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 811-7822
---------------------------------------------
American Century Investment Trust
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(Exact name of registrant as specified in charter)
4500 Main Street, Kansas City, Missouri 64141
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(Address of principal executive offices) (Zip code)
David C. Tucker, Esq., 4500 Main Street, 9th Floor, Kansas City, Missouri 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
----------------------------
Date of fiscal year end: March 31, 2003
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Date of reporting period: September 30, 2003
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ITEM 1. REPORTS TO STOCKHOLDERS.
[front cover]
September 30, 2003
American Century
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of covered bridge]
Prime Money Market
[american century logo and text logo (reg.sm)]
[inside front cover]
Table of Contents
Our Message to You........................................................ 1
PRIME MONEY MARKET
Performance............................................................... 2
Portfolio Commentary...................................................... 3
Schedule of Investments................................................... 4
FINANCIAL STATEMENTS
Statement of Assets and Liabilities....................................... 9
Statement of Operations................................................... 10
Statement of Changes in Net Assets........................................ 11
Notes to Financial Statements............................................. 12
Financial Highlights ..................................................... 16
OTHER INFORMATION
Share Class Information................................................... 21
Additional Information.................................................... 22
Index Definition.......................................................... 23
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with the semiannual report for the American
Century Prime Money Market Fund for the six months ended September 30, 2003.
The report includes comparative performance figures, 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.
Many of you have called or written to express your concern about allegations of
wrongdoing by other mutual fund investment management firms. We share your
concern--fund companies must put investors first and do everything possible to
maintain investor trust. Through the Investment Company Institute, the mutual
fund trade association, American Century has advocated industry-wide proposals
that strengthen protections for fund investors. We believe that decisive action
is needed to show that we are committed, as an industry, to the interests of the
95 million investors we serve.
As information about alleged trading abuses in the mutual fund industry has come
to light, we have posted messages and commentary about these issues on
www.americancentury.com. Beyond what's currently in the headlines, American
Century has been a champion of many important investor and industry issues,
which are outlined in a document titled Putting Investors First. We invite you
to visit our Web site and read about how our values have influenced these
positions.
As always, we deeply appreciate your investment with American Century.
Sincerely,
/s/ James E. Stowers, Jr.
James E. Stowers, Jr.
Founder and Chairman
/s/ James E. Stowers III
James E. Stowers III
Co-Chairman of the Board
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1
Prime Money Market - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2003
----------------------
AVERAGE ANNUAL RETURNS
- -------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------------------
INVESTOR CLASS 0.80% 3.53% 4.31% 11/17/1993
- -------------------------------------------------------------------------------------------
90-DAY TREASURY BILL INDEX 1.12% 3.51% 4.25%(1) --
- -------------------------------------------------------------------------------------------
LIPPER MONEY MARKET INSTRUMENT FUNDS
AVERAGE RETURN 0.56% 3.23% 4.03%(1) --
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Fund's Lipper Ranking(2) 95 of 400 58 of 280 26 of 167(1) --
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Advisor Class 0.55% 3.28% 3.30% 8/28/1998
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A Class(3) 1/31/2003
No sales charge* -- -- 0.35%(4)
With sales charge* -- -- -0.65%(4)
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B Class(3) 1/31/2003
No sales charge* -- -- 0.30%(4)
With sales charge* -- -- -4.70%(4)
- -------------------------------------------------------------------------------------------
C Class(3) 0.22% -- 0.33% 5/7/2002
- -------------------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. (Please see the Share Class Information pages
for more about the applicable sales charges for each share class.) The SEC
requires that mutual funds provide performance information net of maximum sales
charges in all cases where charges could be applied.
(1) Since 11/30/93, the date nearest the Investor Class's inception for which
data are available.
(2) Lipper rankings are based on average annual total returns for the fund in a
given category for the periods indicated.
(3) If American Century had not voluntarily waived all or a portion of service
and distribution fees, class returns would have been lower during these
periods.
(4) Returns for periods less than one year are not annualized.
PORTFOLIO COMPOSITION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/03 3/31/03
- --------------------------------------------------------------------------------
A-1+ 61% 64%
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A-1 39% 36%
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Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
PORTFOLIO COMPOSITION BY MATURITY
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/03 3/31/03
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1-30 days 52% 46%
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31-90 days 27% 35%
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91-180 days 9% 7%
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More than 180 days 12% 12%
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YIELDS AND WEIGHTED AVERAGE MATURITY
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INVESTOR CLASS -- 9/30/03
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7-Day Current Yield 0.52%
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7-Day Effective Yield 0.52%
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9/30/03 3/31/03
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Weighted Average
Maturity 63 days 70 days
- --------------------------------------------------------------------------------
Past performance does not guarantee future results.
Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.
Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund. The 7-day current yield more closely reflects the current earnings of the
fund than the total return.
- ------
2
Prime Money Market - Portfolio Commentary
By Denise Tabacco, portfolio manager
PERFORMANCE SUMMARY
Prime Money Market's 0.31%* total return for the six months ended September 30,
2003, ranked in the top quarter of Lipper Inc.'s money market funds category
(#102 out of 408 funds). The fund's recent performance is consistent with its
longer-term results--Prime Money Market's one- and five-year returns also
ranked in the top quarter of the Lipper category. (See the previous page for
additional performance information.)
ECONOMIC AND MARKET REVIEW
Money market rates continued to decline during the past six months. A lackluster
economic environment, characterized by rising unemployment and a weak
manufacturing sector, led the Federal Reserve (the Fed) to cut short-term
interest rates in June. The Fed's 13th rate cut since the end of 2000 brought
the federal funds rate target down to a 45-year low of 1%. Investors anticipated
the Fed's action, pushing money market yields lower in the weeks leading up to
the rate cut.
In addition to the sluggish economy, the Fed cited the threat of deflation, or
falling prices, as a reason for its latest rate cut. Fed Chairman Alan Greenspan
reinforced this view during a July appearance before Congress, noting that the
Fed could maintain this accommodative interest rate policy for a considerable
period of time, even if economic growth accelerates.
The economy picked up steam in the third quarter, growing at an estimated 7.2%
rate. However, persistent weakness in the labor market cast doubts on the
underlying strength of the economy's recovery. As a result, money market rates
were relatively steady over the last half of the period.
PORTFOLIO STRATEGY
Echoing the general decline in money market rates, Prime Money Market's
seven-day current yield fell from 0.71% to 0.52% during the period. The
portfolio's average maturity was a relatively long 65-75 days for most of the
period, reflecting our expectation of stable or declining rates. Yields on
commercial paper, which historically comprised a majority of the portfolio,
remained at low levels because of limited issuance, so we focused on longer-term
corporate securities maturing in six months to one year.
A NOTE ABOUT THE FUND'S YIELD
The sharp decline in interest rates over the past several years has brought
money market yields down to very low levels. Nonetheless, we expect Prime Money
Market to maintain a positive yield unless the Fed cuts interest rates
significantly in the future. Should that happen, American Century will examine
all possible ways to maintain yields that are competitive and positive,
including the waiver of management fees.
*All fund returns referenced in this commentary are for Investor Class shares.
