------------------
OFFICERS
--------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: See entry under "Interested
Trustee."
--------------------------------------------------------------------------------
ROBERT T. JACKSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Executive Vice President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC
(August 1997 to present); Chief Financial Officer, ACC (May 1995 to October
2002); President, ACSC (January 1999 to present); Executive Vice President, ACC
(May 1995 to present); Also serves as: Executive Vice President and Chief
Financial Officer, ACIM, ACIS and other ACC subsidiaries; and Treasurer, ACIM
--------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer and Chief
Accounting Officer
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President (April 1998
to present) and Assistant Treasurer, ACSC (September 1985 to present)
--------------------------------------------------------------------------------
DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1958
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
LENGTH OF TIME SERVED (YEARS): 5
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, ACIM, ACIS,
ACSC, and other ACC subsidiaries (June 1998 to present); General Counsel, ACC,
ACIM, ACIS, ACSC, and other ACC subsidiaries (June 1998 to present)
--------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Controller
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
--------------------------------------------------------------------------------
C. JEAN WADE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1964
POSITION(S) HELD WITH FUND: Controller(1)
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
--------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, Corporate Tax, ACSC
(April 1998 to present); Vice President, ACIM, ACIS and other ACC subsidiaries
(April 1999 to present); President, American Century Employee Benefit Services,
Inc. (January 2000 to December 2000); Treasurer, American Century Ventures, Inc.
(December 1999 to January 2001); Treasurer, American Century Employee Benefit
Services, Inc. (December 2000 to December 2003)
--------------------------------------------------------------------------------
(1) Ms. Wade serves in a similar capacity for seven other investment companies
advised by ACIM.
The SAI has additional information about the funds' trustees and is available
without charge upon request by calling 1-800-345-2021.
------
33
Share Class Information
One class of shares is authorized for sale by Tax-Free Money Market: Investor
Class. Two classes of shares are authorized for sale by Tax-Free Bond: Investor
Class and Institutional Class. The total expense ratio for Institutional Class
shares is lower than that of Investor Class shares.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) in an American Century fund or at least $10
million in multiple funds. In recognition of the larger investments and account
balances and comparatively lower transaction costs, the total expense ratio of
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
------
34
Additional Information
INDEX DEFINITION
The following index is used to illustrate investment market, sector, or style
performance or to serve as a fund performance comparison. It is not an
investment product available for purchase.
The LEHMAN BROTHERS MUNICIPAL 5-YEAR GENERAL OBLIGATION (GO) INDEX is composed
of investment-grade U.S. municipal securities, with maturities of four to six
years, that are general obligations of a state or local government.
RISK FACTORS
The funds may concentrate their investments in certain states and therefore may
have more exposure to credit risk related to those states than a fund with a
broader geographical diversification. Income may be subject to state and local
taxes and, if applicable, the alternative minimum tax.
------
35
Notes
------
36
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
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
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
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.
The American Century logo, American Century and
American Century Investments are service marks
of American Century Services Corporation.
0407 American Century Investment Services, Inc.
SH-ANN-38591N (c)2004 American Century Services Corporation
[front cover]
MAY 31, 2004
American Century Investments
Annual Report
[photos]
Arizona Municipal Bond Fund
Florida Municipal Bond Fund
High-Yield Municipal Fund
[american century logo and text logo (reg.tm)]
[inside front cover]
Table of Contents
Our Message to You ........................................................ 1
ARIZONA MUNICIPAL BOND
Performance ............................................................... 2
Portfolio Commentary ...................................................... 4
Yields ................................................................. 4
Portfolio Composition by Credit Rating ................................. 5
Top Five Sectors ....................................................... 5
Schedule of Investments ................................................... 6
FLORIDA MUNICIPAL BOND
Performance ............................................................... 8
Portfolio Commentary ......................................................10
Yields .................................................................10
Portfolio Composition by Credit Rating .................................11
Top Five Sectors .......................................................11
Schedule of Investments ...................................................12
HIGH-YIELD MUNICIPAL
Performance ...............................................................15
Portfolio Commentary ......................................................17
Yields .................................................................17
Portfolio Composition by Credit Rating .................................18
Top Five States ........................................................18
Schedule of Investments ...................................................19
FINANCIAL STATEMENTS
Statement of Assets and Liabilities .......................................23
Statement of Operations ...................................................24
Statement of Changes in Net Assets ........................................25
Notes to Financial Statements .............................................27
Financial Highlights ......................................................33
Report of Independent Registered Public Accounting Firm ...................45
OTHER INFORMATION
Management ................................................................46
Share Class Information ...................................................49
Additional Information ....................................................50
Index Definitions .........................................................52
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
Our Message to You
[photo]
JAMES E. STOWERS III WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the annual report for the Arizona Municipal
Bond, Florida Municipal Bond, and High-Yield Municipal funds for the fiscal year
ended May 31, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
commentary that provide insight into market conditions that affected the fund's
performance.
In addition, through our americancentury.com Web site, we provide quarterly
commentaries on all portfolios managed by our investment teams, the views of our
senior investment officers, and other communications about investing, portfolio
strategy, and the markets. We also have many resources available in the
Education & Planning section of our site to help you meet your goals.
Your next shareholder report for these funds will be the semiannual report dated
November 30, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER AND CHAIRMAN
/s/James E. Stowers III
James E. Stowers III
CO-CHAIRMAN OF THE BOARD
------
1
Arizona Municipal Bond - Performance
TOTAL RETURNS AS OF MAY 31, 2004
---------------------------------
AVERAGE ANNUAL RETURNS
--------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS(1) INCEPTION(1) DATE
--------------------------------------------------------------------------------
INVESTOR CLASS -1.06% 5.05% 5.49% 5.62% 4/11/94
--------------------------------------------------------------------------------
LEHMAN BROTHERS
MUNICIPAL
5-YEAR GO INDEX -0.22% 5.04% 5.48% 5.55%(2) --
--------------------------------------------------------------------------------
LIPPER OTHER
STATES INTERMEDIATE
MUNICIPAL DEBT FUNDS
AVERAGE RETURNS -1.07% 4.16% 4.77% 4.85%(3) --
--------------------------------------------------------------------------------
Investor Class's
Lipper Ranking
5/31/04(4) 60 of 115 2 of 85 2 of 53 2 of 45(3) --
--------------------------------------------------------------------------------
Investor Class's
Lipper Ranking
6/30/04(4) 46 of 115 1 of 86 2 of 55 2 of 45(3) --
--------------------------------------------------------------------------------
A Class 2/27/04
No sales charge* -- -- -- -2.87%(5)
With sales charge* -- -- -- -7.24%(5)
--------------------------------------------------------------------------------
B Class 2/27/04
No sales charge* -- -- -- -3.06%(5)
With sales charge* -- -- -- -8.06%(5)
--------------------------------------------------------------------------------
C Class 2/27/04
No sales charge* -- -- -- -3.06%(5)
With sales charge* -- -- -- -4.02%(5)
--------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a maximum 5.75% initial
sales charge for equity funds and 4.50% maximum initial sales charge for fixed
income funds and may be subject to a maximum CDSC of 1.00%. B Class shares
redeemed within six years of purchase are subject to a CDSC that declines from
5.00% during the first year after purchase to 0.00% the sixth year after
purchase. C Class shares redeemed within 12 months of purchase are subject to a
maximum CDSC of 1.00%. Please see the Share Class Information pages for more
about the applicable sales charges for each share class. The SEC requires that
mutual funds provide performance information net of maximum sales charges in all
cases where charges could be applied.
(1) Investor Class returns and rankings would have been lower if management
fees had not been waived from 4/11/94 to 12/31/95. Beginning on 1/1/96,
management fees were phased in at a rate of 0.10% each month until 7/1/96.
(2) Since 3/31/94, the date nearest the fund's inception for which data are
available.
(3) Since 4/14/94, the date nearest the fund's inception for which data are
available.
(4) Lipper rankings are based on average annual total returns for the Investor
Class in a given category for the periods indicated.
(5) Returns for periods less than one year are not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the indices do not.
------
2
Arizona Municipal Bond - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made May 31, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended May 31
----------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------------------
Investor Class* 7.52% 4.65% 5.77% 7.19% 4.51% 0.20% 10.57% 6.74% 9.36% -1.06%
----------------------------------------------------------------------------------------------------
Lehman Brothers
Municipal 5-Year
GO Index 6.89% 4.74% 6.08% 6.95% 4.90% 0.65% 10.17% 6.33% 8.72% -0.22%
----------------------------------------------------------------------------------------------------
*Investor Class returns and rankings would have been lower if management fees
had not been waived from 4/11/94 to 12/31/95. Beginning on 1/1/96, management
fees were phased in at a rate of 0.10% each month until 7/1/96.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the indices do not.
------
3
Arizona Municipal Bond - Portfolio Commentary
BY KENNETH SALINGER, PORTFOLIO MANAGER
PERFORMANCE SUMMARY
Arizona Municipal Bond returned -1.06%* for the 12 months ended May 31, 2004. By
comparison, the average return of the 115 Other States Intermediate Municipal
Debt Funds tracked by Lipper Inc. was -1.07%. (See page 2 for additional
details.)
During the majority of the performance period, we emphasized strategies that we
believed would hold up well in light of our expectations for bond yields to rise
as the U.S. economy improved. Although we were right on the money with regard to
economic improvements, we weren't quite as accurate when it came to forecasting
when the rise in bond yields would occur.
Since we're after long-term results, however, we maintained Arizona Municipal
Bond's defensive positioning and that choice began to pay off during the last
six months. From a long-term results standpoint, Arizona Municipal Bond finished
among the top 5% of its Lipper peer group for the five- and 10-year periods
ended May 31, 2004.
ECONOMIC BACKDROP
Turning to the U.S. economy, growth (as measured by seasonally adjusted real
gross domestic product) surged to an 8.2% annualized pace during the third
quarter of 2003, marking the fastest three-month rate in almost two decades.
Activity moderated thereafter but nevertheless finished the first quarter of
2004 at 3.9%.
In addition, labor-market conditions improved, providing what had previously
been a key missing ingredient. Upbeat monthly employment reports, specifically
for March and April, helped to underscore that notion and drive up expectations
for better economic times ahead.
On the inflation front, prices rose from well-behaved levels. As measured by the
consumer price index for all urban consumers (and excluding food and energy
components), inflation increased at a 2.9% seasonally adjusted annual rate for
the first five months of 2004, compared with a very modest 1.1% for all of 2003.
PORTFOLIO AT A GLANCE
--------------------------------------------------------------------------------
AS OF AS OF
5/31/04 5/31/03
--------------------------------------------------------------------------------
Weighted Average
Maturity 7.4 yrs 8.5 yrs
--------------------------------------------------------------------------------
Average Duration
(Modified) 4.4 yrs 4.9 yrs
--------------------------------------------------------------------------------
YIELDS AS OF MAY 31, 2004
--------------------------------------------------------------------------------
30-DAY SEC YIELD
--------------------------------------------------------------------------------
Investor Class 2.93%
--------------------------------------------------------------------------------
A Class 2.58%
--------------------------------------------------------------------------------
B Class 1.89%
--------------------------------------------------------------------------------
C Class 1.99%
--------------------------------------------------------------------------------
INVESTOR CLASS 30-DAY TAX-EQUIVALENT YIELDS(1)
--------------------------------------------------------------------------------
28.54% Tax Bracket 4.10%
--------------------------------------------------------------------------------
31.40% Tax Bracket 4.27%
--------------------------------------------------------------------------------
36.38% Tax Bracket 4.60%
--------------------------------------------------------------------------------
38.28% Tax Bracket 4.74%
--------------------------------------------------------------------------------
(1) The tax brackets indicated are combined federal and state tax brackets.
Actual tax-equivalent yields may be lower, if alternative minimum tax is
applicable.
*All fund returns and yields referenced in this commentary are for Investor
Class shares.
(continued)
------
4
Arizona Municipal Bond - Portfolio Commentary
INTEREST RATE AND MARKET BACKDROP
As the economy and labor market improved, the outlook for short-term interest
rates switched directions. In June 2003, the Federal Reserve (the Fed) reduced
its main interest rate benchmark to a better than four-decade low of 1.0%. In
subsequent post-meeting statements, the Fed drummed up expectations that
short-term interest rates could be maintained at such levels for the near
future, which helped municipal bond yields to trend generally lower before
bottoming in mid-March 2004.
Bond yields rose sharply after that, however, thanks in part to Fed comments
about the eventual need for higher interest rates in light of the improved
economic backdrop and job-producing labor market.
The net result for the 12 months was that municipal bond prices fell across the
board, with yields on bonds maturing in four and five years generally increasing
the most and by as much as 100 basis points (1.00%).
Falling prices translated into a lackluster performance from a return
standpoint; the Lehman Brothers Municipal 5-Year GO Index returned -0.22% for
the fiscal year, compared with its 10-year average annual return of 5.48%.
PORTFOLIO STRATEGIES
We employed several strategies to accomplish the portfolio's defensive
positioning. To begin with, we emphasized a bond maturity structure that we
thought would perform well if the yield gap between short- and long-term bonds
decreases. We believe such an outcome to be a possibility if the Fed starts
raising short-term interest rates and inflation concerns ease.
In addition, we continued to focus on bonds rated AAA and AA. As shown in the
Portfolio Composition by Credit Rating table at bottom left, such securities
represented 82% of the portfolio at the end of May, compared with 81% six months
ago.
Finally, we occasionally established what we believed to be a conservatively low
sensitivity to interest rates. That generally limited losses when bond yields
rose, but dampened gains when yields fell.
PORTFOLIO COMPOSITION BY CREDIT RATING
--------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
5/31/04 11/30/03
--------------------------------------------------------------------------------
AAA 67% 61%
--------------------------------------------------------------------------------
AA 15% 20%
--------------------------------------------------------------------------------
A 11% 9%
--------------------------------------------------------------------------------
BBB 7% 10%
--------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
TOP FIVE SECTORS AS OF MAY 31, 2004
--------------------------------------------------------------------------------
% OF FUND
INVESTMENTS
--------------------------------------------------------------------------------
General Obligation (GO) 41%
--------------------------------------------------------------------------------
Higher Education 13%
--------------------------------------------------------------------------------
Water and Sewer Revenue 10%
--------------------------------------------------------------------------------
Certificates of Participation
(COPs)/Leases 9%
--------------------------------------------------------------------------------
Special Tax Revenue 9%
--------------------------------------------------------------------------------
------
5
Arizona Municipal Bond - Schedule of Investments
MAY 31, 2004
Principal Amount Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 98.9%
ARIZONA -- 93.6%
--------------------------------------------------------------------------------
$1,750,000 Arizona School Facilities Board
Rev., (State School
Improvement), 5.50%, 7/1/18 $ 1,894,900
--------------------------------------------------------------------------------
1,000,000 Arizona State University Rev.,
5.00%, 7/1/06 (FSA) 1,060,190
--------------------------------------------------------------------------------
1,000,000 Arizona Student Loan
Acquisition Auth. Rev., Series
1999 A1, (Guaranteed Student
Loans), 5.65%, 5/1/14 1,066,190
--------------------------------------------------------------------------------
1,880,000 Arizona Tourism & Sports Auth.
