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 --------------------------------------------- AMERICAN CENTURY MUNICIPAL TRUST - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 4500 Main Street, Kansas City, Missouri 64111 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) David C. Tucker, Esq., 4500 Main Street, 9th Floor, Kansas City, Missouri 64111 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 816-531-5575 ---------------------------- Date of fiscal year end: 05-31 ------------------------------------------------------- Date of reporting period: NOVEMBER 30, 2005 ------------------------------------------------------ ITEM 1. REPORTS TO STOCKHOLDERS. American Century Investment SEMIANNUAL REPORT NOVEMBER 30, 2005 [image of boy with toy airplane] Tax-Free Money Market Fund Tax-Free Bond Fund [american century investments logo and text logo] Table of Contents Our Message to You . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 TAX-FREE MONEY MARKET Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . . . 4 Portfolio Composition by Maturity. . . . . . . . . . . . . . . . . . . . 4 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 5 TAX-FREE BOND Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . . 12 Top Five States . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Schedule of Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 13 Shareholder Fee Examples . . . . . . . . . . . . . . . . . . . . . . . . . 23 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . 25 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 26 Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . 27 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 28 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 OTHER INFORMATION Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . 36 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 37 The opinions expressed in each of the Portfolio Commentaries 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 semiannual report for the American Century Tax-Free Money Market and Tax-Free Bond funds for the six months ended November 30, 2005. This report includes comparative performance figures, portfolio and market commentary, summary tables, a full list of portfolio holdings, and financial statements and highlights. We hope you find this information helpful in monitoring your investment. 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. Your next shareholder report for these funds will be the annual report dated May 31, 2006, 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 AMERICAN CENTURY COMPANIES, INC. /s/James E. Stowers III James E. Stowers III CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. - ------ 1 Tax-Free Money Market - Performance TOTAL RETURNS AS OF NOVEMBER 30, 2005 -------------------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS(2) INCEPTION(2) DATE - ------------------------------------------------------------------------------------------------------------ INVESTOR CLASS 1.08% 1.93% 1.49% 2.40% 3.32% 7/31/84 - ------------------------------------------------------------------------------------------------------------ AVERAGE RETURN OF LIPPER'S TAX-EXEMPT MONEY MARKET FUNDS(3) 0.91% 1.61% 1.20% 2.15% 3.17%(4) -- - ------------------------------------------------------------------------------------------------------------ Fund's Lipper Ranking as of 11/30/05(3) 8 of 113 11 of 111 8 of 93 7 of 79 5 of 29(4) -- - ------------------------------------------------------------------------------------------------------------ Fund's Lipper Ranking as of 12/31/05(3) 9 of 114 12 of 113 9 of 94 6 of 80 5 of 29(4) -- - ------------------------------------------------------------------------------------------------------------ (1) Total returns for periods less than one year are not annualized. (2) 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. (3) Data provided by Lipper Inc. - A Reuters Company. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. Lipper Fund Performance -- Performance data is total return, and is preliminary and subject to revision. Lipper Rankings -- Rankings are based only on the universe shown and are based on average annual total returns. This listing might not represent the complete universe of funds tracked by Lipper. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (4) Since 8/31/84, the date nearest the fund's inception for which data are available. 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. Investment income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax (AMT). Capital gains are not exempt from state and federal income tax. 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 PORTFOLIO MANAGER: ALAN KRUSS PERFORMANCE SUMMARY Tax-Free Money Market returned 1.08%* for the six months ended November 30, 2005, outperforming the 0.91% average return of the 113 funds in Lipper's "Tax-Exempt Money Market Funds" category, and ranking the fund in the top 8% (8 of 113) of the Lipper peers. Tax-Free Money Market also ranks in the top 9% for the 5- and 10-year periods ended November 30 (see page 2 for performance numbers). ECONOMIC REVIEW The resilient U.S. economy grew at an approximately 3-4% annual rate during the six months despite severe hurricane damage along the Gulf Coast, an energy price spike, and higher short-term interest rates. Crude oil futures shot over 30% higher during the summer from their May 31 level, topping $70 a barrel as Hurricane Katrina approached the Gulf Coast. Fueled by a 21.7% annualized increase in energy costs, the Consumer Price Index rose at a 3.8% annualized growth rate in the first 11 months of 2005. To combat inflation pressures, the Federal Reserve (the Fed) continued hiking its overnight rate target in quarter-point increments, raising it from 3% to 4%. PORTFOLIO POSITIONING & STRATEGY Tax-Free Money Market's 7-day current yield rose overall from 2.41% on May 31, 2005, to 2.60% as of November 30, 2005. Some of this increase was the result of the Federal Reserve raising short-term interest rates four times during the period. In spite of the overall rise in rates, there were some yield fluctuations during the period. For example, in June--and again in July and August--technical imbalances in the market caused yields to temporarily plummet. This was a result of the market being flush with cash because of securities maturing, being called, and paying coupons. The subsequent increase in demand pushed yields on "floaters"--which account for most of the fund's assets--lower. Tax-Free Money Market's weighted average maturity (WAM) fell as low as 16 days in mid-June as various securities matured. Though the purchase of some Kentucky TRANs (tax and revenue anticipation notes) with one-year maturities and attractive yields brought the WAM back up to around 29 days in late June, it rolled back down to 17 days by mid-August. The YIELDS AS OF NOVEMBER 30, 2005 - -------------------------------------------------------------------------------- 7-DAY CURRENT YIELD - -------------------------------------------------------------------------------- 2.60% - -------------------------------------------------------------------------------- 7-DAY EFFECTIVE YIELD - -------------------------------------------------------------------------------- 2.64% - -------------------------------------------------------------------------------- 7-DAY TAX-EQUIVALENT CURRENT YIELDS* - -------------------------------------------------------------------------------- 25.0% Tax Bracket 3.47% - -------------------------------------------------------------------------------- 28.0% Tax Bracket 3.61% - -------------------------------------------------------------------------------- 33.0% Tax Bracket 3.88% - -------------------------------------------------------------------------------- 35.0% Tax Bracket 4.00% - -------------------------------------------------------------------------------- *The tax brackets indicated are for federal taxes only. Actual tax-equivalent yields may be lower, if alternative minimum tax is applicable. *Total returns for periods less than one year are not annualized. (continued) - ------ 3 Tax-Free Money Market - Portfolio Commentary WAM jumped back up to 29 days in late August with the purchase of some Texas TRANs, then rolled down to 23 days by November 30. Managers kept the bulk of portfolio assets in variable rate demand notes (VRDNs) - -- short-term, floating-rate municipal notes, which allow the portfolio to capture higher yields more quickly as interest rates move higher. As of November 30, 2005, VRDNs made up about 90% of the portfolio's holdings. PORTFOLIO COMPOSITION BY CREDIT RATING - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 11/30/05 5/31/05 - -------------------------------------------------------------------------------- A-1+ 68% 68% - -------------------------------------------------------------------------------- A-1 32% 32% - -------------------------------------------------------------------------------- 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 11/30/05 5/31/05 - -------------------------------------------------------------------------------- 1-30 days 93% 88% - -------------------------------------------------------------------------------- 31-90 days -- 3% - -------------------------------------------------------------------------------- 91-180 days 1% 8% - -------------------------------------------------------------------------------- More than 180 days 6% 1% - -------------------------------------------------------------------------------- - ------ 4 Tax-Free Money Market - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- MUNICIPAL SECURITIES -- 99.5% - -------------------------------------------------------------------------------- ALABAMA -- 4.9% - -------------------------------------------------------------------------------- $ 2,500 Birmingham Public Park & Recreation Board Rev., (Children's Zoo), VRDN, 3.16%, 12/1/05 (LOC: AmSouth Bank) $ 2,500 - -------------------------------------------------------------------------------- 4,005 Brundidge Combined Utilities Rev., Series 2002 A, VRDN, 3.14%, 12/1/05 (LOC: SouthTrust Bank N.A.) 4,005 - -------------------------------------------------------------------------------- 5,000 Taylor-Ryan Improvement District No. 2 Rev., VRDN, 3.03%, 12/1/05 (LOC: Wachovia Bank N.A.) 5,000 - -------------------------------------------------------------------------------- 2,125 Tuscaloosa Health Care Auth. Rev., (Pine Valley), VRDN, 3.16%, 12/1/05 (LOC: AmSouth Bank) 2,125 - -------------------------------------------------------------------------------- 13,630 - -------------------------------------------------------------------------------- ARIZONA -- 2.4% - -------------------------------------------------------------------------------- 6,750 Maricopa County Industrial Development Auth. Rev., (Michael Pylman Dairies), VRDN, 3.30%, 12/1/05 (LOC: Wells Fargo Bank N.A.) 6,750 - -------------------------------------------------------------------------------- CALIFORNIA -- 3.4% - -------------------------------------------------------------------------------- 1,443 Alameda County Industrial Development Auth. Rev., (Design Workshops), VRDN, 3.42%, 12/1/05 (LOC: Wells Fargo Bank N.A.) 1,443 - -------------------------------------------------------------------------------- 1,087 California Economic Development Financing Auth. Rev., (Wesflex Pipe Manufacturing), VRDN, 3.35%, 12/1/05 (LOC: Wells Fargo Bank N.A.) 1,087 - -------------------------------------------------------------------------------- 7,000 Puttable Floating Option Tax-Exempt Receipts, VRDN, 3.35%, 12/1/05 (LOC: Lloyds Bank plc) 7,000 - -------------------------------------------------------------------------------- 9,530 - -------------------------------------------------------------------------------- COLORADO -- 3.9% - -------------------------------------------------------------------------------- 3,095 Arvada Water Enterprise Rev., VRDN, 2.85%, 12/1/05 (FSA) (SBBPA: Dexia Credit Local) 3,095 - -------------------------------------------------------------------------------- 2,100 Colorado Health Facilities Auth. Rev., (Boulder Community Hospital), VRDN, 3.13%, 12/7/05 (LOC: Bank One Colorado N.A.) 2,100 - -------------------------------------------------------------------------------- 5,800 Colorado Housing & Finance Auth. Rev., (Kroger Co.), VRDN, 3.00%, 12/1/05 (LOC: U.S. Bank Trust N.A.) 5,800 - -------------------------------------------------------------------------------- 10,995 - -------------------------------------------------------------------------------- FLORIDA -- 4.8% - -------------------------------------------------------------------------------- 2,190 Broward County Health Facilities Auth. Rev., (John Knox Village), VRDN, 3.11%, 12/1/05 (RADIAN) (SBBPA: SunTrust Bank) 2,190 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $ 4,945 Florida Housing Finance Agency Rev., VRDN, 3.17%, 12/1/05 (SBBPA: Merrill Lynch Capital Services) (Acquired 2/6/04 - 4/19/04, Cost $4,945)(1) $ 4,945 - -------------------------------------------------------------------------------- 4,300 Miami-Dade County Industrial Development Auth. Rev., (Palmer Trinity Private College), VRDN, 3.12%, 12/1/05 (LOC: Keybank N.A.) 4,300 - -------------------------------------------------------------------------------- 1,110 Palm Beach County Rev., (Zoological Society Inc.), VRDN, 3.10%, 12/1/05 (LOC: Northern Trust Co.) 1,110 - -------------------------------------------------------------------------------- 900 Seminole County Industrial Development Auth. Rev., VRDN, 3.24%, 12/1/05 (LOC: Bank of America N.A.) 900 - -------------------------------------------------------------------------------- 13,445 - -------------------------------------------------------------------------------- GEORGIA -- 2.9% - -------------------------------------------------------------------------------- 5,495 Fulton County Development Auth. Rev., (Automatic Data Processing), VRDN, 3.00%, 12/15/05 5,495 - -------------------------------------------------------------------------------- 2,600 Savannah Economic Development Auth. Rev., Series 2002 A, (Westside Urban Health Center), VRDN, 3.05%, 12/7/05 (LOC: SunTrust Bank) 2,600 - -------------------------------------------------------------------------------- 8,095 - -------------------------------------------------------------------------------- HAWAII -- 1.8% - -------------------------------------------------------------------------------- 3,000 Hawaii Pacific Health Rev., Series 2004 B, (Department Budget & Finance), VRDN, 3.08%, 12/7/05 (RADIAN) (SBBPA: Bank of Nova Scotia) 3,000 - -------------------------------------------------------------------------------- 2,000 Hawaii Pacific Health Rev., Series 2004 B-2, (Department Budget & Finance), VRDN, 3.08%, 12/7/05 (RADIAN) (SBBPA: Bank of Nova Scotia) 2,000 - -------------------------------------------------------------------------------- 5,000 - -------------------------------------------------------------------------------- IDAHO -- 1.1% - -------------------------------------------------------------------------------- 3,000 Lincoln County Industrial Development Corp. Rev., (Double A Dairy), VRDN, 3.30%, 12/1/05 (LOC: Bank of America N.A.) 3,000 - -------------------------------------------------------------------------------- ILLINOIS -- 0.9% - -------------------------------------------------------------------------------- 2,400 Illinois Finance Auth. Rev., (Institutional Gas Technology), VRDN, 3.11%, 12/1/05 (LOC: Harris Trust & Savings Bank) 2,400 - -------------------------------------------------------------------------------- INDIANA -- 9.3% - -------------------------------------------------------------------------------- 2,800 Jasper County Industrial Development Rev., (Newberry Farms LLC), VRDN, 3.30%, 12/1/05 (LOC: Bank of the West) 2,800 - -------------------------------------------------------------------------------- 5,865 La Porte Industrial Development Rev., (KKO Realty), VRDN, 3.30%, 12/1/05 (LOC: Bank of New York) 5,865 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 5 Tax-Free Money Market - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $ 1,610 Morgan County Rev., Series 2002 A, (Morgan Hospital & Medical Center), VRDN, 3.16%, 12/1/05 (LOC: Fifth Third Bank) $ 1,610 - -------------------------------------------------------------------------------- 12,075 Morgan County Rev., Series 2002 B, (Morgan Hospital & Medical Center), VRDN, 3.11%, 12/1/05 (LOC: Fifth Third Bank) 12,075 - -------------------------------------------------------------------------------- 3,625 Vincennes Economic Development Rev., (Grandview Care Inc.), VRDN, 3.15%, 12/1/05 (LOC: Bank One N.A.) 3,625 - -------------------------------------------------------------------------------- 25,975 - -------------------------------------------------------------------------------- KENTUCKY -- 2.5% - -------------------------------------------------------------------------------- 5,000 Kentucky Asset Liability Commission Tax and Rev. Anticipation Notes, Series 2005 A, 4.00%, 6/28/06 5,037 - -------------------------------------------------------------------------------- 1,000 Murray Industrial Building Rev., (Kroger Co.), VRDN, 3.00%, 12/1/05 (LOC: U.S. Bank N.A.) 1,000 - -------------------------------------------------------------------------------- 1,000 Winchester Industrial Building Rev., (Kroger Co.), VRDN, 3.00%, 12/1/05 (LOC: U.S. Bank N.A.) 1,000 - -------------------------------------------------------------------------------- 7,037 - -------------------------------------------------------------------------------- LOUISIANA -- 2.4% - -------------------------------------------------------------------------------- 4,000 Louisiana Local Government Environmental Facilities & Community Development Auth. Rev., (New Orleans Sacred Heart), VRDN, 3.05%, 12/7/05 (LOC: SunTrust Bank) 4,000 - -------------------------------------------------------------------------------- 2,800 Louisiana Local Government Environmental Facilities & Community Development Auth. Rev., (Trinity Episcopal School), VRDN, 3.10%, 12/7/05 (LOC: SunTrust Bank) 2,800 - -------------------------------------------------------------------------------- 6,800 - -------------------------------------------------------------------------------- MARYLAND -- 0.4% - -------------------------------------------------------------------------------- 1,000 Maryland Economic Development Corp. Rev., Series 2002 B, (Federation of American Societies), VRDN, 3.10%, 12/7/05 (LOC: SunTrust Bank) 1,000 - -------------------------------------------------------------------------------- MASSACHUSSETTS -- 1.4% - -------------------------------------------------------------------------------- 4,000 Massachusetts Development Finance Agency Rev., Series 2005 A, (Suffolk University), VRDN, 3.06%, 12/7/05 (Assured Guarantee) (SBBPA: Citizens Bank of Massachusetts) 4,000 - -------------------------------------------------------------------------------- MICHIGAN -- 0.5% - -------------------------------------------------------------------------------- 1,400 Detroit Rev., Series 2003 B, VRDN, 3.00%, 12/1/05 (FSA) (SBBPA: Dexia Credit Local) 1,400 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- MINNESOTA -- 4.9% - -------------------------------------------------------------------------------- $ 7,140 Dakota County Community Development Agency Rev., (Catholic Finance Corp.), VRDN, 3.13%, 12/7/05 (LOC: U.S. Bank N.A.) $ 7,140 - -------------------------------------------------------------------------------- 6,500 East Grand Forks Rev., (American Crystal Sugar Co.), VRDN, 3.30%, 12/1/05 (LOC: Wachovia Bank N.A.) 6,500 - -------------------------------------------------------------------------------- 13,640 - -------------------------------------------------------------------------------- MISSISSIPPI -- 1.5% - -------------------------------------------------------------------------------- 1,750 De Soto County School District GO, 3.50%, 5/1/06 (FGIC) 1,755 - -------------------------------------------------------------------------------- 2,570 Mississippi Business Finance Corp. Rev., Series 2004 B, VRDN, 3.02%, 12/1/05 (LOC: Wells Fargo Bank N.A.) 2,570 - -------------------------------------------------------------------------------- 4,325 - -------------------------------------------------------------------------------- MISSOURI -- 6.7% - -------------------------------------------------------------------------------- 6,700 Jackson County Industrial Development Auth. Rev., (Linda Hall Library), VRDN, 3.16%, 12/1/05 (LOC: Commerce Bank N.A.) 6,700 - -------------------------------------------------------------------------------- 2,560 Kansas City Industrial Development Auth. Rev., (Plaza Manor Nursing), VRDN, 3.19%, 12/1/05 (LOC: Comerica Bank) 2,560 - -------------------------------------------------------------------------------- 9,400 Missouri State Health & Educational Facilities Auth. COP, (Pembroke Hill School), VRDN, 3.16%, 12/1/05 (LOC: Commerce Bank N.A.) 9,400 - -------------------------------------------------------------------------------- 18,660 - -------------------------------------------------------------------------------- NEVADA -- 1.3% - -------------------------------------------------------------------------------- 3,600 Clark County Economic Development Rev., (Lutheran Secondary School Association), VRDN, 3.25%, 12/1/05 (LOC: Allied Irish Bank plc) 3,600 - -------------------------------------------------------------------------------- NEW HAMPSHIRE -- 0.5% - -------------------------------------------------------------------------------- 1,390 New Hampshire Health & Education Facilities Auth. Rev., Series 2004 B, (South New Hampshire Medical Center), VRDN, 3.13%, 12/1/05 (RADIAN) (SBBPA: Fleet National Bank) 1,390 - -------------------------------------------------------------------------------- NEW MEXICO -- 0.2% - -------------------------------------------------------------------------------- 485 Farmington Pollution, 3.00%, 12/1/05 (LOC: Barclays Bank plc) 485 - -------------------------------------------------------------------------------- NORTH CAROLINA -- 4.8% - -------------------------------------------------------------------------------- 1,580 North Carolina Medical Care Commission Retirement Facilities Rev., (Aldersgate), VRDN, 3.08%, 12/7/05 (LOC: Branch Banking & Trust) 1,580 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 Tax-Free Money Market - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $11,900 North Carolina Medical Care Commission Retirement Facilities Rev., Series 2001 C, (Village at Brookwood), VRDN, 3.08%, 12/7/05 (LOC: Branch Banking & Trust) $ 11,900 - -------------------------------------------------------------------------------- 13,480 - -------------------------------------------------------------------------------- OREGON -- 4.7% - -------------------------------------------------------------------------------- 13,100 Port of Portland Public Grain Elevator Rev., (Columbia Grain Inc.), VRDN, 3.11%, 12/1/05 (LOC: Wachovia Bank, N.A.) 13,100 - -------------------------------------------------------------------------------- SOUTH CAROLINA -- 2.9% - -------------------------------------------------------------------------------- 8,150 South Carolina Jobs Economic Development Auth Rev., (Greenville Technical College), VRDN, 3.05%, 12/7/05 (LOC: SunTrust Bank) 8,150 - -------------------------------------------------------------------------------- TENNESSEE -- 6.8% - -------------------------------------------------------------------------------- 7,880 Bradley County Industrial Development Board Rev., (Kroger Co.), VRDN, 3.00%, 12/1/05 (LOC: U.S. Bank N.A.) 7,880 - -------------------------------------------------------------------------------- 700 Cookeville Industrial Development Board Rev., Series 2001 A, (Advocacy & Resources Project), VRDN, 3.16%, 12/1/05 (LOC: AmSouth Bank) 700 - -------------------------------------------------------------------------------- 2,300 Knox County Industrial Development Board Rev., (Kroger Co.), VRDN, 3.14%, 12/1/05 (LOC: U.S. Bank Trust N.A.) 2,300 - -------------------------------------------------------------------------------- 8,200 Shelby County Health Educational & Housing Facilities Board Rev., (Kings Daughter & Sons), VRDN, 3.16%, 12/1/05 (LOC: AmSouth Bank) 8,200 - -------------------------------------------------------------------------------- 19,080 - -------------------------------------------------------------------------------- TEXAS -- 14.0% - -------------------------------------------------------------------------------- 10,000 Crawford Education Facilities Corp. Rev., (University Package System A), VRDN, 3.13%, 12/1/05 (LOC: BNP Paribas) 10,000 - -------------------------------------------------------------------------------- 5,500 Gulf Coast Industrial Development Auth. Rev., (Petrounited Term Inc.), VRDN, 3.15%, 12/1/05 (LOC: BNP Paribas) 5,500 - -------------------------------------------------------------------------------- 3,000 Hale County Industrial Development Corp. Rev., (Struikmans), VRDN, 3.30%, 12/1/05 (LOC: Bank of the West) 3,000 - -------------------------------------------------------------------------------- 4,000 Hale County Industrial Development Corp. Rev., (White River Ranch), VRDN, 3.30%, 12/1/05 (LOC: Wells Fargo Bank N.A) 4,000 - -------------------------------------------------------------------------------- 2,470 Lubbock Health Facilities Development Corp. Rev., (Saint Joseph Health System), 5.00%, 7/1/06 (FSA) 2,500 - -------------------------------------------------------------------------------- $ 3,645 San Antonio Education Facilities Corp. Rev., Series 2004 A, (Phase 1 Dormitory), VRDN, 3.13%, 12/1/05 (LOC: Allied Irish Bank plc) $ 3,645 - -------------------------------------------------------------------------------- 10,000 Texas Tax & Rev. Anticipation Notes, 4.50%, 8/31/06 10,109 - -------------------------------------------------------------------------------- 38,754 - -------------------------------------------------------------------------------- VERMONT -- 0.8% - -------------------------------------------------------------------------------- 2,285 Vermont Educational & Health Buildings Financing Agency Rev., Series 2004 B, (Landmark College), VRDN, 3.16%, 12/1/05 (RADIAN) (LOC: SunTrust Bank) 2,285 - -------------------------------------------------------------------------------- VIRGINIA -- 3.2% - -------------------------------------------------------------------------------- 2,400 Bristol Industrial Development Auth. Rev., (Bristol Health Care Center Inc.), VRDN, 2.85%, 12/1/05 (LOC: Regions Bank) 2,400 - -------------------------------------------------------------------------------- 6,600 Suffolk Industrial Development Auth. Rev., (Lake Prince Center), VRDN, 3.13%, 12/7/05 (LOC: Branch Banking & Trust) 6,600 - -------------------------------------------------------------------------------- 9,000 - -------------------------------------------------------------------------------- WASHINGTON -- 1.4% - -------------------------------------------------------------------------------- 3,000 Everett Public Facilities District Rev., Series 2005 A, 2.75%, 12/8/05 (LOC: Bank of America N.A.) (Acquired 11/3/05, Cost $3,000)(1) 3,000 - -------------------------------------------------------------------------------- 840 Pierce County Economic Development Corporate Rev., (K & M Holdings II), VRDN, 3.15%, 12/7/05 (LOC: Wells Fargo Bank, N.A.) (Acquired 11/17/97, Cost $840)(1) 840 - -------------------------------------------------------------------------------- 3,840 - -------------------------------------------------------------------------------- WEST VIRGINIA -- 1.4% - -------------------------------------------------------------------------------- 4,000 West Virginia Economic Development Auth. Rev., (Collins Hardwood Co.), VRDN, 3.30%, 12/1/05 (LOC: Bank of America N.A.) 4,000 - -------------------------------------------------------------------------------- WYOMING -- 1.8% - -------------------------------------------------------------------------------- 5,000 Sweetwater County Poll Rev., (Citizens Utilities Co.), VRDN, 2.75%, 12/2/05 (LOC: Barclays Bank plc) (Acquired 11/3/05, Cost $5,000)(1) 5,000 - -------------------------------------------------------------------------------- TOTAL MUNICIPAL SECURITIES 277,846 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS(2) - -------------------------------------------------------------------------------- 47 Federated Tax-Free Obligation Funds 47 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.5% 277,893 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 0.5% 1,267 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $279,160 ================================================================================ See Notes to Financial Statements. (continued) - ------ 7 Tax-Free Money Market - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) NOTES TO SCHEDULE OF INVESTMENTS COP = Certificates of Participation FGIC = Financial Guaranty Insurance Co. FSA = Financial Security Assurance, Inc. GO = General Obligation LOC = Letter of Credit RADIAN = Radian Asset Assurance, Inc. SBBPA = Standby Bond Purchase Agreement VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown is effective November 30, 2005. (1) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at November 30, 2005, was $13,785 (in thousands), which represented 4.9% of net assets. (2) Category is less than 0.05% of total net assets. See Notes to Financial Statements. - ------ 8 Tax-Free Bond - Performance TOTAL RETURNS AS OF NOVEMBER 30, 2005 -------------------------------- AVERAGE ANNUAL RETURNS - ---------------------------------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ---------------------------------------------------------------------------------------------------------- INVESTOR CLASS 0.55% 2.90% 4.98% 4.91% 5.50% 3/2/87 - ---------------------------------------------------------------------------------------------------------- LEHMAN BROTHERS MUNICIPAL 5-YEAR GO INDEX 0.15% 1.52% 4.83% 4.83% 5.65%(2) -- - ---------------------------------------------------------------------------------------------------------- AVERAGE RETURN OF LIPPER'S INTERMEDIATE MUNICIPAL DEBT FUNDS(3) -0.02% 1.92% 4.63% 4.57% 5.63%(4) -- - ---------------------------------------------------------------------------------------------------------- Fund's Lipper Ranking as of 11/30/05(3) -- 19 of 145 26 of 93 12 of 67 8 of 12(4) -- - ---------------------------------------------------------------------------------------------------------- Fund's Lipper Ranking as of 12/31/05(3) -- 25 of 147 24 of 95 12 of 67 8 of 12(4) -- - ---------------------------------------------------------------------------------------------------------- Institutional Class 0.65% 3.10% -- -- 3.23% 4/15/03 - ---------------------------------------------------------------------------------------------------------- Advisor Class -- -- -- -- 0.32%(1) 7/29/05 - ---------------------------------------------------------------------------------------------------------- (1) Total returns for periods less than one year are not annualized. (2) Since 2/28/87, the date nearest the Investor Class's inception for which data are available. (3) Data provided by Lipper Inc. - A Reuters Company. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. Lipper Fund Performance -- Performance data is total return, and is preliminary and subject to revision. Lipper Rankings -- Rankings are based only on the universe shown and are based on average annual total returns. This listing might not represent the complete universe of funds tracked by Lipper. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (4) Since 3/31/87, the date nearest the Investor Class's inception for which data are available. 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. As interest rates rise, bond values will decline. Investment income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax (AMT). Capital gains are not exempt from state and federal income tax. 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. (continued) - ------ 9 Tax-Free Bond - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made November 30, 1995