------
3
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
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COMMERCIAL PAPER(1) -- 46.1%
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$ 5,000,000 American Family
Financial Services, Inc.,
1.04%, 11/5/03 $ 4,994,944
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10,000,000 American Family
Financial Services, Inc.,
1.03%, 11/6/03 9,989,700
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5,000,000 American Family
Financial Services, Inc.,
1.11%, 12/15/03 4,988,438
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10,000,000 Amstel Funding Corp., 1.20%,
10/28/03 (Acquired 5/7/03,
Cost $9,942,333)(2) 9,991,000
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20,000,000 Amstel Funding Corp., 1.08%,
11/5/03 (Acquired 8/1/03,
Cost $19,944,800)(2) 19,979,000
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35,000,000 Amstel Funding Corp., 1.05%,
12/12/03 (Acquired 6/10/03,
Cost $34,813,188)(2) 34,926,500
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10,000,000 Amstel Funding Corp.,
1.08%, 12/22/03 9,975,400
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25,000,000 Amsterdam Funding Corp.,
1.07%, 10/8/03 (Acquired
9/2/03, Cost $24,973,250)(2) 24,994,799
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15,575,000 Amsterdam Funding Corp.,
1.07%, 10/14/03 (Acquired
9/12/03, Cost $15,560,186)(2) 15,568,982
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24,355,000 Amsterdam Funding Corp.,
1.06%, 10/20/03 (Acquired
9/12/03, Cost $24,327,749)(2) 24,341,375
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25,000,000 Charta Corp., 1.07%,
10/7/03 (Acquired 7/31/03,
Cost $24,950,215)(2) 24,995,542
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25,000,000 Charta Corp., 1.04%,
10/23/03 (Acquired 7/22/03,
Cost $24,932,833)(2) 24,984,111
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10,000,000 Chevron UK Investment plc,
1.03%, 10/1/03 (Acquired
9/9/03, Cost $9,993,706)(2) 10,000,000
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20,000,000 Chevron UK Investment plc,
1.04%, 10/2/03 (Acquired
9/3/03, Cost $19,983,244)(2) 19,999,422
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10,000,000 CRC Funding LLC, 1.08%,
10/2/03 (Acquired 8/28/03,
Cost $9,989,500)(2) 9,999,700
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9,000,000 CRC Funding LLC, 1.03%,
10/10/03 (Acquired 7/3/03,
Cost $8,974,508)(2) 8,997,683
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60,000,000 Credit Suisse First
Boston U.S.A., Inc., 1.05%,
10/17/03 (Acquired 7/21/03,
Cost $59,846,000)(2) 59,972,000
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20,000,000 Crown Point Capital Co.,
1.05%, 10/6/03 (Acquired
7/7/03, Cost $19,946,917)(2) 19,997,083
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10,172,000 Crown Point Capital Co.,
1.04%, 10/20/03 (Acquired
7/18/03, Cost $10,144,377)(2) 10,166,417
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Principal Amount Value
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$14,281,000 Crown Point Capital Co., 1.04%,
10/24/03 (Acquired 7/23/03,
Cost $14,242,632)(2) $ 14,271,511
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35,000,000 Dakota Notes of the Citibank,
1.06%, 10/9/03 (Acquired
8/12/03, Cost $34,940,228)(2) 34,991,755
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30,000,000 Dakota Notes of the Citibank,
1.04%, 10/24/03 (Acquired
7/25/03, Cost $29,921,133)(2) 29,980,067
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35,000,000 Emerald Notes of the MBNA,
1.08%, 10/16/03 (Acquired
8/1/03, Cost $34,920,200)(2) 34,984,250
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25,000,000 Falcon Asset Securitization
Corp., 1.03%, 1/12/04
(Acquired 7/10/03,
Cost $24,866,958)(2) 24,926,327
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30,000,000 Fortis Funding LLC,
1.05%, 10/6/03 29,995,625
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30,000,000 General Electric Financial
Assurance Holdings, 0.99%,
12/15/03 (Acquired 6/10/03,
Cost $29,845,734)(2) 29,938,457
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13,000,000 Govco Inc., 1.04%,
10/23/03 (Acquired 7/24/03,
Cost $12,966,200)(2) 12,991,738
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13,300,000 Govco Inc., 1.06%,
10/28/03 (Acquired 9/4/03,
Cost $13,278,853)(2) 13,289,426
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35,000,000 Govco Inc., 1.06%,
11/4/03 (Acquired 9/4/03,
Cost $34,937,136)(2) 34,964,960
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7,750,000 Govco Inc., 1.07%,
11/24/03 (Acquired 9/4/03,
Cost $7,731,342)(2) 7,737,561
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10,000,000 HBOS Treasury Services plc,
1.05%, 10/2/03 9,999,709
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12,000,000 HBOS Treasury Services plc,
1.05%, 11/10/03 11,986,000
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25,000,000 ING Funding LLC,
1.03%, 10/14/03 24,990,702
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20,000,000 Lexington Parker Capital,
1.07%, 11/6/03 (Acquired
8/6/03, Cost $19,945,311)(2) 19,978,600
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30,000,000 Lexington Parker Capital,
1.18%, 12/1/03 (Acquired
6/2/03, Cost $29,822,017)(2) 29,940,016
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15,000,000 Lexington Parker Capital,
1.08%, 1/23/04 (Acquired
7/29/03, Cost $14,919,900)(2) 14,948,700
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40,000,000 Morgan Stanley,
1.06%, 11/4/03 39,959,956
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35,000,000 Network Rail CP Finance plc,
1.07%, 12/3/03 (Acquired
9/19/03, Cost $34,921,979)(2) 34,934,463
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13,000,000 Newcastle Certificates, 1.05%,
10/22/03 (Acquired 7/23/03,
Cost $12,965,496)(2) 12,992,038
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40,000,000 Newcastle Certificates, 1.07%,
10/24/03 (Acquired 8/22/03,
Cost $39,925,100)(2) 39,972,655
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See Notes to Financial Statements. (continued)
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4
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$26,000,000 Newcastle Certificates, 1.07%,
11/25/03 (Acquired 9/23/03,
Cost $25,951,315)(2) $ 25,957,497
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35,000,000 Old Line Funding Corp., 1.06%,
10/23/03 (Acquired 9/5/03,
Cost $34,950,533)(2) 34,977,327
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25,000,000 Paradigm Funding LLC, 1.08%,
11/26/03 (Acquired 8/28/03,
Cost $24,932,500)(2) 24,958,000
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25,000,000 Rabobank Nederland N.V.,
1.08%, 12/1/03 24,954,462
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25,000,000 Rio Tinto America Inc., 1.03%,
10/10/03 (Acquired 7/7/03,
Cost $24,932,049)(2) 24,993,563
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10,000,000 Spintab-Swedmortgage AB,
1.04%, 10/1/03 10,000,000
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12,000,000 Spintab-Swedmortgage AB,
1.04%, 10/3/03 11,999,307
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25,000,000 Spintab-Swedmortgage AB,
0.92%, 10/30/03 24,981,472
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30,000,000 Stadshypotek Inc., 1.08%,
10/14/03 (Acquired 8/1/03,
Cost $29,933,400)(2) 29,988,300
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21,620,000 Tannehill Capital Co. LLC,
1.06%, 10/8/03 (Acquired
9/8/03-9/12/03,
Cost $21,601,800)(2) 21,615,544
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5,070,000 Tannehill Capital Co. LLC,
1.10%, 10/20/03 (Acquired
9/24/03, Cost $5,065,972)(2) 5,067,057
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22,356,000 Thunder Bay Funding Inc.,
1.07%, 11/7/03 (Acquired
9/12/03, Cost $22,318,964)(2) 22,331,530
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20,000,000 Toyota Motor Credit Corp.,
1.04%, 11/19/03 (Acquired
7/25/03, Cost $19,932,400)(2) 19,971,689
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50,000,000 Westdeutsche Landesbank AG,
1.08%, 11/3/03 (Acquired
8/7/03, Cost $49,868,000)(2) 49,950,499
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TOTAL COMMERCIAL PAPER 1,188,382,859
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MUNICIPAL SECURITIES -- 14.4%
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3,725,000 Acworth Downtown
Development Auth. Rev.,
(Cable/Fiber Project),
VRDN, 1.15%, 10/2/03
(AMBAC) 3,725,000
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8,100,000 Alaska Housing Finance
Corp. Rev., Series 2002 B,
VRDN, 1.07%, 10/2/03 (FSA) 8,100,000
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7,115,000 Association of Bay Area
Governments Finance Auth.