Tax Rev., (Baseball Training
Facilities), 5.00%, 7/1/13 1,942,341
--------------------------------------------------------------------------------
415,000 Coconino County Tuba City
Unified School District No. 15
Rev., Series 2004 A, (Project
2001), 3.25%, 7/1/14 (MBIA) 381,829
--------------------------------------------------------------------------------
1,910,000 Energy Management Services
LLC Rev., (Arizona State
University - Main Campus),
4.50%, 7/1/11 (MBIA) 2,017,915
--------------------------------------------------------------------------------
1,000,000 Glendale Industrial Development
Auth. Rev., Series 1998 A,
(Midwestern University),
5.375%, 5/15/28 1,006,560
--------------------------------------------------------------------------------
500,000 Glendale Industrial Development
Auth. Rev., Series 2001 A,
(Midwestern University),
5.75%, 5/15/21 524,210
--------------------------------------------------------------------------------
1,125,000 Greater Arizona Development
Auth. Rev., Series 2004 A,
4.25%, 8/1/10 1,156,016
--------------------------------------------------------------------------------
1,235,000 Maricopa County Alhambra
Elementary School District
No. 68 GO, 3.00%, 7/1/11
(FGIC) 1,159,739
--------------------------------------------------------------------------------
1,615,000 Maricopa County Elementary
School District No. 79 GO,
Series 2000 A, (Litchfield
Elementary Projects of 1998),
4.55%, 7/1/07 (FSA) 1,710,656
--------------------------------------------------------------------------------
175,000 Maricopa County Industrial
Development Auth. Hospital
Facility Rev., Series 1990 A,
(Samaritan Health Services),
7.15%, 12/1/04 (MBIA)(1) 180,135
--------------------------------------------------------------------------------
1,040,000 Maricopa County Kyrene Unified
School District No. 28 GO,
Series 2001 B, 4.30%, 7/1/07
(MBIA)(2) 952,879
--------------------------------------------------------------------------------
1,445,000 Maricopa County Phoenix
Unified High School District
No. 210 GO, 4.75%, 7/1/11
(FSA) 1,550,947
--------------------------------------------------------------------------------
1,000,000 Maricopa County Phoenix
Unified High School District
No. 210 GO, Series 1992 E,
7.10%, 7/1/04 1,005,220
--------------------------------------------------------------------------------
Principal Amount Value
--------------------------------------------------------------------------------
$1,000,000 Maricopa County Phoenix
Unified School District No. 1 GO,
5.50%, 7/1/07 (MBIA) $ 1,095,920
--------------------------------------------------------------------------------
1,955,000 Maricopa County Saddle
Mountain Unified School
District No. 90 GO, Series
2003 A, 5.00%, 7/1/10 2,059,690
--------------------------------------------------------------------------------
1,000,000 Maricopa County Scottsdale
Unified School District No. 48
GO, 6.60%, 7/1/12 1,200,220
--------------------------------------------------------------------------------
1,000,000 Maricopa County Stadium
District Rev., 2.50%, 6/1/04
(AMBAC) 1,000,100
--------------------------------------------------------------------------------
2,145,000 Mesa Industrial Development
Auth. Rev., Series 1998 A1,
(Lutheran Health System),
4.75%, 1/1/05 (MBIA) 2,187,364
--------------------------------------------------------------------------------
1,265,000 Mohave County Community
College District Rev., 5.75%,
3/1/14 (AMBAC) 1,404,884
--------------------------------------------------------------------------------
1,150,000 Mohave County Community
College District Rev., (State
Board of Directors), 6.00%,
3/1/20 (MBIA) 1,267,174
--------------------------------------------------------------------------------
1,000,000 Phoenix Civic Improvement
Corp. Rev., (Senior Lien),
5.00%, 7/1/05 1,036,690
--------------------------------------------------------------------------------
1,000,000 Phoenix Civic Improvement
Corp. Wastewater System Rev.,
(Junior Lien), 6.25%, 7/1/10,
Prerefunded at 101% of Par
(FGIC)(1) 1,165,230
--------------------------------------------------------------------------------
1,000,000 Phoenix Civic Improvement
Corp. Water System Rev.,
(Junior Lien), 6.50%, 7/1/06 1,088,590
--------------------------------------------------------------------------------
1,000,000 Phoenix Civic Improvement
Corp. Water System Rev.,
(Junior Lien), 5.50%, 7/1/19
(FGIC) 1,078,190
--------------------------------------------------------------------------------
2,070,000 Phoenix GO, Series 1995 A,
6.25%, 7/1/17 2,451,335
--------------------------------------------------------------------------------
1,000,000 Phoenix GO, Series 1995 B,
5.25%, 7/1/06 1,083,580
--------------------------------------------------------------------------------
815,000 Phoenix Industrial Development
Auth. Single Family Mortgage
Rev., Series 1998 A, 6.60%,
12/1/29 (GNMA/FNMA/FHLMC) 816,231
--------------------------------------------------------------------------------
1,525,000 Pima County Marana Unified
School District No. 6 GO, 4.50%,
7/1/13 (MBIA) 1,592,649
--------------------------------------------------------------------------------
1,125,000 Pima County Marana Unified
School District No. 6 GO, 5.50%,
7/1/15 (FGIC) 1,221,559
--------------------------------------------------------------------------------
1,710,000 Pima County Metropolitan
Domestic Water Improvement
District Rev., 5.25%, 7/1/18
(AMBAC) 1,862,310
--------------------------------------------------------------------------------
1,800,000 Pima County Metropolitan
Domestic Water Improvement
District Rev., 5.25%, 7/1/19
(AMBAC) 1,953,864
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
6
Arizona Municipal Bond - Schedule of Investments
MAY 31, 2004
Principal Amount Value
--------------------------------------------------------------------------------
$1,000,000 Pima County Sunnyside Unified
School District No. 12 GO,
5.50%, 7/1/05 (MBIA) $ 1,052,920
--------------------------------------------------------------------------------
1,550,000 Pima County Unified School
District No. 10 GO, Series
1995 B, (Amphitheater), 5.05%,
7/1/05 (MBIA) 1,624,493
--------------------------------------------------------------------------------
1,000,000 Pima County Unified School
District No. 10 GO, Series
1995 B, (Amphitheater), 7.00%,
7/1/05 (MBIA) 1,058,580
--------------------------------------------------------------------------------
615,000 Pinal County Community
College District Rev., 2.75%,
7/1/08 (AMBAC) 607,829
--------------------------------------------------------------------------------
820,000 Pinal County COP, 4.75%,
6/1/13 (AMBAC) 864,772
--------------------------------------------------------------------------------
435,000 Prescott Valley Municipal
Property Corp. Rev., 3.00%,
1/1/05 (FGIC) 439,172
--------------------------------------------------------------------------------
1,500,000 Salt River Project Agricultural
Improvement and Power
District Electrical System Rev.,
Series 2001 A, 5.00%, 1/1/05 1,532,190
--------------------------------------------------------------------------------
1,345,000 Scottsdale GO, 4.00%, 7/1/04 1,348,349
--------------------------------------------------------------------------------
1,600,000 Scottsdale GO, 6.25%, 7/1/09,
Prerefunded at 100% of Par(1) 1,828,768
--------------------------------------------------------------------------------
1,000,000 Sedona COP, 5.75%, 7/1/20 1,057,000
--------------------------------------------------------------------------------
1,645,000 University of Arizona COP,
Series 2002 A, 5.50%, 6/1/17
(AMBAC) 1,786,009
--------------------------------------------------------------------------------
500,000 Yavapai County Camp Verde
Unified School District No. 28
GO, 6.10%, 7/1/04 (FGIC) 502,070
--------------------------------------------------------------------------------
56,877,459
--------------------------------------------------------------------------------
PUERTO RICO -- 3.6%
--------------------------------------------------------------------------------
1,000,000 Puerto Rico Commonwealth GO,
(Public Improvement), 5.25%,
7/1/10 1,088,080
--------------------------------------------------------------------------------
1,000,000 Puerto Rico Public Buildings
Auth. Rev., Series 2002 C,
(Government Facilities), 5.50%,
7/1/10 1,101,630
--------------------------------------------------------------------------------
2,189,710
--------------------------------------------------------------------------------
U.S. VIRGIN ISLANDS -- 1.7%
--------------------------------------------------------------------------------
1,000,000 Virgin Islands Public Finance
Auth. Rev., Series 1999 A,
(Gross Receipts Taxes), 5.00%,
10/1/04 1,010,258
--------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES
(Cost $58,086,136) 60,077,427
--------------------------------------------------------------------------------
Principal Amount Value
--------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES -- 1.1%
ARIZONA -- 1.1%
--------------------------------------------------------------------------------
$ 75,000 Coconino County Pollution
Control Corp. Rev., (Arizona
Public Service Co.), VRDN,
1.10%, 6/1/04 (LOC: KBC
Bank N.V.) $75,000
--------------------------------------------------------------------------------
415,000 Pima County Industrial
Development Auth. Rev., (Lease
Purchase), VRDN, 1.22%,
6/3/04 (SBBPA: Societe
Generale) 415,000
--------------------------------------------------------------------------------
200,000 Pima County Industrial
Development Auth. Rev.,
(Tucson Electric), VRDN, 1.08%,
6/2/04 (LOC: Toronto Dominion
Bank) 200,000
--------------------------------------------------------------------------------
TOTAL SHORT-TERM MUNICIPAL
SECURITIES
(Cost $690,000) 690,000
--------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 100.0%
(Cost $58,776,136) $60,767,427
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
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
LOC = Letter of Credit
MBIA = MBIA Insurance Corporation
SBBPA = Standby Bond Purchase Agreement
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective May 31, 2004.
(1) Escrowed to maturity in U.S. government securities or state and local
government securities.
(2) Security is a zero-coupon municipal bond. The rate indicated is the
yield to maturity at purchase. Zero-coupon securities are issued at a
substantial discount from their value at maturity.
See Notes to Financial Statements.
------
7
Florida Municipal Bond - Performance
TOTAL RETURNS AS OF MAY 31, 2004
---------------------------------
AVERAGE ANNUAL RETURNS
--------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS(1) INCEPTION(1) DATE
--------------------------------------------------------------------------------
INVESTOR CLASS -1.30% 5.04% 5.63% 5.74% 4/11/94
--------------------------------------------------------------------------------
LEHMAN BROTHERS
MUNICIPAL
5-YEAR GO INDEX -0.22% 5.04% 5.48% 5.55%(2) --
--------------------------------------------------------------------------------
LIPPER FLORIDA
INTERMEDIATE
MUNICIPAL DEBT FUNDS
AVERAGE RETURNS -1.44% 4.11% 4.65% 4.72%(3) --
--------------------------------------------------------------------------------
Investor Class's
Lipper Ranking
5/31/04(4) 8 of 19 1 of 16 1 of 10 1 of 10(3) --
--------------------------------------------------------------------------------
Investor Class's
Lipper Ranking
6/30/04(4) 7 of 19 1 of 16 1 of 10 1 of 10(3) --
--------------------------------------------------------------------------------
A Class 2/27/04
No sales charge* -- -- -- -3.10%(5)
With sales charge* -- -- -- -7.43%(5)
--------------------------------------------------------------------------------
B Class 2/27/04
No sales charge* -- -- -- -3.28%(5)
With sales charge* -- -- -- -8.28%(5)
--------------------------------------------------------------------------------
C Class 2/27/04
No sales charge* -- -- -- -3.28%(5)
With sales charge* -- -- -- -4.24%(5)
--------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a maximum 5.75% initial
sales charge for equity funds and 4.50% maximum initial sales charge for fixed
income funds and may be subject to a maximum CDSC of 1.00%. B Class shares
redeemed within six years of purchase are subject to a CDSC that declines from
5.00% during the first year after purchase to 0.00% the sixth year after
purchase. C Class shares redeemed within 12 months of purchase are subject to a
maximum CDSC of 1.00%. Please see the Share Class Information pages for more
about the applicable sales charges for each share class. The SEC requires that
mutual funds provide performance information net of maximum sales charges in all
cases where charges could be applied.
(1) Investor Class returns and rankings would have been lower if management
fees had not been waived from 4/11/94 to 12/31/95. Beginning on 1/1/96,
management fees were phased in at a rate of 0.10% each month until 7/1/96.
(2) Since 3/31/94, the date nearest the fund's inception for which data are
available.
(3) Since 4/14/94, the date nearest the fund's inception for which data are
available.
(4) Lipper rankings are based on average annual total returns for the Investor
Class in a given category for the periods indicated.
(5) Returns for periods less than one year are not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the indices do not.
------
8
Florida Municipal Bond - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made May 31, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended May 31
----------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------------------
Investor Class* 7.31% 4.34% 6.63% 8.20% 4.71% 0.49% 10.70% 5.98% 9.90% -1.30%
----------------------------------------------------------------------------------------------------
Lehman Brothers
Municipal 5-Year
GO Index 6.89% 4.74% 6.08% 6.95% 4.90% 0.65% 10.17% 6.33% 8.72% -0.22%
----------------------------------------------------------------------------------------------------
*Investor Class returns and rankings would have been lower if management fees
had not been waived from 4/11/94 to 12/31/95. Beginning on 1/1/96, management
fees were phased in at a rate of 0.10% each month until 7/1/96.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the indices do not.
------
9
Florida Municipal Bond - Portfolio Commentary
BY KENNETH SALINGER, PORTFOLIO MANAGER
PERFORMANCE SUMMARY
Florida Municipal Bond returned -1.30%* for the 12 months ended May 31, 2004. By
comparison, the average return of the 19 Florida Intermediate Municipal Debt
Funds tracked by Lipper Inc. was -1.44%. (See page 8 for additional details.)
During the majority of the performance period, we emphasized strategies that we
believed would hold up well in light of our expectations for bond yields to rise
as the U.S. economy improved. Although we were right on the money with regard to
economic improvements, we weren't quite as accurate when it came to forecasting
when the rise in bond yields would occur.
Since we're after long-term results, however, we maintained Florida Municipal
Bond's defensive positioning and expect our employed strategies to pay off in
the times ahead. From a long-term results standpoint, Florida Municipal Bond
finished with a #1 ranking in its Lipper peer group for the five- and 10-year
periods ended May 31, 2004.
ECONOMIC BACKDROP
Turning to the U.S. economy, growth (as measured by seasonally adjusted real
gross domestic product) surged to an 8.2% annualized pace during the third
quarter of 2003, marking the fastest three-month rate in almost two decades.
Activity moderated thereafter but nevertheless finished the first quarter of
2004 at 3.9%.
In addition, labor-market conditions improved, providing what had previously
been a key missing ingredient. Upbeat monthly employment reports, specifically
for March and April, helped to underscore that notion and drive up expectations
for better economic times ahead.
On the inflation front, prices rose from well-behaved levels. As measured by the
consumer price index for all urban consumers (and excluding food and energy
components), inflation increased at a 2.9% seasonally adjusted annual rate for
the first five months of 2004, compared with a very modest 1.1% for all of 2003.
PORTFOLIO AT A GLANCE
--------------------------------------------------------------------------------
AS OF AS OF
5/31/04 5/31/03
--------------------------------------------------------------------------------
Weighted Average
Maturity 7.4 yrs 8.4 yrs
--------------------------------------------------------------------------------
Average Duration
(Modified) 4.5 yrs 4.6 yrs
--------------------------------------------------------------------------------
YIELDS AS OF MAY 31, 2004
--------------------------------------------------------------------------------
30-DAY SEC YIELD
--------------------------------------------------------------------------------
Investor Class 2.85%
--------------------------------------------------------------------------------
A Class 2.49%
--------------------------------------------------------------------------------
B Class 1.85%
--------------------------------------------------------------------------------
C Class 1.85%
--------------------------------------------------------------------------------
INVESTOR CLASS 30-DAY TAX-EQUIVALENT YIELDS(1)
--------------------------------------------------------------------------------
25.00% Tax Bracket 3.80%
--------------------------------------------------------------------------------
28.00% Tax Bracket 3.96%
--------------------------------------------------------------------------------
33.00% Tax Bracket 4.25%
--------------------------------------------------------------------------------
35.00% Tax Bracket 4.38%
--------------------------------------------------------------------------------
(1) The tax brackets indicated are for federal taxes only. Actual tax-equivalent
yields may be lower, if alternative minimum tax is applicable.
*All fund returns and yields referenced in this commentary are for Investor
Class shares.
(continued)
------
10
Florida Municipal Bond - Portfolio Commentary
INTEREST RATE AND MARKET BACKDROP
As the economy and labor market improved, the outlook for short-term interest
rates switched directions. In June 2003, the Federal Reserve (the Fed) reduced
its main interest rate benchmark to a better than four-decade low of 1.0%. In
subsequent post-meeting statements, the Fed drummed up expectations that
short-term interest rates could be maintained at such levels for the near
future, which helped municipal bond yields to trend generally lower before
bottoming in mid-March 2004.