ONE-YEAR RETURNS OVER 10 YEARS Periods ended November 30 - ----------------------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 - ----------------------------------------------------------------------------------------------- Investor Class 4.99% 5.66% 6.77% -0.24% 7.29% 8.25% 6.02% 5.72% 2.14% 2.90% - ----------------------------------------------------------------------------------------------- Lehman Brothers Municipal 5-Year GO Index 5.36% 5.38% 6.32% 1.49% 5.62% 8.24% 6.47% 5.72% 2.36% 1.52% - ----------------------------------------------------------------------------------------------- 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. As interest rates rise, bond values will decline. Investment income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax (AMT). Capital gains are not exempt from state and federal income tax. 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. - ------ 10 Tax-Free Bond - Portfolio Commentary PORTFOLIO MANAGER: KENNETH SALINGER PERFORMANCE SUMMARY Tax-Free Bond returned 0.55%* for the six months ended November 30, 2005, solidly outpacing the 0.15% return of its benchmark--the Lehman Brothers Municipal 5-year GO Index--and the -0.02% average return of its Lipper peer group. The fund also performed well from a longer-term standpoint, returning more than its benchmark for the past one, five, and 10 years, while concurrently ranking among the top 30% of its Lipper peers for those three time periods. (Please see pages 9 and 10.) Tax-Free Bond's modest six-month return reflected a limited performance by municipal bonds amid resilient economic growth, faster inflation, and higher short-term interest rates. We talk about the strategies that we employed to help achieve Tax-Free Bond's superior benchmark- and average-peer-compared results in the Portfolio Strategy & Outlook section on the next page. YIELD SUMMARY Tax-Free Bond's key investment objective is to seek safety of principal and high current income exempt from federal income tax. With that note in mind, the fund's 30-day SEC yield was 3.44% as of November 30, 2005, which translated into the attractive tax-equivalent yields shown in the table on this page. By comparison, Tax-Free Bond's Lipper group average 30-day SEC yield was 3.29%. All else being equal, a higher yield can boost returns and performance. ECONOMIC REVIEW The resilient U.S. economy grew at an approximately 3-4% annual rate during the six months despite severe hurricane damage along the Gulf Coast, an energy price spike, and higher short-term interest rates. Crude oil futures shot over 30% higher during the summer from their May 31 level, topping $70 a barrel as Hurricane Katrina approached the Gulf Coast. Fueled by a 21.7% annualized increase in energy costs, the Consumer Price Index rose at a 3.8% annualized growth rate in the first 11 months of 2005. To combat inflation pressures, the Federal Reserve (the Fed) continued hiking its overnight rate target in quarter-point increments, raising it from 3% to 4%. BROAD BOND MARKET REVIEW The Fed's rate increases pushed short-term yields significantly higher; the two-year Treasury yield rose from 3.58% to 4.42%, a 0.84 percentage point increase. Longer-term yields rose too, but not as much; the 30-year Treasury yield rose from 4.32% to 4.69%, a 0.37 percentage YIELDS AS OF NOVEMBER 30, 2005 - -------------------------------------------------------------------------------- 30-DAY SEC YIELD - -------------------------------------------------------------------------------- Investor Class 3.44% - -------------------------------------------------------------------------------- Institutional Class 3.65% - -------------------------------------------------------------------------------- Advisor Class 3.20% - -------------------------------------------------------------------------------- INVESTOR CLASS 30-DAY TAX-EQUIVALENT YIELDS(1) - -------------------------------------------------------------------------------- 25.0% Tax Bracket 4.59% - -------------------------------------------------------------------------------- 28.0% Tax Bracket 4.78% - -------------------------------------------------------------------------------- 33.0% Tax Bracket 5.13% - -------------------------------------------------------------------------------- 35.0% Tax Bracket 5.29% - -------------------------------------------------------------------------------- (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. Total returns for periods less than one year are not annualized. (continued) - ------ 11 Tax-Free Bond - Portfolio Commentary point increase. This narrowed the difference between shorter- and longer-term yields and "flattened" the yield curve used to illustrate Treasury yield levels at different maturities. MUNICIPAL MARKET REVIEW The municipal yield curve also rose and flattened, but not as much as the Treasury curve; municipal securities generally outperformed their Treasury counterparts. The Lehman Brothers Municipal Bond Index returned 0.36% for the six months compared with -0.81% for Lehman's U.S. Treasury Index. Interestingly, intermediate-maturity municipal securities generally underperformed shorter- and longer-maturity municipals. PORTFOLIO STRATEGY & OUTLOOK On the portfolio front, we emphasized a maturity structure that we believed would benefit from a decrease in the yield gap between short- and long-term municipal bonds. That strategy paid off as short-term bond yields rose (and prices fell) less than long-term bond yields. As the yield curve flattened, we locked in some of the gains from that strategy and invested the proceeds more broadly across all bond maturities--a position we expect to maintain for the time being. We also searched for attractive opportunities caused by seasonal supply and demand fluctuations within and between the various states, a strategy that we continuously employ. By buying bonds at below-average prices during supply surges and later selling into demand once supply tightens up we're often able to enhance performance. Lastly, we added some lower-rated investment-grade securities while generally focusing on AAA and AA bonds. The lower-rated securities tend to afford higher yields while helping to decrease Tax-Free Bond's sensitivity to interest rates. We work closely with our well-seasoned municipal credit research team when looking for such bonds and plan to actively pursue that strategy for the foreseeable future. PORTFOLIO COMPOSITION BY CREDIT RATING - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 11/30/05 5/31/05 - -------------------------------------------------------------------------------- AAA 73% 77% - -------------------------------------------------------------------------------- AA 5% 5% - -------------------------------------------------------------------------------- A 8% 8% - -------------------------------------------------------------------------------- BBB 14% 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 STATES AS OF NOVEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF NET % OF NET ASSETS ASSETS AS OF AS OF 11/30/05 5/31/05 - -------------------------------------------------------------------------------- Texas 13.8% 10.5% - -------------------------------------------------------------------------------- California 8.7% 12.9% - -------------------------------------------------------------------------------- Puerto Rico 7.9% 5.3% - -------------------------------------------------------------------------------- Arizona 7.7% 9.4% - -------------------------------------------------------------------------------- Washington 6.7% 6.3% - -------------------------------------------------------------------------------- - ------ 12 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- MUNICIPAL SECURITIES -- 96.7% - -------------------------------------------------------------------------------- ALABAMA -- 1.1% - -------------------------------------------------------------------------------- $ 865 Alabama Water Pollution Control Auth. GO, 5.75%, 8/15/18 (Ambac) $ 941 - -------------------------------------------------------------------------------- 190 East Central Industrial Development Auth. Rev., 5.25%, 9/1/08, Prerefunded at 100% of Par (Ambac)(1) 199 - -------------------------------------------------------------------------------- 810 East Central Industrial Development Auth. Rev., 5.25%, 9/1/13, Prerefunded at 100% of Par (Ambac)(1) 847 - -------------------------------------------------------------------------------- 1,875 Helena Utilities Board Water & Sewer Rev., 5.75%, 4/1/20 (MBIA) 2,081 - -------------------------------------------------------------------------------- 1,435 Helena Utilities Board Water & Sewer Rev., 5.75%, 4/1/22 (MBIA) 1,591 - -------------------------------------------------------------------------------- 1,250 Huntsville Health Care Auth. Rev., Series 2002 A, 3.80%, 6/1/06 (MBIA) 1,252 - -------------------------------------------------------------------------------- 6,911 - -------------------------------------------------------------------------------- ARIZONA -- 7.4% - -------------------------------------------------------------------------------- 1,275 Arizona Health Facilities Auth. Rev., (Blood Systems Incorporated), 4.00%, 4/1/12 1,269 - -------------------------------------------------------------------------------- 1,175 Arizona Health Facilities Auth. Rev., (Blood Systems Incorporated), 4.50%, 4/1/16 1,177 - -------------------------------------------------------------------------------- 1,000 Arizona Tourism & Sports Auth. Rev., (Baseball Training Facilities), 5.00%, 7/1/11 1,042 - -------------------------------------------------------------------------------- 1,000 Arizona Tourism &Sports Auth. Rev., (Baseball Training Facilities), 5.00%, 7/1/12 1,043 - -------------------------------------------------------------------------------- 2,000 Arizona Tourism & Sports Auth. Rev., Series 2003 A, (Multipurpose Stadium Facility), 5.25%, 7/1/17 (MBIA) 2,158 - -------------------------------------------------------------------------------- 2,925 Chandler Water & Sewer Rev., 4.50%, 7/1/06 (FSA) 2,947 - -------------------------------------------------------------------------------- 2,130 Energy Management Services LLC Rev., (Arizona State University - Main Campus), 4.50%, 7/1/12 (MBIA) 2,231 - -------------------------------------------------------------------------------- 1,930 Gilbert Water Resource Municipal Property Corp. Rev., (Development Fee & Sub-Lien), 4.25%, 4/1/11 1,929 - -------------------------------------------------------------------------------- 3,000 Gilbert Water Resource Municipal Property Corp. Rev., (Development Fee & Sub-Lien), 4.90%, 4/1/19 3,008 - -------------------------------------------------------------------------------- 1,000 Glendale Water & Sewer Rev., 5.00%, 7/1/06 (FGIC) 1,010 - -------------------------------------------------------------------------------- 4,000 Maricopa County Community College District GO, Series 1997 B, 5.00%, 7/1/06 4,081 - -------------------------------------------------------------------------------- 1,155 Maricopa County Gilbert Unified School District No. 41 GO, 5.75%, 7/1/11 (FSA) 1,281 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $1,000 Maricopa County Peoria Unified School District No. 11 GO, (School Improvement), 4.25%, 7/1/18 (Ambac) $ 1,002 - -------------------------------------------------------------------------------- 2,415 Maricopa County Saddle Mountain Unified School District No. 90 GO, Series 2003 A, 5.25%, 7/1/11 2,557 - -------------------------------------------------------------------------------- 2,000 Maricopa County Saddle Mountain Unified School District No. 90 GO, Series 2003 A, 5.25%, 7/1/12 2,124 - -------------------------------------------------------------------------------- 1,000 Mohave County Community College District Rev., (State Board of Directors), 6.00%, 3/1/20 (MBIA) 1,089 - -------------------------------------------------------------------------------- 1,655 Mohave County Industrial Development Auth. GO, Series 2004 A, (Mohave Prison), 5.00%, 4/1/14 (XLCA) 1,764 - -------------------------------------------------------------------------------- 2,000 Phoenix GO, Series 2005 B, 4.25%, 7/1/22 1,941 - -------------------------------------------------------------------------------- 1,200 Pima County Indian Oasis-Baboquivari Unified School District No. 40 GO, Series 2002 A, 4.60%, 7/1/13 (MBIA) 1,256 - -------------------------------------------------------------------------------- 2,600 Pima County Tucson Unified School District No. 1 GO, 4.625%, 7/1/13 (FSA) 2,725 - -------------------------------------------------------------------------------- 3,970 Pinal County COP, 5.00%, 12/1/25 4,037 - -------------------------------------------------------------------------------- 1,425 Pinal County COP, 5.00%, 12/1/26 1,445 - -------------------------------------------------------------------------------- 3,085 South Tucson Municipal Property Corp. Rev., 5.50%, 6/1/24 3,197 - -------------------------------------------------------------------------------- 1,845 West Campus Housing Student Housing Rev., (Arizona State University), 5.00%, 7/1/30 (Ambac) 1,907 - -------------------------------------------------------------------------------- 48,220 - -------------------------------------------------------------------------------- ARKANSAS -- 0.3% - -------------------------------------------------------------------------------- 725 Fort Smith Sales and Use Tax Rev., Series 2001 A, 4.375%, 12/1/11 725 - -------------------------------------------------------------------------------- 1,000 Washington County Rev., Series 2005 B (Regional Medical Center), 5.00%, 2/1/12 1,042 - -------------------------------------------------------------------------------- 1,767 - -------------------------------------------------------------------------------- CALIFORNIA -- 8.7% - -------------------------------------------------------------------------------- 1,500 California Educational Facilities Auth. Rev., Series 2005 A, (Mills College), 5.00%, 9/1/29 1,507 - -------------------------------------------------------------------------------- 5,000 California GO, 5.00%, 4/1/11(2) 5,317 - -------------------------------------------------------------------------------- 1,000 California Public Works Board Lease COP, Series 1994 A, (Various University of California Projects), 6.20%, 10/1/08 1,012 - -------------------------------------------------------------------------------- 1,000 California Statewide Communities Development Auth. Rev., Series 2002 E, (Kaiser Permanente), 4.70%, 6/1/09 1,028 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 13 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $1,075 California Statewide Communities Development Auth. Water & Waste Rev., Series 2004 A, (Pooled Financing Program), 5.00%, 10/1/12 (FSA) $ 1,161 - -------------------------------------------------------------------------------- 2,000 California Statewide Communities Development Auth. Water & Waste Rev., Series 2004 A, (Pooled Financing Program), 5.25%, 10/1/19 (FSA) 2,164 - -------------------------------------------------------------------------------- 1,615 Campbell COP, (Civic Center), 5.83%, 10/1/31 (Ambac)(3) 443 - -------------------------------------------------------------------------------- 1,615 Campbell COP, (Civic Center), 5.83%, 10/1/32 (Ambac)(3) 420 - -------------------------------------------------------------------------------- 2,000 Coachella Financing Auth. Tax Allocation Rev., Series 2004 B, (Redevelopment Project No. 4), 5.25%, 9/1/34 (XLCA) 2,094 - -------------------------------------------------------------------------------- 3,000 Imperial Irrigation District COP, (Water Systems), 5.50%, 7/1/29 (Ambac) 3,239 - -------------------------------------------------------------------------------- 5,000 Los Angeles Department of Water & Power Rev., Series 2001 AA3, (Power Systems), 5.25%, 7/1/24 5,050 - -------------------------------------------------------------------------------- 2,200 Manteca Unified School District GO, 5.25%, 8/1/23 (FSA) 2,439 - -------------------------------------------------------------------------------- 18,315 Merced Irrigation District Rev., 5.25%, 9/1/36 (XLCA)(2) 19,220 - -------------------------------------------------------------------------------- 675 Plumas Unified School District GO, 5.25%, 8/1/19 (FSA) 748 - -------------------------------------------------------------------------------- 1,000 Plumas Unified School District GO, 5.25%, 8/1/20 (FSA) 1,111 - -------------------------------------------------------------------------------- 1,575 Plumas Unified School District GO, Series 2005 B, (2002 Election), 5.00%, 8/1/26 (FSA) 1,647 - -------------------------------------------------------------------------------- 1,120 San Diego Public Water Facilities Financing Auth. Rev., 5.00%, 8/1/24 (MBIA) 1,168 - -------------------------------------------------------------------------------- 2,145 San Francisco Uptown Parking Corporation Rev., (Union Square), 5.50%, 7/1/15 (MBIA) 2,343 - -------------------------------------------------------------------------------- 1,000 San Francisco Uptown Parking Corporation Rev., (Union Square), 6.00%, 7/1/20 (MBIA) 1,117 - -------------------------------------------------------------------------------- 2,000 San Francisco Uptown Parking Corporation Rev., (Union Square), 6.00%, 7/1/31 (MBIA) 2,223 - -------------------------------------------------------------------------------- 1,100 Val Verde Unified School District COP, Series 2005 B, (Construction), 5.00%, 1/1/30 (FGIC) 1,131 - -------------------------------------------------------------------------------- 56,582 - -------------------------------------------------------------------------------- COLORADO -- 2.7% - -------------------------------------------------------------------------------- 1,100 Arapahoe County Water & Wastewater Public Improvement District GO, Series 2002 B, 5.75%, 12/1/17 (MBIA) 1,225 - -------------------------------------------------------------------------------- 1,550 Colorado Educational & Cultural Facilities Auth. Rev., (Excel Academy Charter School), 5.50%, 12/1/33 (XLCA) 1,673 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $ 530 Colorado Educational & Cultural Facilities Auth. Rev., (University Facilities-Northwest Nazarene), 4.50%, 11/1/09 $ 535 - -------------------------------------------------------------------------------- 800 Colorado Educational & Cultural Facilities Auth. Rev., (University Facilities-Northwest Nazarene), 4.60%, 11/1/16 787 - -------------------------------------------------------------------------------- 900 Colorado Educational & Cultural Facilities Auth. Rev., (University Facilities-Northwest Nazarene), 4.75%, 11/1/10 922 - -------------------------------------------------------------------------------- 1,210 Colorado Educational & Cultural Facilities Auth. Rev., Series 2005 A, (Ridgeview Charter School), 5.50%, 8/15/35 (XLCA) 1,304 - -------------------------------------------------------------------------------- 325 Colorado Health Facilities Auth. Rev., (Vail Valley Medical Center), 4.00%, 1/15/06 325 - -------------------------------------------------------------------------------- 500 Colorado Health Facilities Auth. Rev., (Vail Valley Medical Center), 4.00%, 1/15/07 501 - -------------------------------------------------------------------------------- 585 Colorado Health Facilities Auth. Rev., (Vail Valley Medical Center), 4.50%, 1/15/09 594 - -------------------------------------------------------------------------------- 450 Colorado Water Resources & Power Development Auth. Rev., Series 2000 A, 6.25%, 9/1/10, Prerefunded at 100% of Par(1) 504 - -------------------------------------------------------------------------------- 50 Colorado Water Resources & Power Development Auth. Rev., Series 2000 A, 6.25%, 9/1/16 56 - -------------------------------------------------------------------------------- 1,430 Denver West Metropolitan District GO, 5.25%, 12/1/24 1,462 - -------------------------------------------------------------------------------- 1,000 Douglas & Elbert Counties School District No. Re-1 GO, Series 2002 B, 5.75%, 12/15/12, Prerefunded at 100% of Par (FSA/State Aid Withholding)(1) 1,125 - -------------------------------------------------------------------------------- 1,100 Eagle Bend Metropolitan District No. 2 GO, 5.25%, 12/1/23 (RADIAN) 1,149 - -------------------------------------------------------------------------------- 5,000 University of Colorado Regents COP, 6.00%, 12/1/22 (MBIA-IBC) 5,501 - -------------------------------------------------------------------------------- 17,663 - -------------------------------------------------------------------------------- CONNECTICUT -- 0.7% - -------------------------------------------------------------------------------- 2,150 City of Bridgeport GO, Series 2004 A, 5.25%, 8/15/22 (MBIA) 2,309 - -------------------------------------------------------------------------------- 2,215 New Haven Air Rights Package Facility Rev., 5.00%, 12/1/10 (Ambac) 2,363 - -------------------------------------------------------------------------------- 4,672 - -------------------------------------------------------------------------------- DISTRICT OF COLUMBIA -- 0.4% - -------------------------------------------------------------------------------- 1,385 District of Columbia GO, Series 1999 B, 5.50%, 6/1/09 (FSA) 1,476 - -------------------------------------------------------------------------------- 1,155 District of Columbia Rev., (Gonzaga College High School), 5.20%, 7/1/12 (FSA) 1,225 - -------------------------------------------------------------------------------- 2,701 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 14 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- FLORIDA -- 2.5% - -------------------------------------------------------------------------------- $ 200 Broward County Health Facilities Auth. Rev., (John Knox Village), VRDN, 3.11%, 12/1/05 (RADIAN) (SBBPA: SunTrust Bank) $ 200 - -------------------------------------------------------------------------------- 2,585 Greater Orlando Aviation Auth. Rev., Series 2003 A, 5.00%, 10/1/13 (FSA) 2,776 - -------------------------------------------------------------------------------- 500 Highlands County Health Facilities Auth. Rev., Series 2005 A, (Adventist Health), 5.00%, 11/15/11 529 - -------------------------------------------------------------------------------- 500 Highlands County Health Facilities Auth. Rev., Series 2005 B, (Adventist Health), 5.00%, 11/15/09 523 - -------------------------------------------------------------------------------- 500 Highlands County Health Facilities Auth. Rev., Series 2005 B, (Adventist Health), 5.00%, 11/15/10 527 - -------------------------------------------------------------------------------- 1,000 Highlands County Health Facilities Auth. Rev., Series 2005 B, (Adventist Health), 5.00%, 11/15/11 1,057 - -------------------------------------------------------------------------------- 2,500 JEA St. Johns River Power Park System Rev., Series 21, Issue 2, 5.00%, 10/1/11 (MBIA) 2,675 - -------------------------------------------------------------------------------- 2,500 JEA St. Johns River Power Park System Rev., Series 21, Issue 2, 5.00%, 10/1/12 (MBIA) 2,688 - -------------------------------------------------------------------------------- 1,500 Martin County Health Facilities Auth. Rev., Series 2002 A, (Martin Memorial Medical Center), 4.00%, 11/15/06 1,501 - -------------------------------------------------------------------------------- 2,500 Orlando Utilities Commission Rev., Series 2005 A, 4.00%, 10/1/11 (MBIA) 2,550 - -------------------------------------------------------------------------------- 1,000 Orlando Utilities Commission Water & Electric Rev., Series 1989 D, 6.75%, 10/1/17(1) 1,199 - -------------------------------------------------------------------------------- 16,225 - -------------------------------------------------------------------------------- GEORGIA -- 0.2% - -------------------------------------------------------------------------------- 255 Georgia Municipal Electric Power Auth. Rev., Series 1991 V, 6.50%, 1/1/09, Prerefunded at 100% of Par (MBIA-IBC)(1) 274 - -------------------------------------------------------------------------------- 20 Georgia Municipal Electric Power Auth. Rev., Series 1991 V, 6.50%, 1/1/11 (MBIA-IBC) 22 - -------------------------------------------------------------------------------- 110 Georgia Municipal Electric Power Auth. Rev., Series 1991 V, 6.50%, 1/1/12 (MBIA-IBC)(1) 124 - -------------------------------------------------------------------------------- 615 Georgia Municipal Electric Power Auth. Rev., Series 1991 V, 6.50%, 1/1/12 (MBIA-IBC) 688 - -------------------------------------------------------------------------------- 1,108 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- HAWAII -- 0.1% - -------------------------------------------------------------------------------- $ 500 Maui County GO, Series 2000 A, 6.50%, 3/1/10, Prerefunded at 101% of Par (FGIC)(1) $ 563 - -------------------------------------------------------------------------------- IDAHO -- 0.2% - -------------------------------------------------------------------------------- 1,000 Blaine County Hailey School District No. 61 GO, 5.00%, 7/30/10 (Ambac) 1,066 - -------------------------------------------------------------------------------- ILLINOIS -- 3.9% - -------------------------------------------------------------------------------- 2,000 Bedford Park GO, Series 2004 A, 5.25%, 12/15/20 (FSA) 2,167 - -------------------------------------------------------------------------------- 4,000 Chicago O'Hare International Airport Rev., Series 1993 A, (Senior Lien), 5.00%, 1/1/12 (MBIA-IBC) 4,264 - -------------------------------------------------------------------------------- 1,000 Chicago O'Hare International Airport Rev., Series 2004 A, 5.00%, 1/1/26 (MBIA) 1,034 - -------------------------------------------------------------------------------- 2,000 Illinois Dedicated Tax Rev., (Civic Center), 6.25%, 12/15/20 (Ambac) 2,391 - -------------------------------------------------------------------------------- 595 Illinois Development Finance Auth. Rev., Series 2001 B, (Midwestern University), 5.00%, 5/15/08 611 - -------------------------------------------------------------------------------- 655 Illinois Development Finance Auth. Rev., Series 2001 B, (Midwestern University), 5.125%, 5/15/10 685 - -------------------------------------------------------------------------------- 400 Illinois Development Finance Auth. Rev., Series 2001 B, (Midwestern University), 5.75%, 5/15/16 427 - -------------------------------------------------------------------------------- 1,155 Illinois Finance Auth. Rev., Series 2005 A, (Depaul University), 5.00%, 10/1/14 1,214 - -------------------------------------------------------------------------------- 1,000 Illinois Finance Auth. Rev., Series 2005 A, (Depaul University), 5.00%, 10/1/15 1,052 - -------------------------------------------------------------------------------- 1,140 Illinois Health Facilities Auth. Rev., Series 1992 C, (Evangelical Hospital), 6.75%, 4/15/12(1) 1,287 - -------------------------------------------------------------------------------- 1,000 Illinois Regional Transportation Auth. Rev., Series 1990 A, 7.20%, 11/1/20 (Ambac) 1,254 - -------------------------------------------------------------------------------- 930 Kane County Geneva Community Unit School District No. 304 GO, 6.20%, 1/1/24 (FSA) 1,082 - -------------------------------------------------------------------------------- 1,105 Ogle Lee & De Kalb Counties Township High School District No. 212 GO, 6.00%, 12/1/17 (MBIA) 1,238 - -------------------------------------------------------------------------------- 1,220 Ogle Lee & De Kalb Counties Township High School District No. 212 GO, 6.00%, 12/1/18 (MBIA) 1,364 - -------------------------------------------------------------------------------- 1,855 Peoria County School District No. 150 Peoria GO, Series 2005 A, 5.00%, 1/1/10 (FSA) 1,957 - -------------------------------------------------------------------------------- 1,250 Town of Cicero GO, Series 2005 A, 5.25%, 1/1/20 (XLCA) 1,345 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 15 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $1,000 Town of Cicero GO, Series 2005 A, 5.25%, 1/1/21 (XLCA) $ 1,074 - -------------------------------------------------------------------------------- 1,000 University of Illinois COP, (Utility Infrastructure), 5.75%, 8/15/08 (MBIA) 1,058 - -------------------------------------------------------------------------------- 25,504 - -------------------------------------------------------------------------------- INDIANA -- 1.2% - -------------------------------------------------------------------------------- 1,900 Indiana Health Facilities Financing Auth. Hospital Rev., (Holy Cross Health System Corp.), 5.375%, 12/1/12 (MBIA) 1,996 - -------------------------------------------------------------------------------- 220 Indiana Transportation Finance Auth. Rev., Series 1990 A, 7.25%, 6/1/15(1) 253 - -------------------------------------------------------------------------------- 780 Indiana Transportation Finance Auth. Rev., Series 1990 A, 7.25%, 6/1/15 945 - -------------------------------------------------------------------------------- 1,500 Mount Vernon of Hancock County Multi-School Building Corp. Rev., Series 2001 B, (First Mortgage), 5.75%, 7/15/11 (Ambac) 1,661 - -------------------------------------------------------------------------------- 1,650 Valparaiso Middle Schools Building Corp. Rev., (First Mortgage), 5.75%, 7/15/11, Prerefunded at 100% of Par (FGIC)(1) 1,827 - -------------------------------------------------------------------------------- 1,000 Zionsville Community Schools Building Corp. GO, (First Mortgage), 5.75%, 1/15/12 (FGIC/State Aid Withholding) 1,113 - -------------------------------------------------------------------------------- 7,795 - -------------------------------------------------------------------------------- IOWA -- 0.5% - -------------------------------------------------------------------------------- 3,350 Coralville GO, Series 2005 K-2, 5.00%, 6/1/07 3,409 - -------------------------------------------------------------------------------- KANSAS -- 0.4% - -------------------------------------------------------------------------------- 1,280 Wichita Hospital Facilities Rev., Series 2001 III, 5.25%, 11/15/13 1,353 - -------------------------------------------------------------------------------- 1,195 Wichita Hospital Facilities Rev., Series 2001 III, 5.50%, 11/15/16 1,269 - -------------------------------------------------------------------------------- 2,622 - -------------------------------------------------------------------------------- KENTUCKY -- 3.1% - -------------------------------------------------------------------------------- 20,000 Kentucky Asset Liability Commission Tax and Rev. Anticipation Notes, Series 2005 A, 4.00%, 6/28/06 20,080 - -------------------------------------------------------------------------------- LOUISIANA -- 0.5% - -------------------------------------------------------------------------------- 1,740 Louisiana Local Government Environmental Facilities & Community Development Auth. Rev., (Ascension Parish Library), 5.25%, 4/1/23 (Ambac) 1,857 - -------------------------------------------------------------------------------- 1,215 Louisiana Local Government Environmental Facilities & Community Development Auth. Rev., (Ascension Parish Library), 5.25%, 4/1/35 (Ambac) 1,278 - -------------------------------------------------------------------------------- 3,135 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- MASSACHUSSETTS -- 0.2% - -------------------------------------------------------------------------------- $1,000 Massachusetts Health & Educational Facilities Auth. Rev., Series 1992 F, 6.25%, 7/1/12 (Ambac) $ 1,090 - -------------------------------------------------------------------------------- MICHIGAN -- 2.6% - -------------------------------------------------------------------------------- 3,500 Detroit GO, Series 2004 A-1, 5.25%, 4/1/23 (Ambac) 3,737 - -------------------------------------------------------------------------------- 1,485 Grand Valley State University Rev., 5.75%, 12/1/10 (FGIC) 1,635 - -------------------------------------------------------------------------------- 2,345 Michigan Higher Education Facilities Auth. Rev., (Limited Obligation - Hillsdale College), 5.00%, 3/1/26 2,386 - -------------------------------------------------------------------------------- 575 Taylor GO, 5.00%, 9/1/11 (MBIA) 616 - -------------------------------------------------------------------------------- 1,000 Taylor GO, 5.00%, 9/1/14 (MBIA) 1,080 - -------------------------------------------------------------------------------- 2,010 Wayne Charter County Airport Rev., Series 2002 C, 5.00%, 12/1/11 (FGIC) 2,146 - -------------------------------------------------------------------------------- 2,215 Wayne Charter County Airport Rev., Series 2002 C, 5.375%, 12/1/13 (FGIC) 2,414 - -------------------------------------------------------------------------------- 2,335 Wayne Charter County Airport Rev., Series 2002 C, 5.375%, 12/1/14 (FGIC) 2,532 - -------------------------------------------------------------------------------- 16,546 - -------------------------------------------------------------------------------- MINNESOTA -- 0.4% - -------------------------------------------------------------------------------- 800 City of Chaska Rev., Series 2005 A, (Generating Facilities), 5.00%, 10/1/30 812 - -------------------------------------------------------------------------------- 1,500 Minnesota Higher Education Facilities Auth. Rev., Series 2005-6G, (Saint John University), 5.00%, 10/1/12 1,598 - -------------------------------------------------------------------------------- 2,410 - -------------------------------------------------------------------------------- MISSOURI -- 2.2% - -------------------------------------------------------------------------------- 1,200 Camdenton Reorganized School District No. R-III GO, 5.25%, 3/1/22 (FSA) 1,299 - -------------------------------------------------------------------------------- 400 City of Riverside Tax Allocation Rev., (L-385 Levee), 3.25%, 5/1/06 399 - -------------------------------------------------------------------------------- 500 Des Peres GO, 5.25%, 2/1/19 (Ambac) 543 - -------------------------------------------------------------------------------- 1,145 Jackson County Public Building Corp. COP, Series 2000 A, 6.00%, 11/1/18 1,218 - -------------------------------------------------------------------------------- 2,775 Missouri Development Finance Board COP, Series 2000 A, (Midtown Redevelopment), 5.75%, 4/1/22 (MBIA) 3,000 - -------------------------------------------------------------------------------- 2,000 Missouri Development Finance Board Rev., Series 2005 A, (Branson Landing), 4.75%, 6/1/25 1,965 - -------------------------------------------------------------------------------- 2,500 Missouri Development Finance Board Rev., Series 2005 A, (Branson Landing), 5.00%, 6/1/35 2,509 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 16 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $2,875 Missouri Health & Educational Facilities Auth. Rev., Series 1998 A, (Park Lane Medical Center), 5.60%, 1/1/15 (MBIA) $ 3,104 - -------------------------------------------------------------------------------- 14,037 - -------------------------------------------------------------------------------- NEVADA -- 1.3% - -------------------------------------------------------------------------------- 1,000 Clark County School District GO, Series 1997 B, (Building & Renovation), 5.25%, 6/15/07, Prerefunded at 101% of Par (FGIC)(1) 1,038 - -------------------------------------------------------------------------------- 3,295 Las Vegas Redevelopment Agency Tax Increment Rev., Series 2003 A, (Fremont Street), 4.50%, 6/15/10 3,349 - -------------------------------------------------------------------------------- 1,550 Reno Sales and Room Tax Rev., (ReTrac-Reno Transportation Rail Access Corridor), (Senior Lien), 5.50%, 6/1/19 (Ambac) 1,687 - -------------------------------------------------------------------------------- 1,865 Reno Sales and Room Tax Rev., (ReTrac-Reno Transportation Rail Access Corridor), (Senior Lien), 5.50%, 6/1/20 (Ambac) 2,031 - -------------------------------------------------------------------------------- 8,105 - -------------------------------------------------------------------------------- NEW HAMPSHIRE -- 1.0% - -------------------------------------------------------------------------------- 1,660 New Hampshire Health & Education Facilities Auth. Rev., Series 2004 A, (Kendal at Hanover), 5.00%, 10/1/11 1,717 - -------------------------------------------------------------------------------- 680 New Hampshire Health & Education Facilities Auth. Rev., Series 2004 A, (Kendal at Hanover), 5.00%, 10/1/12 705 - -------------------------------------------------------------------------------- 1,030 New Hampshire Health & Education Facilities Auth. Rev., Series 2004 A, (Kendal at Hanover), 5.00%, 10/1/13 1,062 - -------------------------------------------------------------------------------- 3,000 New Hampshire Health & Education Facilities Auth. Rev., Series 2004 A, (Kendal at Hanover), 5.00%, 10/1/18 3,032 - -------------------------------------------------------------------------------- 6,516 - -------------------------------------------------------------------------------- NEW JERSEY -- 4.8% - -------------------------------------------------------------------------------- 4,080 New Jersey Economic Development Auth. Rev., Series 2005 A, (Cranes Mill), 5.00%, 6/1/15 4,158 - -------------------------------------------------------------------------------- 3,310 New Jersey Economic Development Auth. Rev., Series 2005 A, (Cranes Mill), 5.00%, 