for Nonprofit Corporations
Rev., Series 2002 B,
(Colma Bart), VRDN, 1.15%,
10/2/03 (LOC: Bank of
America N.A.) 7,115,000
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Principal Amount Value
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$14,010,000 California Housing Finance
Agency Rev., Series 2000 R,
VRDN, 1.06%, 10/1/03
(AMBAC/FHA) $ 14,010,000
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15,595,000 California Housing Finance
Agency Rev., Series 2001 H,
VRDN, 1.06%, 10/1/03
(GO of Agency) 15,595,000
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30,000,000 California Rev. Anticipation
Warrants, Series 2003 A,
2.00%, 6/16/04 30,189,341
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28,600,000 Catholic Health Initiatives
Rev., Series 1997 C, VRDN,
1.35%, 10/1/03 28,600,000
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5,000,000 Denver City & County
Airport Rev., Series 2002 D,
VRDN, 1.10%, 10/1/03
(LOC: Societe Generale) 5,000,000
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3,315,000 El Monte COP, Series 2003 B,
(Community Improvement),
VRDN, 1.27%, 10/2/03
(LOC: Union Bank of
California N.A., California
State Teacher's Retirement) 3,315,000
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5,490,000 ETC Holdings LLC, VRDN,
1.20%, 10/1/03 5,490,000
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16,250,000 Georgia Municipal Gas
Auth. Rev., Series 2003 A,
(Gas Portfolio III), VRDN,
1.15%, 10/2/03
(LOC: Wachovia Bank N.A.) 16,250,000
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6,000,000 Illinois Health Facilities
Auth. Rev., Series 2002 B,
(Silver Cross), VRDN,
1.12%, 10/1/03
(LOC: Fifth Third Bank) 6,000,000
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8,650,000 Jackson Energy Auth. Rev.,
Series 2003 A, VRDN, 1.15%,
10/2/03 (FGIC) 8,650,000
- --------------------------------------------------------------------------------
9,000,000 Jackson Energy Auth. Rev.,
Series 2003 B, VRDN, 1.15%,
10/2/03 (FGIC) 9,000,000
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4,000,000 Mercer County Improvement
Auth. Bond Anticipation
Notes Rev., 1.35%, 4/15/04
(County Guaranteed) 4,000,000
- --------------------------------------------------------------------------------
10,000,000 Michigan State Housing
Development Auth. Rev.,
Series 2002 C, VRDN, 1.07%,
10/1/03 (MBIA) 10,000,000
- --------------------------------------------------------------------------------
4,000,000 Michigan State University Rev.,
Series 2002 B, VRDN, 1.10%,
10/1/03 (SBBPA: Dexia
Credit Local) 4,000,000
- --------------------------------------------------------------------------------
10,000,000 Mississippi Business Finance
Corporation Industrial
Development Rev.,
(VC Regional Assembly),
VRDN, 1.125%, 10/1/03
(LOC: JPMorgan Chase Bank) 10,000,000
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See Notes to Financial Statements. (continued)
------
5
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 9,265,000 Montgomery County
Redevelopment Auth.
Multifamily Housing Rev.,
Series 2001 A, (Kingswood
Apartments), VRDN, 1.10%,
10/2/03 (LOC: Fannie Mae) $ 9,265,000
- --------------------------------------------------------------------------------
4,530,000 New Hampshire Housing
Finance Auth. Rev.,
(Pra Property Limited),
VRDN, 1.12%, 10/1/03 (FNMA) 4,530,000
- --------------------------------------------------------------------------------
4,700,000 New York City Housing
Development Corp.
Mortgage Rev., Series 2003 B,
VRDN, 1.12%, 10/1/03
(LOC: Keybank N.A.) 4,700,000
- --------------------------------------------------------------------------------
20,950,000 New York Housing Finance
Agency Rev., Series 2002 B,
(900 8th Avenue Housing),
VRDN, 1.07%, 10/1/03
(LOC: Keybank N.A.) 20,950,000
- --------------------------------------------------------------------------------
14,635,000 North Miami Special
Obligation Rev., (Pension
Funding), VRDN, 1.15%,
10/2/03 (AMBAC) 14,635,000
- --------------------------------------------------------------------------------
9,865,000 Oklahoma Development
Finance Auth. Rev.,
Series 2003 A, (Langston
Development Inc.), VRDN,
1.17%, 10/2/03
(LOC: Arvest Bank) 9,865,000
- --------------------------------------------------------------------------------
2,000,000 Olathe Industrial Rev.,
(Zschoche Family), VRDN,
1.15%, 10/2/03
(LOC: U.S. Bank N.A.) 2,000,000
- --------------------------------------------------------------------------------
7,000,000 Olathe Industrial Rev.,
Series 1997 B, (Diamant
Boart Inc.), VRDN, 1.25%,
10/2/03 (LOC: Svenska
Handelsbanken)
(Acquired 12/2/02,
Cost $7,000,000)(2) 7,000,000
- --------------------------------------------------------------------------------
5,000,000 Omaha Special Obligation Rev.,
(Riverfront Redevelopment),
VRDN, 1.22%, 10/1/03
(AMBAC) 5,000,000
- --------------------------------------------------------------------------------
3,900,000 Orange County Industrial
Development Auth. Rev.,
(Jewish Federation
of Greater Orlando),
VRDN, 1.15%, 10/2/03
(LOC: Bank of America N.A.) 3,900,000
- --------------------------------------------------------------------------------
1,505,000 Plymouth Rev., (Carlson
Center), VRDN, 1.15%,
10/2/03 (LOC: U.S. Bank
Trust N.A.) 1,505,000
- --------------------------------------------------------------------------------
7,500,000 Roman Catholic Diocese
of Raleigh Rev., Series 2002 A,
VRDN, 1.17%, 10/2/03
(LOC: Bank of America N.A.) 7,500,000
- --------------------------------------------------------------------------------
8,000,000 San Jose Financing Auth.