Bond yields rose sharply after that, however, thanks in part to Fed comments
about the eventual need for higher interest rates in light of the improved
economic backdrop and job-producing labor market.
The net result for the 12 months was that municipal bond prices fell across the
board, with yields on bonds maturing in four and five years generally increasing
the most and by as much as 100 basis points (1.00%).
Falling prices translated into a lackluster performance from a return
standpoint; the Lehman Brothers Municipal 5-Year GO Index returned -0.22% for
the fiscal year, compared with its 10-year average annual return of 5.48%.
PORTFOLIO STRATEGIES
Turning to portfolio strategies, we employed several defensive techniques. For
starters, we occasionally established what we believed to be a conservatively
low sensitivity to interest rates. That generally limited losses when bond
yields rose, but dampened gains when yields fell.
We also continued to concentrate the portfolio in bonds rated AAA and AA. As
demonstrated by the Portfolio Composition by Credit Rating table at bottom left,
such securities represented 82% of the portfolio at the end of May.
Lastly, we emphasized a bond maturity structure that we thought would perform
well if the yield gap between short- and long-term bonds decreases. We believe
such an outcome to be a possibility if the Fed starts raising short-term
interest rates and inflation concerns ease.
PORTFOLIO COMPOSITION BY CREDIT RATING
--------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
5/31/04 11/30/03
--------------------------------------------------------------------------------
AAA 78% 85%
--------------------------------------------------------------------------------
AA 4% 6%
--------------------------------------------------------------------------------
A 5% 2%
--------------------------------------------------------------------------------
BBB 13% 7%
--------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
TOP FIVE SECTORS AS OF MAY 31, 2004
--------------------------------------------------------------------------------
% OF FUND
INVESTMENTS
--------------------------------------------------------------------------------
Certificates of Participation
(COPs)/Leases 19%
--------------------------------------------------------------------------------
Water and Sewer Revenue 14%
--------------------------------------------------------------------------------
Hospital Revenue 11%
--------------------------------------------------------------------------------
General Obligation (GO) 9%
--------------------------------------------------------------------------------
Transportation Revenue 9%
--------------------------------------------------------------------------------
------
11
Florida Municipal Bond - Schedule of Investments
MAY 31, 2004
Principal Amount Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 95.4%
FLORIDA -- 93.6%
--------------------------------------------------------------------------------
$1,110,000 Broward County Airport
Systems Rev., (Passenger
Facility), (Conventional Lien H-1),
5.25%, 10/1/12 (AMBAC) $ 1,169,951
--------------------------------------------------------------------------------
400,000 Broward County Educational
Facilities Auth. Rev., Series
2004 B, (Nova Southeastern),
5.00%, 4/1/14 405,188
--------------------------------------------------------------------------------
500,000 Broward County Educational
Facilities Auth. Rev., Series
2004 B, (Nova Southeastern),
5.50%, 4/1/15 520,395
--------------------------------------------------------------------------------
525,000 Broward County Educational
Facilities Auth. Rev., Series
2004 B, (Nova Southeastern),
5.50%, 4/1/16 542,698
--------------------------------------------------------------------------------
500,000 Broward County School Board
COP, Series 2002 B, 5.375%,
7/1/13 (FSA) 555,755
--------------------------------------------------------------------------------
960,000 Clay County School Board COP,
3.50%, 7/1/14 (MBIA) 894,634
--------------------------------------------------------------------------------
1,475,000 Collier County School Board
COP, 5.50%, 2/15/12 (FSA) 1,650,732
--------------------------------------------------------------------------------
715,000 Crossings at Fleming Island
Community Development
District Special Assessment
Rev., Series 2000 B, 5.25%,
5/1/05 (MBIA) 740,197
--------------------------------------------------------------------------------
250,000 Dade County Aviation Rev.,
Series 1995 E, 5.50%, 10/1/10
(AMBAC) 265,800
--------------------------------------------------------------------------------
1,150,000 Duval County School Board
COP, 5.75%, 7/1/16 (FSA) 1,252,879
--------------------------------------------------------------------------------
130,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
(Multi-County Program), 4.80%,
4/1/06 (GNMA/FNMA) 135,112
--------------------------------------------------------------------------------
195,000 Escambia County Housing
Finance Auth. Single Family
Mortgage Rev., Series 1998 A,
(Multi-County Program), 4.85%,
4/1/07 (GNMA/FNMA) 204,120
--------------------------------------------------------------------------------
1,050,000 Florida Board of Education
Capital Outlay GO, Series
1995 C, 5.50%, 6/1/12,
Prerefunded at 101% of Par
(MBIA)(1) 1,102,385
--------------------------------------------------------------------------------
2,320,000 Florida Division of Bond
Finance Rev., Series 1998 B,
(Environmental Protection -
Preservation), 5.25%, 7/1/10
(FSA) 2,507,409
--------------------------------------------------------------------------------
450,000 Florida Housing Finance
Agency Rev., Series 1995 E,
(Williamsburg Village
Apartments), 5.60%, 12/1/07
(AMBAC) 471,258
--------------------------------------------------------------------------------
Principal Amount Value
--------------------------------------------------------------------------------
$ 555,000 Florida Housing Finance Corp.
Rev., Series 1999-2,
(Homeowner Mortgage), 4.60%,
1/1/21 (FSA) $ 562,792
--------------------------------------------------------------------------------
1,000,000 Florida Municipal Loan Council
Rev., Series 2002 C, 5.25%,
11/1/21 (MBIA) 1,046,500
--------------------------------------------------------------------------------
350,000 Gainesville Utilities System Rev.,
Series 1996 A, 5.75%, 10/1/09 391,755
--------------------------------------------------------------------------------
675,000 Greater Orlando Aviation Auth.
Rev., Series 1999 A, 5.25%,
10/1/09 (FGIC) 724,748
--------------------------------------------------------------------------------
400,000 Hillsborough County Port
District Special Rev., 6.50%,
6/1/04 (FSA) 400,164
--------------------------------------------------------------------------------
445,000 Hollywood Community
Redevelopment Agency Rev.,
(Beach), 3.50%, 3/1/05 448,969
--------------------------------------------------------------------------------
610,000 Hollywood Community
Redevelopment Agency Rev.,
(Beach), 4.00%, 3/1/06 620,980
--------------------------------------------------------------------------------
635,000 Hollywood Community
Redevelopment Agency Rev.,
(Beach), 4.50%, 3/1/07 652,875
--------------------------------------------------------------------------------
690,000 Hollywood Community
Redevelopment Agency Rev.,
(Beach), 5.00%, 3/1/08 718,952
--------------------------------------------------------------------------------
2,010,000 Hollywood Water & Sewer Rev.,
3.00%, 10/1/06 (FSA) 2,051,788
--------------------------------------------------------------------------------
1,235,000 Indian River County Rev.,
(Spring Training Facility),
5.25%, 4/1/15 (FGIC) 1,324,068
--------------------------------------------------------------------------------
2,200,000 Jacksonville Sales Tax Rev.,
(Better Jacksonville), 3.50%,
10/1/15 (AMBAC) 1,995,180
--------------------------------------------------------------------------------
1,000,000 JEA Electric Systems Rev.,
Series 2003-3A, 2.50%,
10/1/05 1,009,560
--------------------------------------------------------------------------------
295,000 Julington Creek Plantation
Community Development
District Assessment Rev.,
2.75%, 5/1/06 (MBIA) 298,626
--------------------------------------------------------------------------------
295,000 Julington Creek Plantation
Community Development
District Assessment Rev.,
3.10%, 5/1/07 (MBIA) 299,449
--------------------------------------------------------------------------------
330,000 Julington Creek Plantation
Community Development
District Assessment Rev.,
3.65%, 5/1/09 (MBIA) 335,580
--------------------------------------------------------------------------------
350,000 Julington Creek Plantation
Community Development
District Assessment Rev.,
3.85%, 5/1/10 (MBIA) 356,909
--------------------------------------------------------------------------------
625,000 Julington Creek Plantation
Community Development
District Assessment Rev.,
4.00%, 5/1/11 (MBIA) 638,344
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
12
Florida Municipal Bond - Schedule of Investments
MAY 31, 2004
Principal Amount Value
--------------------------------------------------------------------------------
$ 850,000 Lee County Industrial
Development Health Care
Facilities Auth. Rev., Series
1999 A, (Shell Point Village),
5.50%, 11/15/09 $ 902,156
--------------------------------------------------------------------------------
1,290,000 Lee County Rev., Series 2001 A,
4.80%, 10/1/12 (AMBAC) 1,375,488
--------------------------------------------------------------------------------
1,000,000 Martin County Health Facilities
Auth. Rev., Series 2002 A,
(Martin Memorial Medical
Center), 3.35%, 11/15/04 1,006,190
--------------------------------------------------------------------------------
1,325,000 Martin County Health Facilities
Auth. Rev., Series 2002 A,
(Martin Memorial Medical
Center), 4.25%, 11/15/07 1,370,395
--------------------------------------------------------------------------------
1,000,000 Miami Beach Stormwater Rev.,
5.75%, 9/1/17 (FGIC) 1,105,770
--------------------------------------------------------------------------------
1,910,000 Miami Beach Water & Sewer
Rev., 5.625%, 9/1/16 (AMBAC) 2,094,008
--------------------------------------------------------------------------------
650,000 Miami Parking Facilities Rev.,
5.25%, 10/1/15 (MBIA) 706,453
--------------------------------------------------------------------------------
1,000,000 Miami-Dade County School
Board COP, Series 2001 C,
5.50%, 10/1/16 (FSA) 1,079,370
--------------------------------------------------------------------------------
1,000,000 Miami-Dade County School
Board COP, Series 2001 C,
5.50%, 10/1/17 (FSA) 1,079,370
--------------------------------------------------------------------------------
160,000 Orange County Health Facilities
Auth. Rev., Series 1996 A,
(Orlando Regional Healthcare),
6.00%, 10/1/04 (MBIA) 162,464
--------------------------------------------------------------------------------
390,000 Orange County Health Facilities
Auth. Rev., Series 1996 A,
(Orlando Regional Healthcare),
6.00%, 10/1/04 (MBIA)(1) 396,240
--------------------------------------------------------------------------------
1,875,000 Orange County School Board
COP, Series 2002 A, 5.50%,
8/1/19 (MBIA) 2,019,881
--------------------------------------------------------------------------------
450,000 Orlando and Orange County
Expressway Auth. Rev., 6.50%,
7/1/11 (FGIC) 532,103
--------------------------------------------------------------------------------
500,000 Orlando Utilities Commission
Water & Electric Rev., 5.70%,
10/1/04 507,495
--------------------------------------------------------------------------------
1,000,000 Palm Beach County Airport
Systems Rev., 4.00%, 10/1/06
(MBIA) 1,041,190
--------------------------------------------------------------------------------
1,000,000 Palm Beach County Airport
Systems Rev., 5.75%, 10/1/14
(MBIA) 1,138,600
--------------------------------------------------------------------------------
1,000,000 Palm Beach County School
Board COP, Series 2002 A,
5.375%, 8/1/17 (FSA) 1,068,750
--------------------------------------------------------------------------------
2,000,000 Pasco County Solid Waste
Disposal & Resource Recovery
System Rev., 6.00%, 4/1/10
(AMBAC) 2,215,199
--------------------------------------------------------------------------------
Principal Amount Value
--------------------------------------------------------------------------------
$ 500,000 Pensacola Airport Rev., Series
1997 B, 5.40%, 10/1/07 (MBIA) $ 531,295
--------------------------------------------------------------------------------
300,000 Plantation Health Facilities Auth.
Rev., (Covenant Village of
Florida Inc.), 4.45%, 12/1/04 304,038
--------------------------------------------------------------------------------
300,000 Plantation Health Facilities Auth.
Rev., (Covenant Village of
Florida Inc.), 4.55%, 12/1/05 309,693
--------------------------------------------------------------------------------
300,000 Plantation Health Facilities Auth.
Rev., (Covenant Village of
Florida Inc.), 4.70%, 12/1/07 315,942
--------------------------------------------------------------------------------
1,000,000 Polk County Finance Auth.
Multifamily Housing Rev.,
Series 1997 A, (Winter Oaks
Apartments), 5.25%, 7/1/07
(FNMA) 1,036,330
--------------------------------------------------------------------------------
1,000,000 Port St. Lucie Gas Tax Rev.,
5.00%, 9/1/12 (FGIC) 1,080,710
--------------------------------------------------------------------------------
500,000 Port St. Lucie Gas Tax Rev.,
5.00%, 9/1/14 (FGIC) 534,270
--------------------------------------------------------------------------------
1,015,000 St. Lucie County Public
Improvement Rev., Series
2000 A, (800 MHZ Radio
System), 5.50%, 4/1/10 (MBIA) 1,128,893
--------------------------------------------------------------------------------
1,000,000 Sumter County School Board
COP, 5.50%, 1/1/21 (MBIA) 1,070,160
--------------------------------------------------------------------------------
1,000,000 Sunrise Utility System Rev.,
5.20%, 10/1/22 (AMBAC) 1,049,010
--------------------------------------------------------------------------------
1,000,000 Tampa Bay Water Utility
System Rev., Series 1998 B,
5.125%, 10/1/08 (FGIC) 1,097,010
--------------------------------------------------------------------------------
400,000 Tampa Guaranteed Entitlement
Rev., 6.00%, 10/1/18 (AMBAC) 456,800
--------------------------------------------------------------------------------
1,000,000 Tampa Water & Sewer Rev.,
6.00%, 10/1/17 (FSA) 1,162,860
--------------------------------------------------------------------------------
910,000 Village Center Community
Development District
Recreational Rev., Series
2001 A, 3.75%, 11/1/05 (MBIA) 936,508
--------------------------------------------------------------------------------
1,545,000 West Orange Healthcare District
Rev., Series 1999 A, 5.10%,
2/1/05 1,580,844
--------------------------------------------------------------------------------
58,691,237
--------------------------------------------------------------------------------
PUERTO RICO -- 1.8%
--------------------------------------------------------------------------------
1,000,000 Puerto Rico Public Buildings
Auth. Rev., Series 2002 C,
(Government Facilities), 5.50%,
7/1/10 1,101,640
--------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES
(Cost $58,187,568) 59,792,877
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
13
Florida Municipal Bond - Schedule of Investments
MAY 31, 2004
Principal Amount Value
--------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES -- 4.6%
FLORIDA -- 4.6%
--------------------------------------------------------------------------------
$1,500,000 Broward County Financing Auth.
Multifamily Housing Rev., Series
1993 A, (Sawgrass Pines
Apartments), VRDN, 1.12%,
6/3/04 (LOC: Bank of America
N.A.) $ 1,500,000
--------------------------------------------------------------------------------
750,000 Broward County Health
Facilities Auth. Rev., (John
Knox Village), VRDN, 1.15%,
6/1/04 (RADIAN) 750,000
--------------------------------------------------------------------------------
250,000 Jacksonville Health Facilities
Auth. Rev., (Genesis
Rehabilitation Hospital), VRDN,
1.09%, 6/1/04 (LOC: Bank of
America N.A.) 250,000
--------------------------------------------------------------------------------
100,000 Orange County School Board
COP, Series 2000 B, VRDN,
1.08%, 6/1/04 (AMBAC) 100,000
--------------------------------------------------------------------------------
300,000 Sarasota County Public Hospital
Board Rev., Series 2003 A,
(Sarasota Memorial Hospital),
VRDN, 1.10%, 6/1/04 (AMBAC) 300,000
--------------------------------------------------------------------------------
TOTAL SHORT-TERM MUNICIPAL
SECURITIES
(Cost $2,900,000) 2,900,000
--------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 100.0%
(Cost $61,087,568) $62,692,877
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance, Inc.
GNMA = Government National Mortgage Association
GO = General Obligation
LOC = Letter of Credit
MBIA = MBIA Insurance Corporation
RADIAN = Radian Asset Assurance, Inc.
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective May 31, 2004.
(1) Escrowed to maturity in U.S. government securities or state and local
government securities.
Notes to Financial Statements.