6/1/20 3,283 - -------------------------------------------------------------------------------- 5,000 New Jersey Tax & Rev. Anticipation Notes, Series 2005 A, 4.00%, 6/23/06 5,021 - -------------------------------------------------------------------------------- 4,235 New Jersey Transit Corporation COP, 5.00%, 10/1/12 (FSA) 4,533 - -------------------------------------------------------------------------------- 5,595 New Jersey Transit Corporation COP, 5.00%, 10/1/13 (FSA) 5,999 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $7,400 New Jersey Transportation Trust Fund Auth. Rev., Series 2004 B, 5.25%, 12/15/12 (FGIC) $ 8,051 - -------------------------------------------------------------------------------- 31,045 - -------------------------------------------------------------------------------- NEW MEXICO -- 0.2% - -------------------------------------------------------------------------------- 1,415 San Juan County Gross Receipts Tax Rev., Series 2001 A, 5.75%, 9/15/21 (Ambac) 1,568 - -------------------------------------------------------------------------------- NEW YORK -- 3.8% - -------------------------------------------------------------------------------- 2,975 City of New York GO, Series 2002 B, 5.25%, 8/1/09 (CIFG) 3,147 - -------------------------------------------------------------------------------- 2,885 City of New York GO, Series 2002 C, 5.25%, 8/1/09 (CIFG) 3,051 - -------------------------------------------------------------------------------- 5,000 City of New York GO, Series 2003 I, 5.75%, 3/1/20 5,476 - -------------------------------------------------------------------------------- 1,375 City of New York GO, Series 2004 I, 5.00%, 8/1/08 1,430 - -------------------------------------------------------------------------------- 855 Monroe County Industrial Development Agency Rev., (Highland Hospital Rochester), 4.00%, 8/1/09 856 - -------------------------------------------------------------------------------- 1,600 Monroe County Industrial Development Agency Rev., (Highland Hospital Rochester), 4.00%, 8/1/10 1,597 - -------------------------------------------------------------------------------- 920 Monroe County Industrial Development Agency Rev., (Highland Hospital Rochester), 5.00%, 8/1/11 963 - -------------------------------------------------------------------------------- 2,000 New York City Transitional Finance Auth. Rev., Series 2005 A1, 5.00%, 11/1/10 2,131 - -------------------------------------------------------------------------------- 1,000 New York Dormitory Auth. COP, Series 1995 A, (State University Educational Facilities), 6.50%, 5/15/06 1,014 - -------------------------------------------------------------------------------- 1,440 New York Dormitory Auth. Rev., Series 1990 A, (UNIC Educational Facilities), 7.50%, 5/15/13 (MBIA-IBC) 1,780 - -------------------------------------------------------------------------------- 1,000 New York Dormitory Auth. Rev., Series 2005 F, 5.00%, 3/15/12 (FSA)(4) 1,074 - -------------------------------------------------------------------------------- 1,160 New York Thruway Auth. Service Contract COP, 5.50%, 4/1/06 1,169 - -------------------------------------------------------------------------------- 1,000 Niagara Falls Bridge Commission Toll Rev., Series 1993 B, 5.25%, 10/1/15 (FGIC) 1,088 - -------------------------------------------------------------------------------- 24,776 - -------------------------------------------------------------------------------- NORTH CAROLINA -- 2.3% - -------------------------------------------------------------------------------- 1,300 Charlotte Airport Rev., Series 2004 A, 5.25%, 7/1/24 (MBIA) 1,387 - -------------------------------------------------------------------------------- 1,195 City of Lincolnton Rev., (Combined Enterprise System), 4.00%, 5/1/12 (XLCA) 1,211 - -------------------------------------------------------------------------------- 1,085 City of Lincolnton Rev., (Combined Enterprise System), 5.00%, 5/1/10 (XLCA) 1,147 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 17 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $1,140 City of Lincolnton Rev., (Combined Enterprise System), 5.00%, 5/1/11 (XLCA) $ 1,214 - -------------------------------------------------------------------------------- 2,000 North Carolina Eastern Municipal Power Agency System Rev., Series 1993 B, 6.00%, 1/1/06 (FSA) 2,005 - -------------------------------------------------------------------------------- 2,500 North Carolina Medical Care Commission Rev., Series 2004 A, (Health Care Housing - ARC Projects), 5.50%, 10/1/24 2,576 - -------------------------------------------------------------------------------- 1,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev., Series 1992, 6.00%, 1/1/10 (MBIA) 1,092 - -------------------------------------------------------------------------------- 2,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev., Series 2003 A, 5.50%, 1/1/13 2,167 - -------------------------------------------------------------------------------- 1,100 University of North Carolina at Chapel Hill Rev., Series 2005 A, 5.00%, 2/1/08 1,131 - -------------------------------------------------------------------------------- 1,000 University of North Carolina at Chapel Hill Rev., Series 2005 A, 5.00%, 2/1/09 1,038 - -------------------------------------------------------------------------------- 14,968 - -------------------------------------------------------------------------------- NORTH DAKOTA -- 0.3% - -------------------------------------------------------------------------------- 1,500 Grand Forks Health Care System Rev., (Altru Health System Obligation Group), 7.125%, 8/15/24 1,641 - -------------------------------------------------------------------------------- OHIO -- 1.9% - -------------------------------------------------------------------------------- 500 Erie County Hospital Facilities Rev., Series 2002 A, (Firelands Regional Medical Center), 4.50%, 8/15/07 507 - -------------------------------------------------------------------------------- 1,150 Mad River Local School District GO, (Classroom Facilities), 5.75%, 12/1/19 (FGIC) 1,280 - -------------------------------------------------------------------------------- 1,700 Milford Exempt Village School District GO, (School Improvement), 6.00%, 12/1/11 (FSA) 1,913 - -------------------------------------------------------------------------------- 1,005 Ohio GO, Series 2005 A, (Infrastructure Improvement), 5.00%, 9/1/11(4) 1,078 - -------------------------------------------------------------------------------- 1,365 Ohio GO, Series 2005 A, (Infrastructure Improvement), 5.00%, 9/1/12(4) 1,471 - -------------------------------------------------------------------------------- 750 Ohio Higher Educational Facility Commission Rev., Series 1990 B, (Case Western Reserve University), 6.50%, 10/1/20 913 - -------------------------------------------------------------------------------- 1,505 Summit County GO, 5.75%, 12/1/12, Prerefunded at 101% of Par (FGIC)(1) 1,694 - -------------------------------------------------------------------------------- 1,550 Tri Valley Local School District GO, 5.75%, 12/1/21 (FGIC) 1,716 - -------------------------------------------------------------------------------- 1,280 Westlake GO, (Street Improvement), 5.25%, 12/1/25 1,430 - -------------------------------------------------------------------------------- 12,002 - -------------------------------------------------------------------------------- OKLAHOMA -- 1.6% - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $1,000 Comanche County Hospital Auth. Rev., 5.00%, 7/1/11 (RADIAN) $ 1,048 - -------------------------------------------------------------------------------- 1,525 Comanche County Hospital Auth. Rev., 5.00%, 7/1/12 (RADIAN) 1,600 - -------------------------------------------------------------------------------- 1,730 Durant Community Facilities Auth. GO, 5.75%, 11/1/24 (XLCA) 1,939 - -------------------------------------------------------------------------------- 5,225 Tulsa County Industrial Auth. Rev., Series 2005 C, 5.00%, 5/15/10 (FSA)(2) 5,544 - -------------------------------------------------------------------------------- 10,131 - -------------------------------------------------------------------------------- OREGON -- 1.7% - -------------------------------------------------------------------------------- 1,475 Clackamas County School District No. 108 GO, (Estacada), 5.25%, 6/15/19 (FSA) 1,636 - -------------------------------------------------------------------------------- 2,135 Clackamas County School District No. 108 GO, (Estacada), 5.50%, 6/15/23 (FSA) 2,449 - -------------------------------------------------------------------------------- 1,200 Clackamas County School District No. 108 GO, (Estacada), 5.50%, 6/15/24 (FSA) 1,382 - -------------------------------------------------------------------------------- 400 Oregon State Facilities Auth. Rev., Series 2005 A, (Linfield College), 5.00%, 10/1/13 421 - -------------------------------------------------------------------------------- 925 Oregon State Facilities Auth. Rev., Series 2005 A, (Linfield College), 5.00%, 10/1/14 972 - -------------------------------------------------------------------------------- 2,000 Oregon State Facilities Auth. Rev., Series 2005 A, (Linfield College), 5.00%, 10/1/20 2,067 - -------------------------------------------------------------------------------- 2,115 Oregon State Facilities Auth. Rev., Series 2005 A, (Linfield College), 5.00%, 10/1/25 2,160 - -------------------------------------------------------------------------------- 11,087 - -------------------------------------------------------------------------------- PENNSYLVANIA -- 1.1% - -------------------------------------------------------------------------------- 1,000 Ephrata Area School District GO, 5.00%, 3/1/22 (FGIC) 1,053 - -------------------------------------------------------------------------------- 1,000 Oxford Area School District GO, Series 2001 A, 5.50%, 2/15/12 (FGIC/State Aid Withholding) 1,100 - -------------------------------------------------------------------------------- 2,975 Philadelphia School District GO, Series 2002 A, 5.25%, 2/1/11 (FSA/State Aid Withholding) 3,200 - -------------------------------------------------------------------------------- 1,500 Pittsburgh School District GO, 5.25%, 9/1/09 (FSA) 1,591 - -------------------------------------------------------------------------------- 6,944 - -------------------------------------------------------------------------------- PUERTO RICO -- 7.9% - -------------------------------------------------------------------------------- 6,000 Government Development Bank of Puerto Rico Rev., 3.35%, 1/24/06 (Acquired 7/28/05, Cost $6,000)(5) 5,997 - -------------------------------------------------------------------------------- 10,000 Government Development Bank of Puerto Rico Rev., 3.40%, 1/13/06 (Acquired 8/5/05, Cost $10,000)(5) 9,996 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 18 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $9,000 Government Development Bank of Puerto Rico Rev., 3.40%, 1/24/06 (Acquired 8/5/05, Cost $9,000)(5) $ 8,996 - -------------------------------------------------------------------------------- 14,000 Government Development Bank of Puerto Rico Rev., 3.50%, 1/20/06 (Acquired 8/18/05, Cost $14,000)(5) 13,995 - -------------------------------------------------------------------------------- 10,000 Government Development Bank of Puerto Rico Rev., 3.55%, 1/24/06 (Acquired 8/11/05, Cost $10,000)(5) 9,998 - -------------------------------------------------------------------------------- 2,500 Puerto Rico Highway & Transportation Auth. Rev., 5.00%, 7/1/08 (CIFG) 2,597 - -------------------------------------------------------------------------------- 51,579 - -------------------------------------------------------------------------------- RHODE ISLAND -- 0.7% - -------------------------------------------------------------------------------- 1,000 Cranston GO, 6.375%, 11/15/09, Prerefunded at 101% of Par (FGIC)(1) 1,115 - -------------------------------------------------------------------------------- 2,000 Rhode Island Depositors Economic Protection Corp. Special Obligation Rev., Series 1993 A, 6.25%, 8/1/16 (MBIA)(1) 2,385 - -------------------------------------------------------------------------------- 1,300 Rhode Island Depositors Economic Protection Corp. Special Obligation Rev., Series 1993 B, 6.00%, 8/1/17 (MBIA)(1) 1,392 - -------------------------------------------------------------------------------- 4,892 - -------------------------------------------------------------------------------- SOUTH CAROLINA -- 3.3% - -------------------------------------------------------------------------------- 1,700 Florence Water & Sewer Rev., 7.50%, 3/1/18 (Ambac) 1,973 - -------------------------------------------------------------------------------- 2,300 Lancaster Educational Assistance Program Inc. Rev., (School District Lancaster County), 5.00%, 12/1/26 2,310 - -------------------------------------------------------------------------------- 3,500 Laurens County School District No. 55 Rev., 5.25%, 12/1/30 3,569 - -------------------------------------------------------------------------------- 875 Piedmont Municipal Power Agency Rev., 6.75%, 1/1/19 (FGIC) 1,083 - -------------------------------------------------------------------------------- 625 Piedmont Municipal Power Agency Rev., 6.75%, 1/1/19 (FGIC)(1) 787 - -------------------------------------------------------------------------------- 375 Piedmont Municipal Power Agency Rev., Series 1991 A, 6.50%, 1/1/16 (FGIC) 444 - -------------------------------------------------------------------------------- 625 Piedmont Municipal Power Agency Rev., Series 1991 A, 6.50%, 1/1/16 (FGIC)(1) 752 - -------------------------------------------------------------------------------- 3,115 Piedmont Municipal Power Agency Rev., Series 2002 A, 4.00%, 1/1/07 (FGIC) 3,116 - -------------------------------------------------------------------------------- 3,035 South Carolina Jobs Economic Development Auth. Hospital Facilities Rev., Series 2003 C, (Palmetto Health), 5.00%, 8/1/08 (ACA) 3,125 - -------------------------------------------------------------------------------- 3,195 South Carolina Jobs Economic Development Auth. Hospital Facilities Rev., Series 2003 C, (Palmetto Health), 5.50%, 8/1/09 (ACA) 3,372 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $1,095 Spartanburg County Health Services District Inc. Hospital Rev., 5.50%, 4/15/16 (FSA) $ 1,179 - -------------------------------------------------------------------------------- 21,710 - -------------------------------------------------------------------------------- TENNESSEE -- 0.9% - -------------------------------------------------------------------------------- 2,970 Chattanooga Health Educational & Housing Facility Board Rev., Series 2005 A, (Campus Development Foundation, Inc. Phase I LLC), 5.00%, 10/1/15 3,035 - -------------------------------------------------------------------------------- 1,050 Clarksville Water Sewer & Gas Rev., 4.25%, 2/1/07 (FSA) 1,062 - -------------------------------------------------------------------------------- 1,685 Clarksville Water Sewer & Gas Rev., 4.85%, 2/1/15 (FSA) 1,769 - -------------------------------------------------------------------------------- 5,866 - -------------------------------------------------------------------------------- TEXAS -- 13.8% - -------------------------------------------------------------------------------- 2,035 Cash Special Utility District Rev., 5.25%, 9/1/24 (MBIA) 2,180 - -------------------------------------------------------------------------------- 1,815 Clint Independent School District GO, 6.00%, 2/15/17 (PSF-GTD) 2,008 - -------------------------------------------------------------------------------- 1,000 Corpus Christi Utility System Rev., 5.50%, 7/15/07 (FSA) 1,034 - -------------------------------------------------------------------------------- 1,000 Dallas-Fort Worth Regional Airport Rev., Series 1994 A, 5.90%, 11/1/08 (MBIA) 1,002 - -------------------------------------------------------------------------------- 2,035 Del Valle Independent School District GO, (School Building), 5.00%, 6/15/27 (PSF-GTD) 2,101 - -------------------------------------------------------------------------------- 525 Denison Hospital Auth. Rev., (Texoma Medical Center), 5.90%, 8/15/07 (ACA) 543 - -------------------------------------------------------------------------------- 1,000 Denton Utility System Rev., Series 1996 A, 5.95%, 12/1/06, Prerefunded at 100% of Par (MBIA)(1) 1,027 - -------------------------------------------------------------------------------- 2,000 Donna Independent School District GO, 5.00%, 2/15/15 (PSF-GTD) 2,145 - -------------------------------------------------------------------------------- 1,115 Edcouch-Elsa Independent School District GO, 5.00%, 2/15/14 (PSF-GTD) 1,196 - -------------------------------------------------------------------------------- 540 Garza County Public Facility Corp. Rev., 4.50%, 10/1/06 542 - -------------------------------------------------------------------------------- 380 Garza County Public Facility Corp. Rev., 4.50%, 10/1/07 382 - -------------------------------------------------------------------------------- 400 Garza County Public Facility Corp. Rev., 4.75%, 10/1/08 406 - -------------------------------------------------------------------------------- 420 Garza County Public Facility Corp. Rev., 4.75%, 10/1/09 427 - -------------------------------------------------------------------------------- 585 Garza County Public Facility Corp. Rev., 4.75%, 10/1/10 595 - -------------------------------------------------------------------------------- 610 Garza County Public Facility Corp. Rev., 5.00%, 10/1/11 626 - -------------------------------------------------------------------------------- 2,015 Garza County Public Facility Corp. Rev., 5.00%, 10/1/13 2,051 - -------------------------------------------------------------------------------- 1,115 Garza County Public Facility Corp. Rev., 5.25%, 10/1/14 1,152 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 19 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $1,225 Garza County Public Facility Corp. Rev., 5.25%, 10/1/15 $ 1,264 - -------------------------------------------------------------------------------- 1,145 Garza County Public Facility Corp. Rev., 5.25%, 10/1/16 1,180 - -------------------------------------------------------------------------------- 1,165 Harris County Housing Finance Corporation Rev., (Las Americas Apartments), 4.90%, 3/1/11 (FNMA) 1,196 - -------------------------------------------------------------------------------- 3,000 Hays Consolidated Independent School District GO, 5.20%, 8/15/11 (PSF-GTD)(3) 2,399 - -------------------------------------------------------------------------------- 1,295 Hidalgo County GO, 5.50%, 8/15/19 (FGIC) 1,410 - -------------------------------------------------------------------------------- 1,750 Hidalgo County GO, 5.50%, 8/15/21 (FGIC) 1,901 - -------------------------------------------------------------------------------- 574 Houston Participation Interest COP, 6.40%, 6/1/27 620 - -------------------------------------------------------------------------------- 500 Houston Water & Sewer System Rev., Series 1992 C, (Junior Lien), 5.90%, 12/1/05 (MBIA)(1) 500 - -------------------------------------------------------------------------------- 1,500 Houston Water & Sewer System Rev., Series 1997 C, (Junior Lien), 5.375%, 12/1/07 (FGIC) 1,574 - -------------------------------------------------------------------------------- 1,375 Kerrville Health Facilities Development Corp. Rev., (Sid Peterson Memorial Hospital), 5.00%, 8/15/11 1,423 - -------------------------------------------------------------------------------- 1,630 Live Oak GO, 5.25%, 8/1/22 (MBIA) 1,750 - -------------------------------------------------------------------------------- 1,000 Lubbock Health Facilities Development Corp. Rev., (Lutheran Retirement), 6.00%, 3/20/29 (GNMA) 1,078 - -------------------------------------------------------------------------------- 1,740 Montgomery County GO, 5.50%, 3/1/24 (Ambac) 1,899 - -------------------------------------------------------------------------------- 550 Pasadena Independent School District GO, Series 2001 A, 6.05%, 2/15/16 (PSF-GTD) 635 - -------------------------------------------------------------------------------- 1,500 Pearland Independent School District GO, 6.00%, 2/15/09 (PSF-GTD) 1,616 - -------------------------------------------------------------------------------- 2,000 San Antonio Electric and Gas Rev., 7.10%, 2/1/09 (FGIC)(1)(3) 1,782 - -------------------------------------------------------------------------------- 1,715 San Benito Consolidated Independent School District GO, 5.00%, 2/15/24 (PSF-GTD) 1,786 - -------------------------------------------------------------------------------- 1,800 San Benito Consolidated Independent School District GO, 5.00%, 2/15/25 (PSF-GTD) 1,871 - -------------------------------------------------------------------------------- 1,915 San Felipe-Del Rio Consolidated Independent School District GO, 5.00%, 2/15/23 1,991 - -------------------------------------------------------------------------------- 2,025 San Felipe-Del Rio Consolidated Independent School District GO, 5.00%, 2/15/24 2,101 - -------------------------------------------------------------------------------- 1,505 Seguin Independent School District GO, 5.25%, 4/1/23 (PSF-GTD) 1,615 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $2,120 Southside Independent School District GO, Series 2004 A, 5.25%, 8/15/25 (PSF-GTD) $ 2,259 - -------------------------------------------------------------------------------- 2,345 Texas Municipal Power Agency COP, (Sub-Lien), 4.00%, 9/1/09 (FGIC) 2,363 - -------------------------------------------------------------------------------- 1,230 Texas Public Finance Auth. Building Rev., (Technical College), 6.25%, 8/1/09 (MBIA) 1,303 - -------------------------------------------------------------------------------- 20,000 Texas Tax & Rev. Anticipation Notes, 4.50%, 8/31/06 20,176 - -------------------------------------------------------------------------------- 1,000 Texas Technical University Rev., 5.00%, 8/15/08 (MBIA) 1,041 - -------------------------------------------------------------------------------- 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) 1,093 - -------------------------------------------------------------------------------- 1,000 Tyler Health Facilities Development Corp. Rev., (Mother Frances Hospital), 4.50%, 7/1/06 1,006 - -------------------------------------------------------------------------------- 2,000 Tyler Health Facilities Development Corp. Rev., (Mother Frances Hospital), 5.00%, 7/1/08 2,061 - -------------------------------------------------------------------------------- 1,000 Tyler Water & Sewer Rev., 5.25%, 9/1/24 (MBIA) 1,074 - -------------------------------------------------------------------------------- 1,265 West Oso Independent School District GO, 5.50%, 8/15/26 (PSF-GTD) 1,367 - -------------------------------------------------------------------------------- 4,340 Williamson County GO, 5.50%, 2/15/11, Prerefunded at 100% of Par (FSA)(1) 4,722 - -------------------------------------------------------------------------------- 89,473 - -------------------------------------------------------------------------------- U.S. VIRGIN ISLANDS -- 0.3% - -------------------------------------------------------------------------------- 2,000 Virgin Islands Public Finance Auth. Rev., Series 1998 A, (Senior Lien), 5.20%, 10/1/09 2,090 - -------------------------------------------------------------------------------- UTAH -- 1.6% - -------------------------------------------------------------------------------- 1,000 Salt Lake City Hospital Rev., Series 1988 A, (Intermountain Health Corporation), 8.125%, 5/15/15(1) 1,213 - -------------------------------------------------------------------------------- 1,495 Utah County Municipal Building Auth. Lease COP, 5.00%, 11/1/09 (Ambac) 1,579 - -------------------------------------------------------------------------------- 3,735 Utah County Municipal Building Auth. Lease COP, 5.25%, 11/1/11 (Ambac) 4,054 - -------------------------------------------------------------------------------- 1,000 Utah County Municipal Building Auth. Lease COP, 5.50%, 11/1/11 (Ambac) 1,099 - -------------------------------------------------------------------------------- 1,130 West Valley City Municipal Building Auth. COP, Series 2002 A, 5.00%, 8/1/10 (Ambac) 1,198 - -------------------------------------------------------------------------------- 1,305 West Valley City Utility Sales Tax Rev., Series 2001 A, 5.50%, 7/15/16 (MBIA) 1,418 - -------------------------------------------------------------------------------- 10,561 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 20 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- VIRGINIA -- 0.6% - -------------------------------------------------------------------------------- $1,500 Fairfax County COP, 5.30%, 4/15/23 $ 1,596 - -------------------------------------------------------------------------------- 1,000 Hampton Industrial Development Auth. Rev., Series 1994 A, (Sentara General Hospital), 6.50%, 11/1/06, Prerefunded at 100% of Par(1) 1,029 - -------------------------------------------------------------------------------- 1,115 Pittsylvania County GO, Series 2001 B, 5.75%, 3/1/18 (MBIA) 1,242 - -------------------------------------------------------------------------------- 3,867 - -------------------------------------------------------------------------------- WASHINGTON -- 6.7% - -------------------------------------------------------------------------------- 1,000 Benton County Public Utility District No. 1 Rev., Series 2001 A, 5.625%, 11/1/19 (FSA) 1,093 - -------------------------------------------------------------------------------- 5,000 City of Tacoma Rev., Series 2001 A, 5.625%, 1/1/11, Prerefunded at 101% of Par (FSA)(1) 5,514 - -------------------------------------------------------------------------------- 1,000 Cowlitz County Kelso School District No. 458 GO, 5.75%, 12/1/18 (FSA) 1,105 - -------------------------------------------------------------------------------- 1,750 Energy Northwest Rev., 4.75%, 7/1/20 (MBIA) 1,794 - -------------------------------------------------------------------------------- 500 Energy Northwest Rev., 5.00%, 7/1/10 (MBIA) 529 - -------------------------------------------------------------------------------- 3,500 Energy Northwest Rev., Series 2002 A, (Columbia Generating), 5.75%, 7/1/18 (MBIA) 3,863 - -------------------------------------------------------------------------------- 10,000 Energy Northwest Rev., Series 2002 B, (Columbia Generating), 6.00%, 7/1/18 (Ambac) 11,206 - -------------------------------------------------------------------------------- 2,000 King County GO, Series 1997 D, 5.75%, 12/1/07 2,131 - -------------------------------------------------------------------------------- 1,555 King County Lake Washington School District No. 414 GO, 5.75%, 12/1/15 1,741 - -------------------------------------------------------------------------------- 1,260 Mason County Shelton School District No. 309 GO, 5.625%, 12/1/17 (FGIC) 1,379 - -------------------------------------------------------------------------------- 1,120 Metropolitan Park District of Tacoma GO, 6.00%, 12/1/16 (Ambac) 1,256 - -------------------------------------------------------------------------------- 1,000 Metropolitan Park District of Tacoma GO, 6.00%, 12/1/18 (Ambac) 1,118 - -------------------------------------------------------------------------------- 1,720 University of Washington Rev., (Student Facilities Fee), 5.875%, 6/1/10 (FSA) 1,904 - -------------------------------------------------------------------------------- 1,000 Washington GO, Series 1990 A, 6.75%, 2/1/15 1,167 - -------------------------------------------------------------------------------- 1,000 Washington Public Power Supply System Rev., Series 1996 A, (Nuclear Project No. 1), 5.75%, 7/1/12 (MBIA) 1,034 - -------------------------------------------------------------------------------- 4,570 Washington Public Power Supply System Rev., Series 1998 A, (Nuclear Project No. 2), 5.00%, 7/1/12 (FSA) 4,819 - -------------------------------------------------------------------------------- Principal Amount ($ IN THOUSANDS) Value - -------------------------------------------------------------------------------- $1,500 Whitman County Pullman School District No. 267 GO, 5.625%, 12/1/16 (FSA) $ 1,656 - -------------------------------------------------------------------------------- 43,309 - -------------------------------------------------------------------------------- WISCONSIN -- 1.6% - -------------------------------------------------------------------------------- 1,320 Sheboygan Area School District GO, 5.00%, 3/1/25 (FSA) 1,374 - -------------------------------------------------------------------------------- 1,180 Winneconne Community School District GO, 6.75%, 4/1/06, Prerefunded at 100% of Par (FGIC)(1) 1,194 - -------------------------------------------------------------------------------- 1,990 Wisconsin Clean Water Rev., 6.875%, 6/1/11 2,263 - -------------------------------------------------------------------------------- 2,590 Wisconsin Health & Educational Facilities Auth. Rev., (Aurora Medical Group), 6.00%, 11/15/10 (FSA) 2,857 - -------------------------------------------------------------------------------- 500 Wisconsin Health & Educational Facilities Auth. Rev., (Blood Center Southeastern), 5.50%, 6/1/24 523 - -------------------------------------------------------------------------------- 750 Wisconsin Health & Educational Facilities Auth. Rev., (Blood Center Southeastern), 5.75%, 6/1/34 789 - -------------------------------------------------------------------------------- 1,225 Wisconsin Health & Educational Facilities Auth. Rev., (Wheaton Franciscan Services), 4.00%, 8/15/06 1,231 - -------------------------------------------------------------------------------- 10,231 - -------------------------------------------------------------------------------- TOTAL MUNICIPAL SECURITIES (Cost $612,187) 626,467 - -------------------------------------------------------------------------------- SHORT-TERM MUNICIPAL SECURITIES -- 2.7% - -------------------------------------------------------------------------------- ALABAMA -- 1.4% - -------------------------------------------------------------------------------- 8,900 Birmingham Baptist Medical Centers Special Care Facilities Financing Auth. Rev., Series 2000 C, (Baptist Health System), VRDN, 4.35%, 7/1/06 8,952 - -------------------------------------------------------------------------------- ARIZONA -- 0.3% - -------------------------------------------------------------------------------- 2,200 Pima County Industrial Development Auth. Rev., (Tucson Electric), VRDN, 3.00%, 12/7/05 (LOC: Bank of New York) 2,200 - -------------------------------------------------------------------------------- OHIO -- 1.0% - -------------------------------------------------------------------------------- 6,735 County of Trumbull Rev., (Shepherd Valley), VRDN, 3.06%, 12/1/05 (RADIAN) (SBBPA: Fleet National Bank) 6,735 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM MUNICIPAL SECURITIES (Cost $17,835) 17,887 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.4% (Cost $630,022) 644,354 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 0.6% 3,741 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $648,095 ================================================================================ See Notes to Financial Statements. (continued) - ------ 21 Tax-Free Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) FUTURES CONTRACTS* ($ IN THOUSANDS) Expiration Underlying Face Unrealized Contracts Purchased Date Amount at Value Gain (Loss) - -------------------------------------------------------------------------------- 75 U.S. Treasury 5-Year Notes March 2006 $ 7,945 $(9) =============================== Expiration Underlying Face Unrealized Contracts Sold Date Amount at Value Gain (Loss) - -------------------------------------------------------------------------------- 50 U.S. Long Bond March 2006 $ 5,602 $11 - -------------------------------------------------------------------------------- 100 U.S. Treasury 10-Year Notes March 2006 10,853 17 - -------------------------------------------------------------------------------- $16,455 $28 =============================== *FUTURES CONTRACTS typically are based on an index or specific securities and tend to track the performance of the index or specific securities while remaining very liquid (easy to buy and sell). By investing its cash assets in futures, the fund has increased exposure to certain markets while maintaining easy access to cash. By selling futures, the fund hedges its investments against price fluctuations. NOTES TO SCHEDULE OF INVESTMENTS ACA = American Capital Access Ambac = Ambac Assurance Corporation CIFG = CDC IXIS Financial Guaranty North America 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 MBIA-IBC = MBIA Insured Bond Certificates PSF-GTD = Permanent School Fund - Guaranteed RADIAN = Radian Asset Assurance, Inc. SBBPA = Standby Bond Purchase Agreement VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown is effective November 30, 2005. XLCA = XL Capital Ltd. (1) Escrowed to maturity in U.S. government securities or state and local government securities. (2) Security, or a portion thereof, has been segregated for a futures contract and/or 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) When-issued security. (5) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at November 30, 2005, was $48,982 (in thousands), which represented 7.6% of total net assets. See Notes to Financial Statements. - ------ 22 Shareholder Fee Examples (Unaudited) Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from June 1, 2005 to November 30, 2005 (except as noted). ACTUAL EXPENSES The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If you hold Investor Class shares of any American Century fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century account (i.e., not a financial intermediary or retirement plan account), American Century may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered under your Social Security number. PERSONAL ACCOUNTS include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund's share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. (continued) - ------ 23 Shareholder Fee Examples (Unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - ----------------------------------------------------------------------------------------- EXPENSES PAID BEGINNING ENDING DURING PERIOD(1) ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 6/1/05 - EXPENSE 6/1/05 11/30/05 11/30/05 RATIO(1) - ----------------------------------------------------------------------------------------- TAX-FREE MONEY MARKET SHAREHOLDER FEE EXAMPLE - ----------------------------------------------------------------------------------------- ACTUAL - ----------------------------------------------------------------------------------------- Investor Class $1,000 $1,010.80 $2.62 0.52% - ----------------------------------------------------------------------------------------- HYPOTHETICAL - ----------------------------------------------------------------------------------------- Investor Class $1,000 $1,022.46 $2.64 0.52% - ----------------------------------------------------------------------------------------- TAX-FREE BOND SHAREHOLDER FEE EXAMPLE - ----------------------------------------------------------------------------------------- ACTUAL - ----------------------------------------------------------------------------------------- Investor Class $1,000 $1,005.50 $2.46 0.49% - ----------------------------------------------------------------------------------------- Institutional Class $1,000 $1,006.50 $1.46 0.29% - ----------------------------------------------------------------------------------------- Advisor Class $1,000 $1,003.20(2) $2.52(3) 0.74% - ----------------------------------------------------------------------------------------- HYPOTHETICAL - ----------------------------------------------- Investor Class $1,000 $1,022.61 $2.48 0.49% - ----------------------------------------------------------------------------------------- Institutional Class $1,000 $1,023.61 $1.47 0.29% - ----------------------------------------------------------------------------------------- Advisor Class $1,000 $1,021.36(4) $3.75(4) 0.74% - ----------------------------------------------------------------------------------------- (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (2) Ending account value based on actual return from July 29, 2005 (commencement of sale) through November 30, 2005. (3) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 124, the number of days in the period from July 29, 2005 (commencement of sale) through November 30, 2005, divided by 365, to reflect the period. Had the class been available for the full period, the expenses paid during the period would have been higher. (4) Ending account value and expenses paid during period assumes the class had been available throughout the entire period and are calculated using the class's annualized expense ratio listed in the table above. - ------ 24 Statement of Assets and Liabilities NOVEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- TAX-FREE (AMOUNTS IN THOUSANDS EXCEPT PER-SHARE AMOUNTS) MONEY MARKET TAX-FREE BOND - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $277,893 and $630,022, respectively) $277,893 $644,354 - ---------------------------------------------- Cash 243 199 - ---------------------------------------------- Receivable for capital shares sold -- 484 - ---------------------------------------------- Receivable for variation margin on futures contracts -- 18 - ---------------------------------------------- Interest receivable 1,137 9,205 - ---------------------------------------------- Prepaid portfolio insurance 8 -- - -------------------------------------------------------------------------------- 279,281 654,260 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payable for investments purchased -- 5,481 - ---------------------------------------------- Accrued management fees 113 256 - ---------------------------------------------- Dividends payable 8 428 - -------------------------------------------------------------------------------- 121 6,165 - -------------------------------------------------------------------------------- Net Assets $279,160 $648,095 ================================================================================ NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital paid in $279,206 $633,518 - ---------------------------------------------- Accumulated undistributed net realized gain (loss) on investment transactions (46) 226 - ---------------------------------------------- Net unrealized appreciation on investments and futures -- 14,351 - -------------------------------------------------------------------------------- $279,160 $648,095 ================================================================================ INVESTOR CLASS ($ AND SHARES IN FULL) - -------------------------------------------------------------------------------- Net assets $279,159,537 $639,705,847 - ---------------------------------------------- Shares outstanding 279,205,956 59,574,744 - ---------------------------------------------- Net asset value per share $1.00 $10.74 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS ($ AND SHARES IN FULL) - -------------------------------------------------------------------------------- Net assets N/A $8,363,658 - ---------------------------------------------- Shares outstanding N/A 778,893 - ---------------------------------------------- Net asset value per share N/A $10.74 - -------------------------------------------------------------------------------- ADVISOR CLASS ($ AND SHARES IN FULL) - -------------------------------------------------------------------------------- Net assets N/A $25,075 - ---------------------------------------------- Shares outstanding N/A 2,335 - ---------------------------------------------- Net asset value per share N/A $10.74 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 25 Statement of Operations FOR THE SIX MONTHS ENDED NOVEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- TAX-FREE (AMOUNTS IN THOUSANDS) MONEY MARKET TAX-FREE BOND - -------------------------------------------------------------------------------- INVESTMENT INCOME (LOSS) - -------------------------------------------------------------------------------- INCOME: - --------------------------------------------------- Interest $3,826 $13,224 - -------------------------------------------------------------------------------- EXPENSES: - --------------------------------------------------- Management fees 707 1,534 - --------------------------------------------------- Distribution fees -- Advisor Class -- -- - --------------------------------------------------- Trustees' fees and expenses 9 20 - --------------------------------------------------- Portfolio insurance 25 -- - --------------------------------------------------- Other expenses -- 1 - -------------------------------------------------------------------------------- 741 1,555 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 3,085 11,669 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS) ON: - -------------------------------------------------------------------------------- Investment transactions 13 440 - --------------------------------------------------- Futures transactions -- 1,176 - -------------------------------------------------------------------------------- 13 1,616 - -------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: - --------------------------------------------------- Investments -- (9,947) - --------------------------------------------------- Futures -- 290 - -------------------------------------------------------------------------------- -- (9,657) - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 13 (8,041) - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $3,098 $ 3,628 ================================================================================ See Notes to Financial Statements. - ------ 26 Statement of Changes in Net Assets SIX MONTHS ENDED NOVEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MAY 31, 2005 - -------------------------------------------------------------------------------- (AMOUNTS IN THOUSANDS) TAX-FREE MONEY MARKET TAX-FREE BOND - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS 11/30/2005 5/31/2005 11/30/2005 5/31/2005 - -------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------- Net investment income (loss) $3,085 $3,568 $11,669 $20,827 - --------------------------------- Net realized gain (loss) 13 (1) 1,616 (374) - --------------------------------- Change in net unrealized appreciation (depreciation) -- -- (9,657) 9,574 - -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 3,098 3,567 3,628 30,027 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------- From net investment income: - --------------------------------- Investor Class (3,085) (3,568) (11,530) (20,531) - --------------------------------- Institutional Class -- -- (168) (299) - --------------------------------- Advisor Class -- -- -- -- - -------------------------------------------------------------------------------- Decrease in net assets from distributions (3,085) (3,568) (11,698) (20,830) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (5,704) 8,607 36,949 18,619 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (5,691) 8,606 28,879 27,816 - -------------------------------------------------------------------------------- NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 284,851 276,245 619,216 591,400 - -------------------------------------------------------------------------------- End of period $279,160 $284,851 $648,095 $619,216 ================================================================================ Undistributed net investment income -- -- -- $29 ================================================================================ See Notes to Financial Statements. - ------ 27 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) (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, Institutional Class and the Advisor 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. The Advisor Class of Tax-Free Bond commenced operations on July 29, 2005. 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. If the funds determine that the market price of a portfolio security is not readily available, or that the valuation methods mentioned above do not reflect the security's fair value, such security is valued at its fair value as determined by, or in accordance with procedures adopted by, the Board of Trustees or its designee if such fair value determination would materially impact a fund's net asset value. Circumstances that may cause the fund to fair value a security include: 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; or trading in a security has been halted during the trading day. 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 paydown gain (loss) and 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 its 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, Tax-Free Bond 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 Tax-Free Bond. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. Tax-Free Bond 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) - ------ 28 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) (AMOUNTS IN THOUSANDS) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INDEMNIFICATIONS -- Under the trust's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business, the funds enter into contracts that provide general indemnifications. The funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. The risk of material loss from such claims is considered by management to be remote. 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) (the investment advisor), under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (the 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 and accrued daily based on the daily net assets of each specific class of shares of each fund and paid monthly in arrears. The fee consists of (1) an Investment Category Fee based on the daily net assets of the funds and certain other accounts managed by the investment advisor that are in the same broad investment category as each fund and (2) a Complex Fee based on the assets of all the funds in the American Century family of funds. 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 and the Advisor Class are 0.2000% and 0.2500%, respectively, less at each point within the Complex Fee Range. The effective annual management fee for the Investor Class of Tax-Free Money Market and Tax-Free Bond for the six months ended November 30, 2005 was 0.49% and 0.48%, respectively. The effective annual management fee for the Institutional Class and Advisor Class of Tax-Free Bond for the six months ended November 30, 2005 was 0.28% and 0.23% respectively. DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a Master Distribution and Shareholder Services Plan (the plan) for the Advisor Class, pursuant to Rule 12b-1 of the 1940 Act. The plan provides that the Advisor Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution fee equal to 0.25% and an annual service fee equal to 0.25%. The fees are computed and accrued daily based on the Advisor Class's daily net assets and paid monthly in arrears. The distribution fee provides compensation for expenses incurred by financial intermediaries in connection with distributing shares of the Advisor Class including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of Tax-Free Bond. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers. Fees incurred under the plan during the six months ended November 30, 2005, are detailed in the Statement of Operations. MONEY MARKET INSURANCE -- Effective February 1, 2005, Tax-Free Money Market, along with other money market funds managed by ACIM, has entered into an insurance agreement with Ambac Assurance Corporation (Ambac). Ambac 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 to Ambac, which are amortized daily over one year. For the six months ended November 30, 2005, the annualized ratio of money market insurance expense to average net assets was 0.02% for Tax-Free Money Market. RELATED PARTIES -- Certain officers and trustees of the trust are also officers and/or directors, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the trust's investment advisor, ACIM, the distributor of the trust, ACIS, and the trust's transfer agent, American Century Services, LLC. Tax-Free Bond has a bank line of credit agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds and a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. (continued) - ------ 29 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) (AMOUNTS IN THOUSANDS) 3. INVESTMENT TRANSACTIONS Purchases and sales of investment securities for Tax-Free Bond, excluding short-term investments, for the six months ended November 30, 2005 were $333,641 and $294,148 respectively. All investment transactions for Tax-Free Money market were considered short-term during the six months ended November 30, 2005. 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 - ----------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ------------------------- Sold 83,567 $83,567 8,097 $87,509 - ------------------------- Issued in reinvestment of distributions 3,036 3,036 825 8,924 - ------------------------- Redeemed (92,307) (92,307) (5,477) (59,185) - ----------------------------------------------------------------------------- Net increase (decrease) (5,704) $ (5,704) 3,445 $37,248 ============================================================================= YEAR ENDED MAY 31, 2005 - ------------------------- Sold 189,979 $189,979 13,170 $142,894 - ------------------------- Issued in reinvestment of distributions 3,493 3,493 1,443 15,658 - ------------------------- Redeemed (184,865) (184,865) (13,004) (140,935) - ----------------------------------------------------------------------------- Net increase (decrease) 8,607 $ 8,607 1,609 $ 17,617 ============================================================================= INSTITUTIONAL CLASS - ----------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ------------------------- Sold N/A N/A 2 $ 27 - ------------------------- Issued in reinvestment of distributions 15 164 - ------------------------- Redeemed (47) (515) - ----------------------------------------------------------------------------- Net increase (decrease) (30) $(324) ============================================================================= YEAR ENDED MAY 31, 2005 - ------------------------- Sold N/A N/A 455 $4,953 - ------------------------- Issued in reinvestment of distributions 27 298 - ------------------------- Redeemed (393) (4,249) - ----------------------------------------------------------------------------- Net increase (decrease) 89 $1,002 ============================================================================= ADVISOR CLASS - ----------------------------------------------------------------------------- PERIOD ENDED NOVEMBER 30, 2005(1) - ------------------------- Sold N/A N/A 2 $25 ============================================================================= (1) July 29, 2005 (commencement of sale) through November 30, 2005. 5. BANK LINE OF CREDIT Tax-Free Bond, along with certain other funds managed by ACIM or American Century Global Investment Management, Inc. (ACGIM), have a $575 million unsecured bank line of credit agreement with JPMCB, which was renewed to $500 million effective December 14, 2005. Tax-Free Bond 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%. Tax-Free Bond did not borrow from the line during the six months ended November 30, 2005. (continued) - ------ 30 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) (AMOUNTS IN THOUSANDS) 6. FEDERAL TAX INFORMATION The book-basis 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 November 30, 2005, the federal tax cost of investments was as follows: TAX-FREE MONEY MARKET TAX-FREE BOND - -------------------------------------------------------------------------------- Federal tax cost of investments $277,893 $630,022 ================================================================================ Gross tax appreciation of investments -- $15,808 - -------------------------------------------------- Gross tax depreciation of investments -- (1,476) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments -- $14,332 ================================================================================ The cost of investments for federal income tax purposes was the same as the cost for financial reporting purposes. As of May 31, 2005, Tax-Free Money Market and Tax-Free Bond had accumulated capital losses of $59 and $1,661, respectively, which 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 2012 2013 - ------------------------------------------------------------------------- Tax-Free Money Market $(6) $(39) $(9) -- $(4) $(1) - ------------------------------------------------------------------------- Tax-Free Bond -- -- -- -- $(663) $(998) - ------------------------------------------------------------------------- - ------ 31 Tax-Free Money Market - Financial Highlights For a Share Outstanding Throughout the Years Ended May 31 (except as noted) - --------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------- Income From Investment Operations - -------------------- Net Investment Income (Loss) 0.01 0.01 0.01 0.01 0.02 0.04 - --------------------------------------------------------------------------------------- Distributions - -------------------- From Net Investment Income (0.01) (0.01) (0.01) (0.01) (0.02) (0.04) - --------------------------------------------------------------------------------------- Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ======================================================================================= TOTAL RETURN(2) 1.08% 1.33% 0.64% 1.05% 1.64% 3.71% - --------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.52%(3) 0.51% 0.51% 0.51% 0.51% 0.50% - -------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 2.15%(3) 1.31% 0.65% 1.04% 1.62% 3.64% - -------------------- Net Assets, End of Period (in thousands) $279,160 $284,851 $276,245 $272,256 $250,035 $249,461 - --------------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (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. (3) Annualized. See Notes to Financial Statements. - ------ 32 Tax-Free Bond - Financial Highlights For a Share Outstanding Throughout the Years Ended May 31 (except as noted) - --------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.88 $10.71 $11.19 $10.63 $10.50 $9.93 - --------------------------------------------------------------------------------------- Income From Investment Operations - --------------------- Net Investment Income (Loss) 0.20 0.38 0.37 0.39 0.44 0.48 - --------------------- Net Realized and Unrealized Gain (Loss) (0.14) 0.17 (0.45) 0.58 0.22 0.57 - --------------------------------------------------------------------------------------- Total From Investment Operations 0.06 0.55 (0.08) 0.97 0.66 1.05 - --------------------------------------------------------------------------------------- Distributions - --------------------- From Net Investment Income (0.20) (0.38) (0.37) (0.39) (0.44) (0.48) - --------------------- From Net Realized Gains -- -- (0.03) (0.02) (0.09) -- - --------------------------------------------------------------------------------------- Total Distributions (0.20) (0.38) (0.40) (0.41) (0.53) (0.48) - --------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.74 $10.88 $10.71 $11.19 $10.63 $10.50 ======================================================================================= TOTAL RETURN(2) 0.55% 5.16% (0.79)% 9.31% 6.45% 10.77% - --------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.49%(3) 0.50% 0.51% 0.51% 0.51% 0.51% - --------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 3.68%(3) 3.46% 3.34% 3.62% 4.14% 4.65% - --------------------- Portfolio Turnover Rate 53% 77% 60% 57% 86% 106% - --------------------- Net Assets, End of Period (in thousands) $639,706 $610,420 $583,689 $620,000 $382,447 $188,186 - --------------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (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. See Notes to Financial Statements. - ------ 33 Tax-Free Bond - Financial Highlights For a Share Outstanding Throughout the Years Ended May 31 (except as noted) - ---------------------------------------------------------------------------- INSTITUTIONAL CLASS - ---------------------------------------------------------------------------- 2005(1) 2005 2004 2003(2) - ---------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.88 $10.71 $11.19 $10.90 - ---------------------------------------------------------------------------- Income From Investment Operations - ------------------------- Net Investment Income (Loss) 0.21 0.40 0.39 0.05 - ------------------------- Net Realized and Unrealized Gain (Loss) (0.14) 0.17 (0.45) 0.29 - ---------------------------------------------------------------------------- Total From Investment Operations 0.07 0.57 (0.06) 0.34 - ---------------------------------------------------------------------------- Distributions - ------------------------- From Net Investment Income (0.21) (0.40) (0.39) (0.05) - ------------------------- From Net Realized Gains -- -- (0.03) -- - ---------------------------------------------------------------------------- Total Distributions (0.21) (0.40) (0.42) (0.05) - ---------------------------------------------------------------------------- Net Asset Value, End of Period $10.74 $10.88 $10.71 $11.19 ============================================================================ TOTAL RETURN(3) 0.65% 5.37% (0.60)% 3.14% - ---------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.29%(4) 0.30% 0.31% 0.30%(4) - ------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 3.88%(4) 3.66% 3.54% 3.68%(4) - ------------------------- Portfolio Turnover Rate 53% 77% 60% 57%(5) - ------------------------- Net Assets, End of Period (in thousands) $8,364 $8,796 $7,711 $7,609 - ---------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) April 15, 2003 (commencement of sale) through May 31, 2003. (3) 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. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended May 31, 2003. See Notes to Financial Statements. - ------ 34 Tax-Free Bond - Financial Highlights For a Share Outstanding Through the Period Indicated - -------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------- 2005(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.83 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------------------------ Net Investment Income (Loss) 0.12 - ------------------------------------------------------------ Net Realized and Unrealized Gain (Loss) (0.09) - -------------------------------------------------------------------------------- Total From Investment Operations 0.03 - -------------------------------------------------------------------------------- Distributions - ------------------------------------------------------------ From Net Investment Income (0.12) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.74 ================================================================================ TOTAL RETURN(2) 0.32% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.74%(3) - ------------------------------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 3.50%(3) - ------------------------------------------------------------ Portfolio Turnover Rate 53%(4) - ------------------------------------------------------------ Net Assets, End of Period (in thousands) $25 - -------------------------------------------------------------------------------- (1) July 29, 2005 (commencement of sale) through November 30, 2005 (unaudited). (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 six months ended November 30, 2005. See Notes to Financial Statements. - ------ 35 Share Class Information One class of shares is authorized for sale by Tax-Free Money Market: Investor Class. Three classes of shares are authorized for sale by Tax-Free Bond: Investor Class, Institutional Class, and Advisor Class. The total expense ratio for Institutional Class shares is lower than that of Investor Class shares. The total expense ratio for Advisor Class shares is higher 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 certain financial intermediaries (such as banks, broker-dealers, insurance companies and investment advisors), which may require payment of a transaction fee to the financial intermediary. 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 unified management fee of Institutional Class shares is 0.20% less than the unified management fee of Investor Class shares. ADVISOR CLASS shares are sold primarily through institutions such as investment advisors, banks, broker-dealers, insurance companies, and financial advisors. Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. The total expense ratio of Advisor Class shares is 0.25% higher 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. - ------ 36 Additional Information 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 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. The LEHMAN BROTHERS MUNICIPAL BOND INDEX is a market value-weighted index designed for the long-term tax-exempt bond market. The LEHMAN BROTHERS U.S. AGGREGATE INDEX represents securities that are taxable, registered with the Securities and Exchange Commission, and U.S. dollar-denominated. The index covers the U.S. investment-grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. The LEHMAN BROTHERS U.S. TREASURY INDEX is composed of those securities included in the Lehman Brothers U.S. Aggregate Index that are public obligations of the U.S. Treasury with a remaining maturity of one year or more. QUARTERLY PORTFOLIO DISCLOSURE The funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's Web site at sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The funds also make their complete schedule of portfolio holdings for the most recent quarter of their fiscal year available on their Web site at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 37 Notes - ------ 38 Notes - ------ 39 Notes - ------ 40 CONTACT US AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR SERVICES REPRESENTATIVE: 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 PROFESSIONALS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY MUNICIPAL TRUST INVESTMENT ADVISOR: 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 Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc. American Century Investment Services, Inc., Distributor (c)2006 American Century Proprietary Holdings, Inc. All rights reserved. 0601 SH-SAN-47302N [front cover] American Century Investments SEMIANNUAL REPORT [photo of boy] NOVEMBER 30, 2005 Arizona Municipal Bond Fund Florida Municipal Bond Fund High-Yield Municipal Fund [american century investments logo and text logo] Table of Contents Our Message to You . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARIZONA MUNICIPAL BOND Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Portfolio at a Glance and Yields . . . . . . . . . . . . . . . . . . . . . .4 Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . . . . .5 Top Five Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 FLORIDA MUNICIPAL BOND Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Portfolio at a Glance and Yields . . . . . . . . . . . . . . . . . . . . . 10 Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . . . . 11 Top Five Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 HIGH-YIELD MUNICIPAL Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Portfolio at a Glance and Yields . . . . . . . . . . . . . . . . . . . . . 16 Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . . . . 17 Top Five Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Shareholder Fee Examples . . . . . . . . . . . . . . . . . . . . . . . . . . .24 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . 27 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . .29 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 31 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 OTHER INFORMATION Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 The opinions expressed in each of the Portfolio Commentaries 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 semiannual report for the Arizona Municipal Bond, Florida Municipal Bond and High-Yield Municipal funds for the six months ended November 30, 2005. The report includes comparative performance figures, portfolio and market commentaries, summary tables, a full list of portfolio holdings, and financial statements and highlights. We hope you find this information helpful in monitoring your investment. 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. Your next shareholder report for these funds will be the annual report dated May 31, 2006, 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 AMERICAN CENTURY COMPANIES, INC. /s/James E. Stowers III James E. Stowers III CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. - ------ 1 Arizona Municipal Bond - Performance TOTAL RETURNS AS OF NOVEMBER 30, 2005 --------------------------------- AVERAGE ANNUAL RETURNS - ---------------------------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ---------------------------------------------------------------------------------------------------- INVESTOR CLASS 0.42% 2.62% 4.97% 4.83% 5.37% 4/11/94 - ---------------------------------------------------------------------------------------------------- LEHMAN BROTHERS MUNICIPAL 5-YEAR GO INDEX 0.15% 1.52% 4.83% 4.83% 5.22%(2) -- - ---------------------------------------------------------------------------------------------------- LIPPER OTHER STATES INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE RETURNS(3) -0.20% 1.72% 4.27% 4.13% 4.63%(4) -- - ---------------------------------------------------------------------------------------------------- Investor Class's Lipper Ranking as of 11/30/05(3) -- 8 of 111 6 of 81 2 of 59 3 of 43(4) -- - ---------------------------------------------------------------------------------------------------- Investor Class's Lipper Ranking as of 12/31/05(3) -- 8 of 115 7 of 88 4 of 61 3 of 43(4) -- - ---------------------------------------------------------------------------------------------------- A Class 2/27/04 No sales charge* 0.29% 2.36% -- -- 1.26% With sales charge* -4.25% -2.29% -- -- -1.36% - ---------------------------------------------------------------------------------------------------- B Class 2/27/04 No sales charge* -0.07% 1.63% -- -- 0.53% With sales charge* -5.07% -2.37% -- -- -1.76% - ---------------------------------------------------------------------------------------------------- C Class 2/27/04 No sales charge* -0.09% 1.59% -- -- 0.50% With sales charge* -1.07% 1.59% -- -- 0.50% - ---------------------------------------------------------------------------------------------------- *Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 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 page 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) Total returns for periods less than one year are not annualized. (2) Since 3/31/94, the date nearest the Investor Class's inception for which data are available. (3) Data provided by Lipper Inc. - A Reuters Company. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. Lipper Fund Performance -- Performance data is total return, and is preliminary and subject to revision. Lipper Rankings -- Rankings are based only on the universe shown and are based on average annual total returns. This listing might not represent the complete universe of funds tracked by Lipper. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (4) Since 4/14/94, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 2 Arizona Municipal Bond - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made November 30, 1995