Lease Rev., Series 2001 B,
(Hayes Mansion Phase), VRDN,
1.06%, 10/1/03 (AMBAC) 8,000,000
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 5,250,000 Santa Rosa Pension
Obligation Rev., Series
2003 A, VRDN, 1.20%,
10/2/03 (LOC: Landesbank
Hessen-Thurigen Girozentrale) $ 5,250,000
- --------------------------------------------------------------------------------
13,800,000 Santa Rosa Wastewater Rev.,
Series 2002 A, VRDN, 1.20%,
10/2/03 (LOC: Landesbank
Hessen-Thurigen) 13,800,000
- --------------------------------------------------------------------------------
6,450,000 South Bend Mac L.P.,
VRDN, 1.10%, 10/1/03 6,450,000
- --------------------------------------------------------------------------------
25,000,000 Southeast Alabama Gas
District General Systems Rev.,
Series 2003 A, VRDN,
1.18%, 10/2/03 (XLCA) 25,000,000
- --------------------------------------------------------------------------------
4,245,000 Sterling Tax Allocation Rev.,
(Rock River Redevelopment),
VRDN, 1.19%, 10/1/03
(LOC: Wachovia Bank N.A.) 4,245,000
- --------------------------------------------------------------------------------
11,135,000 Texas GO, Series 2002 B,
(Veterans Housing),
VRDN, 1.10%, 10/1/03
(SBBPA: Landesbank
Hessen-Thurigen Girozentrale) 11,135,000
- --------------------------------------------------------------------------------
18,000,000 Texas Public Finance
Auth. Special Tax Rev.,
1.15%, 2/4/04 18,000,000
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES 371,769,341
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 14.4%
- --------------------------------------------------------------------------------
9,875,000 215 Jane Investors LLC,
Series 2002, VRN, 1.20%,
10/1/03 (Acquired 6/11/02,
Cost $9,875,000)(2) 9,875,000
- --------------------------------------------------------------------------------
50,000,000 American Express Credit Corp.,
VRN, 1.19%, 10/17/03,
resets monthly off the
1-month LIBOR plus 0.07%
with no caps 50,006,495
- --------------------------------------------------------------------------------
20,000,000 Associates Corp. of North
America, 5.75%, 11/1/03 20,076,470
- --------------------------------------------------------------------------------
41,000,000 Blue Heron Funding Limited,
1.15%, 10/21/03 (Acquired
5/20/03, Cost $41,000,000)(2) 41,000,000
- --------------------------------------------------------------------------------
20,000,000 General Electric Capital
Corp., VRN, 1.39%, 10/1/03,
resets daily off the Federal
Funds Rate plus 0.20%
with no caps 20,003,224
- --------------------------------------------------------------------------------
20,250,000 General Electric Capital Corp.,
VRN, 1.24%, 10/20/03,
resets monthly off the
1-month LIBOR plus 0.12%
with no caps 20,270,797
- --------------------------------------------------------------------------------
10,750,000 General Electric Capital
Corp., VRN, 1.21%, 10/22/03,
resets quarterly off the
3-month LIBOR plus 0.10%
with no caps 10,758,943
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$50,000,000 Paradigm Funding LLC, VRN,
1.08%, 10/15/03, resets
monthly off the 1-month
LIBOR minus 0.04%
with no caps (Acquired
7/15/03, Cost $50,000,000)(2) $ 50,000,000
- --------------------------------------------------------------------------------
4,075,000 Service Oil, Inc., VRN, 1.20%,
10/1/03 (LOC: U.S. Bank N.A.) 4,075,000
- --------------------------------------------------------------------------------
50,000,000 Transamerica Occidental
Life Insurance Co., VRN,
1.23%, 11/3/03, resets
quarterly off the 3-month
LIBOR plus 0.11% with no
caps (Acquired 11/9/99,
Cost $50,000,000)(2) 50,000,000
- --------------------------------------------------------------------------------
41,000,000 Travelers Insurance Co. Group,
VRN, 1.21%, 11/7/03,
resets quarterly off the
3-month LIBOR plus 0.08%
with no caps (Acquired
8/7/03, Cost $41,000,000)(2) 41,000,000
- --------------------------------------------------------------------------------
20,000,000 U.S. Bank National Association,
VRN, 1.06%, 10/27/03,
resets monthly off the
1-month LIBOR minus
0.06% with no caps 20,000,000
- --------------------------------------------------------------------------------
33,389,000 Unilever Capital Corp.,
6.75%, 11/1/03 33,542,061
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS 370,607,990
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES -- 12.4%
- --------------------------------------------------------------------------------
41,000,000 FHLB, 1.32%, 4/14/04 41,000,000
- --------------------------------------------------------------------------------
12,000,000 FHLB, 3.75%, 4/15/04 12,155,892
- --------------------------------------------------------------------------------
40,000,000 FHLB, 1.375%, 5/12/04 40,000,000
- --------------------------------------------------------------------------------
40,000,000 FHLB, 1.25%, 6/1/04 40,003,870
- --------------------------------------------------------------------------------
28,000,000 FHLB, 1.08%, 7/16/04 28,000,000
- --------------------------------------------------------------------------------
6,000,000 FHLMC, 3.25%, 1/15/04 6,036,203
- --------------------------------------------------------------------------------
45,000,000 FHLMC, 5.25%, 2/15/04 45,638,811
- --------------------------------------------------------------------------------
25,000,000 FNMA, 5.125%, 2/13/04 25,367,486
- --------------------------------------------------------------------------------
25,000,000 FNMA, 4.75%, 3/15/04 25,406,182
- --------------------------------------------------------------------------------
7,334,000 FNMA, 3.625%, 4/15/04 7,424,375
- --------------------------------------------------------------------------------
10,000,000 FNMA, 1.20%, 8/17/04 10,000,000
- --------------------------------------------------------------------------------
20,000,000 FNMA, 1.30%, 8/30/04 20,000,000
- --------------------------------------------------------------------------------
20,000,000 FNMA, VRN, 1.08%,
11/13/03, resets weekly
off the 3-month T-Bill rate
plus 0.13% with no caps 20,000,000
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 321,032,819
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 9.9%
- --------------------------------------------------------------------------------
$25,000,000 Canadian Imperial Bank
of Commerce (New York),
1.03%, 10/7/03 $ 25,000,000
- --------------------------------------------------------------------------------
20,000,000 Canadian Imperial Bank
of Commerce (New York),
1.06%, 11/17/03 20,000,000
- --------------------------------------------------------------------------------
25,000,000 Canadian Imperial Bank
of Commerce (New York),
1.06%, 3/26/04 25,000,000
- --------------------------------------------------------------------------------
35,000,000 First Tennessee Bank N.A.,
1.02%, 10/3/03 35,000,000
- --------------------------------------------------------------------------------
30,000,000 First Tennessee Bank N.A.,
1.06%, 11/12/03 30,000,000
- --------------------------------------------------------------------------------
39,500,000 Svenska Handelsbanken AB,
1.20%, 10/8/03 39,500,000
- --------------------------------------------------------------------------------
38,300,000 UBS AG, 1.24%, 3/22/04 38,298,182
- --------------------------------------------------------------------------------
25,000,000 Wells Fargo Bank, N.A.,
1.07%, 10/27/03 25,000,000
- --------------------------------------------------------------------------------
17,500,000 Westdeutsche Landesbank AG,
1.32%, 4/15/04 17,500,000
- --------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 255,298,182
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY
SECURITIES AND EQUIVALENTS -- 1.5%
- --------------------------------------------------------------------------------
40,000,000 TR, 1.22%, 8/15/04(1) 39,577,452
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
DISCOUNT NOTES -- 1.3%
- --------------------------------------------------------------------------------
34,250,000 FHLMC Discount Notes,
1.08%, 11/6/03(1) 34,213,181
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 100.0% $2,580,881,824
================================================================================
See Notes to Financial Statements. (continued)
------
7
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FHA = Federal Housing Authority
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
FSA = Financial Security Assurance Inc.
GO = General Obligation
LIBOR = London Interbank Offered Rate
LOC = Letter of Credit
MBIA = MBIA Insurance Corp.
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
SBBPA = Standby Bond Purchase Agreement
TR = Treasury Receipts
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective September 30, 2003.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective September 30, 2003.
XLCA = XL Capital Ltd.
(1) The yield to maturity at purchase is indicated.
(2) Security was purchased under Rule 144A or Section 4(2) of the
Securities Act of 1933 or is a private placement and, unless registered
under the Act or exempted from registration, may only be sold to qualified
institutional investors. The aggregate value of restricted securities at
September 30, 2003, was $1,168,442,144, which represented 44.9% of net
assets. Restricted securities considered illiquid represent 3.5% of net
assets.
See Notes to Financial Statements.