------
14
High-Yield Municipal - Performance
TOTAL RETURNS AS OF MAY 31, 2004
------------------------
AVERAGE ANNUAL RETURNS
--------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS(1) INCEPTION(1) DATE
--------------------------------------------------------------------------------
INVESTOR CLASS 3.07% 5.30% 5.60% 3/31/98
--------------------------------------------------------------------------------
LEHMAN BROTHERS
LONG-TERM MUNICIPAL
BOND INDEX -0.26% 5.57% 5.46% --
--------------------------------------------------------------------------------
LIPPER HIGH-YIELD
MUNICIPAL DEBT FUNDS
AVERAGE RETURNS 3.08% 3.19% 3.33% --
--------------------------------------------------------------------------------
Investor Class's Lipper
Ranking 5/31/04(2) 29 of 80 3 of 55 1 of 50 --
--------------------------------------------------------------------------------
Investor Class's Lipper
Ranking 6/30/04(2) 23 of 80 7 of 59 1 of 50 --
--------------------------------------------------------------------------------
A Class 1/31/03
No sales charge* 2.81% -- 4.84%
With sales charge* -1.79% -- 1.30%
--------------------------------------------------------------------------------
B Class 1/31/03
No sales charge* 2.05% -- 4.16%
With sales charge* -1.95% -- 1.17%
--------------------------------------------------------------------------------
C Class 2.20% -- 4.50% 7/24/02
--------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a maximum 5.75% initial
sales charge for equity funds and 4.50% maximum initial sales charge for fixed
income funds and may be subject to a maximum CDSC of 1.00%. B Class shares
redeemed within six years of purchase are subject to a CDSC that declines from
5.00% during the first year after purchase to 0.00% the sixth year after
purchase. C Class shares redeemed within 12 months of purchase are subject to a
maximum CDSC of 1.00%. Please see the Share Class Information pages for more
about the applicable sales charges for each share class. The SEC requires that
mutual funds provide performance information net of maximum sales charges in all
cases where charges could be applied.
(1) Investor Class returns and rankings would have been lower if management
fees had not been waived from 3/31/98 to 4/30/99. Beginning on 5/1/99,
management fees were phased in at a rate of 0.10% each month until 10/31/99.
(2) Lipper rankings are based on average annual total returns for the Investor
Class in a given category for the periods indicated.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the indices do not.
------
15
High-Yield Municipal - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made March 31, 1998
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended May 31
--------------------------------------------------------------------------------
1998* 1999 2000 2001 2002 2003 2004
--------------------------------------------------------------------------------
Investor Class 1.81% 6.18% -2.81% 9.13% 8.25% 9.40% 3.07%
--------------------------------------------------------------------------------
Lehman Brothers
Long-Term Municipal
Bond Index 1.41% 4.35% -4.45% 15.38% 6.64% 11.84% -0.26%
--------------------------------------------------------------------------------
* From 3/31/98 (the class's inception date) to 5/31/98. Not annualized.
**Investor Class returns and rankings would have been lower if management fees
had not been waived from 3/31/98 to 4/30/99. Beginning on 5/1/99, management
fees were phased in at a rate of 0.10% each month until 10/31/99.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the indices
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the indices do not.
------
16
High-Yield Municipal - Portfolio Commentary
BY STEVEN PERMUT, PORTFOLIO MANAGER
RETURN SUMMARY & PERSPECTIVE
High-Yield Municipal returned 3.07%* for the fiscal year ended May 31, 2004.
That compares favorably with the Lehman Brothers Long-Term Municipal Bond Index,
which declined 0.26%. The index reflects the performance of investment-grade
municipal bonds, which tend to underperform high-yield municipals when interest
rates rise.
The fund's fiscal year return closely mirrored its Lipper peer group's average
(see page 15). The fund lagged the peer group during the first half of the
period when tax-exempt airline bonds (owned by other high-yield municipal
portfolios but not ours) outperformed, but we made up most of the difference
when airline bonds underperformed more recently.
High-Yield Municipal continued to distinguish itself over longer time frames,
outperforming the peer group for the five-year and since-inception periods ended
May 31, 2004, and ranking in the top 10% of those peer groups.
YIELD SUMMARY & PERSPECTIVE
Our investment objective is to seek high current income that is exempt from
federal income tax. As of May 31, 2004, we'd invested 73% of the portfolio in
municipal debt that was below investment-grade (either with credit ratings below
BBB or unrated but determined by us to be of equivalent quality). These bonds
offer higher yields as compensation for their perceived risk. As of May 31,
2004, the fund's 30-day SEC yield was 4.97%,* offering a 7.65% 30-day
tax-equivalent yield for investors in the 35% federal tax bracket.
The fund's 30-day SEC yield rose during the fiscal year--on May 31, 2003, the
yield was 4.86%. Municipal yields generally increased during the period.
ECONOMIC & MARKET PERSPECTIVE
Municipal bond yields rose during the fiscal year as economic and job growth
surged, inflation increased, and the market anticipated interest rate hikes by
the Federal Reserve. Economic growth, as measured by GDP, spiked to 8.2%
annualized in the third quarter of 2003, then settled near 4% for the next two
quarters. That helped trigger a surge in job growth in the spring of 2004 (an
PORTFOLIO AT A GLANCE
--------------------------------------------------------------------------------
AS OF AS OF
5/31/04 5/31/03
--------------------------------------------------------------------------------
Weighted Average
Maturity 18.4 yrs 19.1 yrs
--------------------------------------------------------------------------------
Average Duration
(Modified) 7.0 yrs 6.2 yrs
--------------------------------------------------------------------------------
YIELDS AS OF MAY 31, 2004
--------------------------------------------------------------------------------
30-DAY SEC YIELD
--------------------------------------------------------------------------------
Investor Class 4.97%
--------------------------------------------------------------------------------
A Class 4.51%
--------------------------------------------------------------------------------
B Class 3.97%
--------------------------------------------------------------------------------
C Class 3.97%
--------------------------------------------------------------------------------
INVESTOR CLASS 30-DAY TAX-EQUIVALENT YIELDS(1)
--------------------------------------------------------------------------------
25.00% Tax Bracket 6.63%
--------------------------------------------------------------------------------
28.00% Tax Bracket 6.90%
--------------------------------------------------------------------------------
33.00% Tax Bracket 7.42%
--------------------------------------------------------------------------------
35.00% Tax Bracket 7.65%
--------------------------------------------------------------------------------
(1) The tax brackets indicated are for federal taxes only. Actual tax-equivalent
yields may be lower, if alternative minimum tax is applicable.
*All fund returns and yields referenced in this commentary are for Investor
Class shares.
(continued)
------
17
High-Yield Municipal - Portfolio Commentary
estimated 912,000 jobs were added in the three months ended May 2004) along with
a sharp rise in core consumer prices. The jumps in job growth and core inflation
helped create expectations that the Federal Reserve would start raising its
overnight interest rate target as early as June 30, 2004.
The broad U.S. bond market mostly suffered price declines for the period, but
conditions were relatively favorable for high-yield municipals. For example, in
the one-month ended April 30, 2004, the 10-year Treasury note and the Lehman
Brothers Long-Term Municipal Bond Index declined sharply, falling 4.83% and
3.15%, respectively, while High-Yield Municipal and its Lipper group average
dipped just 1.05% and 1.43%, respectively.
PORTFOLIO POSITIONING & STRATEGY
We employ techniques designed to realize capital appreciation as well as income.
Much of the appreciation potential resides in land-secured bonds, which
represented the portfolio's largest sector position at the beginning, middle,
and end of the fiscal year. Land-secured bonds finance real estate development
projects and are typically backed by property tax revenues.
Land-secured investments have potential for price appreciation as economic
conditions improve and/or the projects are developed and their finances
solidify. A land-secured bond that finances a housing development, for example,
starts out as a sole obligation of the developer, but is eventually backed by
the pool of new homeowners, diversifying the credit risk.
In addition to our other strategies, we continued to focus on the thorough
credit reviews and careful security selection that are the foundations of our
approach. We believe our process reduces the risks of potential downgrades and
defaults inherent to the high-yield sector; there have been no defaults in the
portfolio since the fund's inception. Along those lines, we've limited our
exposure to tobacco bonds and held no airline bonds as of May 31, 2004, two
sectors that have been volatile in 2004.
PORTFOLIO COMPOSITION BY CREDIT RATING
--------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
5/31/04 11/30/03
--------------------------------------------------------------------------------
AAA 19% 22%
--------------------------------------------------------------------------------
AA 2% 3%
--------------------------------------------------------------------------------
A 1% .--
--------------------------------------------------------------------------------
BBB 5% 7%
--------------------------------------------------------------------------------
BB 4% 2%
--------------------------------------------------------------------------------
Unrated 69% 66%
--------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
TOP FIVE SECTORS AS OF MAY 31, 2004
--------------------------------------------------------------------------------
% OF FUND
INVESTMENTS
--------------------------------------------------------------------------------
Land-Secured 42%
--------------------------------------------------------------------------------
General Obligation (GO) 17%
--------------------------------------------------------------------------------
Certificates of Participation
(COPs)/Leases 6%
--------------------------------------------------------------------------------
Hospital Revenue 5%
--------------------------------------------------------------------------------
Housing Revenue 4%
--------------------------------------------------------------------------------
------
18
High-Yield Municipal - Schedule of Investments
MAY 31, 2004
Principal Amount Value
--------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 96.5%
ALASKA -- 0.5%
--------------------------------------------------------------------------------
$ 500,000 Anchorage Schools GO, Series
2000 A, 5.75%, 12/1/16
(MBIA) $ 550,905
--------------------------------------------------------------------------------
ARIZONA -- 2.2%
--------------------------------------------------------------------------------
1,125,000 Maricopa County Industrial
Development Auth. Education
Rev., (Horizon Community
Learning Center), 7.95%,
6/15/23 1,158,795
--------------------------------------------------------------------------------
1,140,000 Sundance Community
Facilities Assessment District
No. 2 Rev., 7.125%, 7/1/27 1,144,423
--------------------------------------------------------------------------------
2,303,218
--------------------------------------------------------------------------------
CALIFORNIA -- 19.4%
--------------------------------------------------------------------------------
2,000,000 Beaumont Financing Auth.
Rev., Series 2003 A, 6.875%,
9/1/27 2,064,600
--------------------------------------------------------------------------------
2,000,000 California Mobilehome Park
Financing Auth. Rev., Series
2003 B, (Palomar Estates
E&W), 7.00%, 9/15/36(1) 2,042,240
--------------------------------------------------------------------------------
1,000,000 California Statewide
Communities Development
Auth. COP, Series 1999 A,
(Windsor Terrace Healthcare),
7.875%, 10/1/29 (Acquired
10/26/99, Cost $1,000,000)(2) 972,630
--------------------------------------------------------------------------------
750,000 California Statewide
Communities Development
Auth. Rev., (Thomas Jefferson
School of Law), 7.75%,
10/1/31 791,805
--------------------------------------------------------------------------------
2,000,000 Capistrano Unified School
District Community Facilities
(No. 90-2 Talega) Special Tax
Rev., 6.00%, 9/1/33 1,982,080
--------------------------------------------------------------------------------
950,000 Hawaiian Gardens COP, Series
2000 A, 8.00%, 6/1/23 1,007,181
--------------------------------------------------------------------------------
1,500,000 Lee Lake Water District
Community Facilities District
No. 3 Special Tax, (Retreat),
5.95%, 9/1/34 1,436,070
--------------------------------------------------------------------------------
2,000,000 Northern Mariana Islands
Commonwealth GO, Series
2003 A, 6.75%, 10/1/33 2,000,160
--------------------------------------------------------------------------------
2,500,000 Perris Public Financing Auth.
Special Tax Rev., Series
2003 A, 6.25%, 9/1/33 2,516,775
--------------------------------------------------------------------------------
1,000,000 Soledad Special Assessment,
(Diamond Ridge Assessment
District No. 02-01), 6.75%,
9/2/33 1,022,990
--------------------------------------------------------------------------------
1,610,000 Vallejo Multifamily Housing
Rev., Series 1998 B, (Solano
Affordable Housing), 8.25%,
4/1/39 (Acquired 12/12/02,
Cost $1,742,648)(2) 1,712,283
--------------------------------------------------------------------------------
Principal Amount Value
--------------------------------------------------------------------------------
$2,500,000 West Patterson Financing
Auth. Community Facilities
District No. 1 Improvement
Special Tax Rev., Series
2004 A, 6.10%, 9/1/32 $ 2,403,850
--------------------------------------------------------------------------------
19,952,664
--------------------------------------------------------------------------------
COLORADO -- 6.6%
--------------------------------------------------------------------------------
1,500,000 Denver Health & Hospital Auth.
Healthcare Rev., Series 2004 A,
6.25%, 12/1/33(3) 1,501,710
--------------------------------------------------------------------------------
640,000 Douglas County School
District No. Re-1 GO, Series
2002 B, (Douglas & Elbert
Counties), 5.75%, 12/15/19
(FSA/State Aid Withholding) 709,248
--------------------------------------------------------------------------------
3,000,000 One Horse Business
Improvement District Rev.,
6.00%, 6/1/24(3) 3,028,050
--------------------------------------------------------------------------------
1,500,000 Plaza Metropolitan District
No. 1 Rev., 8.00%, 12/1/25 1,522,425
--------------------------------------------------------------------------------
6,761,433
--------------------------------------------------------------------------------
CONNECTICUT -- 1.0%
--------------------------------------------------------------------------------
1,000,000 Connecticut Development Auth.
Industrial Rev., (Afco Cargo
BDL-LLC), 8.00%, 4/1/30 1,032,170
--------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 1.8%
--------------------------------------------------------------------------------
1,000,000 District of Columbia COP,
(Public Safety & Emergency),
5.50%, 1/1/19 (AMBAC) 1,065,530
--------------------------------------------------------------------------------
750,000 Metropolitan Washington D.C.