ONE-YEAR RETURNS OVER 10 YEARS Periods ended November 30 - --------------------------------------------------------------------------------------------------------- 1996* 1997 1998 1999 2000 2001 2002 2003 2004 2005 - --------------------------------------------------------------------------------------------------------- Investor Class 4.91% 5.02% 6.83% -0.09% 6.96% 8.37% 5.99% 5.72% 2.31% 2.62% - --------------------------------------------------------------------------------------------------------- Lehman Brothers Municipal 5-Year GO Index 5.36% 5.38% 6.32% 1.49% 5.62% 8.24% 6.47% 5.72% 2.36% 1.52% - --------------------------------------------------------------------------------------------------------- *Investor Class return 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. As interest rates rise, bond values will decline. Investment income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax (AMT). Capital gains are not exempt from state and federal income tax. 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. - ------ 3 Arizona Municipal Bond - Portfolio Commentary PORTFOLIO MANAGER: KENNETH SALINGER PERFORMANCE SUMMARY Arizona Municipal Bond returned 0.42%* for the six months ended November 30, 2005, solidly outpacing both the 0.15% total return of the Lehman Brothers Municipal 5-year GO Index and the -0.20% average total return of Lipper's Other States Intermediate Municipal Debt Funds. Arizona Municipal Bond also performed well from a longer-term standpoint, either matching or returning more than its benchmark based on average annualized returns for the past one, five, and 10 years, while concurrently ranking among the top 10% of its Lipper peer group for all three time periods. (See pages 2-3 for more performance comparisons.) The fund's modest six-month return reflected a limited performance by municipal bonds amid resilient economic growth, faster inflation, and higher short-term interest rates. We talk about some of the strategies that we employed to help achieve Arizona Municipal Bond's solid benchmark- and peer-compared results in the Portfolio Strategy & Outlook section on the next page. YIELD SUMMARY Arizona Municipal Bond's key investment objective is to seek safety of principal and high current income exempt from federal and Arizona income taxes. With that note in mind, the fund's 30-day SEC yield was 3.37% as of November 30, 2005, which translated into the attractive tax-equivalent yields shown in the table at top right. By comparison, Arizona Municipal Bond's Lipper group average 30-day SEC yield was 2.86%. All else being equal, a higher yield can boost returns and pave the way for better performance. ECONOMIC REVIEW The resilient U.S. economy grew at an approximately 3-4% annual rate during the six months despite severe hurricane damage along the Gulf Coast, an energy price spike, and higher short-term interest rates. Crude oil futures shot over 30% higher during the summer from their May 31 level, topping $70 a barrel as Hurricane Katrina struck the Gulf Coast. Fueled by a 21.7% annualized increase in energy costs, the Consumer Price Index rose at a 3.8% annualized growth rate in the first 11 months of PORTFOLIO AT A GLANCE - -------------------------------------------------------------------------------- AS OF AS OF 11/30/05 5/31/05 - -------------------------------------------------------------------------------- Weighted Average Maturity 7.9 yrs 8.0 yrs - -------------------------------------------------------------------------------- Average Duration (Modified) 4.1 yrs 4.2 yrs - -------------------------------------------------------------------------------- YIELDS AS OF NOVEMBER 30, 2005 - -------------------------------------------------------------------------------- 30-DAY SEC YIELD - -------------------------------------------------------------------------------- Investor Class 3.37% - -------------------------------------------------------------------------------- A Class 2.98% - -------------------------------------------------------------------------------- B Class 2.44% - -------------------------------------------------------------------------------- C Class 2.38% - -------------------------------------------------------------------------------- INVESTOR CLASS 30-DAY TAX-EQUIVALENT YIELDS(1) - -------------------------------------------------------------------------------- 28.54% Tax Bracket 4.72% - -------------------------------------------------------------------------------- 31.40% Tax Bracket 4.91% - -------------------------------------------------------------------------------- 36.38% Tax Bracket 5.29% - -------------------------------------------------------------------------------- 38.28% Tax Bracket 5.46% - -------------------------------------------------------------------------------- (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. Total returns for periods less than one year are not annualized. (continued) - ------ 4 Arizona Municipal Bond - Portfolio Commentary 2005. To combat inflation pressures, the Federal Reserve (the Fed) continued hiking its overnight rate target in quarter-point increments, raising it from 3% to 4%. BROAD BOND MARKET REVIEW The Fed's rate increases pushed short-term yields significantly higher; the two-year Treasury yield rose from 3.58% to 4.42%, a 0.84 percentage point increase. Longer-term yields rose too, but not as much; the 30-year Treasury yield rose from 4.32% to 4.69%, a 0.37 percentage point increase. This narrowed the difference between shorter- and longer-term yields and "flattened" the yield curve used to illustrate Treasury yield levels at different maturities. MUNICIPAL MARKET REVIEW The municipal yield curve also rose and flattened, but not as much as the Treasury curve; municipal securities generally outperformed their Treasury counterparts. The Lehman Brothers Municipal Bond Index returned 0.36% for the six months compared with -0.81% for Lehman's U.S. Treasury Index. Interestingly, intermediate-maturity municipal securities generally underperformed shorter- and longer-maturity municipals. PORTFOLIO STRATEGY & OUTLOOK On the portfolio front, we emphasized a maturity structure that we believed would benefit from a decrease in the yield gap between short- and long-term municipal bonds. That strategy paid off as short-term bond yields rose (and prices fell), while long-term bond yields didn't rise by as much. As the yield curve flattened, we locked in some of the gains from that strategy and invested the proceeds more broadly across all bond maturities--a position we expect to maintain for the time being. Lastly, we continued to work closely with our municipal credit research team in search of lower-rated investment-grade bonds. These securities tend to offer higher yields than their higher-credit-quality counterparts, can reduce a portfolio's sensitivity to interest rates, and potentially boost returns if bought at undervalued levels and subsequently appreciate due to credit-quality upgrades. Unfortunately, the bonds that we found generally offered what we considered to be too little reward for the potential risks. PORTFOLIO COMPOSITION BY CREDIT RATING - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 11/30/05 5/31/05 - -------------------------------------------------------------------------------- AAA 74% 70% - -------------------------------------------------------------------------------- AA 8% 8% - -------------------------------------------------------------------------------- A 11% 15% - -------------------------------------------------------------------------------- BBB 7% 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 NOVEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF FUND INVESTMENTS - -------------------------------------------------------------------------------- General Obligation (GO) 23% - -------------------------------------------------------------------------------- Certificates of Participation (COPs)/Leases 15% - -------------------------------------------------------------------------------- Prerefunded 15% - -------------------------------------------------------------------------------- Water and Sewer Revenue 14% - -------------------------------------------------------------------------------- Industrial Development Revenue 10% - -------------------------------------------------------------------------------- - ------ 5 Arizona Municipal Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- MUNICIPAL SECURITIES -- 97.0% ARIZONA -- 87.8% - -------------------------------------------------------------------------------- $1,000,000 Arizona Health Facilities Auth. Rev., (Blood Systems Incorporated), 5.00%, 4/1/21 $ 1,024,240 - -------------------------------------------------------------------------------- 1,750,000 Arizona School Facilities Board Rev., (State School Improvement), 5.50%, 7/11/11 1,914,518 - -------------------------------------------------------------------------------- 1,000,000 Arizona Student Loan Acquisition Auth. Rev., Series 1999 A1, (Guaranteed Student Loans), 5.65%, 5/1/14 1,066,080 - -------------------------------------------------------------------------------- 1,880,000 Arizona Tourism & Sports Auth. Tax Rev., (Baseball Training Facilities), 5.00%, 7/1/13 1,953,865 - -------------------------------------------------------------------------------- 1,000,000 Arizona Transportation Board Rev., 5.25%, 7/1/13 1,078,070 - -------------------------------------------------------------------------------- 1,000,000 Arizona Transportation Board Rev., Series 2005 B, 5.00%, 7/1/12(1) 1,077,460 - -------------------------------------------------------------------------------- 1,910,000 Energy Management Services LLC Rev., (Arizona State University - Main Campus), 4.50%, 7/1/11 (MBIA)(2) 1,997,707 - -------------------------------------------------------------------------------- 1,000,000 Gilbert Water Resource Municipal Property Corp. Rev., (Development Fee & Sub-Lien), 4.90%, 4/1/19 1,002,740 - -------------------------------------------------------------------------------- 460,000 Glendale Industrial Development Auth. Rev., Series 1998 A, (Midwestern University), 5.375%, 5/15/08, Prerefunded at 101% of Par(3) 486,041 - -------------------------------------------------------------------------------- 540,000 Glendale Industrial Development Auth. Rev., Series 1998 A, (Midwestern University), 5.375%, 5/15/28 553,997 - -------------------------------------------------------------------------------- 500,000 Glendale Industrial Development Auth. Rev., Series 2001 A, (Midwestern University), 5.75%, 5/15/21 537,250 - -------------------------------------------------------------------------------- 1,125,000 Greater Arizona Development Auth. Rev., Series 2004 A, 4.25%, 8/1/10 1,151,505 - -------------------------------------------------------------------------------- 1,185,000 Greater Arizona Development Auth. Rev., Series 2005 A, 5.00%, 8/1/23 (MBIA) 1,242,816 - -------------------------------------------------------------------------------- 1,040,000 Maricopa County Kyrene Elementary School District No. 28 GO, Series 2001 B, 4.30%, 7/1/07 (MBIA)(4) 986,003 - -------------------------------------------------------------------------------- 1,615,000 Maricopa County Litchfield Elementary School District No. 79 GO, Series 2000 A, (Projects of 1998), 4.55%, 7/1/07 (FSA) 1,647,284 - -------------------------------------------------------------------------------- 1,000,000 Maricopa County Phoenix Elementary School District No. 1 GO, 5.50%, 7/1/07 (MBIA) 1,043,270 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- $1,445,000 Maricopa County Phoenix Union High School District No. 210 GO, 4.75%, 7/1/11 (FSA) $ 1,529,489 - -------------------------------------------------------------------------------- 1,000,000 Maricopa County Rev., (Sun Health Corp.), 5.00%, 4/1/10 1,038,510 - -------------------------------------------------------------------------------- 1,955,000 Maricopa County Saddle Mountain Unified School District No. 90 GO, Series 2003 A, 5.00%, 7/1/10 2,037,364 - -------------------------------------------------------------------------------- 1,000,000 Maricopa County Scottsdale Elementary School District No. 48 GO, 6.60%, 7/1/12 1,169,690 - -------------------------------------------------------------------------------- 1,265,000 Mohave County Community College District COP, 5.75%, 3/1/14 (Ambac) 1,372,525 - -------------------------------------------------------------------------------- 1,150,000 Mohave County Community College District Rev., (State Board of Directors), 6.00%, 3/1/20 (MBIA) 1,252,891 - -------------------------------------------------------------------------------- 1,000,000 Northern Arizona University COP, (Research Infrastructure), 5.00%, 9/1/30 (Ambac) 1,033,860 - -------------------------------------------------------------------------------- 1,000,000 Phoenix Civic Improvement Corp. Rev., (Junior Lien), 5.00%, 7/1/21 (MBIA) 1,058,920 - -------------------------------------------------------------------------------- 1,000,000 Phoenix Civic Improvement Corp. Wastewater System Rev., (Junior Lien), 6.25%, 7/1/10, Prerefunded at 101% of Par (FGIC)(3) 1,124,760 - -------------------------------------------------------------------------------- 1,000,000 Phoenix Civic Improvement Corp. Water System Rev., (Junior Lien), 6.50%, 7/1/06 1,018,650 - -------------------------------------------------------------------------------- 1,000,000 Phoenix Civic Improvement Corp. Water System Rev., (Junior Lien), 5.50%, 7/1/19 (FGIC) 1,091,200 - -------------------------------------------------------------------------------- 1,070,000 Phoenix GO, Series 1995 A, 6.25%, 7/1/17 1,290,891 - -------------------------------------------------------------------------------- 1,000,000 Phoenix GO, Series 1995 B, 5.25%, 7/1/06 1,031,800 - -------------------------------------------------------------------------------- 400,000 Phoenix Industrial Development Auth. Single Family Mortgage Rev., Series 1998 A, 6.60%, 12/1/29 (GNMA/FNMA/FHLMC) 405,144 - -------------------------------------------------------------------------------- 1,175,000 Pima County GO, 4.00%, 7/1/06 (FSA) 1,180,217 - -------------------------------------------------------------------------------- 1,710,000 Pima County Metropolitan Domestic Water Improvement District Rev., 5.25%, 7/1/18 (Ambac) 1,899,109 - -------------------------------------------------------------------------------- 1,800,000 Pima County Metropolitan Domestic Water Improvement District Rev., 5.25%, 7/1/19 (Ambac)(2) 2,004,975 - -------------------------------------------------------------------------------- 1,125,000 Pima County Unified School District No. 6 Marana GO, 5.50%, 7/1/15 (FGIC) 1,223,640 - -------------------------------------------------------------------------------- 820,000 Pinal County COP, 4.75%, 6/1/13 (Ambac) 862,673 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 Arizona Municipal Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- $1,000,000 Pinal County COP, 5.00%, 12/1/26 $ 1,014,110 - -------------------------------------------------------------------------------- 1,100,000 Pinal County Unified School District No. 43 Apache Junction GO, Series 2005 A, (School Improvement), 5.00%, 7/1/23 (MBIA) 1,153,317 - -------------------------------------------------------------------------------- 1,600,000 Scottsdale GO, 6.25%, 7/1/09, Prerefunded at 100% of Par(3) 1,751,824 - -------------------------------------------------------------------------------- 1,000,000 Sedona COP, 5.75%, 7/1/09 1,084,890 - -------------------------------------------------------------------------------- 1,645,000 University of Arizona COP, Series 2002 A, 5.50%, 6/1/17 (Ambac) 1,789,480 - -------------------------------------------------------------------------------- 500,000 University of Arizona COP, Series 2005 B, 5.00%, 6/1/24 (Ambac) 520,925 - -------------------------------------------------------------------------------- 1,725,000 University of Arizona COP, Series 2005 D, 5.00%, 6/1/12 (Ambac) 1,850,459 - -------------------------------------------------------------------------------- 51,554,159 - -------------------------------------------------------------------------------- PUERTO RICO -- 9.2% - -------------------------------------------------------------------------------- 2,420,000 Government Development Bank of Puerto Rico Rev., 3.50%, 1/20/06 (Acquired 8/18/05, Cost $2,420,000)(5) 2,419,298 - -------------------------------------------------------------------------------- 1,000,000 Government Development Bank of Puerto Rico Rev., 3.35%, 1/24/06 (Acquired 7/28/05, Cost $1,000,000)(5) 999,460 - -------------------------------------------------------------------------------- 2,000,000 Government Development Bank of Puerto Rico Rev., 3.40%, 1/24/06 (Acquired 8/5/05, Cost $2,000,000)(5) 1,999,080 - -------------------------------------------------------------------------------- 5,417,838 - -------------------------------------------------------------------------------- TOTAL MUNICIPAL SECURITIES (Cost $55,124,193) $56,971,997 - -------------------------------------------------------------------------------- SHORT-TERM MUNICIPAL SECURITIES -- 1.0% ARIZONA -- 1.0% - -------------------------------------------------------------------------------- $ 400,000 Coconino County Pollution Control Corp. Rev., (Arizona Public Service Co.), VRDN, 3.02%, 12/1/05 (LOC: KBC Bank N.V.) 400,000 - -------------------------------------------------------------------------------- 165,000 Pima County Industrial Development Auth. Lease Rev., VRDN, 3.18%, 12/1/05 (SBBPA: Societe Generale) 165,000 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM MUNICIPAL SECURITIES (Cost $565,000) 565,000 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 0.8% 481,000 Federated Arizona Municipal Cash Trust (Cost $481,000) 481,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 98.8% (Cost $56,170,193) 58,017,997 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 1.2% 706,922 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $58,724,919 ================================================================================ SWAP AGREEMENTS* Unrealized Notional Amount Description of Agreement Expiration Date Gain (Loss) - -------------------------------------------------------------------------------------------------------------- $1,500,000 Receive semiannually a variable rate based on the weekly Bond April 2016 $1,944 Market Association Index and pay semiannually a fixed rate =========== equal to 3.913% with Morgan Stanley Capital Services, Inc. *SWAP AGREEMENTS are contracts in which two parties agree to exchange the returns earned or realized on predetermined investments or instruments. The fund may enter into swap agreements in order to manage interest, credit, or market risk or to gain exposure to certain markets. 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. (1) When-issued security. (2) Security, or a portion thereof, has been segregated for a swap agreement and/or when-issued security. (3) Escrowed to maturity in U.S. government securities or state and local government securities. (4) Security is a zero-coupon municipal bond. The rate indicated is the yield to maturity at purchase. Zero-coupon securities are issued at a substantial discount from their value at maturity. (5) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at November 30, 2005 was $5,417,838, which represented 9.2% of total net assets. See Notes to Financial Statements. - ------ 7 Florida Municipal Bond - Performance TOTAL RETURNS AS OF NOVEMBER 30, 2005 --------------------------------- AVERAGE ANNUAL RETURNS - ---------------------------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ---------------------------------------------------------------------------------------------------- INVESTOR CLASS 0.34% 2.38% 4.83% 4.98% 5.44% 4/11/94 - ---------------------------------------------------------------------------------------------------- LEHMAN BROTHERS MUNICIPAL 5-YEAR GO INDEX 0.15% 1.52% 4.83% 4.83% 5.22%(2) -- - ---------------------------------------------------------------------------------------------------- LIPPER FLORIDA INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE RETURNS(3) -0.13% 1.63% 4.05% 4.01% 4.47%(4) -- - ---------------------------------------------------------------------------------------------------- Investor Class's Lipper Ranking as of 11/30/05(3) -- 2 of 18 1 of 15 1 of 11 1 of 10(4) -- - ---------------------------------------------------------------------------------------------------- Investor Class's Lipper Ranking as of 12/31/05(3) -- 2 of 18 1 of 15 1 of 11 1 of 10(4) -- - ---------------------------------------------------------------------------------------------------- A Class 2/27/04 No sales charge* 0.21% 2.13% -- -- 0.91% With sales charge* -4.30% -2.48% -- -- -1.69% - ---------------------------------------------------------------------------------------------------- B Class 2/27/04 No sales charge* -0.17% 1.34% -- -- 0.14% With sales charge* -5.17% -2.66% -- -- -2.15% - ---------------------------------------------------------------------------------------------------- C Class 2/27/04 No sales charge* -0.16% 1.36% -- -- 0.15% With sales charge* -1.15% 1.36% -- -- 0.15% - ---------------------------------------------------------------------------------------------------- *Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 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 page 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) Total returns for periods less than one year are not annualized. (2) Since 3/31/94, the date nearest the Investor Class's inception for which data are available. (3) Data provided by Lipper Inc. - A Reuters Company. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. Lipper Fund Performance -- Performance data is total return, and is preliminary and subject to revision. Lipper Rankings -- Rankings are based only on the universe shown and are based on average annual total returns. This listing might not represent the complete universe of funds tracked by Lipper. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (4) Since 4/14/94, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 8 Florida Municipal Bond - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made November 30, 1995
ONE-YEAR RETURNS OVER 10 YEARS Periods ended November 30 - -------------------------------------------------------------------------------------------------------------- 1996* 1997 1998 1999 2000 2001 2002 2003 2004 2005 - -------------------------------------------------------------------------------------------------------------- Investor Class 4.61% 6.78% 7.39% 0.00% 7.09% 7.82% 6.35% 5.62% 2.10% 2.38% - -------------------------------------------------------------------------------------------------------------- Lehman Brothers Municipal 5-Year GO Index 5.36% 5.38% 6.32% 1.49% 5.62% 8.24% 6.47% 5.72% 2.36% 1.52% - -------------------------------------------------------------------------------------------------------------- *Investor Class return 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. As interest rates rise, bond values will decline. Investment income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax (AMT). Capital gains are not exempt from state and federal income tax. 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. - ------ 9 Florida Municipal Bond - Portfolio Commentary PORTFOLIO MANAGER: KENNETH SALINGER PERFORMANCE SUMMARY Florida Municipal Bond returned 0.34%* for the six months ended November 30, 2005, outpacing the 0.15% return of its benchmark--the Lehman Brothers Municipal 5-year GO Index--and the -0.13% average total return of its Lipper peer group. The fund also performed well from a longer-term standpoint, either matching or returning more than its benchmark based on average annualized one-, five-, and 10-year returns, while finishing second among its Lipper peer group for the trailing year and first for the trailing five and 10 years. (See pages 8-9 for more performance comparisons.) The fund's modest six-month return reflected a limited performance by municipal bonds amid resilient economic growth, faster inflation, and higher short-term interest rates. We talk about some of the strategies that we employed to help achieve Florida Municipal Bond's superior benchmark- and peer-compared results in the Portfolio Strategy & Outlook section on the next page. YIELD SUMMARY Florida Municipal Bond's key investment objective is to seek safety of principal and high current income exempt from federal income tax. With that note in mind, the fund's 30-day SEC yield was 3.45% as of November 30, 2005, which translated into the attractive tax-equivalent yields shown in the table at top right. By comparison, Florida Municipal Bond's Lipper group average 30-day SEC yield was 2.97%. All else being equal, a higher yield can boost returns and pave the way for better performance. ECONOMIC REVIEW The resilient U.S. economy grew at an approximately 3-4% annual rate during the six months despite severe hurricane damage along the Gulf Coast, an energy price spike, and higher short-term interest rates. Crude oil futures shot over 30% higher during the summer from their May 31 level, topping $70 a barrel as Hurricane Katrina struck the Gulf Coast. Fueled by a 21.7% annualized increase in energy costs, the Consumer Price Index rose at a 3.8% annualized growth rate in the first 11 months of PORTFOLIO AT A GLANCE - -------------------------------------------------------------------------------- AS OF AS OF 11/30/05 5/31/05 - -------------------------------------------------------------------------------- Weighted Average Maturity 8.3 yrs 8.8 yrs - -------------------------------------------------------------------------------- Average Duration (Modified) 4.3 yrs 4.0 yrs - -------------------------------------------------------------------------------- YIELDS AS OF NOVEMBER 30, 2005 - -------------------------------------------------------------------------------- 30-DAY SEC YIELD - -------------------------------------------------------------------------------- Investor Class 3.45% - -------------------------------------------------------------------------------- A Class 3.05% - -------------------------------------------------------------------------------- B Class 2.45% - -------------------------------------------------------------------------------- C Class 2.45% - -------------------------------------------------------------------------------- INVESTOR CLASS 30-DAY TAX-EQUIVALENT YIELDS(1) - -------------------------------------------------------------------------------- 25.00% Tax Bracket 4.60% - -------------------------------------------------------------------------------- 28.00% Tax Bracket 4.79% - -------------------------------------------------------------------------------- 33.00% Tax Bracket 5.15% - -------------------------------------------------------------------------------- 35.00% Tax Bracket 5.31% - -------------------------------------------------------------------------------- (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. Total returns for periods less than one year are not annualized. (continued) - ------ 10 Florida Municipal Bond - Portfolio Commentary 2005. To combat inflation pressures, the Federal Reserve (the Fed) continued hiking its overnight rate target in quarter-point increments, raising it from 3% to 4%. BROAD BOND MARKET REVIEW The Fed's rate increases pushed short-term yields significantly higher; the two-year Treasury yield rose from 3.58% to 4.42%, a 0.84 percentage point increase. Longer-term yields rose too, but not as much; the 30-year Treasury yield rose from 4.32% to 4.69%, a 0.37 percentage point increase. This narrowed the difference between shorter- and longer-term yields and "flattened" the yield curve used to illustrate Treasury yield levels at different maturities. MUNICIPAL MARKET REVIEW The municipal yield curve also rose and flattened, but not as much as the Treasury curve; municipal securities generally outperformed their Treasury counterparts. The Lehman Brothers Municipal Bond Index returned 0.36% for the six months compared with -0.81% for Lehman's U.S. Treasury Index. Interestingly, intermediate-maturity municipal securities generally underperformed shorter- and longer-maturity municipals. PORTFOLIO STRATEGY & OUTLOOK On the portfolio front, we emphasized a maturity structure that we believed would benefit from a decrease in the yield gap between short- and long-term municipal bonds. That strategy paid off as short-term bond yields rose (and prices fell), while long-term bond yields didn't rise by as much. As the yield curve flattened, we locked in some of the gains from that strategy and invested the proceeds more broadly across all bond maturities--a position we expect to maintain for the time being. Lastly, we added some lower-rated investment-grade securities while generally focusing on AAA and AA bonds. Lower-rated municipals tend to provide higher yields than their higher-credit-quality counterparts while helping to decrease Florida Municipal Bond's sensitivity to interest rates. We work closely with our seasoned municipal credit research team when looking for such bonds and plan to actively pursue that strategy for the foreseeable future. PORTFOLIO COMPOSITION BY CREDIT RATING - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 11/30/05 5/31/05 - -------------------------------------------------------------------------------- AAA 84% 87% - -------------------------------------------------------------------------------- AA 1% 1% - -------------------------------------------------------------------------------- A 1% -- - -------------------------------------------------------------------------------- BBB 14% 12% - -------------------------------------------------------------------------------- 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 NOVEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF FUND INVESTMENTS - -------------------------------------------------------------------------------- Water and Sewer Revenue 18% - -------------------------------------------------------------------------------- Certificates of Participation (COPs)/Leases 15% - -------------------------------------------------------------------------------- Prerefunded 11% - -------------------------------------------------------------------------------- Transportation Revenue 9% - -------------------------------------------------------------------------------- General Obligation (GO) 8% - -------------------------------------------------------------------------------- - ------ 11 Florida Municipal Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- MUNICIPAL SECURITIES -- 95.3% FLORIDA -- 91.1% - -------------------------------------------------------------------------------- $1,110,000 Broward County Airport Systems Rev., (Passenger Facility), (Conventional Lien H-1), 5.25%, 10/1/12 (Ambac) $ 1,160,205 - -------------------------------------------------------------------------------- 400,000 Broward County Educational Facilities Auth. Rev., Series 2004 B, (Nova Southeastern), 5.00%, 4/1/14 415,300 - -------------------------------------------------------------------------------- 500,000 Broward County Educational Facilities Auth. Rev., Series 2004 B, (Nova Southeastern), 5.50%, 4/1/15 533,510 - -------------------------------------------------------------------------------- 525,000 Broward County Educational Facilities Auth. Rev., Series 2004 B, (Nova Southeastern), 5.50%, 4/1/16 558,983 - -------------------------------------------------------------------------------- 500,000 Broward County School Board COP, Series 2002 B, 5.375%, 7/1/11, Prerefunded at 100% of Par (FSA)(1) 543,870 - -------------------------------------------------------------------------------- 1,000,000 Callaway / Bay County Wastewater System Rev., 5.00%, 9/1/23 (MBIA) 1,044,980 - -------------------------------------------------------------------------------- 1,475,000 Collier County School Board COP, 5.50%, 2/15/12 (FSA) 1,621,836 - -------------------------------------------------------------------------------- 750,000 Covington Park Community Development District Special Assessment, (Capital Improvement), 5.00%, 5/1/21 751,365 - -------------------------------------------------------------------------------- 250,000 Dade County Aviation Rev., Series 1995 E, 5.50%, 10/1/10 (Ambac) 255,080 - -------------------------------------------------------------------------------- 1,150,000 Duval County School Board COP, 5.75%, 7/1/16 (FSA) 1,235,054 - -------------------------------------------------------------------------------- 1,010,000 Emerald Coast Utilities System Auth. Rev., 5.00%, 1/1/25 (FGIC) 1,052,561 - -------------------------------------------------------------------------------- 90,000 Escambia County Housing Finance Auth. Single Family Mortgage Rev., Series 1998 A, (Multi-County Program), 4.80%, 4/1/06 (GNMA/FNMA) 90,392 - -------------------------------------------------------------------------------- 130,000 Escambia County Housing Finance Auth. Single Family Mortgage Rev., Series 1998 A, (Multi-County Program), 4.85%, 4/1/07 (GNMA/FNMA) 132,093 - -------------------------------------------------------------------------------- 2,320,000 Florida Division of Bond Finance GO, Series 1998 B, (Environmental Protection - Preservation), 5.25%, 7/1/10 (FSA)(2) 2,442,170 - -------------------------------------------------------------------------------- 450,000 Florida Housing Finance Agency Rev., Series 1995 E, (Williamsburg Village Apartments), 5.60%, 12/1/07 (Ambac) 459,540 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- $ 255,000 Florida Housing Finance Corp. Rev., Series 1999-2, (Homeowner Mortgage), 4.60%, 1/1/21 (FSA) $ 255,403 - --------------------------------------------------------------------------------- 1,000,000 Florida Municipal Loan Council GO, Series 2002 C, 5.25%, 11/1/21 (MBIA) 1,075,500 - --------------------------------------------------------------------------------- 350,000 Gainesville Utilities System Rev., Series 1996 A, 5.75%, 10/1/09 377,955 - --------------------------------------------------------------------------------- 675,000 Greater Orlando Aviation Auth. Rev., Series 1999 A, 5.25%, 10/1/09 (FGIC) 711,693 - --------------------------------------------------------------------------------- 610,000 Hollywood Community Redevelopment Agency Rev., (Beach), 4.00%, 3/1/06 610,451 - --------------------------------------------------------------------------------- 635,000 Hollywood Community Redevelopment Agency Rev., (Beach), 4.50%, 3/1/07 639,915 - --------------------------------------------------------------------------------- 690,000 Hollywood Community Redevelopment Agency Rev., (Beach), 5.00%, 3/1/08 706,284 - --------------------------------------------------------------------------------- 1,235,000 Indian River County Rev., (Spring Training Facility), 5.25%, 4/1/15 (FGIC) 1,333,467 - --------------------------------------------------------------------------------- 1,565,000 Indian Trace Development District Rev., (Water Management Special Benefit), 5.00%, 5/1/24 (MBIA) 1,649,244 - --------------------------------------------------------------------------------- 330,000 Julington Creek Plantation Community Development District Assessment Rev., 3.65%, 5/1/09 (MBIA) 331,069 - --------------------------------------------------------------------------------- 350,000 Julington Creek Plantation Community Development District Assessment Rev., 3.85%, 5/1/10 (MBIA) 353,423 - --------------------------------------------------------------------------------- 625,000 Julington Creek Plantation Community Development District Assessment Rev., 4.00%, 5/1/11 (MBIA) 634,669 - --------------------------------------------------------------------------------- 850,000 Lee County Industrial Development Health Care Facilities Auth. Rev., Series 1999 A, (Shell Point Village), 5.50%, 11/15/09 883,924 - --------------------------------------------------------------------------------- 1,325,000 Martin County Health Facilities Auth. Rev., Series 2002 A, (Martin Memorial Medical Center), 4.25%, 11/15/07 1,328,564 - --------------------------------------------------------------------------------- 1,000,000 Miami Beach Stormwater Rev., 5.75%, 9/1/17 (FGIC) 1,098,080 - --------------------------------------------------------------------------------- 1,910,000 Miami Beach Water & Sewer Rev., 5.625%, 9/1/16 (Ambac) 2,088,768 - --------------------------------------------------------------------------------- 650,000 Miami Parking Facilities Rev., 5.25%, 10/1/15 (MBIA) 713,284 - --------------------------------------------------------------------------------- 1,000,000 Miami-Dade County School Board COP, Series 2001 C, 5.50%, 10/1/11, Prerefunded at 100% of Par (FSA)(1) 1,097,780 - --------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 12 Florida Municipal Bond - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- $1,000,000 Miami-Dade County School Board COP, Series 2001 C, 5.50%, 10/1/11, Prerefunded at 100% of Par (FSA)(1) $ 1,097,780 - -------------------------------------------------------------------------------- 1,875,000 Orange County School Board COP, Series 2002 A, 5.50%, 8/1/19 (MBIA) 2,043,263 - -------------------------------------------------------------------------------- 450,000 Orlando and Orange County Expressway Auth. Rev., 6.50%, 7/1/11 (FGIC) 514,386 - -------------------------------------------------------------------------------- 1,000,000 Palm Beach County Airport Systems Rev., 5.75%, 10/1/14 (MBIA) 1,132,700 - -------------------------------------------------------------------------------- 1,000,000 Palm Beach County School Board COP, Series 2002 A, 5.375%, 8/1/12, Prerefunded at 100% of Par (FSA)(1) 1,097,650 - -------------------------------------------------------------------------------- 2,000,000 Pasco County Solid Waste Disposal & Resource Recovery System Rev., 6.00%, 4/1/10 (Ambac) 2,153,959 - -------------------------------------------------------------------------------- 305,000 Pensacola Airport Rev., Series 1997 B, 5.40%, 10/1/07 (MBIA) 312,491 - -------------------------------------------------------------------------------- 300,000 Plantation Health Facilities Auth. Rev., (Covenant Village of Florida Inc.), 4.55%, 12/1/05 300,006 - -------------------------------------------------------------------------------- 300,000 Plantation Health Facilities Auth. Rev., (Covenant Village of Florida Inc.), 4.70%, 12/1/07 304,188 - -------------------------------------------------------------------------------- 1,015,000 St. Lucie County Public Improvement COP, Series 2000 A, (800 MHZ Radio System), 5.50%, 4/1/10 (MBIA)(1) 1,096,170 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- $1,000,000 Sumter County School Board COP, 5.50%, 1/1/21 (MBIA) $ 1,089,990 - -------------------------------------------------------------------------------- 1,000,000 Sunrise Utility System Rev., 5.20%, 10/1/22 (Ambac) 1,098,490 - -------------------------------------------------------------------------------- 1,000,000 Tampa Bay Water Utility System Rev., Series 1998 B, 5.125%, 10/1/08, Prerefunded at 101% of Par (FGIC)(1) 1,053,220 - -------------------------------------------------------------------------------- 400,000 Tampa Guaranteed Entitlement Rev., 6.00%, 10/1/18 (Ambac) 455,768 - -------------------------------------------------------------------------------- 1,000,000 Tampa Water & Sewer Rev., 6.00%, 10/1/17 (FSA) 1,176,190 - -------------------------------------------------------------------------------- 640,000 University of Central Florida COP, Series 2005 A, (Convocation Corp.), 5.00%, 10/1/14 (FGIC) 691,418 - -------------------------------------------------------------------------------- 43,804,081 - -------------------------------------------------------------------------------- PUERTO RICO -- 4.2% - -------------------------------------------------------------------------------- 1,000,000 Government Development Bank of Puerto Rico Rev., 3.50%, 1/20/06 (Acquired 8/18/05, Cost $1,000,000)(3) 999,710 - -------------------------------------------------------------------------------- 1,000,000 Government Development Bank of Puerto Rico Rev., 3.40%, 1/24/06 (Acquired 8/5/05, Cost $1,000,000)(3) 999,540 - -------------------------------------------------------------------------------- 1,999,250 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 95.3% (Cost $44,204,199) 45,803,331 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 4.7% 2,244,622 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $48,047,953 ================================================================================ SWAP AGREEMENTS* Unrealized Notional Amount Description of Agreement Expiration Date Gain (Loss) - -------------------------------------------------------------------------------------------------------------- $1,500,000 Receive semiannually a variable rate based on the weekly Bond April 2016 $1,944 Market Association Index and pay semiannually a fixed rate =========== equal to 3.913% with Morgan Stanley Capital Services, Inc. *SWAP AGREEMENTS are contracts in which two parties agree to exchange the returns earned or realized on predetermined investments or instruments. The fund may enter into swap agreements in order to manage interest, credit, or market risk or to gain exposure to certain markets. NOTES TO SCHEDULE OF INVESTMENTS Ambac = Ambac Assurance Corporation COP = Certificates of Participation FGIC = Financial Guaranty Insurance Co. FNMA = Federal National Mortgage Association FSA = Financial Security Assurance, Inc. GNMA = Government National Mortgage Association GO = General Obligation MBIA = MBIA Insurance Corporation (1) Escrowed to maturity in U.S. government securities or state and local government securities. (2) Security, or a portion thereof, has been segregated for a swap agreement. (3) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at November 30, 2005 was $1,999,250, which represented 4.2% of total net assets. See Notes to Financial Statements. - ------ 13 High-Yield Municipal - Performance TOTAL RETURNS AS OF NOVEMBER 30, 2005 -------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 2.06% 7.03% 7.38% 6.04%(2) 3/31/98 - -------------------------------------------------------------------------------- LEHMAN BROTHERS LONG-TERM MUNICIPAL BOND INDEX 0.82% 7.57% 7.39% 6.19% -- - -------------------------------------------------------------------------------- LIPPER HIGH YIELD MUNICIPAL DEBT FUNDS AVERAGE RETURNS(3) 1.51% 6.26% 6.06% 4.27% -- - -------------------------------------------------------------------------------- Investor Class's Lipper Ranking as of 11/30/05(3) -- 21 of 78 10 of 69 4 of 48(2) -- - -------------------------------------------------------------------------------- Investor Class's Lipper Ranking as of 12/31/05(3) -- 21 of 82 11 of 69 4 of 48(2) -- - -------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* 1.93% 6.76% -- 6.31% With sales charge* -2.61% 1.99% -- 4.61% - -------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* 1.55% 5.96% -- 5.56% With sales charge* -3.45% 1.96% -- 4.60% - -------------------------------------------------------------------------------- C Class 7/24/02 No sales charge* 1.54% 5.96% -- 5.53% With sales charge* 0.55% 5.96% -- 5.53% - -------------------------------------------------------------------------------- *Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 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 page 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) Total returns for periods less than one year are not annualized. (2) 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. (3) Data provided by Lipper Inc. - A Reuters Company. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. Lipper Fund Performance -- Performance data is total return, and is preliminary and subject to revision. Lipper Rankings -- Rankings are based only on the universe shown and are based on average annual total returns. This listing might not represent the complete universe of funds tracked by Lipper. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (continued) - ------ 14 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 November 30 - -------------------------------------------------------------------------------- 1998* 1999 2000 2001 2002 2003 2004 2005 - -------------------------------------------------------------------------------- Investor Class 6.08%** -0.70%** 4.33% 8.64% 7.99% 7.03% 6.23% 7.03% - -------------------------------------------------------------------------------- Lehman Brothers Long-Term Municipal Bond Index 5.56% -5.10% 10.70% 10.30% 6.09% 7.55% 5.53% 7.57% - -------------------------------------------------------------------------------- * From 3/31/98 (the class's inception date) to 11/30/98. Not annualized. **Investor Class returns 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. As interest rates rise, bond values will decline. In addition, the lower rated securities in which the fund invests are subject to greater credit risk, default risk, and liquidity risk. Investment income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax (AMT). Capital gains are not exempt from state and federal income tax. 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. - ------ 15 High-Yield Municipal - Portfolio Commentary PORTFOLIO MANAGER: STEVEN PERMUT PERFORMANCE SUMMARY High-Yield Municipal returned 2.06%* for the six months ended November 30, 2005, significantly outperforming its investment-grade broad-market benchmark (the Lehman Brothers Long-Term Municipal Bond Index) and the average return of 82 high-yield municipal debt funds tracked by Lipper, Inc. The six-month return of the Lehman index and the Lipper average were 0.82% and 1.51%, respectively. (See pages 14-15 for more performance comparisons.) High-Yield Municipal also outperformed the Lipper average for the one-year, five-year, and "since inception" periods ended November 30, 2005, while trailing the Lehman index. The investment-grade Lehman index is presented for broad market context, but the Lipper average reflects portfolios and fees that more closely resemble the fund's. High-yield municipal bonds generally outperformed their investment-grade counterparts during the six-month reporting period, but rising bond yields and falling bond prices constrained the municipal bond market's performance. We believe favorable security selection helped the fund's performance compared with its Lipper category. ECONOMIC REVIEW The resilient U.S. economy grew at an approximately 3-4% annual rate during the six months despite severe hurricane damage along the Gulf Coast, an energy price spike, and higher short-term interest rates. Crude oil futures shot over 30% higher during the summer from their May 31 level, topping $70 a barrel as Hurricane Katrina struck the Gulf Coast. Fueled by a 21.7% annualized increase in energy costs, the Consumer Price Index rose at a 3.8% annualized growth rate in the first 11 months of 2005. To combat inflation pressures, the Federal Reserve (the Fed) continued hiking its overnight rate target in quarter-point increments, raising it from 3% to 4%. BROAD BOND MARKET REVIEW The Fed's rate increases pushed short-term yields significantly higher; the two-year Treasury yield rose from 3.58% to 4.42%, a 0.84 percentage point increase. Longer-term yields rose too, but not as much; the 30-year Treasury PORTFOLIO AT A GLANCE - -------------------------------------------------------------------------------- AS OF AS OF 11/30/05 5/31/05 - -------------------------------------------------------------------------------- Weighted Average Maturity 19.5 yrs 18.8 yrs - -------------------------------------------------------------------------------- Average Duration (Modified) 6.3 yrs 5.2 yrs - -------------------------------------------------------------------------------- YIELDS AS OF NOVEMBER 30, 2005 - -------------------------------------------------------------------------------- 30-DAY SEC YIELD - -------------------------------------------------------------------------------- Investor Class 4.50% - -------------------------------------------------------------------------------- A Class 4.06% - -------------------------------------------------------------------------------- B Class 3.49% - -------------------------------------------------------------------------------- C Class 3.49% - -------------------------------------------------------------------------------- INVESTOR CLASS 30-DAY TAX-EQUIVALENT YIELDS(1) - -------------------------------------------------------------------------------- 25.00% Tax Bracket 6.00% - -------------------------------------------------------------------------------- 28.00% Tax Bracket 6.25% - -------------------------------------------------------------------------------- 33.00% Tax Bracket 6.72% - -------------------------------------------------------------------------------- 35.00% Tax Bracket 6.92% - -------------------------------------------------------------------------------- (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. Total returns for periods less than one year are not annualized. (continued) - ------ 16 High-Yield Municipal - Portfolio Commentary yield rose from 4.32% to 4.69%, a 0.37 percentage point increase. This narrowed the difference between shorter- and longer-term yields and "flattened" the yield curve used to illustrate Treasury yield levels at different maturities. MUNICIPAL MARKET REVIEW The municipal yield curve also rose and flattened, but not as much as the Treasury curve; municipal securities generally outperformed their Treasury counterparts. The Lehman Brothers Municipal Bond Index returned 0.36% for the six months compared with -0.81% for Lehman's U.S. Treasury Index. Interestingly, intermediate-maturity municipal securities generally underperformed shorter- and longer-maturity municipals--the Lehman Brothers 10-Year Municipal Index returned - -0.13% while the Lehman 3-Year Municipal Index and Long-Term Municipal Bond Index returned 0.59% and 0.82%, respectively. Meanwhile, high-yield municipals generally outperformed their investment-grade counterparts--Lehman's Non-Investment Grade Municipal Index returned 1.68%. PORTFOLIO STRATEGY & OUTLOOK We continued to focus on the foundations of our investment approach--thorough credit analysis, careful security selection, and diligent monitoring. We believe our procedures reduce risks inherent to the high-yield sector; there have been no defaults in the portfolio since the fund's inception. Our credit analysis helped us avoid airline bonds during the six months, a tactic that we believe played a key role in the fund's relative performance during the period. Price appreciation from narrowing credit spreads and refinancings of fund holdings also boosted returns. Our approach included strategies designed to realize high income and capital appreciation. We overweighted two types of securities: 1) non-rated bonds that met our credit quality criteria (68% of the portfolio as of November 30, 2005), and 2) land-secured bonds (52% of the portfolio) issued where we believe housing demand is greater than supply. Non-rated bonds boosted the yield while land-secured bonds can appreciate as the economy grows and/or projects are developed and their finances solidify. We view these strategies as essentially "evergreen"--we're unlikely to adjust them much as economic and/or bond market conditions change. We don't believe 2006 will provide sufficient reasons to alter the fundamentals of our approach. PORTFOLIO COMPOSITION BY CREDIT RATING - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 11/30/05 5/31/05 - -------------------------------------------------------------------------------- AAA 14% 12% - -------------------------------------------------------------------------------- BBB 14% 12% - -------------------------------------------------------------------------------- BB 4% 6% - -------------------------------------------------------------------------------- Unrated 68% 70% - -------------------------------------------------------------------------------- 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 NOVEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF FUND INVESTMENTS - -------------------------------------------------------------------------------- Land Secured 52% - -------------------------------------------------------------------------------- Special Tax Revenue 8% - -------------------------------------------------------------------------------- Tax Allocation/Tax Increment 6% - -------------------------------------------------------------------------------- Housing Revenue 6% - -------------------------------------------------------------------------------- Hospital Revenue 4% - -------------------------------------------------------------------------------- - ------ 17 High-Yield Municipal - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- MUNICIPAL SECURITIES -- 95.9% ALASKA -- 0.3% - -------------------------------------------------------------------------------- $ 500,000 Anchorage Schools GO, Series 2000 A, 5.75%, 12/1/10, Prerefunded at 100% of Par (MBIA)(1) $ 550,545 - -------------------------------------------------------------------------------- ARIZONA -- 6.0% - -------------------------------------------------------------------------------- 600,000 Centerra Community Facilities District GO, 5.50%, 7/15/29 600,180 - -------------------------------------------------------------------------------- 1,000,000 Gilbert Water Resource Municipal Property Corp. Rev., (Development Fee & Sub-Lien), 4.90%, 4/1/19 1,002,740 - -------------------------------------------------------------------------------- 3,015,000 Pronghorn Ranch Community Facilities District GO, 6.40%, 7/15/29 3,122,726 - -------------------------------------------------------------------------------- 1,000,000 Quailwood Meadows Community Facilities District GO, 6.125%, 7/15/29 1,018,000 - -------------------------------------------------------------------------------- 1,075,000 Sundance Community Facilities Assessment District No. 2 Rev., 7.125%, 7/1/27 1,199,517 - -------------------------------------------------------------------------------- 978,000 Sundance Community Facilities Assessment District No. 3 Rev., 6.50%, 7/1/29 1,058,411 - -------------------------------------------------------------------------------- 1,000,000 Sundance Community Facilities District GO, 5.00%, 7/15/25 1,002,590 - -------------------------------------------------------------------------------- 395,000 Sundance Community Facilities District GO, 6.25%, 7/15/29 426,493 - -------------------------------------------------------------------------------- 550,000 Sundance Community Facilities District GO, 5.125%, 7/15/30 550,380 - -------------------------------------------------------------------------------- 1,500,000 Vistancia Community Facilities District GO, 5.50%, 7/15/20 1,509,360 - -------------------------------------------------------------------------------- 1,200,000 Vistancia Community Facilities District GO, 5.75%, 7/15/24 1,212,720 - -------------------------------------------------------------------------------- 12,703,117 - -------------------------------------------------------------------------------- CALIFORNIA -- 21.5% - -------------------------------------------------------------------------------- 2,000,000 Beaumont Financing Auth. Local Agency Rev., Series 2003 A, 6.875%, 9/1/27 2,230,960 - -------------------------------------------------------------------------------- 1,490,000 Beaumont Financing Auth. Special Tax Rev., Series 2005 B, 5.40%, 9/1/35 1,490,969 - -------------------------------------------------------------------------------- 750,000 California Communities Development Auth. Rev., (Thomas Jefferson School of Law), 7.75%, 10/1/11, Prerefunded at 101% of Par(1) 898,095 - -------------------------------------------------------------------------------- 2,000,000 California Mobilehome Park Financing Auth. Rev., Series 2003 B, (Palomar Estates E&W), 7.00%, 9/15/36 2,182,820 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- $4,000,000 City of Vallejo COP, (Marine World Foundation), 7.00%, 2/1/17 $ 4,170,320 - -------------------------------------------------------------------------------- 4,500,000 El Dorado Special Tax Rev., (Community Facility District No. 1), 5.25%, 9/1/35 4,469,444 - -------------------------------------------------------------------------------- 2,420,000 Golden State Tobacco Securitization Corp. Rev., Series 2003 A-1, 6.75%, 6/1/39 2,726,566 - -------------------------------------------------------------------------------- 500,000 Golden State Tobacco Securitization Corp. Rev., Series 2003 A1, 6.625%, 6/1/40 550,480 - -------------------------------------------------------------------------------- 910,000 Hawaiian Gardens COP, Series 2000 A, 8.00%, 6/1/23 967,949 - -------------------------------------------------------------------------------- 1,510,000 Hemet Unified School District Special Tax Rev., (Community Facilities District No. 2005-2), 5.25%, 9/1/35(2) 1,510,438 - -------------------------------------------------------------------------------- 2,235,000 Independent Cities Lease Finance Auth. Rev., Series 2004 A, (Morgan Hill - Hacienda Various Projects), 5.90%, 11/15/34 2,354,997 - -------------------------------------------------------------------------------- 1,275,000 Indio Community Facilities District No. 04-3 Special Tax Rev., (Terra Lago Improvement Area 1), 5.15%, 9/1/35 1,252,229 - -------------------------------------------------------------------------------- 2,000,000 Indio Redevelopment Agency Tax Allocation Rev., Series 2004 B, (Sub-Merged Project Area), 6.50%, 8/15/34 2,151,760 - -------------------------------------------------------------------------------- 4,735,000 Moreno Valley Unified School District Special Tax Rev., (Community Facilities District No. 2004-6), 5.20%, 9/1/36(2) 4,729,514 - -------------------------------------------------------------------------------- 1,810,000 Murrieta Community Facilities District No. 3 Special Tax Rev., (Creekside Village Improvement Area No. 1), 5.20%, 9/1/35 1,781,040 - -------------------------------------------------------------------------------- 1,390,000 Perris Community Facilities District No. 3, Series 2005 A, (Improvement Area No. 2), 5.30%, 9/1/35 1,402,607 - -------------------------------------------------------------------------------- 3,000,000 Perris Public Financing Auth. Special Tax Rev., Series 2003 A, 6.25%, 9/1/33 3,245,910 - -------------------------------------------------------------------------------- 1,700,000 Poway Unified School District Special Tax Rev., (Community Facilities District No. 6-4), 5.125%, 9/1/35 1,699,864 - -------------------------------------------------------------------------------- 1,000,000 Riverside Unified School District Special Tax Rev., Series 2005 A, (Community Facilities District No. 15), 5.25%, 9/1/35 1,000,290 - -------------------------------------------------------------------------------- 2,000,000 Roseville Special Tax Rev., (Community Facilities District No.1-Westpark), 5.20%, 9/1/36 1,997,700 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 18 High-Yield Municipal - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- $1,000,000 Soledad Special Assessment, (Diamond Ridge Assessment District No. 02-01), 6.75%, 9/2/33 $ 1,086,860 - -------------------------------------------------------------------------------- 1,595,000 Vallejo Multifamily Housing Rev., Series 1998 B, (Solano Affordable Housing), 8.25%, 4/1/39 (Acquired 12/12/02, Cost $1,726,412)(3) 1,752,873 - -------------------------------------------------------------------------------- 45,653,685 - -------------------------------------------------------------------------------- COLORADO -- 5.8% - -------------------------------------------------------------------------------- 3,000,000 Denver Health & Hospital Auth. Healthcare Rev., Series 2004 A, 6.25%, 12/1/33 3,286,260 - -------------------------------------------------------------------------------- 640,000 Douglas County School District No. Re-1 GO, Series 2002 B, (Douglas & Elbert Counties), 5.75%, 12/15/12, Prerefunded at 100% of Par (FSA/State Aid Withholding)(1) 719,699 - -------------------------------------------------------------------------------- 3,000,000 One Horse Business Improvement District Rev., 6.00%, 6/1/24 3,110,880 - -------------------------------------------------------------------------------- 1,500,000 Plaza Metropolitan District No. 1 Rev., 8.00%, 12/1/25 1,652,370 - -------------------------------------------------------------------------------- 2,000,000 Todd Creek Farms Metropolitan District No. 1 Rev., 5.60%, 12/1/14 1,983,980 - -------------------------------------------------------------------------------- 1,500,000 Todd Creek Farms Metropolitan District No. 1 Rev., 6.125%, 12/1/19 1,487,490 - -------------------------------------------------------------------------------- 12,240,679 - -------------------------------------------------------------------------------- CONNECTICUT -- 0.5% - -------------------------------------------------------------------------------- 1,000,000 Connecticut Development Auth. Industrial Rev., (Afco Cargo BDL-LLC), 8.00%, 4/1/30 1,082,960 - -------------------------------------------------------------------------------- DISTRICT OF COLUMBIA -- 0.9% - -------------------------------------------------------------------------------- 1,000,000 District of Columbia COP, (Public Safety & Emergency), 5.50%, 1/1/19 (Ambac) 1,082,970 - -------------------------------------------------------------------------------- 750,000 Metropolitan Washington D.C. Airports Auth. General Rev., Series 2001 A, 5.50%, 10/1/18 (MBIA) 797,865 - -------------------------------------------------------------------------------- 1,880,835 - -------------------------------------------------------------------------------- FLORIDA -- 16.5% - -------------------------------------------------------------------------------- 2,800,000 Anthem Park Community Development District Rev., 5.80%, 5/1/36 2,831,416 - -------------------------------------------------------------------------------- 50,000 Arbor Greene Community Development District Special Assessment, 5.75%, 5/1/06 50,244 - -------------------------------------------------------------------------------- 1,500,000 Bartam Park Community Development Special Assessment, 5.30%, 5/1/35 1,505,775 - -------------------------------------------------------------------------------- 3,395,000 Concorde Estates Community Development District Rev., Series 2004 B, 5.00%, 5/1/11 3,403,657 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- $ 450,000 Covington Park Community Development District Rev., Series 2004 B, (Capital Improvement), 5.30%, 11/1/09 $ 451,953 - -------------------------------------------------------------------------------- 990,000 Double Branch Community Development District Special Assessment, Series 2002 A, 6.70%, 5/1/34 1,074,754 - -------------------------------------------------------------------------------- 640,000 Double Branch Community Development District Special Assessment, Series 2003 C, 5.125%, 5/1/08 642,976 - -------------------------------------------------------------------------------- 4,815,000 Dupree Lakes Community Development District Rev., 5.00%, 11/1/10 4,813,747 - -------------------------------------------------------------------------------- 520,000 Fleming Island Plantation Community Development District Special Assessment, Series 2000 B, 7.375%, 5/1/31 562,172 - -------------------------------------------------------------------------------- 845,000 Gateway Services Community Development District Special Assessment, Series 2003 B, (Sun City Center - Fort Meyers), 5.50%, 5/1/10 848,836 - -------------------------------------------------------------------------------- 580,000 Heritage Harbor South Community Development District Rev., Series 2002 B, 5.40%, 11/1/08 583,091 - -------------------------------------------------------------------------------- 2,000,000 Lake Ashton II Community Development District Rev., Series 2005 B, 4.875%, 11/1/10 2,000,520 - -------------------------------------------------------------------------------- 735,000 Middle Village Community Development District Special Assessment, Series 2004 B, 5.00%, 5/1/09 737,624 - -------------------------------------------------------------------------------- 1,500,000 Midtown Miami Community Development District Special Assessment, Series 2004 A, 6.25%, 5/1/37 1,590,990 - -------------------------------------------------------------------------------- 1,000,000 Orange County School Board COP, Series 2002 A, 5.50%, 8/1/19 (MBIA) 1,089,740 - -------------------------------------------------------------------------------- 200,000 Reunion East Community Development District Special Assessment Rev., Series 2002 B, 5.90%, 11/1/07 201,482 - -------------------------------------------------------------------------------- 1,245,000 South-Dade Venture Community Development District Rev., 6.125%, 5/1/34 1,313,251 - -------------------------------------------------------------------------------- 2,465,000 Sterling Hill Community Development District Special Assessment, Series 2003 B, 5.50%, 11/1/10 2,475,304 - -------------------------------------------------------------------------------- 380,000 Stoneybrook West Community Development District Special Assessment, Series 2000 A, 7.00%, 5/1/32 406,680 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 19 High-Yield Municipal - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- $ 965,000 Waterchase Community Development District Rev., Series 2001 A, 6.70%, 5/1/32 $ 1,030,678 - -------------------------------------------------------------------------------- 3,500,000 Watergrass Community Development District Special Assessment, Series 2005 B, 4.875%, 11/1/10 3,501,995 - -------------------------------------------------------------------------------- 1,710,000 Waters Edge Community Development District Rev., 5.30%, 5/1/36 1,708,632 - -------------------------------------------------------------------------------- 2,000,000 Westchester Community Development District No. 1 Special Assessment, (Infrastructure), 6.125%, 5/1/35 2,094,340 - -------------------------------------------------------------------------------- 34,919,857 - -------------------------------------------------------------------------------- GEORGIA -- 1.0% - -------------------------------------------------------------------------------- 650,000 Atlanta Water & Wastewater Rev., Series 1999 A, 5.50%, 11/1/18 (FGIC) 732,531 - -------------------------------------------------------------------------------- 1,300,000 Gwinnett County Water & Sewer Auth. Rev., 4.00%, 8/1/14 1,311,531 - -------------------------------------------------------------------------------- 2,044,062 - -------------------------------------------------------------------------------- GUAM -- 0.5% - -------------------------------------------------------------------------------- 390,000 Guam International Airport Auth. Rev., Series 2003 A, 4.00%, 10/1/10 (MBIA) 397,722 - -------------------------------------------------------------------------------- 690,000 Guam International Airport Auth. Rev., Series 2003 A, 4.00%, 10/1/11 (MBIA) 702,931 - -------------------------------------------------------------------------------- 1,100,653 - -------------------------------------------------------------------------------- ILLINOIS -- 2.1% - -------------------------------------------------------------------------------- 1,325,000 Bedford Park Tax Allocation Rev., 5.125%, 12/30/18 1,329,704 - -------------------------------------------------------------------------------- 3,000,000 Chicago Tax Increment Allocation Rev., Series 2004 B, (Pilsen Redevelopment), (Junior Lien), 6.75%, 6/1/22 3,149,160 - -------------------------------------------------------------------------------- 4,478,864 - -------------------------------------------------------------------------------- IOWA -- 0.9% - -------------------------------------------------------------------------------- 2,000,000 Tobacco Settlement Auth. Rev., Series 2005 C, 5.50%, 6/1/42 1,946,320 - -------------------------------------------------------------------------------- MARYLAND -- 4.2% - -------------------------------------------------------------------------------- 1,250,000 Anne Arundel County Special Obligation Rev., (Arundel Mills), 7.10%, 7/1/09, Prerefunded at 102% of Par(1) 1,422,625 - -------------------------------------------------------------------------------- 1,000,000 Anne Arundel County Special Obligation Rev., (National Business Park), 7.375%, 7/1/10, Prerefunded at 102% of Par(1) 1,174,470 - -------------------------------------------------------------------------------- 1,000,000 Baltimore Rev., (North Locust Point), 5.50%, 9/1/34 996,330 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- $1,000,000 Maryland Industrial Development Financing Auth. Rev., Series 2005 A, (Our Lady of Good Counsel High School), 6.00%, 5/1/35 $ 1,022,160 - -------------------------------------------------------------------------------- 1,250,000 Prince Georges County Rev., (Victoria Falls), 5.25%, 7/1/35 1,259,663 - -------------------------------------------------------------------------------- 1,224,000 Prince Georges County Rev., (Woodview Village Phase II - Subdistrict), 7.00%, 7/1/32 1,311,822 - -------------------------------------------------------------------------------- 1,810,000 Prince Georges County Special Obligation Rev., (National Harbor), 5.20%, 7/1/34 1,803,230 - -------------------------------------------------------------------------------- 8,990,300 - -------------------------------------------------------------------------------- MASSACHUSSETTS -- 1.0% - -------------------------------------------------------------------------------- 2,000,000 Massachusetts School Building Auth. Rev., Series 2005 A, 5.00%, 8/15/30 (FSA) 2,077,020 - -------------------------------------------------------------------------------- MISSOURI -- 0.6% - -------------------------------------------------------------------------------- 860,000 Missouri Bottom Transportation Development District Hazelwood Rev., 7.20%, 5/1/33 933,161 - -------------------------------------------------------------------------------- 405,000 Missouri Housing Development Commission Mortgage Rev., Series 1998 B2, (Single Family), 6.40%, 9/1/29 413,618 - -------------------------------------------------------------------------------- 1,346,779 - -------------------------------------------------------------------------------- NEVADA -- 11.0% - -------------------------------------------------------------------------------- 1,095,000 Clark County Improvement District No. 121 Special Assessment, (Southern Highlands Area), 7.50%, 12/1/19 1,180,717 - -------------------------------------------------------------------------------- 3,000,000 Clark County Improvement District No. 142 Special Assessment, 5.50%, 8/1/12 3,096,029 - -------------------------------------------------------------------------------- 2,405,000 Clark County Improvement District No. 151 Special Assessment, (Summerlin), 5.00%, 8/1/25 2,400,358 - -------------------------------------------------------------------------------- 695,000 Clark County Improvement Districts No. 108 & 124 Special Assessment, Series 2003 B, 5.25%, 2/1/12 716,899 - -------------------------------------------------------------------------------- 735,000 Clark County Improvement Districts No. 108 & 124 Special Assessment, Series 2003 B, 5.375%, 2/1/13 758,395 - -------------------------------------------------------------------------------- 705,000 Clark County Improvement Districts No. 108 & 124 Special Assessment, Series 2003 B, 5.40%, 2/1/14 727,454 - -------------------------------------------------------------------------------- 1,540,000 Henderson Local Improvement District No. T-14 Special Assessment, 5.25%, 3/1/13 1,589,896 - -------------------------------------------------------------------------------- 1,560,000 Henderson Local Improvement District No. T-15 Special Assessment, 6.10%, 3/1/24 1,613,539 