- ------
8
Statement of Assets and Liabilities
SEPTEMBER 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (amortized cost
and cost for federal income tax purposes) $2,580,881,824
- ---------------------------------------------------------------
Cash 18,604,136
- ---------------------------------------------------------------
Receivable for capital shares sold 1,175
- ---------------------------------------------------------------
Interest receivable 4,914,056
- ---------------------------------------------------------------
Prepaid portfolio insurance 95,559
- --------------------------------------------------------------------------------
2,604,496,750
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Accrued management fees 1,238,661
- ---------------------------------------------------------------
Distribution fees payable 1,073
- ---------------------------------------------------------------
Service fees payable 1,126
- ---------------------------------------------------------------
Dividends payable 6,405
- --------------------------------------------------------------------------------
1,247,265
- --------------------------------------------------------------------------------
NET ASSETS $2,603,249,485
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital paid in $2,603,261,319
- ---------------------------------------------------------------
Accumulated net realized loss on investment transactions (11,834)
- --------------------------------------------------------------------------------
$2,603,249,485
================================================================================
INVESTOR CLASS
- --------------------------------------------------------------------------------
Net assets $2,598,138,685
- ---------------------------------------------------------------
Shares outstanding 2,598,151,391
- ---------------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
Net assets $4,879,962
- ---------------------------------------------------------------
Shares outstanding 4,879,090
- ---------------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
Net assets $103,541
- ---------------------------------------------------------------
Shares outstanding 103,541
- ---------------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
Net assets $25,071
- ---------------------------------------------------------------
Shares outstanding 25,071
- ---------------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
Net assets $102,226
- ---------------------------------------------------------------
Shares outstanding 102,226
- ---------------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
------
9
Statement of Operations
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- ---------------------------------------------------------------
Interest $15,635,115
- --------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------
Management fees 7,602,417
- ---------------------------------------------------------------
Distribution fees:
- ---------------------------------------------------------------
Advisor Class 6,633
- ---------------------------------------------------------------
B Class 100
- ---------------------------------------------------------------
C Class 187
- ---------------------------------------------------------------
Service fees:
- ---------------------------------------------------------------
Advisor Class 6,633
- ---------------------------------------------------------------
B Class 33
- ---------------------------------------------------------------
C Class 93
- ---------------------------------------------------------------
Service and distribution fees -- A Class 128
- ---------------------------------------------------------------
Trustees' fees and expenses 46,345
- ---------------------------------------------------------------
Portfolio insurance and other expenses 143,246
- --------------------------------------------------------------------------------
7,805,815
- ---------------------------------------------------------------
Amount waived (247)
- --------------------------------------------------------------------------------
7,805,568
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,829,547
- --------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENT TRANSACTIONS (3,615)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,825,932
================================================================================
See Notes to Financial Statements.
- ------
10
Statement of Changes in Net Assets
SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) AND YEAR ENDED MARCH 31, 2003
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2003 MARCH 31, 2003
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 7,829,547 $ 31,992,791
- --------------------------------------------
Net realized gain (loss) (3,615) 511
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 7,825,932 31,993,302
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income:
- ---------------------------------------------
Investor Class (7,819,639) (31,863,736)
- ---------------------------------------------
Advisor Class (9,630) (127,225)
- ---------------------------------------------
A Class (198) (25)
- ---------------------------------------------
B Class (47) (25)
- ---------------------------------------------
C Class (33) (1,780)
- ---------------------------------------------
From net realized gains:
- ---------------------------------------------
Investor Class -- (8,678)
- ---------------------------------------------
Advisor Class -- (50)
- ---------------------------------------------
C Class -- (2)
- --------------------------------------------------------------------------------
Decrease in net assets from distributions (7,829,547) (32,001,521)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions 23,037,862 (190,252,441)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 23,034,247 (190,260,660)
================================================================================
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 2,580,215,238 2,770,475,898
- --------------------------------------------------------------------------------
End of period $2,603,249,485 $2,580,215,238
================================================================================
See Notes to Financial Statements.
------
11
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. Prime Money Market Fund (the fund) is one fund in
a series issued by the trust. The fund is diversified under the 1940 Act. The
fund's investment objective is to earn the highest level of current income while
preserving the value of your investment. The following is a summary of the
fund's significant accounting policies.
MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the
Advisor Class, the A Class, the B Class and the C Class. 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 -- Securities are valued at amortized cost, which
approximates current market value. When such valuations do not reflect current
market value, securities may be valued at fair value as determined in accordance
with procedures adopted by the Board of Trustees.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at cost.
The fund requires that the collateral, represented by securities, received in a
repurchase transaction be transferred to the custodian in a manner sufficient to
enable the fund to obtain those securities in the event of a default under the
repurchase agreement. ACIM monitors, on a daily basis, the securities
transferred to ensure the value, including accrued interest, of the securities
under each repurchase agreement is equal to or greater than amounts owed to the
fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, the fund, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The fund 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 fund will
segregate cash, cash equivalents or other appropriate liquid securities on its
records in amounts sufficient to meet the purchase price.
INCOME TAX STATUS -- It is the fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under 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 and
short-term capital gains, if any, are declared daily and paid monthly. The fund
does not expect to realize any long-term capital gains, and accordingly, does
not expect to pay any capital gains distributions.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
- ------
12
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with ACIM,
under which ACIM provides the fund with investment advisory and management
services in exchange for a single, unified management fee per class. The
Agreement provides that all expenses of the fund, except brokerage commissions,
taxes, portfolio insurance, interest, fees and expenses of those trustees who
are not considered "interested persons" as defined in the 1940 Act (including
counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is
computed daily and paid monthly in arrears. It consists of an Investment
Category Fee based on the average net assets of the funds in a specific fund's
investment category and a Complex Fee based on the average net assets of all the
funds managed by ACIM. The rates for the Investment Category Fee range from
0.2570% to 0.3700% and the rates for the Complex Fee (Investor Class, A Class, B
Class and C Class) range from 0.2900% to 0.3100%. The Advisor Class is 0.2500%
less at each point within the Complex Fee range. For the six months ended
September 30, 2003, the effective annual management fee was 0.59%, 0.34%, 0.59%,
0.59% and 0.59% for the Investor, Advisor, A, B and C Classes, respectively.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a Master
Distribution and Shareholder Services Plan for the Advisor Class (the Advisor
Class plan) and a separate Master Distribution and Individual Shareholder
Services Plan for each of the A Class, B Class and C Class (collectively with
the Advisor Class plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The
plans provide the Advisor Class, B Class and C Class will pay American Century
Investment Services, Inc. (ACIS) the following annual distribution and service
fees:
- --------------------------------------------------------------------------------
ADVISOR B C
- --------------------------------------------------------------------------------
Distribution Fee 0.25% 0.75% 0.50%
- --------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 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 daily and paid monthly in arrears
based on each class's average daily closing net assets during the previous
month. The distribution fee provides compensation for expenses incurred in
connection with distributing shares of the classes including, but not limited
to, payments to brokers, dealers, and financial institutions that have entered
into sales agreements with respect to shares of the fund. The service fee
provides compensation for shareholder and administrative services rendered by
ACIS, its affiliates or independent third party providers for Advisor Class
shares and for individual shareholder services rendered by broker/dealers or
other independent financial intermediaries for A, B and C Class shares. All or a
portion of the fees may have been voluntarily waived during the period. For the
six months ended September 30, 2003, the A Class, B Class and C Class waived
$47, $100 and $100, respectively, of distribution and service fees. Fees
incurred under the plans during the six months ended September 30, 2003, are
detailed in the Statement of Operations.
MONEY MARKET INSURANCE -- The fund, along with other money market funds managed
by ACIM, has entered into an insurance agreement with MBIA Insurance Corporation
(MBIA). MBIA provides limited coverage for certain loss events including issuer
defaults as to payment of principal or interest and insolvency of a credit
enhancement provider. The fund pays annual premiums to MBIA, which are amortized
daily over one year.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the trust's investment manager, ACIM, the
distributor of the trust, American Century Investment Services, Inc., and the
trust's transfer agent, American Century Services Corporation.