Airports Auth. General Rev.,
Series 2001 A, 5.50%,
10/1/18 (MBIA) 788,318
--------------------------------------------------------------------------------
1,853,848
--------------------------------------------------------------------------------
FLORIDA -- 20.5%
--------------------------------------------------------------------------------
75,000 Arbor Greene Community
Development District Special
Assessment, 5.75%, 5/1/06 74,895
--------------------------------------------------------------------------------
30,000 Arbor Greene Community
Development District Special
Assessment, 6.50%, 5/1/07 30,095
--------------------------------------------------------------------------------
2,300,000 Concorde Estates Community
Development District Rev.,
Series 2004 B, 5.00%, 5/1/11 2,289,673
--------------------------------------------------------------------------------
1,000,000 Double Branch Community
Development District Special
Assessment, Series 2002 A,
6.70%, 5/1/34 1,053,480
--------------------------------------------------------------------------------
2,000,000 Double Branch Community
Development District Special
Assessment, Series 2003 C,
5.125%, 5/1/08 1,999,280
--------------------------------------------------------------------------------
520,000 Fleming Island Plantation
Community Development
District Special Assessment,
Series 2000 B, 7.375%, 5/1/31 554,164
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
19
High-Yield Municipal - Schedule of Investments
MAY 31, 2004
Principal Amount Value
--------------------------------------------------------------------------------
$1,420,000 Gateway Services Community
Development District Special
Assessment, Series 2003 B,
(Sun City Center - Fort
Meyers), 5.50%, 5/1/10 $ 1,420,355
--------------------------------------------------------------------------------
970,000 Heritage Harbor South
Community Development
District Rev., Series 2002 B,
5.40%, 11/1/08 969,389
--------------------------------------------------------------------------------
210,000 Maple Ridge Community
Development District Special
Assessment, Series 2000 B,
6.15%, 11/1/04 210,575
--------------------------------------------------------------------------------
2,620,000 Middle Village Community
Development District Special
Assessment, Series 2004 A,
6.00%, 5/1/35 2,599,826
--------------------------------------------------------------------------------
1,000,000 Middle Village Community
Development District Special
Assessment, Series 2004 B,
5.00%, 5/1/09 995,740
--------------------------------------------------------------------------------
1,000,000 Orange County School Board
COP, Series 2002 A, 5.50%,
8/1/19 (MBIA) 1,077,270
--------------------------------------------------------------------------------
500,000 Reunion East Community
Development District Special
Assessment Rev., Series
2002 B, 5.90%, 11/1/07 498,965
--------------------------------------------------------------------------------
1,245,000 South-Dade Venture
Community Development
District Rev., 6.125%, 5/1/34 1,237,318
--------------------------------------------------------------------------------
1,315,000 Sterling Hill Community
Development District Special
Assessment, Series 2003 B,
(Capital Improvement
Revenue), 5.50%, 11/1/10 1,315,079
--------------------------------------------------------------------------------
380,000 Stoneybrook West Community
Development District Special
Assessment Rev., Series
2000 A, 7.00%, 5/1/32 397,423
--------------------------------------------------------------------------------
975,000 Waterchase Community
Development District Rev.,
Series 2001 A, 6.70%, 5/1/32 1,009,720
--------------------------------------------------------------------------------
3,500,000 Westchester Community
Development District No. 1
Special Assessment,
(Infrastructure), 6.125%,
5/1/35 3,507,524
--------------------------------------------------------------------------------
21,240,771
--------------------------------------------------------------------------------
GEORGIA -- 0.5%
--------------------------------------------------------------------------------
500,000 Atlanta Water & Wastewater
Rev., Series 1999 A, 5.50%,
11/1/18 (FGIC) 556,845
--------------------------------------------------------------------------------
GUAM -- 1.1%
--------------------------------------------------------------------------------
390,000 Guam International Airport
Auth. Rev., Series 2003 A,
4.00%, 10/1/10 (MBIA) 401,170
--------------------------------------------------------------------------------
Principal Amount Value
--------------------------------------------------------------------------------
$ 690,000 Guam International Airport
Auth. Rev., Series 2003 A,
4.00%, 10/1/11 (MBIA) $ 705,490
--------------------------------------------------------------------------------
1,106,660
--------------------------------------------------------------------------------
MARYLAND -- 3.9%
--------------------------------------------------------------------------------
1,250,000 Anne Arundel County Special
Obligation Rev., (Arundel
Mills), 7.10%, 7/1/29 1,496,962
--------------------------------------------------------------------------------
1,000,000 Anne Arundel County Special
Obligation Rev., (National
Business Park), 7.375%,
7/1/28 1,231,740
--------------------------------------------------------------------------------
1,250,000 Prince Georges County Rev.,
(Woodview Village Phase II -
Subdistrict), 7.00%, 7/1/32 1,262,038
--------------------------------------------------------------------------------
3,990,740
--------------------------------------------------------------------------------
MISSOURI -- 1.6%
--------------------------------------------------------------------------------
860,000 Missouri Bottom Transportation
Development District
Hazelwood Rev., 7.20%,
5/1/33 885,861
--------------------------------------------------------------------------------
745,000 Missouri Housing Development
Commission Mortgage Rev.,
Series 1998 B2, (Single
Family), 6.40%, 9/1/29
(GNMA/FNMA) 768,482
--------------------------------------------------------------------------------
1,654,343
--------------------------------------------------------------------------------
NEVADA -- 15.5%
--------------------------------------------------------------------------------
960,000 Clark County Improvement
District No. 121 Special
Assessment, (Southern
Highlands Area), 7.50%,
12/1/19 1,030,502
--------------------------------------------------------------------------------
3,000,000 Clark County Improvement
District No. 142 Special
Assessment, 5.50%, 8/1/12 3,006,600
--------------------------------------------------------------------------------
720,000 Clark County Improvement
Districts No. 108 & 124
Special Assessment, Series
2003 B, 5.25%, 2/1/12 719,273
--------------------------------------------------------------------------------
760,000 Clark County Improvement
Districts No. 108 & 124
Special Assessment, Series
2003 B, 5.375%, 2/1/13 758,374
--------------------------------------------------------------------------------
730,000 Clark County Improvement
Districts No. 108 & 124
Special Assessment, Series
2003 B, 5.40%, 2/1/14 718,875
--------------------------------------------------------------------------------
1,575,000 Henderson Local Improvement
Districts No. T-14 Special
Assessment, 5.25%, 3/1/13 1,590,845
--------------------------------------------------------------------------------
1,560,000 Henderson Local Improvement
Districts No. T-15 Special
Assessment, 6.10%, 3/1/24 1,538,690
--------------------------------------------------------------------------------
1,105,000 Henderson Redevelopment
Agency Tax Allocation, Series
2002 B, 7.10%, 10/1/22 1,145,587
--------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
20
High-Yield Municipal - Schedule of Investments
MAY 31, 2004
Principal Amount Value
--------------------------------------------------------------------------------
$ 350,000 Henderson Redevelopment
Agency Tax Allocation, Series
2002 B, 7.20%, 10/1/25 $ 359,058
--------------------------------------------------------------------------------
440,000 Las Vegas Special
Improvement District No. 809
Rev., (Summerlin Area),
4.95%, 6/1/12 428,014
--------------------------------------------------------------------------------
460,000 Las Vegas Special
Improvement District No. 809
Rev., (Summerlin Area),
5.05%, 6/1/13 445,036
--------------------------------------------------------------------------------
500,000 Las Vegas Special
Improvement District No. 808
Special Assessment,
(Summerlin Area), 5.40%,
6/1/06 519,205
--------------------------------------------------------------------------------
495,000 Las Vegas Special
Improvement District No. 808
Special Assessment,
(Summerlin Area), 5.70%,
6/1/08 514,270
--------------------------------------------------------------------------------
1,165,000 North Las Vegas Special
Improvement District No. 60
Special Assessment, (Aliante),
5.25%, 12/1/10 1,175,532
--------------------------------------------------------------------------------
500,000 North Las Vegas Special
Improvement District No. 60
Special Assessment, (Aliante),
5.60%, 12/1/12 504,540
--------------------------------------------------------------------------------
755,000 Reno Special Assessment
District No. 4, (Somersett
Parkway), 5.20%, 12/1/10 763,924
--------------------------------------------------------------------------------
795,000 Reno Special Assessment
District No. 4, (Somersett
Parkway), 5.45%, 12/1/11 804,508
--------------------------------------------------------------------------------
16,022,833
--------------------------------------------------------------------------------
NEW JERSEY -- 2.8%
--------------------------------------------------------------------------------
1,000,000 New Jersey Economic
Development Auth. Rev.,
Series 1999 A, (Transportation
Sublease), 6.00%, 5/1/09
(FSA) 1,129,630
--------------------------------------------------------------------------------
2,000,000 Tobacco Settlement Financing
Corp. Rev., 6.75%, 6/1/39(1) 1,774,020
--------------------------------------------------------------------------------
2,903,650
--------------------------------------------------------------------------------
NEW MEXICO -- 1.0%
--------------------------------------------------------------------------------
1,000,000 Ventana West Public
Improvement District Special
Levy Rev., 6.875%, 8/1/33(3) 1,001,680
--------------------------------------------------------------------------------
NEW YORK -- 1.0%
--------------------------------------------------------------------------------
1,000,000 Onondaga County Industrial
Development Auth. Rev., (Air
Cargo), 7.25%, 1/1/32 1,008,470
--------------------------------------------------------------------------------
NORTH CAROLINA -- 2.7%
--------------------------------------------------------------------------------
2,565,000 North Carolina GO, Series
2002 A, (Public Improvement),
5.50%, 3/1/08(1) 2,814,344
--------------------------------------------------------------------------------
Principal Amount Value
--------------------------------------------------------------------------------
OHIO -- 1.6%
--------------------------------------------------------------------------------
$ 500,000 Plain Local School District GO,
5.50%, 12/1/19 (FGIC) $ 540,390
--------------------------------------------------------------------------------
1,100,000 Port of Greater Cincinnati
Development Auth. Special
Assessment, (Cooperative
Public Parking Infrastructure),
6.40%, 2/15/34 1,060,983
--------------------------------------------------------------------------------
1,601,373
--------------------------------------------------------------------------------
OKLAHOMA -- 0.7%
--------------------------------------------------------------------------------
750,000 Oklahoma City Industrial &
Cultural Facilities Trust Rev.,
6.75%, 1/1/23 713,145
--------------------------------------------------------------------------------
PENNSYLVANIA -- 2.1%
--------------------------------------------------------------------------------
1,325,000 Chartiers Valley School District
GO, Series 2004 A, 5.00%,
10/15/20 (FSA/State Aid
Withholding) 1,364,432
--------------------------------------------------------------------------------
835,000 New Morgan Municipal Auth.
Office Rev., Series 1999 A,
(Commonwealth Office),
5.375%, 6/1/08 802,736
--------------------------------------------------------------------------------
2,167,168
--------------------------------------------------------------------------------
RHODE ISLAND -- 0.6%
--------------------------------------------------------------------------------
500,000 Cranston GO, 6.375%,
11/15/17 (FGIC) 571,035
--------------------------------------------------------------------------------
SOUTH CAROLINA -- 1.4%
--------------------------------------------------------------------------------
1,425,000 South Carolina Jobs Economic
Development Auth. Hospital
Facilities Rev., Series 2003 C,
(Palmetto Health), 4.25%,
8/1/05 1,449,453
--------------------------------------------------------------------------------
TEXAS -- 3.1%
--------------------------------------------------------------------------------
805,000 Abia Development Corp.
Airport Facilities Rev., (Aero
Austin L.P.), 6.75%, 1/1/11 779,602
--------------------------------------------------------------------------------
400,000 Bexar County Health Facilities
Development Corp. Rev., (Army
Retirement Residence),
6.125%, 7/1/22 413,196
--------------------------------------------------------------------------------
1,000,000 Bexar County Health Facilities
Development Corp. Rev., (Army
Retirement Residence),
6.30%, 7/1/32 1,025,580
--------------------------------------------------------------------------------
1,000,000 Texas Municipal Power Agency
Rev., (Sub-Lien), 4.00%,
9/1/09 (FGIC)(3) 1,021,040
--------------------------------------------------------------------------------
3,239,418
--------------------------------------------------------------------------------
UTAH -- 1.8%
--------------------------------------------------------------------------------
470,000 Bountiful Hospital Rev., (South
Davis Community Hospital),
5.125%, 12/15/05 (Acquired
9/24/98, Cost $466,489)(2) 476,148
--------------------------------------------------------------------------------
1,235,000 West Valley City Rev., Series
2001 A, 5.50%, 7/15/15
(MBIA) 1,333,775
--------------------------------------------------------------------------------
1,809,923
--------------------------------------------------------------------------------
See Notes to Financial Statements.
------
21
High-Yield Municipal - Schedule of Investments
MAY 31, 2004
Principal Amount Value
--------------------------------------------------------------------------------
WASHINGTON -- 1.2%
--------------------------------------------------------------------------------
$ 860,000 Cowlitz County School District
No. 458 Kelso GO, 5.75%,
12/1/18 (FSA) $ 952,570
--------------------------------------------------------------------------------
250,000 Port of Seattle Rev., Series
2000 B, 6.00%, 2/1/15 (MBIA) 280,028
--------------------------------------------------------------------------------
1,232,598
--------------------------------------------------------------------------------
WISCONSIN -- 1.9%
--------------------------------------------------------------------------------
2,000,000 Wisconsin State Health &
Educational Facilities Auth.
Rev., Series 2004 A,
(Southwest Health Center),
6.25%, 4/1/34 1,909,253
--------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES
(Cost $97,950,275) 99,447,940
--------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL SECURITIES -- 3.5%
ARIZONA -- 2.6%
--------------------------------------------------------------------------------
1,575,000 Coconino County Pollution
Control Corp. Rev., (Arizona
Public Service Co.), VRDN,
1.10%, 6/1/04 (LOC: KBC
Bank N.V.) 1,575,000
--------------------------------------------------------------------------------
700,000 Pima County Industrial
Development Auth. Rev.,
(Lease Purchase), VRDN,
1.22%, 6/3/04 (SBBPA:
Societe Generale) 700,000
--------------------------------------------------------------------------------
400,000 Pima County Industrial
Development Auth. Rev.,
(Tucson Electric), VRDN,
1.08%, 6/2/04 (LOC: Toronto
Dominion Bank) 400,000
--------------------------------------------------------------------------------
2,675,000
--------------------------------------------------------------------------------
CALIFORNIA -- 0.2%
--------------------------------------------------------------------------------
250,000 Allegheny County Industrial
Development Auth. Rev.,
Series 2001 A, (Longwood),
VRDN, 1.10%, 6/1/04 (RADIAN) 250,000
--------------------------------------------------------------------------------
GEORGIA -- 0.5%
--------------------------------------------------------------------------------
500,000 Gainesville & Hall County
Development Auth. Rev.,
Series 2003 A, (Senior Living
Facilities-Lanier Village), VRDN,
1.15%, 6/1/04 (LOC: Bank of
America N.A.) 500,000
--------------------------------------------------------------------------------
Principal Amount Value
--------------------------------------------------------------------------------
TENNESSEE -- 0.2%
--------------------------------------------------------------------------------
$ 200,000 Montgomery County Public
Building Auth. Rev., VRDN,
1.09%, 6/1/04 (LOC: Bank of
America N.A.) $ 200,000
--------------------------------------------------------------------------------
TOTAL SHORT-TERM MUNICIPAL
SECURITIES
(Cost $3,625,000) 3,625,000
--------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 100.0%
(Cost $101,575,275) $103,072,940
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance, Inc.
GNMA = Government National Mortgage Association
GO = General Obligation
LOC = Letter of Credit
MBIA = MBIA Insurance Corporation
RADIAN = Radian Asset Assurance, Inc.
SBBPA = Standby Bond Purchase Agreement
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective May 31, 2004.
(1) Security, or a portion thereof, has been segregated for a when-issued
security.
(2) Security was purchased under Rule 144A or Section 4(2) 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
May 31, 2004, was $3,161,061, which represented 3.2% of net assets.
(3) When-issued security.
See Notes to Financial Statements.
------
22
Statement of Assets and Liabilities
MAY 31, 2004
--------------------------------------------------------------------------------
ARIZONA FLORIDA HIGH-YIELD
MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
Investment securities, at
Value (cost of $58,776,136,
$61,087,568, and $101,575,275,
respectively) $60,767,427 $62,692,877 $103,072,940
-------------------------------
Cash -- 9,307 145,488
-------------------------------
Receivable for
investments sold -- 1,618,776 482,460
-------------------------------
Receivable for capital
shares sold 5,317 94,364 150,833
-------------------------------
Interest receivable 1,128,652 654,169 1,518,836
--------------------------------------------------------------------------------
61,901,396 65,069,493 105,370,557
--------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------
Disbursements in excess
of demand deposit cash 68,039 -- --
-------------------------------
Payable for investments
purchased -- -- 6,502,241
-------------------------------
Payable for capital
shares redeemed 29,891 27,112 --
-------------------------------
Accrued management fees 26,386 27,382 52,166
-------------------------------
Distribution fees payable 7 641 6,690
-------------------------------
Service fees and service
and distribution fees
(A Class) payable 278 331 9,020
-------------------------------
Dividends payable 36,204 62,643 127,610
--------------------------------------------------------------------------------
160,805 118,109 6,697,727
--------------------------------------------------------------------------------
NET ASSETS $61,740,591 $64,951,384 $ 98,672,830
================================================================================
NET ASSETS CONSIST OF:
--------------------------------------------------------------------------------
Capital paid in $59,737,042 $63,641,646 $99,980,781
-------------------------------
Accumulated undistributed
net realized gain (loss)
on investment transactions 12,258 (295,571) (2,805,616)
-------------------------------
Net unrealized appreciation
on investments 1,991,291 1,605,309 1,497,665
--------------------------------------------------------------------------------
$61,740,591 $64,951,384 $98,672,830
================================================================================
INVESTOR CLASS
--------------------------------------------------------------------------------
Net assets $60,202,926 $63,141,711 $54,340,242
-------------------------------
Shares outstanding 5,558,769 5,912,352 5,412,373
-------------------------------
Net asset value per share $10.83 $10.68 $10.04
--------------------------------------------------------------------------------
A CLASS
--------------------------------------------------------------------------------
Net assets $1,522,895 $760,633 $33,334,647
-------------------------------
Shares outstanding 140,615 71,223 3,320,190
-------------------------------
Net asset value per share $10.83 $10.68 $10.04
-------------------------------
Maximum offering price (net
asset value divided by 0.955) $11.34 $11.18 $10.51
--------------------------------------------------------------------------------
B CLASS
--------------------------------------------------------------------------------
Net assets $2,425 $17,324 $2,541,214
-------------------------------
Shares outstanding 224 1,622 253,109
-------------------------------
Net asset value per share $10.83 $10.68 $10.04
--------------------------------------------------------------------------------
C CLASS
--------------------------------------------------------------------------------
Net assets $12,345 $1,031,716 $8,456,727
-------------------------------
Shares outstanding 1,140 96,606 842,304
-------------------------------
Net asset value per share $10.83 $10.68 $10.04
--------------------------------------------------------------------------------
See Notes to Financial Statements.