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 20 High-Yield Municipal - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- $1,000,000 Henderson Local Improvement District No. T-16 Special Assessment, (The Falls at Lake Las Vegas), 5.00%, 3/1/20 $ 993,380 - -------------------------------------------------------------------------------- 250,000 Henderson Local Improvement District No. T-17 Special Assessment, 5.00%, 9/1/18 249,165 - -------------------------------------------------------------------------------- 2,800,000 Henderson Local Improvement District No. T-17 Special Assessment, 5.00%, 9/1/25 2,794,568 - -------------------------------------------------------------------------------- 1,105,000 Henderson Redevelopment Agency Tax Allocation Rev., Series 2002 B, 7.10%, 10/1/22 1,199,245 - -------------------------------------------------------------------------------- 350,000 Henderson Redevelopment Agency Tax Allocation Rev., Series 2002 B, 7.20%, 10/1/25 381,332 - -------------------------------------------------------------------------------- 1,275,000 Las Vegas Improvement District No. 607 Special Assessment, 5.50%, 6/1/13 1,321,168 - -------------------------------------------------------------------------------- 490,000 Las Vegas Improvement District No. 808-Summerlin Area Special Assessment, 5.40%, 6/1/06 492,842 - -------------------------------------------------------------------------------- 495,000 Las Vegas Improvement District No. 808-Summerlin Area Special Assessment, 5.70%, 6/1/08 511,766 - -------------------------------------------------------------------------------- 1,155,000 North Las Vegas Improvement District No. 60-Aliante Special Assessment, 5.25%, 12/1/10 1,199,006 - -------------------------------------------------------------------------------- 490,000 North Las Vegas Improvement District No. 60-Aliante Special Assessment, 5.60%, 12/1/12 508,860 - -------------------------------------------------------------------------------- 745,000 Reno Special Assessment District No. 4 Rev., (Somersett Parkway), 5.20%, 12/1/10 767,864 - -------------------------------------------------------------------------------- 785,000 Reno Special Assessment District No. 4 Rev., (Somersett Parkway), 5.45%, 12/1/11 809,186 - -------------------------------------------------------------------------------- 23,311,669 - -------------------------------------------------------------------------------- NEW JERSEY -- 6.0% - -------------------------------------------------------------------------------- 1,000,000 New Jersey Economic Development Auth. COP, Series 1999 A, (Transportation Sublease), 6.00%, 5/1/09, Prerefunded at 100% of Par (FSA)(1) 1,079,810 - -------------------------------------------------------------------------------- 3,700,000 New Jersey Economic Development Auth. Rev., Series 2005 A, (Cranes Mill), 5.10%, 6/1/27(4) 3,559,807 - -------------------------------------------------------------------------------- 4,000,000 Tobacco Settlement Financing Corp. Rev., 6.00%, 6/1/37 4,120,200 - -------------------------------------------------------------------------------- 3,835,000 Tobacco Settlement Financing Corp. Rev., 6.125%, 6/1/42 3,969,839 - -------------------------------------------------------------------------------- 12,729,656 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- NEW MEXICO -- 1.2% - -------------------------------------------------------------------------------- $1,490,000 Cabezon Public Improvement District Special Tax Rev., 6.30%, 9/1/34 $ 1,526,505 - -------------------------------------------------------------------------------- 1,000,000 Ventana West Public Improvement District Special Levy Rev., 6.875%, 8/1/33 1,056,640 - -------------------------------------------------------------------------------- 2,583,145 - -------------------------------------------------------------------------------- NEW YORK -- 0.9% - -------------------------------------------------------------------------------- 1,000,000 Onondaga County Industrial Development Auth. Rev., (Air Cargo), 7.25%, 1/1/32 1,058,820 - -------------------------------------------------------------------------------- 1,000,000 Westchester Tobacco Asset Securitization Rev., 5.125%, 6/1/38 945,670 - -------------------------------------------------------------------------------- 2,004,490 - -------------------------------------------------------------------------------- NORTHERN MARIANA ISLANDS -- 1.0% - -------------------------------------------------------------------------------- 2,000,000 Northern Mariana Islands Commonwealth GO, Series 2003 A, 6.75%, 10/1/33 2,173,800 - -------------------------------------------------------------------------------- OHIO -- 2.6% - -------------------------------------------------------------------------------- 1,160,000 Hebron Waterworks Rev., 5.875%, 12/1/25 1,192,874 - -------------------------------------------------------------------------------- 745,000 Hebron Waterworks Rev., 6.125%, 12/1/29 776,029 - -------------------------------------------------------------------------------- 1,800,000 Pinnacle Community Infrastructure Financing Facilities Auth. Rev., Series 2004 A, 6.25%, 12/1/36 1,851,751 - -------------------------------------------------------------------------------- 500,000 Plain Local School District GO, 5.50%, 12/1/19 (FGIC) 545,110 - -------------------------------------------------------------------------------- 1,100,000 Port of Greater Cincinnati Development Auth. Special Assessment, (Cooperative Public Parking Infrastructure), 6.40%, 2/15/34 1,181,323 - -------------------------------------------------------------------------------- 5,547,087 - -------------------------------------------------------------------------------- OKLAHOMA -- 0.4% - -------------------------------------------------------------------------------- 750,000 Oklahoma City Industrial & Cultural Facilities Trust Rev., 6.75%, 1/1/23 775,118 - -------------------------------------------------------------------------------- PENNSYLVANIA -- 3.2% - -------------------------------------------------------------------------------- 2,750,000 Allegheny County Redevelopment Auth. Tax Allocation, (Pittsburgh Mills), 5.10%, 7/1/14 2,820,016 - -------------------------------------------------------------------------------- 1,000,000 Allegheny County Redevelopment Auth. Tax Allocation, (Pittsburgh Mills), 5.60%, 7/1/23 1,037,560 - -------------------------------------------------------------------------------- 1,325,000 Chartiers Valley School District GO, Series 2004 A, 5.00%, 10/15/20 (FSA/State Aid Withholding) 1,401,280 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 21 High-Yield Municipal - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- $1,000,000 Langhorne Manor Boro Higher Education Auth. Rev., (Philadelphia Biblical University), 5.50%, 4/1/25 $ 998,150 - -------------------------------------------------------------------------------- 530,000 New Morgan Municipal Auth. Office Rev., Series 1999 A, (Commonwealth Office), 5.375%, 6/1/08 524,917 - -------------------------------------------------------------------------------- 6,781,923 - -------------------------------------------------------------------------------- RHODE ISLAND -- 0.3% - -------------------------------------------------------------------------------- 500,000 Cranston GO, 6.375%, 11/15/09, Prerefunded at 101% of Par (FGIC)(1) 557,740 - -------------------------------------------------------------------------------- TENNESSEE -- 2.4% - -------------------------------------------------------------------------------- 1,475,000 Chattanooga Health Educational & Housing Facility Board Rev., Series 2005 B, (Campus Development Foundation, Inc. Phase I LLC), 5.50%, 10/1/20 1,465,280 - -------------------------------------------------------------------------------- 3,565,000 Chattanooga Health Educational & Housing Facility Board Rev., Series 2005 B, (Campus Development Foundation, Inc. Phase I LLC), 6.00%, 10/1/35 3,606,354 - -------------------------------------------------------------------------------- 5,071,634 - -------------------------------------------------------------------------------- TEXAS -- 2.0% - -------------------------------------------------------------------------------- 710,000 Abia Development Corp. Airport Facilities Rev., (Aero Austin L.P.), 6.75%, 1/1/11 714,998 - -------------------------------------------------------------------------------- 400,000 Bexar County Health Facilities Development Corp. Rev., (Army Retirement Residence), 6.125%, 7/1/22 427,276 - -------------------------------------------------------------------------------- 1,000,000 Bexar County Health Facilities Development Corp. Rev., (Army Retirement Residence), 6.30%, 7/1/32 1,064,250 - -------------------------------------------------------------------------------- 2,000,000 Pearland Development Auth. Rev., 5.50%, 9/1/28 2,042,300 - -------------------------------------------------------------------------------- 4,248,824 - -------------------------------------------------------------------------------- UTAH -- 0.7% - -------------------------------------------------------------------------------- 175,000 Bountiful Hospital Rev., (South Davis Community Hospital), 5.125%, 12/15/05 175,081 - -------------------------------------------------------------------------------- 1,235,000 West Valley City Rev., Series 2001 A, 5.50%, 7/15/15 (MBIA) 1,346,767 - -------------------------------------------------------------------------------- 1,521,848 - -------------------------------------------------------------------------------- VIRGINIA -- 0.9% - -------------------------------------------------------------------------------- 2,000,000 Tobacco Settlement Financing Corp. Rev., 5.625%, 6/1/37 2,005,840 - -------------------------------------------------------------------------------- WASHINGTON -- 0.6% - -------------------------------------------------------------------------------- 860,000 Cowlitz County Kelso School District No. 458 GO, 5.75%, 12/1/18 (FSA) 950,352 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- $ 250,000 Port of Seattle Rev., Series 2000 B, 6.00%, 2/1/15 (MBIA) $ 280,800 - -------------------------------------------------------------------------------- 1,231,152 - -------------------------------------------------------------------------------- WISCONSIN -- 0.9% - -------------------------------------------------------------------------------- 2,000,000 Wisconsin State Health & Educational Facilities Auth. Rev., Series 2004 A, (Southwest Health Center), 6.25%, 4/1/34 2,025,680 - -------------------------------------------------------------------------------- TOTAL MUNICIPAL SECURITIES (Cost $197,600,290) 203,585,282 - -------------------------------------------------------------------------------- SHORT-TERM MUNICIPAL SECURITIES -- 5.2% ARIZONA -- 0.5% - -------------------------------------------------------------------------------- 950,000 Pima County Industrial Development Auth. Lease Rev., VRDN, 3.18%, 12/1/05 (SBBPA: Societe Generale) 950,000 - -------------------------------------------------------------------------------- MICHIGAN -- 2.0% - -------------------------------------------------------------------------------- 4,300,000 Detroit Rev., Series 2003 B, VRDN, 3.00%, 12/1/05 (FSA)(4) 4,300,000 - -------------------------------------------------------------------------------- OHIO -- 1.7% - -------------------------------------------------------------------------------- 3,675,000 Trumbull County Rev., (Shepherd Valley), VRDN, 3.06%, 12/1/05 (RADIAN) (SBBPA: Fleet National Bank)(4) 3,675,000 - -------------------------------------------------------------------------------- PENNSYLVANIA -- 1.0% - -------------------------------------------------------------------------------- 2,110,000 Delaware County Industrial Development Auth. Rev., (Exelon), VRDN, 3.06%, 12/1/05 (LOC: Wachovia Bank N.A.) 2,110,000 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM MUNICIPAL SECURITIES (Cost $11,035,000) 11,035,000 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS(5) 27,000 Federated Tax-Free Obligation Fund (Cost $27,000) 27,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 101.1% (Cost $208,662,290) 214,647,282 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (1.1)% (2,377,972) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $212,269,310 ================================================================================ See Notes to Financial Statements. (continued) - ------ 22 High-Yield Municipal - Schedule of Investments NOVEMBER 30, 2005 (UNAUDITED) FUTURES CONTRACTS* Expiration Underlying Face Unrealized Contracts Sold Date Amount at Value Gain (Loss) - -------------------------------------------------------------------------------- 40 U.S. Long Bond March 2006 $4,481,250 $8,347 ================================== *FUTURES CONTRACTS typically are based on an index or specific securities and tend to track the performance of the index or specific securities while remaining very liquid (easy to buy and sell). By selling futures, the fund hedges its investments against price fluctuations. NOTES TO SCHEDULE OF INVESTMENTS Ambac = Ambac Assurance Corporation COP = Certificates of Participation FGIC = Financial Guaranty Insurance Co. FSA = Financial Security Assurance, Inc. 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 November 30, 2005. (1) Escrowed to maturity in U.S. government securities or state and local government securities. (2) When-issued security. (3) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at November 30, 2005 was $1,752,873, which represented 0.8% of total net assets. (4) Security, or a portion thereof, has been segregated for a futures contract and/or when-issued security. (5) Category is less than 0.05% of total net assets. See Notes to Financial Statements. - ------ 23 Shareholder Fee Examples (Unaudited) Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from June 1, 2005 to November 30, 2005. ACTUAL EXPENSES The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If you hold Investor Class shares of any American Century fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century account (i.e., not a financial intermediary or retirement plan account), American Century may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered under your Social Security number. PERSONAL ACCOUNTS include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund's share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. (continued) - ------ 24 Shareholder Fee Examples (Unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 6/1/05 - EXPENSE 6/1/05 11/30/05 11/30/05 RATIO* - -------------------------------------------------------------------------------- ARIZONA MUNICIPAL BOND SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- ACTUAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,004.20 $2.46 0.49% - -------------------------------------------------------------------------------- A Class $1,000 $1,002.90 $3.72 0.74% - -------------------------------------------------------------------------------- B Class $1,000 $999.30 $7.47 1.49% - -------------------------------------------------------------------------------- C Class $1,000 $999.10 $7.47 1.49% - -------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,022.61 $2.48 0.49% - -------------------------------------------------------------------------------- A Class $1,000 $1,021.36 $3.75 0.74% - -------------------------------------------------------------------------------- B Class $1,000 $1,017.60 $7.54 1.49% - -------------------------------------------------------------------------------- C Class $1,000 $1,017.60 $7.54 1.49% - -------------------------------------------------------------------------------- FLORIDA MUNICIPAL BOND SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- ACTUAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,003.40 $2.46 0.49% - -------------------------------------------------------------------------------- A Class $1,000 $1,002.10 $3.71 0.74% - -------------------------------------------------------------------------------- B Class $1,000 $998.30 $7.46 1.49% - -------------------------------------------------------------------------------- C Class $1,000 $998.40 $7.46 1.49% - -------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,022.61 $2.48 0.49% - -------------------------------------------------------------------------------- A Class $1,000 $1,021.36 $3.75 0.74% - -------------------------------------------------------------------------------- B Class $1,000 $1,017.60 $7.54 1.49% - -------------------------------------------------------------------------------- C Class $1,000 $1,017.60 $7.54 1.49% - -------------------------------------------------------------------------------- *Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (continued) - ------ 25 Shareholder Fee Examples (Unaudited) - -------------------------------------------------------------------------------- EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 6/1/05 - EXPENSE 6/1/05 11/30/05 11/30/05 RATIO* - -------------------------------------------------------------------------------- HIGH-YIELD MUNICIPAL SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- ACTUAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,020.60 $3.14 0.62% - -------------------------------------------------------------------------------- A Class $1,000 $1,019.30 $4.40 0.87% - -------------------------------------------------------------------------------- B Class $1,000 $1,015.50 $8.19 1.62% - -------------------------------------------------------------------------------- C Class $1,000 $1,015.40 $8.18 1.62% - -------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,021.96 $3.14 0.62% - -------------------------------------------------------------------------------- A Class $1,000 $1,020.71 $4.41 0.87% - -------------------------------------------------------------------------------- B Class $1,000 $1,016.95 $8.19 1.62% - -------------------------------------------------------------------------------- C Class $1,000 $1,016.95 $8.19 1.62% - -------------------------------------------------------------------------------- *Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 26 Statement of Assets and Liabilities NOVEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- ARIZONA FLORIDA MUNICIPAL MUNICIPAL HIGH-YIELD BOND BOND MUNICIPAL - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $56,170,193, $44,204,199, and $208,662,290, respectively) $58,017,997 $45,803,331 $214,647,282 - ---------------------------------- Cash 65,856 -- 51,564 - ---------------------------------- Receivable for investments sold 758,499 1,850,974 -- - ---------------------------------- Receivable for capital shares sold 3,829 1,678 886,848 - ---------------------------------- Receivable for variation margin on futures contracts 245 2,008 6,695 - ---------------------------------- Unrealized appreciation on swap agreements 1,944 1,944 -- - ---------------------------------- Interest receivable 1,016,491 540,725 3,296,933 - -------------------------------------------------------------------------------- 59,864,861 48,200,660 218,889,322 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Disbursements in excess of demand deposit cash -- 85,454 -- - ---------------------------------- Payable for investments purchased 1,075,213 -- 6,216,082 - ---------------------------------- Payable for capital shares redeemed -- -- 20,430 - ---------------------------------- Accrued management fees 23,380 19,500 104,989 - ---------------------------------- Distribution fees payable 418 1,152 16,692 - ---------------------------------- Service fees (and distribution fees -- A Class) payable 984 728 27,636 - ---------------------------------- Dividends payable 39,947 45,873 234,183 - -------------------------------------------------------------------------------- 1,139,942 152,707 6,620,012 - -------------------------------------------------------------------------------- NET ASSETS $58,724,919 $48,047,953 $212,269,310 ================================================================================ NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital paid in $56,832,538 $46,779,768 $208,791,027 - ---------------------------------- Accumulated undistributed net realized gain (loss) on investment transactions 42,633 (332,891) (2,515,056) - ---------------------------------- Net unrealized appreciation on investments 1,849,748 1,601,076 5,993,339 - -------------------------------------------------------------------------------- $58,724,919 $48,047,953 $212,269,310 ================================================================================ INVESTOR CLASS - -------------------------------------------------------------------------------- Net assets $53,948,895 $44,540,498 $73,728,411 - ---------------------------------- Shares outstanding 5,000,627 4,185,186 7,047,887 - ---------------------------------- Net asset value per share $10.79 $10.64 $10.46 - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- Net assets $4,135,570 $1,641,986 $110,493,767 - ---------------------------------- Shares outstanding 383,334 154,287 10,562,384 - ---------------------------------- Net asset value per share $10.79 $10.64 $10.46 - ---------------------------------- Maximum offering price (net asset value divided by 0.955) $11.30 $11.14 $10.95 - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- Net assets $2,524 $29,271 $4,168,232 - ---------------------------------- Shares outstanding 234 2,750 398,452 - ---------------------------------- Net asset value per share $10.79 $10.64 $10.46 - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- Net assets $637,930 $1,836,198 $23,878,900 - ---------------------------------- Shares outstanding 59,131 172,536 2,282,643 - ---------------------------------- Net asset value per share $10.79 $10.64 $10.46 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 27 Statement of Operations FOR THE SIX MONTHS ENDED NOVEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- ARIZONA FLORIDA MUNICIPAL MUNICIPAL HIGH-YIELD BOND BOND MUNICIPAL - -------------------------------------------------------------------------------- INVESTMENT INCOME - -------------------------------------------------------------------------------- INCOME: - ---------------------------------- Interest $1,087,394 $1,104,147 $5,130,253 - -------------------------------------------------------------------------------- EXPENSES: - ---------------------------------- Management fees 142,579 124,074 581,201 - ---------------------------------- Distribution Fees: - ---------------------------------- B Class 9 104 14,398 - ---------------------------------- C Class 2,654 6,620 77,097 - ---------------------------------- Service Fees: - --------------------------------- B Class 3 35 4,800 - ---------------------------------- C Class 885 2,207 25,699 - ---------------------------------- Service and distribution fees -- A Class 5,076 2,335 120,174 - ---------------------------------- Trustees' fees and expenses 1,891 1,669 5,870 - ---------------------------------- Other expenses 92 49 709 - -------------------------------------------------------------------------------- 153,189 137,093 829,948 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 934,205 967,054 4,300,305 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- Net realized gain (loss) on investment transactions 57,887 167,993 110,700 - ---------------------------------- Change in net unrealized appreciation (depreciation) on investments (744,873) (981,732) (867,203) - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) (686,986) (813,739) (756,503) - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 247,219 $ 153,315 $3,543,802 ================================================================================ See Notes to Financial Statements. - ------ 28 Statement of Changes in Net Assets SIX MONTHS ENDED NOVEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MAY 31, 2005 - ---------------------------------------------------------------------------------------------------- ARIZONA MUNICIPAL BOND FLORIDA MUNICIPAL BOND - ---------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS NOV. 30, 2005 MAY 31, 2005 NOV. 30, 2005 MAY 31, 2005 - ---------------------------------------------------------------------------------------------------- OPERATIONS - ---------------------------------------------------------------------------------------------------- Net investment income $ 934,205 $ 2,278,480 $ 967,054 $ 2,157,343 - --------------------------------- Net realized gain (loss) 57,887 99,571 167,993 (205,313) - --------------------------------- Change in net unrealized appreciation (depreciation) (744,873) 603,330 (981,732) 977,499 - ---------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 247,219 2,981,381 153,315 2,929,529 - ---------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ---------------------------------------------------------------------------------------------------- From net investment income - --------------------------------- Investor Class (1,063,738) (2,147,979) (908,025) (2,068,408) - --------------------------------- A Class (75,165) (118,487) (33,595) (50,159) - --------------------------------- B Class (38) (72) (389) (423) - --------------------------------- C Class (10,431) (11,942) (25,045) (38,353) - --------------------------------- From net realized gains - --------------------------------- Investor Class -- (12,600) -- -- - --------------------------------- A Class -- (792) -- -- - --------------------------------- B Class -- (1) -- -- - --------------------------------- C Class -- (102) -- -- - ---------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (1,149,372) (2,291,975) (967,054) (2,157,343) - ---------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - ---------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions 1,432,530 (4,235,455) (4,541,352) (12,320,526) - ---------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 530,377 (3,546,049) (5,355,091) (11,548,340) NET ASSETS - ---------------------------------------------------------------------------------------------------- Beginning of period 58,194,542 61,740,591 53,403,044 64,951,384 - ---------------------------------------------------------------------------------------------------- End of period $58,724,919 $58,194,542 $48,047,953 $ 53,403,044 ==================================================================================================== See Notes to Financial Statements. (continued) - ------ 29 Statement of Changes in Net Assets SIX MONTHS ENDED NOVEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MAY 31, 2005 - -------------------------------------------------------------------------------- HIGH-YIELD MUNICIPAL - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS NOV. 30, 2005 MAY 31, 2005 - -------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------- Net investment income $ 4,300,305 $ 5,964,223 - ------------------------------------------ Net realized gain (loss) 110,700 190,926 - ------------------------------------------ Change in net unrealized appreciation (depreciation) (867,203) 5,362,877 - -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 3,543,802 11,518,026 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------- From net investment income - ------------------------------------------ Investor Class (1,642,688) (2,901,842) - ------------------------------------------ A Class (2,204,195) (2,459,571) - ------------------------------------------ B Class (73,344) (121,581) - ------------------------------------------ C Class (391,137) (481,229) - -------------------------------------------------------------------------------- Decrease in net assets from distributions (4,311,364) (5,964,223) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions 50,397,715 58,412,524 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 49,630,153 63,966,327 NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 162,639,157 98,672,830 - -------------------------------------------------------------------------------- End of period $212,269,310 $162,639,157 ================================================================================ Undistributed net investment income -- $11,059 ================================================================================ - ------ 30 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Municipal Trust (the trust) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Arizona Municipal Bond Fund (Arizona Municipal Bond), Florida Municipal Bond Fund (Florida Municipal Bond) 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 Bond'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 Bond'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 Bond and Florida Municipal Bond invest primarily in Arizona and Florida municipal obligations, respectively. High-Yield Municipal's investment objective is to seek high current income that is exempt from federal income taxes. Capital appreciation is a secondary objective. High-Yield Municipal invests primarily in long-term and intermediate-term municipal obligations. 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 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 fund are allocated to each class of shares based on their relative net assets. SECURITY VALUATIONS -- Debt securities maturing in greater than 60 days 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. If the funds determine that the market price of a portfolio security is not readily available, or that the valuation methods mentioned above do not reflect the security's fair value, such security is valued at its fair value as determined by, or in accordance with procedures adopted by, the Board of Trustees or its designee if such fair value determination would materially impact a fund's net asset value. Circumstances that may cause the funds to fair value a security include: 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; or trading in a security has been halted during the trading day. 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 -- The funds may enter into futures contracts in order to manage the funds' 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 funds are 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 funds. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. The funds recognize 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. (continued) - ------ 31 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) SWAP AGREEMENTS -- The funds may enter into a swap agreement in order to attempt to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets; protect against currency fluctuations; attempt to manage duration to protect against any increase in the price of securities the funds anticipate purchasing at a later date; or gain exposure to certain markets in the most economical way possible. A swap agreement is a contract in which two parties agree to exchange the returns earned or realized on predetermined investments or instruments. The funds will segregate cash, cash equivalents or other appropriate liquid securities on their records in amounts sufficient to meet requirements. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statement of Assets and Liabilities. Swap agreements are valued daily and changes in value, including the periodic amounts of interest to be paid or received on swaps are recorded as unrealized appreciation (depreciation) on investments. Realized gain or loss is recorded upon receipt or payment of a periodic settlement or termination of swap agreements. The risks of entering into swap agreements include the possible lack of liquidity, failure of the counterparty to meet its obligations, and that there may be unfavorable changes in the underlying investments and instruments. 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. INDEMNIFICATIONS -- Under the trust's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business, the funds enter into contracts that provide general indemnifications. The funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. The risk of material loss from such claims is considered by management to be remote. 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) (the investment advisor), under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The Agreement provides that all expenses of the funds, except brokerage commissions, taxes, 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 and accrued daily based on the daily net assets of each specific class of shares of each fund and paid monthly in arrears. The fee consists of (1) an Investment Category Fee based on the daily net assets of the funds and certain other accounts managed by the investment advisor that are in the same broad investment category as each fund and (2) a Complex Fee based on the assets of all the funds in the American Century family of funds. The rates for the Investment Category Fee range from 0.1625% to 0.2800% for Arizona Municipal Bond and Florida Municipal Bond, and from 0.2925% to 0.4100% for High-Yield Municipal. The rates for the Complex Fee range from 0.2500% to 0.3100%. For the six months ended November 30, 2005, the effective annual management fee for the Investor Class, A Class, B Class and C Class of Arizona Municipal Bond, Florida Municipal Bond and High-Yield Municipal were 0.48%, 0.48% and 0.61%, respectively. (continued) - ------ 32 NOVEMBER 30, 2005 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) 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% - -------------------------------------------------------------------------------- Service Fee 0.25% - -------------------------------------------------------------------------------- The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The fees are computed and accrued daily based on each class's daily net assets and paid monthly in arrears. 