(continued)
------
13
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows (unlimited number of shares
authorized):
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ---------------------------------------------
Sold 1,102,163,333 $ 1,102,163,333
- ---------------------------------------------
Issued in reinvestment of distributions 7,693,024 7,693,024
- ---------------------------------------------
Redeemed (1,086,408,132) (1,086,408,132)
- --------------------------------------------------------------------------------
Net increase 23,448,225 $ 23,448,225
================================================================================
YEAR ENDED MARCH 31, 2003
- ---------------------------------------------
Sold 2,590,130,017 $ 2,590,130,017
- ---------------------------------------------
Issued in reinvestment of distributions 31,203,319 31,203,319
- ---------------------------------------------
Redeemed (2,802,779,766) (2,802,779,766)
- --------------------------------------------------------------------------------
Net decrease (181,446,430) $ (181,446,430)
================================================================================
ADVISOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ---------------------------------------------
Sold 1,663,204 $ 1,663,204
- ---------------------------------------------
Issued in reinvestment of distributions 9,630 9,630
- ---------------------------------------------
Redeemed (2,224,048) (2,224,048)
- --------------------------------------------------------------------------------
Net decrease (551,214) $ (551,214)
================================================================================
YEAR ENDED MARCH 31, 2003
- ---------------------------------------------
Sold 12,446,959 $ 12,446,959
- ---------------------------------------------
Issued in reinvestment of distributions 126,366 126,366
- ---------------------------------------------
Redeemed (21,469,323) (21,469,323)
- --------------------------------------------------------------------------------
Net decrease (8,895,998) $ (8,895,998)
================================================================================
A CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ---------------------------------------------
Sold 1,274,119 $ 1,274,119
- ---------------------------------------------
Issued in reinvestment of distributions 91 91
- ---------------------------------------------
Redeemed (1,195,694) (1,195,694)
- --------------------------------------------------------------------------------
Net increase 78,516 $ 78,516
================================================================================
PERIOD ENDED MARCH 31, 2003(1)
- ---------------------------------------------
Sold 25,000 $25,000
- ---------------------------------------------
Issued in reinvestment of distributions 25 25
- --------------------------------------------------------------------------------
Net increase 25,025 $25,025
================================================================================
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(continued)
- ------
14
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
3. CAPITAL SHARE TRANSACTIONS (CONTINUED)
SHARES AMOUNT
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ---------------------------------------------
Sold 20,685 $ 20,685
- ---------------------------------------------
Issued in reinvestment of distributions 47 47
- ---------------------------------------------
Redeemed (20,686) (20,686)
- --------------------------------------------------------------------------------
Net increase 46 $ 46
================================================================================
PERIOD ENDED MARCH 31, 2003(1)
- ---------------------------------------------
Sold 25,000 $25,000
- ---------------------------------------------
Issued in reinvestment of distributions 25 25
- --------------------------------------------------------------------------------
Net increase 25,025 $25,025
================================================================================
C CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ---------------------------------------------
Sold 236,636 $ 236,636
- ---------------------------------------------
Issued in reinvestment of distributions 23 23
- ---------------------------------------------
Redeemed (174,370) (174,370)
- --------------------------------------------------------------------------------
Net increase 62,289 $ 62,289
================================================================================
PERIOD ENDED MARCH 31, 2003(2)
- ---------------------------------------------
Sold 1,023,161 $1,023,161
- ---------------------------------------------
Issued in reinvestment of distributions 1,640 1,640
- ---------------------------------------------
Redeemed (984,864) (984,864)
- --------------------------------------------------------------------------------
Net increase 39,937 $ 39,937
================================================================================
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) May 7, 2002 (commencement of sale) through March 31, 2003.
4. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of March 31, 2003, the fund had accumulated net realized capital loss
carryovers for federal income tax purposes of $13,940 (expiring 2010) which may
be used to offset future taxable realized gains.
------
15
Prime Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- -------------------------------------------------------------------------------------------------------------
2003(1) 2003 2002(2) 2002 2001 2000(3) 1999
- -------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- -------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income --(4) 0.01 --(4) 0.03 0.06 0.05 0.05
- -------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income --(4) (0.01) --(4) (0.03) (0.06) (0.05) (0.05)
- -------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=============================================================================================================
TOTAL RETURN(5) 0.31% 1.19% 0.13% 3.16% 6.05% 4.92% 5.07%
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.61%(6) 0.61% 0.60%(6) 0.60% 0.60% 0.60% 0.58%(7)
- --------------------------
Ratio of Operating
Expenses to Average
Net Assets (Before
Expense Waiver) 0.61%(6) 0.61% 0.60%(6) 0.60% 0.60% 0.60% 0.60%
- --------------------------
Ratio of Net Investment
Income to Average
Net Assets 0.61%(6) 1.19% 1.48%(6) 3.13% 5.88% 4.81% 4.91%(7)
- --------------------------
Ratio of Net Investment
Income to Average
Net Assets (Before
Expense Waiver) 0.61%(6) 1.19% 1.48%(6) 3.13% 5.88% 4.81% 4.89%
- --------------------------
Net Assets, End of Period
(in thousands) $2,598,139 $2,574,694 $2,756,147 $2,796,914 $2,875,876 $2,921,825 $2,851,880
- ---------------------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) One-month period ended March 31, 2002. The fund's fiscal year end was
changed from February 28 to March 31, resulting in a one-month reporting
period. For years prior, the fund's fiscal year end was February 28.
(3) Year ended February 29, 2000.
(4) Per-share amount was less than $0.005.
(5) 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.
(6) Annualized.
(7) The manager waived a portion of expenses through May 31, 1998.
See Notes to Financial Statements.
- ------
16
Prime Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- -----------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------------
2003(1) 2003 2002(2) 2002 2001 2000(3) 1999(4)
- -----------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income --(5) 0.01 --(5) 0.03 0.06 0.05 0.02
- -----------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income --(5) (0.01) --(5) (0.03) (0.06) (0.05) (0.02)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================================
TOTAL RETURN(6) 0.18% 0.93% 0.10% 2.90% 5.79% 4.66% 2.31%
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.86%(7) 0.86% 0.85%(7) 0.85% 0.85% 0.85% 0.85%(7)
- --------------------------
Ratio of Net Investment
Income to Average
Net Assets 0.36%(7) 0.94% 1.23%(7) 2.88% 5.63% 4.56% 4.53%(7)
- --------------------------
Net Assets, End of Period
(in thousands) $4,880 $5,431 $14,329 $13,609 $7,784 $4,799 $3,215
- -------------------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) One-month period ended March 31, 2002. The fund's fiscal year end was
changed from February 28 to March 31, resulting in a one-month reporting
period. For years prior, the fund's fiscal year end was February 28.
(3) Year ended February 29, 2000.
(4) August 28, 1998 (commencement of sale) through February 28, 1999.
(5) Per-share amount was less than $0.005.
(6) 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.
(7) Annualized.
See Notes to Financial Statements.
------
17
Prime Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2003(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.00 $1.00
- --------------------------------------------------
Income From Investment Operations
- --------------------------------------------------
Net Investment Income --(3) --(3)
- --------------------------------------------------------------------------------
Distributions
- --------------------------------------------------
From Net Investment Income --(3) --(3)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00
================================================================================
TOTAL RETURN(4) 0.24% 0.12%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets(5) 0.76%(6) 0.61%(6)
- --------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 0.86%(6) 0.86%(6)
- --------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(5) 0.46%(6) 0.76%(6)
- --------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) 0.36%(6) 0.51%(6)
- --------------------------------------------------
Net Assets, End of Period (in thousands) $104 $25
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized.
(5) The distributor voluntarily waived a portion of the service and
distribution fees.
(6) Annualized.
See Notes to Financial Statements.