------
23
Statement of Operations
YEAR ENDED MAY 31, 2004
--------------------------------------------------------------------------------
ARIZONA FLORIDA HIGH-YIELD
MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL
--------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------
INCOME:
-------------------------------
Interest $ 2,819,848 $ 2,709,679 $ 4,309,723
--------------------------------------------------------------------------------
EXPENSES:
-------------------------------
Management fees 335,748 313,533 476,099
-------------------------------
Distribution Fees:
-------------------------------
B Class 5 17 13,391
-------------------------------
C Class 8 1,312 31,745
-------------------------------
Service Fees:
-------------------------------
B Class 2 6 4,464
-------------------------------
C Class 3 437 12,249
-------------------------------
Service and distribution
fees -- A Class 322 138 36,845
-------------------------------
Trustees' fees and expenses 3,744 3,488 4,012
-------------------------------
Other expenses 256 695 224
--------------------------------------------------------------------------------
340,088 319,626 579,029
--------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,479,760 2,390,053 3,730,694
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS)
--------------------------------------------------------------------------------
Net realized gain (loss) on
investment transactions 31,189 (295,541) (995,135)
-------------------------------
Change in net unrealized
appreciation on investments (3,334,628) (3,291,538) (903,953)
--------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED LOSS (3,303,439) (3,587,079) (1,899,088)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $ (823,679) $(1,197,026) $ 1,831,606
================================================================================
See Notes to Financial Statements.
------
24
Statement of Changes in Net Assets
YEARS ENDED MAY 31, 2004 AND MAY 31, 2003
----------------------------------------------------------------------------------------------------
ARIZONA MUNICIPAL BOND FLORIDA MUNICIPAL BOND
----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2004 2003 2004 2003
----------------------------------------------------------------------------------------------------
OPERATIONS
----------------------------------------------------------------------------------------------------
Net investment income $ 2,479,760 $ 2,652,679 $ 2,390,053 $ 2,433,072
---------------------------------
Net realized gain (loss) 31,189 436,649 (295,541) 462,181
---------------------------------
Change in net
unrealized appreciation (3,334,628) 3,257,820 (3,291,538) 3,132,967
----------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations (823,679) 6,347,148 (1,197,026) 6,028,220
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
----------------------------------------------------------------------------------------------------
From net investment income
---------------------------------
Investor Class (2,475,048) (2,652,679) (2,383,929) (2,433,072)
---------------------------------
A Class (4,663) -- (1,775) --
---------------------------------
B Class (17) -- (55) --
---------------------------------
C Class (32) -- (4,294) --
---------------------------------
From net realized gains
---------------------------------
Investor Class (232,087) (485,706) (240,945) (379,812)
----------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (2,711,847) (3,138,385) (2,630,998) (2,812,884)
----------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
----------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from capital
share transactions (10,511,290) 6,252,087 (1,298,103) 12,296,803
----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (14,046,816) 9,460,850 (5,126,127) 15,512,139
NET ASSETS
----------------------------------------------------------------------------------------------------
Beginning of period 75,787,407 66,326,557 70,077,511 54,565,372
----------------------------------------------------------------------------------------------------
End of period $ 61,740,591 $75,787,407 $64,951,384 $70,077,511
====================================================================================================
See Notes to Financial Statements. (continued)
------
25
Statement of Changes in Net Assets
YEARS ENDED MAY 31, 2004 AND MAY 31, 2003
--------------------------------------------------------------------------------
HIGH-YIELD MUNICIPAL
--------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2004 2003
--------------------------------------------------------------------------------
OPERATIONS
--------------------------------------------------------------------------------
Net investment income $ 3,730,694 $ 2,359,756
--------------------------------------
Net realized gain (loss) (995,135) 387,088
--------------------------------------
Change in net unrealized appreciation (903,953) 1,368,122
--------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 1,831,606 4,114,966
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------------------------------------------------
From net investment income
--------------------------------------
Investor Class (2,750,692) (2,333,121)
--------------------------------------
A Class (704,142) (10,585)
--------------------------------------
B Class (72,484) (2,969)
--------------------------------------
C Class (203,376) (13,081)
--------------------------------------------------------------------------------
Decrease in net assets
from distributions (3,730,694) (2,359,756)
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
--------------------------------------------------------------------------------
Net increase in net assets
from capital share transactions 42,671,909 19,983,116
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 40,772,821 21,738,326
NET ASSETS
--------------------------------------------------------------------------------
Beginning of period 57,900,009 36,161,683
--------------------------------------------------------------------------------
End of period $98,672,830 $57,900,009
================================================================================
See Notes to Financial Statements.
------
26
Notes to Financial Statements
MAY 31, 2004
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 Municipal Bond Fund (Arizona Municipal), Florida
Municipal Bond Fund (Florida Municipal) and High-Yield Municipal Fund
(High-Yield Municipal) (collectively, the funds) are three funds in a series
issued by the trust. The funds are non-diversified under the 1940 Act. Arizona
Municipal's investment objective is to seek safety of principal and high current
income that is exempt from federal income tax and taxes imposed by the state of
Arizona. Florida Municipal's investment objective is to seek safety of principal
and high current income that is exempt from federal income tax and taxes imposed
by the state of Florida. Arizona Municipal and Florida Municipal invest
primarily in Arizona and Florida municipal obligations, respectively. High-Yield
Municipal's investment objective is to seek high current income exempt from
federal income taxes. Capital appreciation is a secondary objective. High-Yield
Municipal invests primarily in lower-rated long-term and intermediate-term
municipal obligations, which are subject to greater credit risk and consequently
offer higher yields. The following is a summary of the funds' significant
accounting policies.
MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the A
Class, the B Class and the C Class. The A Class may incur an initial sales
charge. The A Class, B Class and C Class may be subject to a contingent deferred
sales charge. The share classes differ principally in their respective sales
charges and shareholder servicing and distribution expenses and arrangements.
All shares of the funds represent an equal pro rata interest in the assets of
the class to which such shares belong, and have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except for class
specific expenses and exclusive rights to vote on matters affecting only
individual classes. Income, non-class specific expenses, and realized and
unrealized capital gains and losses of the funds are allocated to each class of
shares based on their relative net assets. Arizona Municipal and Florida
Municipal's A Class, B Class and C Class commenced on February 27, 2004, at
which time the Investor Class was no longer available to new investors.
High-Yield Municipal A Class and B Class commenced on January 31, 2003, at which
time the Investor Class was no longer available to new investors. High-Yield
Municipal C Class commenced on July 24, 2002.
SECURITY VALUATIONS -- Securities are valued through a commercial pricing
service or at the mean of the most recent bid and asked prices. Debt securities
maturing within 60 days may be valued at cost, plus or minus any amortized
discount or premium. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
Board of Trustees if such fair value determination would materially impact a
fund's net asset value. Valuations may not be readily available if, for example:
an event occurred after the close of the exchange on which a portfolio security
principally trades (but before the close of the New York Stock Exchange) that
was likely to have changed the value of the security; a security has been
declared in default; trading in a security has been halted during the trading
day; or the demand for the security (as reflected by its trading volume) is
insufficient for quoted prices to be reliable.
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.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The funds may engage in securities
transactions on a when-issued or forward commitment basis. Under these
arrangements, the securities' prices and yields are fixed on the date of the
commitment, but payment and delivery are scheduled for a future date. During
this period, securities are subject to market fluctuations. The funds will
segregate cash, cash equivalents or other appropriate liquid securities on its
records in amounts sufficient to meet the purchase price.
INCOME TAX STATUS -- It is each fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under 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 paid monthly. Distributions from net realized gains, if any,
are generally declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
------
27
Notes to Financial Statements
MAY 31, 2004
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
American Century Investment Management, Inc. (ACIM), under which ACIM provides
the funds with investment advisory and management services in exchange for a
single, unified management fee per class. The Agreement provides that all
expenses of the funds, except brokerage commissions, 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 computed daily and paid monthly in
arrears. 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 Arizona Municipal
and Florida Municipal and from 0.2925% to 0.4100% for High-Yield Municipal. The
rates for the Complex Fee range from 0.2900% to 0.3100%. For the year ended May
31, 2004, the effective annual management fee for the Investor, A, B and C
Classes of Arizona Municipal, Florida Municipal and High-Yield Municipal were
0.50%, 0.50% and 0.63%, respectively.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a separate
Master Distribution and Individual Shareholder Services Plan for each of the A
Class, B Class and C Class (collectively, the plans), pursuant to Rule 12b-1 of
the 1940 Act. The plans provide that the B Class and C Class will pay American
Century Investment Services, Inc. (ACIS) the following annual distribution and
service fees:
--------------------------------------------------------------------------------
B C
--------------------------------------------------------------------------------
Distribution Fee 0.75% 0.75%
--------------------------------------------------------------------------------
Service Fee 0.25% 0.25%
--------------------------------------------------------------------------------
Effective January 2, 2004, the distribution fee for the High-Yield Municipal C
Class increased from 0.50% to 0.75%. This increase was approved by High-Yield
Municipal C Class shareholders on November 21, 2003.
The plans provide that the A Class will pay ACIS an annual distribution and
service fee of 0.25%. The fees are computed daily and paid monthly in arrears
based on each class's average daily closing net assets during the previous
month. The distribution fee provides compensation for expenses incurred in
connection with distributing shares of the classes including, but not limited
to, payments to brokers, dealers, and financial institutions that have entered
into sales agreements with respect to shares of the funds. The service fee
provides compensation for individual shareholder services rendered by
broker/dealers or other independent financial intermediaries. Fees incurred
under the plans during the year ended May 31, 2004, are detailed in the
Statement of Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment manager, ACIM, the
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services Corporation.
The funds have a bank line of credit agreement with JPMorgan Chase Bank (JPMCB).
JPMCB is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an
equity investor in ACC.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
May 31, 2004, were as follows:
--------------------------------------------------------------------------------
ARIZONA FLORIDA HIGH-YIELD
MUNICIPAL MUNICIPAL MUNICIPAL
--------------------------------------------------------------------------------
Purchases $16,539,525 $35,624,079 $63,703,452
--------------------------------------------------------------------------------
Proceeds from sales $27,944,151 $38,449,413 $19,494,415
--------------------------------------------------------------------------------
(continued)
------
28
Notes to Financial Statements
MAY 31, 2004
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows (unlimited number of shares
authorized):
-------------------------------------------------------------------------------------------
ARIZONA MUNICIPAL FLORIDA MUNICIPAL
-------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------
INVESTOR CLASS
-------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2004
----------------------------
Sold 1,104,061 $ 12,270,490 2,239,701 $ 24,609,125
----------------------------
Issued in reinvestment
of distributions 194,526 2,153,394 163,544 1,785,188
----------------------------
Redeemed (2,390,629) (26,478,887) (2,699,299) (29,538,071)
-------------------------------------------------------------------------------------------
Net decrease (1,092,042) $(12,055,003) (296,054) $ (3,143,758)
===========================================================================================
YEAR ENDED MAY 31, 2003
----------------------------
Sold 2,401,588 $ 26,659,951 3,399,806 $ 37,203,985
----------------------------
Issued in reinvestment
of distributions 228,851 2,545,075 182,002 2,002,779
----------------------------
Redeemed (2,068,611) (22,952,939) (2,457,953) (26,909,961)
-------------------------------------------------------------------------------------------
Net increase 561,828 $ 6,252,087 1,123,855 $ 12,296,803
===========================================================================================
A CLASS
-------------------------------------------------------------------------------------------
PERIOD ENDED MAY 31, 2004(1)
----------------------------
Sold 140,335 $1,525,844 75,652 $812,437
----------------------------
Issued in reinvestment
of distributions 423 4,580 135 1,442
----------------------------
Redeemed (143) (1,548) (4,564) (49,461)
-------------------------------------------------------------------------------------------
Net increase 140,615 $1,528,876 71,223 $764,418
===========================================================================================
B CLASS
-------------------------------------------------------------------------------------------
PERIOD ENDED MAY 31, 2004(1)
----------------------------
Sold 222 $2,501 1,618 $17,589
----------------------------
Issued in reinvestment
of distributions 2 17 4 44
----------------------------
Redeemed -- -- -- --
-------------------------------------------------------------------------------------------
Net increase 224 $2,518 1,622 $17,633
===========================================================================================
C CLASS
-------------------------------------------------------------------------------------------
PERIOD ENDED MAY 31, 2004(1)
----------------------------
Sold 1,136 $12,287 96,560 $1,063,114
----------------------------
Issued in reinvestment
of distributions 4 32 46 490
----------------------------
Redeemed -- -- -- --
-------------------------------------------------------------------------------------------
Net increase 1,140 $12,319 96,606 $1,063,604
===========================================================================================
(1) February 27, 2004 (commencement of sale) through May 31, 2004 for Arizona
Municipal and Florida Municipal.
(continued)
------
29
Notes to Financial Statements
MAY 31, 2004
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
--------------------------------------------------------------------------------
HIGH-YIELD MUNICIPAL
--------------------------------------------------------------------------------
SHARES AMOUNT
--------------------------------------------------------------------------------
INVESTOR CLASS
--------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2004
---------------------------------------
Sold 2,105,766 $ 21,372,933
---------------------------------------
Issued in reinvestment of distributions 172,654 1,748,659
---------------------------------------
Redeemed (2,096,608) (21,123,641)
--------------------------------------------------------------------------------
Net increase 181,812 $ 1,997,951
================================================================================
YEAR ENDED MAY 31, 2003
---------------------------------------
Sold 3,267,201 $ 32,862,450
---------------------------------------
Issued in reinvestment of distributions 158,809 1,602,355
---------------------------------------
Redeemed (1,860,077) (18,711,967)
--------------------------------------------------------------------------------
Net increase 1,565,933 $ 15,752,838
================================================================================
A CLASS
--------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2004
---------------------------------------
Sold 3,322,531 $33,809,734
---------------------------------------
Issued in reinvestment of distributions 58,748 596,254
---------------------------------------
Redeemed (267,633) (2,706,887)
--------------------------------------------------------------------------------
Net increase 3,113,646 $31,699,101
================================================================================
PERIOD ENDED MAY 31, 2003(1)
---------------------------------------
Sold 207,255 $2,104,320
---------------------------------------
Issued in reinvestment of distributions 896 9,138
---------------------------------------
Redeemed (1,607) (16,709)
--------------------------------------------------------------------------------
Net increase 206,544 $2,096,749
================================================================================
B CLASS
--------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2004
---------------------------------------
Sold 190,141 $1,926,243
---------------------------------------
Issued in reinvestment of distributions 1,944 19,717
---------------------------------------
Redeemed (8,032) (81,096)
--------------------------------------------------------------------------------
Net increase 184,053 $1,864,864
================================================================================
PERIOD ENDED MAY 31, 2003(1)
---------------------------------------
Sold 69,381 $701,503
---------------------------------------
Issued in reinvestment
of distributions 125 1,269
---------------------------------------
Redeemed (450) (4,533)
--------------------------------------------------------------------------------
Net increase 69,056 $698,239
================================================================================
(1) January 31, 2003 (commencement of sale) through May 31, 2003.