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 six months ended November 30, 2005, 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 advisor, ACIM, the distributor of the trust, ACIS, and the trust's transfer agent, American Century Services, LLC. The funds have a bank line of credit agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds and 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 six months ended November 30, 2005, were as follows: - -------------------------------------------------------------------------------- ARIZONA FLORIDA HIGH-YIELD MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL - -------------------------------------------------------------------------------- Purchases $14,822,578 $9,083,313 $55,494,998 - -------------------------------------------------------------------------------- Proceeds from sales $18,121,369 $15,616,553 $8,130,212 - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows (unlimited number of shares authorized): - -------------------------------------------------------------------------------- ARIZONA MUNICIPAL BOND FLORIDA MUNICIPAL BOND - -------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ------------------------ Sold 370,330 $ 4,022,182 220,024 $ 2,369,190 - ------------------------ Issued in reinvestment of distributions 77,594 844,107 61,177 656,708 - ------------------------ Redeemed (303,164) (3,291,165) (669,301) (7,181,384) - -------------------------------------------------------------------------------- Net increase (decrease) 144,760 $ 1,575,124 (388,100) $(4,155,486) ================================================================================ YEAR ENDED MAY 31, 2005 - ------------------------ Sold 497,128 $ 5,453,127 606,561 $ 6,566,886 - ------------------------ Issued in reinvestment of distributions 154,557 1,693,720 120,932 1,308,172 - ------------------------ Redeemed (1,354,587) (14,829,390) (2,066,559) (22,321,798) - -------------------------------------------------------------------------------- Net increase (decrease) (702,902) $ (7,682,543) (1,339,066) $(14,446,740) ================================================================================ (continued) - ------ 33 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - -------------------------------------------------------------------------------- ARIZONA MUNICIPAL BOND FLORIDA MUNICIPAL BOND - -------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ------------------------ Sold 30,712 $ 334,011 32,037 $ 344,708 - ------------------------ Issued in reinvestment of distributions 3,438 37,452 2,080 22,328 - ------------------------ Redeemed (40,590) (444,395) (74,530) (800,797) - -------------------------------------------------------------------------------- Net increase (decrease) (6,440) $ (72,932) (40,413) $(433,761) ================================================================================ YEAR ENDED MAY 31, 2005 - ------------------------ Sold 372,585 $ 4,093,428 195,189 $2,118,110 - ------------------------ Issued in reinvestment of distributions 9,356 102,522 3,574 38,654 - ------------------------ Redeemed (132,782) (1,455,838) (75,286) (817,082) - -------------------------------------------------------------------------------- Net increase (decrease) 249,159 $ 2,740,112 123,477 $1,339,682 ================================================================================ B CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ------------------------ Sold 6 $ 70 923 $ 9,998 - ------------------------ Issued in reinvestment of distributions 4 38 36 389 - ------------------------ Redeemed (6) (69) (2) (20) - -------------------------------------------------------------------------------- Net increase (decrease) 4 $ 39 957 $10,367 ================================================================================ YEAR ENDED MAY 31, 2005 - ------------------------ Sold -- -- 1,294 $ 13,963 - ------------------------ Issued in reinvestment of distributions 6 $72 29 316 - ------------------------ Redeemed -- -- (1,152) (12,511) - -------------------------------------------------------------------------------- Net increase (decrease) 6 $72 171 $ 1,768 ================================================================================ C CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ------------------------ Sold 6,493 $ 70,652 18,269 $ 196,389 - ------------------------ Issued in reinvestment of distributions 208 2,267 389 4,179 - ------------------------ Redeemed (13,169) (142,620) (15,080) (163,040) - -------------------------------------------------------------------------------- Net increase (decrease) (6,468) $ (69,701) 3,578 $ 37,528 ================================================================================ YEAR ENDED MAY 31, 2005 - ------------------------ Sold 64,215 $704,230 119,292 $1,291,031 - ------------------------ Issued in reinvestment of distributions 244 2,674 667 7,218 - ------------------------ Redeemed -- -- (47,607) (513,485) - -------------------------------------------------------------------------------- Net increase (decrease) 64,459 $706,904 72,352 $ 784,764 ================================================================================ (continued) - ------ 34 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - -------------------------------------------------------------------------------- HIGH-YIELD MUNICIPAL - -------------------------------------------------------------------------------- SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ----------------------------------------- Sold 1,562,125 $16,410,562 - ---------------------------------------- Issued in reinvestment of distributions 94,246 990,112 - ---------------------------------------- Redeemed (605,251) (6,359,528) - -------------------------------------------------------------------------------- Net increase (decrease) 1,051,120 $11,041,146 ================================================================================ YEAR ENDED MAY 31, 2005 - ---------------------------------------- Sold 1,643,141 $ 16,916,130 - ---------------------------------------- Issued in reinvestment of distributions 166,485 1,714,843 - ---------------------------------------- Redeemed (1,225,232) (12,610,602) - -------------------------------------------------------------------------------- Net increase (decrease) 584,394 $ 6,020,371 ================================================================================ A CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ---------------------------------------- Sold 3,575,590 $37,569,659 - ---------------------------------------- Issued in reinvestment of distributions 174,908 1,837,357 - ---------------------------------------- Redeemed (729,088) (7,658,627) - -------------------------------------------------------------------------------- Net increase (decrease) 3,021,410 $31,748,389 ================================================================================ YEAR ENDED MAY 31, 2005 - ---------------------------------------- Sold 5,239,532 $ 54,036,738 - ---------------------------------------- Issued in reinvestment of distributions 197,779 2,042,149 - ---------------------------------------- Redeemed (1,216,527) (12,559,763) - -------------------------------------------------------------------------------- Net increase (decrease) 4,220,784 $ 43,519,124 ================================================================================ B CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ---------------------------------------- Sold 66,301 $ 696,216 - ---------------------------------------- Issued in reinvestment of distributions 2,276 23,901 - ---------------------------------------- Redeemed (10,557) (110,563) - -------------------------------------------------------------------------------- Net increase (decrease) 58,020 $ 609,554 ================================================================================ YEAR ENDED MAY 31, 2005 - ---------------------------------------- Sold 127,879 $1,316,273 - ---------------------------------------- Issued in reinvestment of distributions 3,482 35,901 - ---------------------------------------- Redeemed (44,038) (455,285) - -------------------------------------------------------------------------------- Net increase (decrease) 87,323 $ 896,889 ================================================================================ (continued) - ------ 35 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - -------------------------------------------------------------------------------- HIGH-YIELD MUNICIPAL - -------------------------------------------------------------------------------- SHARES AMOUNT - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED NOVEMBER 30, 2005 - ---------------------------------------- Sold 764,610 $ 8,031,900 - ---------------------------------------- Issued in reinvestment of distributions 12,573 132,065 - ---------------------------------------- Redeemed (110,977) (1,165,339) - -------------------------------------------------------------------------------- Net increase (decrease) 666,206 $ 6,998,626 ================================================================================ YEAR ENDED MAY 31, 2005 - ---------------------------------------- Sold 893,109 $ 9,203,406 - ---------------------------------------- Issued in reinvestment of distributions 12,105 125,038 - ---------------------------------------- Redeemed (131,081) (1,352,304) - -------------------------------------------------------------------------------- Net increase (decrease) 774,133 $ 7,976,140 ================================================================================ 5. BANK LINE OF CREDIT The funds, along with certain other funds managed by ACIM or American Century Global Investment Management, Inc. (ACGIM), have a $575,000,000 unsecured bank line of credit agreement with JPMCB, which was renewed to $500,000,000 effective December 14, 2005. 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 six months ended November 30, 2005. 6. RISK FACTORS Arizona Municipal Bond and Florida Municipal Bond 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. (continued) - ------ 36 Notes to Financial Statements NOVEMBER 30, 2005 (UNAUDITED) 7. FEDERAL TAX INFORMATION The book-basis 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. Certain distributions have been recharacterized between income, realized gain and capital for federal income tax purposes. As of November 30, 2005, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- ARIZONA FLORIDA MUNICIPAL MUNICIPAL HIGH-YIELD BOND BOND MUNICIPAL - -------------------------------------------------------------------------------- Federal tax cost of investments $56,170,193 $44,204,199 $208,662,290 ================================================================================ Gross tax appreciation of investments $1,979,822 $1,634,384 $6,343,085 - ------------------------------ Gross tax depreciation of investments (132,018) (35,252) (358,093) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $1,847,804 $1,599,132 $5,984,992 ================================================================================ The cost of investments for federal income tax purposes was the same as the cost for financial reporting purposes. Following are the capital loss carryovers and capital loss deferral amounts as of May 31, 2005: - -------------------------------------------------------------------------------- ARIZONA FLORIDA MUNICIPAL MUNICIPAL HIGH-YIELD BOND BOND MUNICIPAL - -------------------------------------------------------------------------------- Accumulated capital losses -- $(506,351) $(2,656,716) - -------------------------------------------------------------------------------- Capital loss deferral -- $(20,323) -- - -------------------------------------------------------------------------------- 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 2012 2013 - ---------------------------------------------------------------------------------------------------- Florida Municipal -- -- -- -- $(144,485) $(361,866) - ---------------------------------------------------------------------------------------------------- High-Yield Municipal $(396,804) $(1,090,034) $(323,643) -- $(145,918) $(700,317) - ---------------------------------------------------------------------------------------------------- The capital loss deferrals represent net capital losses incurred in the seven-month period ended May 31, 2005. The funds have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. - ------ 37 Arizona Municipal Bond - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - ---------------------------------------------------------------------------------------------------- INVESTOR CLASS - ---------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.96 $10.83 $11.40 $10.89 $10.69 $10.12 - ---------------------------------------------------------------------------------------------------- Income From Investment Operations - --------------------------- Net Investment Income 0.18(2) 0.42 0.41 0.41 0.44 0.48 - --------------------------- Net Realized and Unrealized Gain (Loss) (0.13) 0.13 (0.53) 0.59 0.27 0.57 - ---------------------------------------------------------------------------------------------------- Total From Investment Operations 0.05 0.55 (0.12) 1.00 0.71 1.05 - ---------------------------------------------------------------------------------------------------- Distributions - --------------------------- From Net Investment Income (0.22) (0.42) (0.41) (0.41) (0.44) (0.48) - --------------------------- From Net Realized Gains -- --(3) (0.04) (0.08) (0.07) -- - ---------------------------------------------------------------------------------------------------- Total Distributions (0.22) (0.42) (0.45) (0.49) (0.51) (0.48) - ---------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.79 $10.96 $10.83 $11.40 $10.89 $10.69 ==================================================================================================== TOTAL RETURN(4) 0.42% 5.21% (1.06)% 9.36% 6.74% 10.57% RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.49%(5) 0.50% 0.51% 0.51% 0.51% 0.51% - --------------------------- Ratio of Net Investment Income to Average Net Assets 3.22%(5) 3.86% 3.70% 3.70% 4.04% 4.57% - --------------------------- Portfolio Turnover Rate 29% 48% 26% 50% 77% 104% - --------------------------- Net Assets, End of Period (in thousands) $53,949 $53,203 $60,203 $75,787 $66,327 $50,309 - ---------------------------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Per-share amount is less than $0.005. (4) 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 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. (5) Annualized. See Notes to Financial Statements. - ------ 38 Arizona Municipal Bond - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.96 $10.83 $11.25 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income 0.16(3) 0.40 0.10 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) (0.13) 0.13 (0.42) - -------------------------------------------------------------------------------- Total From Investment Operations 0.03 0.53 (0.32) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.20) (0.40) (0.10) - ------------------------------------------ From Net Realized Gains -- --(4) -- - -------------------------------------------------------------------------------- Total Distributions (0.20) (0.40) (0.10) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.79 $10.96 $10.83 ================================================================================ TOTAL RETURN(5) 0.29% 4.94% (2.87)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.74%(6) 0.75% 0.76%(6) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.97%(6) 3.61% 3.63%(6) - ------------------------------------------ Portfolio Turnover Rate 29% 48% 26%(7) - ------------------------------------------ Net Assets, End of Period (in thousands) $4,136 $4,271 $1,523 - -------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) February 27, 2004 (commencement of sale) through May 31, 2004. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount is less than $0.005. (5) 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. (6) Annualized. (7) 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 Arizona Municipal Bond - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.96 $10.83 $11.25 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income 0.12(3) 0.32 0.08 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) (0.13) 0.13 (0.42) - -------------------------------------------------------------------------------- Total From Investment Operations (0.01) 0.45 (0.34) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.16) (0.32) (0.08) - ------------------------------------------ From Net Realized Gains -- --(4) -- - -------------------------------------------------------------------------------- Total Distributions (0.16) (0.32) (0.08) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.79 $10.96 $10.83 ================================================================================ TOTAL RETURN(5) (0.07)% 4.19% (3.06)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.49%(6) 1.50% 1.51%(6) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.22%(6) 2.86% 2.88%(6) - ------------------------------------------ Portfolio Turnover Rate 29% 48% 26%(7) - ------------------------------------------ Net Assets, End of Period (in thousands) $3 $3 $2 - -------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) February 27, 2004 (commencement of sale) through May 31, 2004. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount is less than $0.005. (5) 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. (6) Annualized. (7) 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 Arizona Municipal Bond - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.96 $10.83 $11.25 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income 0.12(3) 0.31 0.08 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) (0.13) 0.13 (0.42) - -------------------------------------------------------------------------------- Total From Investment Operations (0.01) 0.44 (0.34) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.16) (0.31) (0.08) - ------------------------------------------ From Net Realized Gains -- --(4) -- - -------------------------------------------------------------------------------- Total Distributions (0.16) (0.31) (0.08) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.79 $10.96 $10.83 ================================================================================ TOTAL RETURN(5) (0.09)% 4.15% (3.06)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.49%(6) 1.50% 1.51%(6) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.22%(6) 2.86% 2.88%(6) - ------------------------------------------ Portfolio Turnover Rate 29% 48% 26%(7) - ------------------------------------------ Net Assets, End of Period (in thousands) $638 $719 $12 - -------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) February 27, 2004 (commencement of sale) through May 31, 2004. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount is less than $0.005. (5) 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. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended May 31, 2004. See Notes to Financial Statements. - ------ 41 Florida Municipal Bond - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - ---------------------------------------------------------------------------------------------------- INVESTOR CLASS - ---------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.81 $10.68 $11.29 $10.73 $10.67 $10.08 - ---------------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------- Net Investment Income 0.21 0.39 0.42 0.42 0.44 0.47 - ---------------------------- Net Realized and Unrealized Gain (Loss) (0.17) 0.13 (0.56) 0.62 0.19 0.59 - ---------------------------------------------------------------------------------------------------- Total From Investment Operations 0.04 0.52 (0.14) 1.04 0.63 1.06 - ---------------------------------------------------------------------------------------------------- Distributions - ---------------------------- From Net Investment Income (0.21) (0.39) (0.42) (0.42) (0.44) (0.47) - ---------------------------- From Net Realized Gains -- -- (0.05) (0.06) (0.13) -- - ---------------------------------------------------------------------------------------------------- Total Distributions (0.21) (0.39) (0.47) (0.48) (0.57) (0.47) - ---------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.64 $10.81 $10.68 $11.29 $10.73 $10.67 ==================================================================================================== TOTAL RETURN(2) 0.34% 4.88% (1.30)% 9.90% 5.98% 10.70% RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.49%(3) 0.50% 0.51% 0.51% 0.51% 0.51% - ---------------------------- Ratio of Net Investment Income to Average Net Assets 3.84%(3) 3.56% 3.82% 3.78% 4.03% 4.49% - ---------------------------- Portfolio Turnover Rate 19% 44% 59% 45% 75% 138% - ---------------------------- Net Assets, End of Period (in thousands) $44,540 $49,451 $63,142 $70,078 $54,565 $53,860 - ---------------------------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (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 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. See Notes to Financial Statements. - ------ 42 Florida Municipal Bond - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.81 $10.68 $11.11 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income 0.19 0.36 0.09 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) (0.17) 0.13 (0.43) - -------------------------------------------------------------------------------- Total From Investment Operations 0.02 0.49 (0.34) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.19) (0.36) (0.09) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.64 $10.81 $10.68 ================================================================================ TOTAL RETURN(3) 0.21% 4.62% (3.10)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.74%(4) 0.75% 0.76%(4) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 3.59%(4) 3.31% 3.34%(4) - ------------------------------------------ Portfolio Turnover Rate 19% 44% 59%(5) - ------------------------------------------ Net Assets, End of Period (in thousands) $1,642 $2,105 $761 - -------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) February 27, 2004 (commencement of sale) through May 31, 2004. (3) 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. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended May 31, 2004. See Notes to Financial Statements. - ------ 43 Florida Municipal Bond - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.81 $10.68 $11.11 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income 0.15 0.28 0.07 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) (0.17) 0.13 (0.43) - -------------------------------------------------------------------------------- Total From Investment Operations (0.02) 0.41 (0.36) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.15) (0.28) (0.07) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.64 $10.81 $10.68 ================================================================================ TOTAL RETURN(3) (0.17)% 3.83% (3.28)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.49%(4) 1.50% 1.51%(4) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.84%(4) 2.56% 2.59%(4) - ------------------------------------------ Portfolio Turnover Rate 19% 44% 59%(5) - ------------------------------------------ Net Assets, End of Period (in thousands) $29 $19 $17 - -------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) February 27, 2004 (commencement of sale) through May 31, 2004. (3) 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. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended May 31, 2004. See Notes to Financial Statements. - ------ 44 Florida Municipal Bond - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.81 $10.68 $11.11 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income 0.15 0.28 0.07 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) (0.17) 0.13 (0.43) - -------------------------------------------------------------------------------- Total From Investment Operations (0.02) 0.41 (0.36) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.15) (0.28) (0.07) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.64 $10.81 $10.68 ================================================================================ TOTAL RETURN(3) (0.16)% 3.84% (3.28)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.49%(4) 1.50% 1.51%(4) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.84%(4) 2.56% 2.59%(4) - ------------------------------------------ Portfolio Turnover Rate 19% 44% 59%(5) - ------------------------------------------ Net Assets, End of Period (in thousands) $1,836 $1,827 $1,032 - -------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) February 27, 2004 (commencement of sale) through May 31, 2004. (3) 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. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended May 31, 2004. See Notes to Financial Statements. - ------ 45 High-Yield Municipal - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - ---------------------------------------------------------------------------------------------------- INVESTOR CLASS - ---------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.50 $10.04 $10.25 $9.87 $9.62 $9.32 - ---------------------------------------------------------------------------------------------------- Income From Investment Operations - --------------------------- Net Investment Income 0.25 0.51 0.52 0.53 0.53 0.53 - --------------------------- Net Realized and Unrealized Gain (Loss) (0.04) 0.46 (0.21) 0.38 0.25 0.30 - ---------------------------------------------------------------------------------------------------- Total From Investment Operations 0.21 0.97 0.31 0.91 0.78 0.83 - ---------------------------------------------------------------------------------------------------- Distributions - --------------------------- From Net Investment Income (0.25) (0.51) (0.52) (0.53) (0.53) (0.53) - ---------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.46 $10.50 $10.04 $10.25 $9.87 $9.62 ==================================================================================================== TOTAL RETURN(2) 2.06% 9.84% 3.07% 9.40% 8.25% 9.13% RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.62%(3) 0.63% 0.64% 0.64% 0.64% 0.64% - --------------------------- Ratio of Net Investment Income to Average Net Assets 4.82%(3) 4.92% 5.06% 5.22% 5.39% 5.59% - --------------------------- Portfolio Turnover Rate 4% 30% 27% 43% 28% 50% - --------------------------- Net Assets, End of Period (in thousands) $73,728 $62,945 $54,340 $53,621 $36,162 $29,342 - ---------------------------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (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 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. See Notes to Financial Statements. - ------ 46 High-Yield Municipal - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.50 $10.04 $10.25 $10.06 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------- Net Investment Income 0.24 0.48 0.49 0.17 - ---------------------------------- Net Realized and Unrealized Gain (Loss) (0.04) 0.46 (0.21) 0.19 - -------------------------------------------------------------------------------- Total From Investment Operations 0.20 0.94 0.28 0.36 - -------------------------------------------------------------------------------- Distributions - ---------------------------------- From Net Investment Income (0.24) (0.48) (0.49) (0.17) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.46 $10.50 $10.04 $10.25 ================================================================================ TOTAL RETURN(3) 1.93% 9.56% 2.81% 3.57% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.87%(4) 0.88% 0.89% 0.88%(4) - ---------------------------------- Ratio of Net Investment Income to Average Net Assets 4.57%(4) 4.67% 4.81% 5.03%(4) - ---------------------------------- Portfolio Turnover Rate 4% 30% 27% 43%(5) - ---------------------------------- Net Assets, End of Period (in thousands) $110,494 $79,154 $33,335 $2,117 - -------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) January 31, 2003 (commencement of sale) through May 31, 2003. (3) 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. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended May 31, 2003. See Notes to Financial Statements. - ------ 47 High-Yield Municipal - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.50 $10.04 $10.25 $10.06 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------- Net Investment Income 0.20 0.40 0.42 0.15 - ---------------------------------- Net Realized and Unrealized Gain (Loss) (0.04) 0.46 (0.21) 0.19 - -------------------------------------------------------------------------------- Total From Investment Operations 0.16 0.86 0.21 0.34 - -------------------------------------------------------------------------------- Distributions - ---------------------------------- From Net Investment Income (0.20) (0.40) (0.42) (0.15) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.46 $10.50 $10.04 $10.25 ================================================================================ TOTAL RETURN(3) 1.55% 8.75% 2.05% 3.44% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.62%(4) 1.63% 1.64% 1.63%(4) - ---------------------------------- Ratio of Net Investment Income to Average Net Assets 3.82%(4) 3.92% 4.06% 4.35%(4) - ---------------------------------- Portfolio Turnover Rate 4% 30% 27% 43%(5) - ---------------------------------- Net Assets, End of Period (in thousands) $4,168 $3,573 $2,541 $708 - -------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) January 31, 2003 (commencement of sale) through May 31, 2003. (3) 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. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended May 31, 2003. See Notes to Financial Statements. - ------ 48 High-Yield Municipal - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MAY 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.50 $10.04 $10.25 $10.03 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------- Net Investment Income 0.20 0.40 0.43 0.39 - ---------------------------------- Net Realized and Unrealized Gain (Loss) (0.04) 0.46 (0.21) 0.22 - -------------------------------------------------------------------------------- Total From Investment Operations 0.16 0.86 0.22 0.61 - -------------------------------------------------------------------------------- Distributions - ---------------------------------- From Net Investment Income (0.20) (0.40) (0.43) (0.39) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.46 $10.50 $10.04 $10.25 ================================================================================ TOTAL RETURN(3) 1.54% 8.74% 2.20% 6.15% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.62%(4) 1.63% 1.54% 1.39%(4) - ---------------------------------- Ratio of Net Investment Income to Average Net Assets 3.82%(4) 3.92% 4.16% 4.55%(4) - ---------------------------------- Portfolio Turnover Rate 4% 30% 27% 43%(5) - ---------------------------------- Net Assets, End of Period (in thousands) $23,879 $16,967 $8,457 $1,454 - -------------------------------------------------------------------------------- (1) Six months ended November 30, 2005 (unaudited). (2) July 24, 2002 (commencement of sale) through May 31, 2003. (3) 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. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended May 31, 2003. See Notes to Financial Statements. - ------ 49 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 that of Investor Class shares. The funds are available for purchase only through financial intermediaries by investors who seek advice from them. The funds are closed to other investors, but those with open accounts may make additional investments and reinvest dividends and capital gains distributions as long as such accounts remain open. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; or 2) through certain financial intermediaries (such as banks, broker-dealers, insurance companies and investment advisors), which may require payment of a transaction fee to the financial intermediary. 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, 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. The unified management fee for A Class shares is the same as for Investor 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% after the sixth year. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. The unified management fee for B Class shares is the same as for Investor Class shares. 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. The unified management fee for C Class shares is the same as for Investor Class shares. C Class shares also are subject to a Rule 12b-1 service and distribution fee of 1.00%. All classes of shares represent a pro rata interest in the funds and generally have the same rights and preferences. - ------ 50 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' investment advisor, 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 advisor 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. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's Web site at sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The funds also make their complete schedule of portfolio holdings for the most recent quarter of their fiscal year available on their Web site at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 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 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. The LEHMAN BROTHERS MUNICIPAL BOND INDEX is a market value-weighted index designed for the long-term tax-exempt bond market. The LEHMAN BROTHERS U.S. AGGREGATE INDEX represents securities that are taxable, registered with the Securities and Exchange Commission, and U.S. dollar-denominated. The index covers the U.S. investment-grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. The LEHMAN BROTHERS U.S. TREASURY INDEX is composed of those securities included in the Lehman Brothers U.S. Aggregate Index that are public obligations of the U.S. Treasury with a remaining maturity of one year or more. The LEHMAN BROTHERS 3-YEAR MUNICIPAL INDEX is composed of those securities included in the Lehman Brothers Municipal Bond Index that are investment-grade and have maturities between two and four years. The LEHMAN BROTHERS 10-YEAR MUNICIPAL INDEX is composed of those securities included in the Lehman Brothers Municipal Bond Index that are investment-grade and have maturities between eight and twelve years. The LEHMAN BROTHERS NON-INVESTMENT GRADE MUNICIPAL BOND INDEX is composed of non-investment grade U.S. municipal securities with a remaining maturity of one year or more. - ------ 52 [inside back cover - blank] [back cover] CONTACT US AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR SERVICES REPRESENTATIVE: 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 PROFESSIONALS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY MUNICIPAL TRUST INVESTMENT ADVISOR: 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 Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc. American Century Investment Services, Inc., Distributor 0601 (c)2006 American Century Proprietary Holdings, Inc. SH-SAN-47303N All rights reserved. ITEM 2. CODE OF ETHICS. Not applicable for semiannual report filings. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semiannual report filings. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semiannual report filings. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant's board. ITEM 11. 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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Not applicable for semiannual report filings. (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 /s/ William M. Lyons By: ------------------------------------- Name: William M. Lyons Title: President Date: January 27, 2006 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. /s/ William M. Lyons By: ----------------------------------------- Name: William M. Lyons Title: President (principal executive officer) Date: January 27, 2006 /s/ Maryanne L. Roepke By: ----------------------------------------- Name: Maryanne L. Roepke Title: Sr. Vice President, Treasurer, and Chief Financial Officer (principal financial officer) Date: January 27, 2006