- ------
18
Prime Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2003(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.00 $1.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------------
Net Investment Income --(3) --(3)
- --------------------------------------------------------------------------------
Distributions
- --------------------------------------------------
From Net Investment Income --(3) --(3)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00
================================================================================
TOTAL RETURN(4) 0.19% 0.12%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets(5) 0.86%(6) 0.61%(6)
- --------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.61%(6) 1.61%(6)
- --------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(5) 0.36%(6) 0.76%(6)
- --------------------------------------------------
Ratio of Net Investment Loss
to Average Net Assets
(Before Expense Waiver) (0.39)%(6) (0.24)%(6)
- --------------------------------------------------
Net Assets, End of Period (in thousands) $25 $25
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized.
(5) The distributor voluntarily waived all or a portion of the distribution and
service fees.
(6) Annualized.
See Notes to Financial Statements.
------
19
Prime Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2003(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.00 $1.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------------
Net Investment Income --(3) --(3)
- --------------------------------------------------------------------------------
Distributions
- --------------------------------------------------
From Net Investment Income --(3) --(3)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00
================================================================================
TOTAL RETURN(4) 0.06% 0.40%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets(5) 1.09%(6) 1.34%(6)
- --------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.36%(6) 1.36%(6)
- --------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(5) 0.13%(6) 0.47%(6)
- --------------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets
(Before Expense Waiver) (0.14)%(6) 0.45%(6)
- --------------------------------------------------
Net Assets, End of Period (in thousands) $102 $40
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) May 7, 2002 (commencement of sale) through March 31, 2003.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized.
(5) The distributor voluntarily waived a portion of the distribution and
service fees.
(6) Annualized.
See Notes to Financial Statements.
- ------
20
Share Class Information
Five classes of shares are authorized for sale by the fund: Investor Class,
Advisor Class, A Class, B Class, and C Class. The total expense ratios for
Advisor, A, B, and C Class shares are 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 a
broker-dealer, which may require payment of a transaction fee to the broker.
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.
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 net asset value. A Class
shares may be subject to a contingent deferred sales charge (CDSC). There is no
CDSC on shares acquired through reinvestment of dividends or capital gains. The
prospectus contains information regarding reductions and waivers of sales
charges for A Class shares. A Class shares also are subject to a 0.25% annual
Rule 12b-1 service and distribution fee.
B CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. B Class shares redeemed within six years of purchase are
subject to a CDSC that declines from 5.00% during the first year after purchase
to 0.00% the sixth year after purchase. There is no CDSC on shares acquired
through reinvestment of dividends or capital gains. B Class shares also are
subject to a 1.00% annual Rule 12b-1 service and distribution fee. B Class
shares automatically convert to A Class shares (with lower expenses) eight years
after their purchase date.
C CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. C Class shares redeemed within 12 months of purchase are
subject to a CDSC of 1.00%. There is no CDSC on shares acquired through
reinvestment of dividends or capital gains. C Class shares also are subject to a
Rule 12b-1 service and distribution fee of up to 1.00%.
All classes of shares represent a pro rata interest in the fund and generally
have the same rights and preferences.
------
21
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b)
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 fund's manager, is responsible
for exercising the voting rights associated with the securities purchased and/or
held by the fund. A description of the policies and procedures the manager uses
in fulfilling this responsibility is available without charge, upon request, by
calling 1-800-345-2021. It is also available on American Century's Web site at
www.americancentury.com and on the Securities and Exchange Commission's Web site
at www.sec.gov.
- ------
22
Index Definition
The following index is 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 90-DAY U.S. TREASURY BILL INDEX is derived from secondary market interest
rates as published by the Federal Reserve Bank and includes three-month,
six-month, and one-year instruments.
------
23
Notes
- ------
24
[back cover]
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
COMPANIES
0311 American Century Investment Services, Inc.
SH-SAN-36281S (c)2003 American Century Services Corporation
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY INVESTMENT TRUST
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
[front cover]
September 30, 2003
American Century
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of bridge over creek]
Diversified Bond
High-Yield
[american century logo and text logo (reg.sm)]
[inside front cover]
Table of Contents
Our Message to You....................................................... 1
DIVERSIFIED BOND
Performance.............................................................. 2
Portfolio Commentary..................................................... 4
Portfolio at a Glance................................................. 4
Yields................................................................ 4
Portfolio Composition by Credit Rating................................ 5
Types of Investments in Portfolio..................................... 5
Schedule of Investments.................................................. 6
HIGH-YIELD
Performance.............................................................. 12
Portfolio Commentary..................................................... 14
Portfolio at a Glance................................................. 14
Yields................................................................ 14
Portfolio Composition by Credit Rating................................ 15
Top Five Industries................................................... 15
Schedule of Investments.................................................. 16
FINANCIAL STATEMENTS
Statement of Assets and Liabilities...................................... 19
Statement of Operations.................................................. 21
Statement of Changes in Net Assets....................................... 22
Notes to Financial Statements............................................ 23
Financial Highlights..................................................... 29
OTHER INFORMATION
Proxy Voting Results..................................................... 40
Share Class Information.................................................. 41
Additional Information................................................... 43
Index Definitions........................................................ 44
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with the semiannual report for the American
Century Diversified Bond and High-Yield funds for the six months ended Sept. 30,
2003.
The 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.
Many of you have called or written to express your concern about allegations of
wrongdoing by other mutual fund investment management firms. We share your
concern--fund companies must put investors first and do everything possible to
maintain investor trust. Through the Investment Company Institute, the mutual
fund trade association, American Century has advocated industry-wide proposals
that strengthen protections for fund investors. We believe that decisive action
is needed to show that we are committed, as an industry, to the interests of the
95 million investors we serve.
As information about alleged trading abuses in the mutual fund industry has come
to light, we have posted messages and commentary about these issues on
www.americancentury.com. Beyond what's currently in the headlines, American
Century has been a champion of many important investor and industry issues,
which are outlined in a document titled Putting Investors First. We invite you
to visit our Web site and read about how our values have influenced these
positions.
As always, we deeply appreciate your investment with American Century.
Sincerely,
/s/ James E. Stowers, Jr.
James E. Stowers, Jr.
Founder and Chairman
/s/ James E. Stowers III
James E. Stowers III
Co-Chairman of the Board
------
1
Diversified Bond - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2003
--------------------------------------
AVERAGE ANNUAL RETURNS
- -------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------------------
INVESTOR CLASS 5.19% -- -- 5.98% 12/3/2001
- -------------------------------------------------------------------------------------------
LEHMAN BROTHERS U.S.
AGGREGATE INDEX 5.41% -- -- 7.25%(1) --
- -------------------------------------------------------------------------------------------
Institutional Class 5.40% 5.93% 6.36% 6.50% 4/1/1993
- -------------------------------------------------------------------------------------------
Advisor Class 4.92% -- -- 5.72% 12/3/2001
- -------------------------------------------------------------------------------------------
A Class(2) 1/31/2003
No sales charge* -- -- -- 3.32%(3)
With sales charge* -- -- -- -1.32%(3)
- -------------------------------------------------------------------------------------------
B Class(2) 1/31/2003
No sales charge* -- -- -- 2.86%(3)
With sales charge* -- -- -- -2.14%(3)
- -------------------------------------------------------------------------------------------
C Class(2) 1/31/2003
No sales charge* -- -- -- 3.00%(3)
With sales charge* -- -- -- 2.00%(3)
- -------------------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. (A Class shares have an initial sales charge and
CDSC; B and C Class shares have CDSCs. Please see the Share Class Information
pages for more about the applicable sales charges for each share class.) The SEC
requires that mutual funds provide performance information net of maximum sales
charges in all cases where charges could be applied.
(1) Since 11/30/01, the date nearest the Investor Class's inception for which
data are available.
(2) Class returns would have been lower if American Century had not voluntarily
waived all or a portion of service and distribution fees during the period.
(3) Returns for periods less than one year are not annualized.