(continued)
------
30
Notes to Financial Statements
MAY 31, 2004
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
--------------------------------------------------------------------------------
HIGH-YIELD MUNICIPAL
--------------------------------------------------------------------------------
SHARES AMOUNT
--------------------------------------------------------------------------------
C CLASS
--------------------------------------------------------------------------------
YEAR ENDED MAY 31, 2004
---------------------------------------
Sold 747,335 $7,588,614
---------------------------------------
Issued in reinvestment of distributions 3,584 36,339
---------------------------------------
Redeemed (50,448) (514,960)
--------------------------------------------------------------------------------
Net increase 700,471 $7,109,993
================================================================================
PERIOD ENDED MAY 31, 2003(1)
---------------------------------------
Sold 145,513 $1,472,327
---------------------------------------
Issued in reinvestment of distributions 713 7,215
---------------------------------------
Redeemed (4,393) (44,252)
--------------------------------------------------------------------------------
Net increase 141,833 $1,435,290
================================================================================
(1) July 24, 2002 (commencement of sale) through May 31, 2003.
5. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM, have a $650,000,000
unsecured bank line of credit agreement with JPMCB. The funds may borrow money
for temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The
funds did not borrow from the line during the year ended May 31, 2004.
6. RISK FACTORS
Arizona Municipal and Florida Municipal concentrate their investments in a
single state and therefore may have more exposure to credit risk related to the
state of Arizona and Florida, respectively, than a fund with a broader
geographical diversification. Income may be subject to state and local taxes
and, if applicable, the alternative minimum tax.
High-Yield Municipal may concentrate its investments in certain states and
therefore may have more exposure to credit risk related to those states than a
fund with a broader geographical diversification. High-Yield Municipal invests
primarily in lower-rated debt securities, which are subject to substantial risks
including price volatility, liquidity risk, and default risk. Income may be
subject to state and local taxes and, if applicable, the alternative minimum
tax.
7. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years May 31, 2004 and May
31, 2003 were as follows:
------------------------------------------------------------------------------------------------------
ARIZONA MUNICIPAL FLORIDA MUNICIPAL HIGH-YIELD MUNICIPAL
------------------------------------------------------------------------------------------------------
2004 2003 2004 2003 2004 2003
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
------------------------------------------------------------------------------------------------------
Ordinary income $2,710,226 $3,114,068 $2,627,402 $2,810,518 $3,730,694 $2,359,756
------------------------------------------------------------------------------------------------------
Long-term capital gains $1,621 $24,317 $3,596 $2,366 -- --
------------------------------------------------------------------------------------------------------
(continued)
------
31
Notes to Financial Statements
MAY 31, 2004
7. FEDERAL TAX INFORMATION (CONTINUED)
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 the financial statements.
As of May 31, 2004, the components of distributable earnings on a tax-basis and
the federal tax cost of investments were as follows:
--------------------------------------------------------------------------------
ARIZONA FLORIDA HIGH-YIELD
MUNICIPAL MUNICIPAL MUNICIPAL
--------------------------------------------------------------------------------
COMPONENTS OF DISTRIBUTABLE
EARNINGS AND TAX COST
--------------------------------------------------------------------------------
Federal tax cost of investments $58,776,136 $61,087,568 $101,575,275
================================================================================
Gross tax appreciation
of investments $2,257,599 $1,914,272 $2,004,551
----------------------------------
Gross tax depreciation
of investments (266,308) (308,963) (506,886)
--------------------------------------------------------------------------------
Net tax appreciation
of investments $1,991,291 $1,605,309 $1,497,665
================================================================================
Accumulated long-term gains $12,258 -- --
----------------------------------
Accumulated capital losses -- $(144,503) $(1,956,410)
----------------------------------
Capital loss deferral -- $(151,068) $(849,206)
--------------------------------------------------------------------------------
The cost of investments for federal income tax purposes was the same as the cost
for financial reporting purposes.
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for federal
income tax purposes. The capital loss carryovers expire as follows:
--------------------------------------------------------------------------------
2008 2009 2010 2011
--------------------------------------------------------------------------------
Florida Municipal -- -- -- $(144,503)
--------------------------------------------------------------------------------
High-Yield Municipal $(396,804) $(1,090,034) $(323,643) $(145,929)
--------------------------------------------------------------------------------
The capital loss deferrals represent net capital losses incurred in the
seven-month period ended May 31, 2004. The funds have elected to treat such
losses as having been incurred in the following fiscal year for federal income
tax purposes.
8. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The funds designate exempt interest and capital gain dividends for the fiscal
year ended May 31, 2004, as follows:
--------------------------------------------------------------------------------
ARIZONA FLORIDA HIGH-YIELD
MUNICIPAL MUNICIPAL MUNICIPAL
--------------------------------------------------------------------------------
Exempt interest dividends $2,484,871 $2,391,630 $3,679,903
--------------------------------------------------------------------------------
Long-term capital gain $1,621 $3,596 --
--------------------------------------------------------------------------------
------
32
Arizona Municipal Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31
--------------------------------------------------------------------------------
INVESTOR CLASS
--------------------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $11.40 $10.89 $10.69 $10.12 $10.62
--------------------------------------------------------------------------------
Income From
Investment Operations
-------------------------
Net Investment Income 0.41 0.41 0.44 0.48 0.48
-------------------------
Net Realized and
Unrealized Gain (Loss) (0.53) 0.59 0.27 0.57 (0.47)
--------------------------------------------------------------------------------
Total From
Investment Operations (0.12) 1.00 0.71 1.05 0.01
--------------------------------------------------------------------------------
Distributions
-------------------------
From Net
Investment Income (0.41) (0.41) (0.44) (0.48) (0.48)
-------------------------
From Net
Realized Gains (0.04) (0.08) (0.07) -- (0.03)
--------------------------------------------------------------------------------
Total Distributions (0.45) (0.49) (0.51) (0.48) (0.51)
--------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.83 $11.40 $10.89 $10.69 $10.12
================================================================================
TOTAL RETURN(1) (1.06)% 9.36% 6.74% 10.57% 0.20%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.51% 0.51% 0.51% 0.51% 0.51%
-------------------------
Ratio of Net Investment
Income to Average
Net Assets 3.70% 3.70% 4.04% 4.57% 4.71%
-------------------------
Portfolio Turnover Rate 26% 50% 77% 104% 117%
-------------------------
Net Assets, End of Period
(in thousands) $60,203 $75,787 $66,327 $50,309 $40,594
--------------------------------------------------------------------------------
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
------
33
Arizona Municipal Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
--------------------------------------------------------------------------------
A CLASS
--------------------------------------------------------------------------------
2004(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.25
--------------------------------------------------------------------------------
Income From Investment Operations
-------------------------------------------------------------
Net Investment Income 0.10
-------------------------------------------------------------
Net Realized and Unrealized Loss (0.42)
--------------------------------------------------------------------------------
Total From Investment Operations (0.32)
--------------------------------------------------------------------------------
Distributions
-------------------------------------------------------------
From Net Investment Income (0.10)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.83
================================================================================
TOTAL RETURN(2) (2.87)%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.76%(3)
-------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 3.63%(3)
-------------------------------------------------------------
Portfolio Turnover Rate 26%(4)
-------------------------------------------------------------
Net Assets, End of Period (in thousands) $1,523
--------------------------------------------------------------------------------
(1) February 27, 2004 (commencement of sale) through May 31, 2004.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2004.
See Notes to Financial Statements.
------
34
Arizona Municipal Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
--------------------------------------------------------------------------------
B CLASS
--------------------------------------------------------------------------------
2004(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.25
--------------------------------------------------------------------------------
Income From Investment Operations
-------------------------------------------------------------
Net Investment Income 0.08
-------------------------------------------------------------
Net Realized and Unrealized Loss (0.42)
--------------------------------------------------------------------------------
Total From Investment Operations (0.34)
--------------------------------------------------------------------------------
Distributions
-------------------------------------------------------------
From Net Investment Income (0.08)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.83
================================================================================
TOTAL RETURN(2) (3.06)%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.51%(3)
-------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.88%(3)
-------------------------------------------------------------
Portfolio Turnover Rate 26%(4)
-------------------------------------------------------------
Net Assets, End of Period (in thousands) $2
--------------------------------------------------------------------------------
(1) February 27, 2004 (commencement of sale) through May 31, 2004.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2004.
See Notes to Financial Statements.
------
35
Arizona Municipal Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
--------------------------------------------------------------------------------
C CLASS
--------------------------------------------------------------------------------
2004(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.25
--------------------------------------------------------------------------------
Income From Investment Operations
-------------------------------------------------------------
Net Investment Income 0.08
-------------------------------------------------------------
Net Realized and Unrealized Loss (0.42)
--------------------------------------------------------------------------------
Total From Investment Operations (0.34)
--------------------------------------------------------------------------------
Distributions
-------------------------------------------------------------
From Net Investment Income (0.08)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.83
================================================================================
TOTAL RETURN(2) (3.06)%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.51%(3)
-------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.88%(3)
-------------------------------------------------------------
Portfolio Turnover Rate 26%(4)
-------------------------------------------------------------
Net Assets, End of Period (in thousands) $12
--------------------------------------------------------------------------------
(1) February 27, 2004 (commencement of sale) through May 31, 2004.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2004.
See Notes to Financial Statements.
------
36
Florida Municipal Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31
--------------------------------------------------------------------------------
INVESTOR CLASS
--------------------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $11.29 $10.73 $10.67 $10.08 $10.50
--------------------------------------------------------------------------------
Income From
Investment Operations
-------------------------
Net Investment Income 0.42 0.42 0.44 0.47 0.45
-------------------------
Net Realized and
Unrealized Gain (Loss) (0.56) 0.62 0.19 0.59 (0.41)
--------------------------------------------------------------------------------
Total From
Investment Operations (0.14) 1.04 0.63 1.06 0.04
--------------------------------------------------------------------------------
Distributions
-------------------------
From Net
Investment Income (0.42) (0.42) (0.44) (0.47) (0.45)
-------------------------
From Net
Realized Gains (0.05) (0.06) (0.13) -- (0.01)
--------------------------------------------------------------------------------
Total Distributions (0.47) (0.48) (0.57) (0.47) (0.46)
--------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.68 $11.29 $10.73 $10.67 $10.08
================================================================================
TOTAL RETURN(1) (1.30)% 9.90% 5.98% 10.70% 0.49%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.51% 0.51% 0.51% 0.51% 0.51%
-------------------------
Ratio of Net Investment
Income to Average
Net Assets 3.82% 3.78% 4.03% 4.49% 4.49%
-------------------------
Portfolio Turnover Rate 59% 45% 75% 138% 155%
-------------------------
Net Assets, End of Period
(in thousands) $63,142 $70,078 $54,565 $53,860 $46,077
--------------------------------------------------------------------------------
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
------
37
Florida Municipal Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
--------------------------------------------------------------------------------
A CLASS
--------------------------------------------------------------------------------
2004(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.11
--------------------------------------------------------------------------------
Income From Investment Operations
-------------------------------------------------------------
Net Investment Income 0.09
-------------------------------------------------------------
Net Realized and Unrealized Loss (0.43)
--------------------------------------------------------------------------------
Total From Investment Operations (0.34)
--------------------------------------------------------------------------------
Distributions
-------------------------------------------------------------
From Net Investment Income (0.09)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.68
================================================================================
TOTAL RETURN(2) (3.10)%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.76%(3)
-------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 3.34%(3)
-------------------------------------------------------------
Portfolio Turnover Rate 59%(4)
-------------------------------------------------------------
Net Assets, End of Period (in thousands) $761
--------------------------------------------------------------------------------
(1) February 27, 2004 (commencement of sale) through May 31, 2004.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2004.
See Notes to Financial Statements.
------
38
Florida Municipal Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
--------------------------------------------------------------------------------
B CLASS
--------------------------------------------------------------------------------
2004(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.11
--------------------------------------------------------------------------------
Income From Investment Operations
-------------------------------------------------------------
Net Investment Income 0.07
-------------------------------------------------------------
Net Realized and Unrealized Loss (0.43)
--------------------------------------------------------------------------------
Total From Investment Operations (0.36)
--------------------------------------------------------------------------------
Distributions
-------------------------------------------------------------
From Net Investment Income (0.07)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.68
================================================================================
TOTAL RETURN(2) (3.28)%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.51%(3)
-------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.59%(3)
-------------------------------------------------------------
Portfolio Turnover Rate 59%(4)
-------------------------------------------------------------
Net Assets, End of Period (in thousands) $17
--------------------------------------------------------------------------------
(1) February 27, 2004 (commencement of sale) through May 31, 2004.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2004.
See Notes to Financial Statements.
------
39
Florida Municipal Bond - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
--------------------------------------------------------------------------------
C CLASS
--------------------------------------------------------------------------------
2004(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.11
--------------------------------------------------------------------------------
Income From Investment Operations
-------------------------------------------------------------
Net Investment Income 0.07
-------------------------------------------------------------
Net Realized and Unrealized Loss (0.43)
--------------------------------------------------------------------------------
Total From Investment Operations (0.36)
--------------------------------------------------------------------------------
Distributions
-------------------------------------------------------------
From Net Investment Income (0.07)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.68
================================================================================
TOTAL RETURN(2) (3.28)%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.51%(3)
-------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.59%(3)
-------------------------------------------------------------
Portfolio Turnover Rate 59%(4)
-------------------------------------------------------------
Net Assets, End of Period (in thousands) $1,032
--------------------------------------------------------------------------------
(1) February 27, 2004 (commencement of sale) through May 31, 2004.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2004.
See Notes to Financial Statements.
------
40
High-Yield Municipal - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31
--------------------------------------------------------------------------------
INVESTOR CLASS
--------------------------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.25 $9.87 $9.62 $9.32 $10.12
--------------------------------------------------------------------------------
Income From
Investment Operations
-------------------------
Net Investment Income 0.52 0.53 0.53 0.53 0.51
-------------------------
Net Realized and
Unrealized Gain (Loss) (0.21) 0.38 0.25 0.30 (0.79)
--------------------------------------------------------------------------------
Total From
Investment Operations 0.31 0.91 0.78 0.83 (0.28)
--------------------------------------------------------------------------------
Distributions
-------------------------
From Net
Investment Income (0.52) (0.53) (0.53) (0.53) (0.51)
-------------------------
From Net
Realized Gains -- -- -- -- (0.01)
--------------------------------------------------------------------------------
Total Distributions (0.52) (0.53) (0.53) (0.53) (0.52)
--------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.04 $10.25 $9.87 $9.62 $9.32
================================================================================
TOTAL RETURN(1) 3.07% 9.40% 8.25% 9.13% (2.81)%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.64% 0.64% 0.64% 0.64% 0.52%(2)
-------------------------
Ratio of Net Investment
Income to Average
Net Assets 5.06% 5.22% 5.39% 5.59% 5.31%(2)
-------------------------
Portfolio Turnover Rate 27% 43% 28% 50% 60%
-------------------------
Net Assets, End of Period
(in thousands) $54,340 $53,621 $36,162 $29,342 $28,189
--------------------------------------------------------------------------------
(1) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
(2) ACIM voluntarily agreed to pay all expenses of the fund from March 31, 1998
(inception) through April 30, 1999. In May 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% and the
annualized ratio of net investment income to average net assets would have
been 5.19%.
See Notes to Financial Statements.
------
41
High-Yield Municipal - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
--------------------------------------------------------------------------------
A CLASS
--------------------------------------------------------------------------------
2004 2003(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.25 $10.06
--------------------------------------------------------------------------------
Income From Investment Operations
-----------------------------------------------------
Net Investment Income 0.49 0.17
-----------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.21) 0.19
--------------------------------------------------------------------------------
Total From Investment Operations 0.28 0.36
--------------------------------------------------------------------------------
Distributions
-----------------------------------------------------
From Net Investment Income (0.49) (0.17)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.04 $10.25
================================================================================
TOTAL RETURN(2) 2.81% 3.57%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.89% 0.88%(3)
-----------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 4.81% 5.03%(3)
-----------------------------------------------------
Portfolio Turnover Rate 27% 43%(4)
-----------------------------------------------------
Net Assets, End of Period (in thousands) $33,335 $2,117
--------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through May 31, 2003.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2003.
See Notes to Financial Statements.
------
42
High-Yield Municipal - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
--------------------------------------------------------------------------------
B CLASS
--------------------------------------------------------------------------------
2004 2003(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.25 $10.06
--------------------------------------------------------------------------------
Income From Investment Operations
-----------------------------------------------------
Net Investment Income 0.42 0.15
-----------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.21) 0.19
--------------------------------------------------------------------------------
Total From Investment Operations 0.21 0.34
--------------------------------------------------------------------------------
Distributions
-----------------------------------------------------
From Net Investment Income (0.42) (0.15)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.04 $10.25
================================================================================
TOTAL RETURN(2) 2.05% 3.44%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.64% 1.63%(3)
------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 4.06% 4.35%(3)
------------------------------------------------------
Portfolio Turnover Rate 27% 43%(4)
------------------------------------------------------
Net Assets, End of Period (in thousands) $2,541 $708
--------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through May 31, 2003.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2003.
See Notes to Financial Statements.
------
43
High-Yield Municipal - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED)
--------------------------------------------------------------------------------
C CLASS
--------------------------------------------------------------------------------
2004 2003(1)
--------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.25 $10.03
--------------------------------------------------------------------------------
Income From Investment Operations
------------------------------------------------------
Net Investment Income 0.43 0.39
------------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.21) 0.22
--------------------------------------------------------------------------------
Total From Investment Operations 0.22 0.61
--------------------------------------------------------------------------------
Distributions
------------------------------------------------------
From Net Investment Income (0.43) (0.39)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $10.04 $10.25
================================================================================
TOTAL RETURN(2) 2.20% 6.15%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.54% 1.39%(3)
-------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 4.16% 4.55%(3)
-------------------------------------------------------
Portfolio Turnover Rate 27% 43%(4)
-------------------------------------------------------
Net Assets, End of Period (in thousands) $8,457 $1,454
--------------------------------------------------------------------------------
(1) July 24, 2002 (commencement of sale) through May 31, 2003.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended May 31, 2003.
See Notes to Financial Statements.
------
44
Report of Independent Registered Public Accounting Firm
To the Trustees of the American Century Municipal Trust and Shareholders of the
American Century Arizona Municipal Bond Fund, American Century Florida Municipal
Bond Fund and American Century High-Yield Municipal Fund:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the American Century Arizona
Municipal Bond Fund, the American Century Florida Municipal Bond Fund and the
American Century High-Yield Municipal Fund (three of the five funds in the
American Century Municipal Trust hereafter referred to as the "Funds") at May
31, 2004, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
July 12, 2004
------
45
Management
The individuals listed below serve as trustees or officers of the funds. Each
trustee serves until his or her successor is duly elected and qualified or until
he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the remaining
independent trustees. The independent trustees have extended the mandatory
retirement age of Mr. Eisenstat to 75. Mr. Scott may serve until age 77 based on
an extension granted under retirement guidelines in effect prior to March 2004.
Those listed as interested trustees are "interested" primarily by virtue of
their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly-owned subsidiaries, including the funds' investment advisor, American
Century Investment Management, Inc. (ACIM); the funds' principal underwriter,
American Century Investment Services, Inc. (ACIS); and the funds' transfer
agent, American Century Services Corporation (ACSC).
The other trustees (more than three-fourths of the total number) are
independent; that is, they are not employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM, ACIS, and ACSC. The trustees serve in this capacity for eight registered
investment companies in the American Century family of funds.
All persons named as officers of the funds also serve in similar capacities for
the other 12 investment companies advised by ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated for
his or her service as an officer of the funds. The listed officers are
interested persons of the funds and are appointed or re-appointed on an annual
basis.
INDEPENDENT TRUSTEES
--------------------------------------------------------------------------------
ALBERT EISENSTAT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1930
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, General Partner, Discovery
Ventures (Venture capital firm, 1996 to 1998)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Independent Director, Sungard Data Systems
(1991 to present); Independent Director, Business Objects S/A (1994 to present);
Independent Director, Commercial Metals (1983 to 2001)
--------------------------------------------------------------------------------
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Lead Trustee
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of Law
and Business, Stanford Law School (1979 to present); Mark and Eva Stern
Professor of Law and Business, Columbia University School of Law (1992 to
present); Counsel, Marron, Reid & Sheehy (a San Francisco law firm, 1984 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
(continued)
------
46
Management
INDEPENDENT TRUSTEES (CONTINUED)
--------------------------------------------------------------------------------
KATHRYN A. HALL, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Investment
Officer, Offit Hall Capital Management, LLC (April 2002 to present); President
and Managing Director, Laurel Management Company, L.L.C. (1996 to April 2002)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Princeton University Investment
Company (1997 to present); Director, Stanford Management Company (2001 to
present); Director, UCSF Foundation (2000 to present); Director, San Francisco
Day School (1999 to present)
--------------------------------------------------------------------------------
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 23
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Partner, Oak Hill Capital
Management (1999 to present); Frank E. Buck Professor of Finance, Stanford
Graduate School of Business (1981 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Dimensional Fund Advisors
(investment advisor, 1982 to present); Director, Smith Breeden Family of Funds
(1992 to present)
--------------------------------------------------------------------------------
KENNETH E. SCOTT, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1928
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 32
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Ralph M. Parsons Professor of Law
and Business, Stanford Law School (1972 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 1
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, Stanford
University (1977 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Cadence Design Systems (1992 to
present); Director, Watson Wyatt Worldwide (2002 to present); Director,
Palmsource Inc. (2002 to present)
--------------------------------------------------------------------------------
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Trustee
LENGTH OF TIME SERVED (YEARS): 19
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Director and Partner,
Windy Hill Productions, LP (educational software, 1994 to 1998)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, Indus International (software
solutions, January 1999 to present); Director, Quintus Corporation (automation
solutions, 1995 to present)
--------------------------------------------------------------------------------
INTERESTED TRUSTEE
--------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Trustee, Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC and
other ACC subsidiaries (September 2000 to present); President, ACC (June 1997 to
present); President, ACIM (September 2002 to present); President, ACIS (July
2003 to present); Chief Operating Officer, ACC (June 1996 to September 2000);
Also serves as: Executive Vice President, ACSC and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 33
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
(continued)
------
47
Management
OFFICERS
--------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: See entry under "Interested
Trustee."
--------------------------------------------------------------------------------
ROBERT T. JACKSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUND: Executive Vice President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC
(August 1997 to present); Chief Financial Officer, ACC (May 1995 to October
2002); President, ACSC (January 1999 to present); Executive Vice President, ACC
(May 1995 to present); Also serves as: Executive Vice President and Chief
Financial Officer, ACIM, ACIS and other ACC subsidiaries; and Treasurer, ACIM
--------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer and Chief
Accounting Officer
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President (April 1998
to present) and Assistant Treasurer, ACSC (September 1985 to present)
--------------------------------------------------------------------------------
DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1958
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
LENGTH OF TIME SERVED (YEARS): 5
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, ACIM, ACIS,
ACSC, and other ACC subsidiaries (June 1998 to present); General Counsel, ACC,
ACIM, ACIS, ACSC, and other ACC subsidiaries (June 1998 to present)
--------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Controller
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
--------------------------------------------------------------------------------
C. JEAN WADE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1964
POSITION(S) HELD WITH FUND: Controller(1)
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
--------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, Corporate Tax, ACSC
(April 1998 to present); Vice President, ACIM, ACIS and other ACC subsidiaries
(April 1999 to present); President, American Century Employee Benefit Services,
Inc. (January 2000 to December 2000); Treasurer, American Century Ventures, Inc.
(December 1999 to January 2001); Treasurer, American Century Employee Benefit
Services, Inc. (December 2000 to December 2003)
--------------------------------------------------------------------------------
(1) Ms. Wade serves in a similar capacity for seven other investment companies
advised by ACIM.
The SAI has additional information about the funds' trustees and is available
without charge upon request by calling 1-800-345-2021.
------
48
Share Class Information
Four classes of shares are authorized for sale by the funds: Investor Class, A
Class, B Class, and C Class. The total expense ratios of A Class, B Class, and C
Class shares are higher than those of Investor Class shares. ON JANUARY 31,
2003, INVESTOR CLASS SHARES BECAME UNAVAILABLE TO NEW INVESTORS OF HIGH-YIELD
MUNICIPAL. ON FEBRUARY 27, 2004, INVESTOR CLASS SHARES BECAME UNAVAILABLE TO NEW
INVESTORS OF ARIZONA MUNCIPAL AND FLORIDA MUNICIPAL.
INVESTOR CLASS shares are available for purchase by existing shareholders in two
ways: 1) directly from American Century without any commissions or other fees;
or 2) through a broker-dealer, which may require payment of a transaction fee to
the broker.
A CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. A Class shares are sold at their offering price, which is
net asset value plus an initial sales charge that ranges from 4.50% to 0.00% for
fixed-income funds and 5.75% to 0.00% for equity funds, depending on the amount
invested. The initial sales charge is deducted from the purchase amount before
it is invested. A Class shares may be subject to a contingent deferred sales
charge (CDSC). There is no CDSC on shares acquired through reinvestment of
dividends or capital gains. The prospectus contains information regarding
reductions and waivers of sales charges for A Class shares. A Class shares also
are subject to a 0.25% annual Rule 12b-1 service and distribution fee.
B CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. B Class shares redeemed within six years of purchase are
subject to a CDSC that declines from 5.00% during the first year after purchase
to 0.00% the sixth year after purchase. There is no CDSC on shares acquired
through reinvestment of dividends or capital gains. B Class shares also are
subject to a 1.00% annual Rule 12b-1 service and distribution fee. B Class
shares automatically convert to A Class shares (with lower expenses) eight years
after their purchase date.
C CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. C Class shares redeemed within 12 months of purchase are
subject to a CDSC of 1.00%. There is no CDSC on shares acquired through
reinvestment of dividends or capital gains. C Class shares also are subject to a
Rule 12b-1 service and distribution fee of up to 1.00%.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
------
49
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' manager, is responsible
for exercising the voting rights associated with the securities purchased and/or
held by the funds. A description of the policies and procedures the manager uses
in fulfilling this responsibility is available without charge, upon request, by
calling 1-800-345-2021. It is also available on American Century's Web site at
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
(continued)
------
50
Additional Information
RISK FACTORS
Arizona Municipal and Florida Municipal concentrate their investments in a
single state and therefore may have more exposure to credit risk related to the
states of Arizona and Florida, respectively, than a fund with a broader
geographical diversification. Income may be subject to state and local taxes
and, if applicable, the alternative minimum tax.
High-Yield Municipal may concentrate its investments in certain states and
therefore may have more exposure to credit risk related to those states than a
fund with a broader geographical diversification. High-Yield Municipal invests
primarily in lower-rated debt securities, which are subject to substantial risks
including price volatility, liquidity risk, and default risk. Income may be
subject to state and local taxes and, if applicable, the alternative minimum
tax.
------
51
Index Definitions
The following indices are used to illustrate investment market, sector, or style
performance or to serve as fund performance comparisons. They are not investment
products available for purchase.
The Lehman Brothers Municipal Bond Index is a market-value-weighted index
designed for the long-term tax-exempt bond market. The LEHMAN BROTHERS LONG-TERM
MUNICIPAL BOND INDEX is composed of those securities included in the Lehman
Brothers Municipal Bond Index that have maturities greater than 22 years.
The LEHMAN BROTHERS MUNICIPAL 5-YEAR GENERAL OBLIGATION (GO) INDEX is composed
of investment-grade U.S. municipal securities, with maturities of four to six
years, that are general obligations of a state or local government.
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52
[inside back cover - blank]
[back cover]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
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
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
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.
The American Century logo, American Century and American Century Investments are
service marks of American Century Services Corporation.
0407 American Century Investment Services, Inc.
SH-ANN-38590N (c)2004 American Century Services Corporation
ITEM 2. CODE OF ETHICS.
a. The registrant has adopted a Code of Ethics for Senior Financial
Officers that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer, and persons
performing similar functions.
b. No response required.
c. None.
d. None.
e. Not applicable.
f. The registrant's Code of Ethics for Senior Financial Officers was
filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s Annual
Certified Shareholder Report on Form N-CSR, File No. 811-0816, on
December 23, 2003, and is incorporated herein by reference.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board has determined that the registrant has at least
one audit committee financial expert serving on its audit committee.
(a)(2) Albert Eisenstat is the registrant's designated audit committee
financial expert. He is "independent" as defined in Item 3 of Form
N-CSR.
(a)(3) Not applicable.
(b) No response required.
(c) No response required.
(d) No response required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit of the
registrant's annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements for those fiscal years were as follows:
FY 2003: $133,194
FY 2004: $68,018
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit of the registrant's financial statements
and are not reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2003: $ 0
FY 2004: $ 0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01
of Regulation S-X (relating to certain engagements for non-audit services with
the registrant's investment adviser and its affiliates):
FY 2003: $ 0
FY 2004: $ 0
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning were as follows:
For services rendered to the registrant:
FY 2003: $53,461
FY 2004: $22,270
These services included review of federal and state income tax forms and
federal excise tax forms.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01
of Regulation S-X (relating to certain engagements for non-audit services with
the registrant's investment adviser and its affiliates):
FY 2003: $ 0
FY 2004: $ 0
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for products
and services provided by the principal accountant, other than the services
reported in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2003: $ 0
FY 2004: $ 0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01
of Regulation S-X (relating to certain engagements for non-audit services with
the registrant's investment adviser and its affiliates):
FY 2003: $ 0
FY 2004: $ 0
(e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation
S-X, before the accountant is engaged by the registrant to render
audit or non-audit services, the engagement is approved by the
registrant's audit committee. Pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X, the registrant's audit committee also
pre-approves its accountant's engagements for non-audit services with
the registrant's investment adviser, its parent company, and any
entity controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant, if the
engagement relates directly to the operations and financial reporting
of the registrant.
(e)(2) All services described in each of paragraphs (b) through (d) of this
Item were pre-approved before the engagement by the registrant's audit
committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of
Regulation S-X. Consequently, none of such services were required to
be approved by the audit committee pursuant to paragraph (c)(7)(i)(C).
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than 50%.
(g) The aggregate non-audit fees billed by the registrants accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years of
the registrant were as follows: [JA7]
FY 2003: $253,844
FY 2004: $22,270
(h) The registrant's investment adviser and accountant have notified the
registrant's audit committee of all non-audit services that were
rendered by the registrant's accountant to the registrant's investment
adviser, its parent company, and any entity controlled by, or under
common control with the investment adviser that provides services to
the registrant, which services were not required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The
notification provided to the registrant's audit committee included
sufficient details regarding such services to allow the registrant's
audit committee to consider the continuing independence of its
principal accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED].
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant does not currently have in place procedures by which
shareholders may recommend nominees to the registrant's board.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) are effective based on their evaluation of these controls and
procedures as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the registrant's last fiscal half-year that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Registrant's Code of Ethics for Senior Financial Officers, which is
the subject of the disclosure required by Item 2 of Form N-CSR, was
filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s
Certified Shareholder Report on Form N-CSR, File No. 811-3706, on
December 23, 2003.
(a)(2) Separate certifications by the registrant's principal executive
officer and principal financial officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are filed and attached hereto as Exhibit
99.302CERT.
(a)(3) Not applicable.
(b) A certification by the registrant's chief executive officer and chief
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: American Century Municipal Trust
By: /s/ William M. Lyons
-----------------------------------------
Name: William M. Lyons
Title: President
Date: August 6, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ William M. Lyons
----------------------------------------
Name: William M. Lyons
Title: President
(principal executive officer)
Date: August 6, 2004
By: /s/ Maryanne L. Roepke
---------------------------------------
Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer, and
Chief Accounting Officer
(principal financial officer)
Date: August 6, 2004