(continued)
- ------
2
Diversified Bond - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made December 3, 2001
*Fund data from 12/3/01, the Investor Class's inception date. Index data from
11/30/01, the date nearest the Investor Class's inception for which data are
available.
The charts on the performance pages give historical return data for the fund.
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. Unless otherwise
indicated, the charts are based on Investor Class shares; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table on the previous page). Past performance does not guarantee future results.
None of these charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
------
3
Diversified Bond - Portfolio Commentary
By Jeff Houston, portfolio manager
RETURNS REMAINED POSITIVE DESPITE ECONOMIC UPTURN
Diversified Bond and its broad market index, the Lehman Brothers U.S. Aggregate
Index (LBA), posted positive returns for the six months ended Sept. 30, 2003,
despite stronger economic growth and a resurgent U.S. stock market. Diversified
Bond and the LBA gained 2.16% and 2.35% respectively for the six months, boosted
primarily by the performance of investment-grade corporate bonds.* The corporate
component of the LBA rose 4.96% during the six-month period, led by
transportation (especially airlines), consumer cyclicals (particularly
automotive), and communications (notably cable media).
Like those corporate bonds, the major U.S. stock indices rose during the six
months, influenced by a rebounding U.S. economy that grew at a 3.3% annual rate
in the second quarter of 2003 and an estimated 7.2% annual rate in the third
quarter. The S&P 500 Index advanced 18.45% and the Nasdaq Composite was up
33.49%.
ROLLERCOASTER RIDE FOR BOND INVESTORS
During the six months ended Sept. 30, 2003, the broad taxable investment-grade
U.S. bond market, as represented by the LBA, went on a rollercoaster ride that
was wilder than the final 2.35% return indicates.
From March 31 to mid-June, the LBA was up nearly 4% as lingering signs of
economic weakness -- including high unemployment -- boosted demand for bonds.
But the market suddenly reversed direction in mid-June and sold off sharply for
about 45 days, plunging the LBA into negative territory by the end of July. The
market recovered somewhat in September after national payroll employment
declined in August by what was originally reported as 93,000 jobs (later revised
to 41,000).
SECTOR RETURNS
While the corporate bond sector outperformed the LBA during the six months, the
index's other two largest components -- the mortgage-backed securities (MBS) and
Treasury sectors -- underperformed, returning 1.18% and 1.78% respectively.
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
9/30/03 3/31/03
- --------------------------------------------------------------------------------
Weighted Average
Maturity 5.8 years 5.4 years
- --------------------------------------------------------------------------------
Average Duration 4.4 years 4.1 years
- --------------------------------------------------------------------------------
YIELDS AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor Class 3.02%
- --------------------------------------------------------------------------------
Institutional Class 3.22%
- --------------------------------------------------------------------------------
Advisor Class 2.77%
- --------------------------------------------------------------------------------
A Class 2.65%
- --------------------------------------------------------------------------------
B Class 2.04%
- --------------------------------------------------------------------------------
C Class 2.28%
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE (ADR)
- --------------------------------------------------------------------------------
Investor Class 3.93%
- --------------------------------------------------------------------------------
Institutional Class 4.13%
- --------------------------------------------------------------------------------
Advisor Class 3.68%
- --------------------------------------------------------------------------------
A Class 3.68%
- --------------------------------------------------------------------------------
B Class 2.92%
- --------------------------------------------------------------------------------
C Class 3.20%
- --------------------------------------------------------------------------------
*All fund returns referenced in this
commentary are for Investor Class shares. (continued)
- ------
4
Diversified Bond - Portfolio Commentary
MBS were affected by plunging mortgage interest rates and soaring refinancing
activity during the period. The average conforming 30-year fixed mortgage rate
dropped to a record-low 5.21% in June, according to Freddie Mac. Meanwhile, the
Mortgage Bankers Association's refinancing index reached 9162.7 for the week
ended June 13. (Later, it dropped back to just 2506.8 for the week ended Sept.
26.)
Treasurys experienced tremendous volatility, including one of the worst months
(July) in the sector's history. The 10-year Treasury note yield started the six
months at 3.80%, plunged to just 3.11% in mid-June, soared to over 4.40% in the
following 45 days, and finished at 3.94%.
PORTFOLIO POSITIONING
Diversified Bond aims to provide a high level of income by investing in
non-money market debt securities, which may include MBS, other asset-backed
securities (ABS), corporate debt, and government securities. The portfolio is
managed with a goal of adding value by modestly overweighting the relatively
undervalued, higher-yielding sectors of the market.
During the six months, the main differences between the portfolio and the LBA
were relative portfolio overweights in corporates, commercial MBS, and ABS; and
underweights in fixed-rate MBS, Treasurys, and agency securities. These
positions were established in anticipation of stronger economic growth and
higher interest rates. However, we were somewhat early with that call, which
held back relative performance. But given the increased likelihood of a stronger
economy and rising interest rates in coming quarters, we believe the portfolio's
position is appropriate for current economic and market conditions.
PORTFOLIO COMPOSITION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/03 3/31/03
- --------------------------------------------------------------------------------
AAA 58% 73%
- --------------------------------------------------------------------------------
AA 8% 3%
- --------------------------------------------------------------------------------
A 13% 14%
- --------------------------------------------------------------------------------
BBB 15% 9%
- --------------------------------------------------------------------------------
BB 6% 1%
- --------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
9/30/03 3/31/03
- --------------------------------------------------------------------------------
Corporate Bonds 33.8% 25.9%
- --------------------------------------------------------------------------------
Mortgage-Backed
Securities 24.0% 22.4%
- --------------------------------------------------------------------------------
U.S. Treasury Securities 13.4% 24.8%
- --------------------------------------------------------------------------------
CMOs 8.1% 10.5%
- --------------------------------------------------------------------------------
Asset-Backed Securities 7.6% 3.5%
- --------------------------------------------------------------------------------
U.S. Government
Agency Securities 4.0% 5.1%
- --------------------------------------------------------------------------------
Municipals 3.5% --
- --------------------------------------------------------------------------------
Other(1) 5.6% 7.8%
- --------------------------------------------------------------------------------
(1) Includes Temporary Cash Investments.
------
5
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 33.8%
- --------------------------------------------------------------------------------
ALCOHOL -- 0.3%
- --------------------------------------------------------------------------------
$ 1,500,000 Miller Brewing Co., 4.25%,
8/15/08 (Acquired 8/6/03,
Cost $1,494,855)(1) $ 1,542,774
- --------------------------------------------------------------------------------
BANKS -- 2.5%
- --------------------------------------------------------------------------------
3,300,000 Bank of America Corp.,
6.625%, 6/15/04 3,425,050
- --------------------------------------------------------------------------------
1,500,000 Bank of America Corp.,
4.75%, 8/15/13 1,500,423
- --------------------------------------------------------------------------------
2,300,000 Citigroup Inc., 4.125%, 6/30/05 2,397,706
- --------------------------------------------------------------------------------
1,500,000 Citigroup Inc., 7.25%, 10/1/10 1,779,216
- --------------------------------------------------------------------------------
1,500,000 Marshall & Ilsley Bank,
4.125%, 9/4/07 1,577,109
- --------------------------------------------------------------------------------
2,000,000 US Bancorp, 2.75%, 3/30/06 2,034,204
- --------------------------------------------------------------------------------
12,713,708
- --------------------------------------------------------------------------------
CHEMICALS -- 0.6%
- --------------------------------------------------------------------------------
2,800,000 Crompton Corp., 8.50%, 3/15/05 2,933,000
- --------------------------------------------------------------------------------
CLOTHING STORES -- 0.2%
- --------------------------------------------------------------------------------
750,000 Limited Brands, 6.95%, 3/1/33 829,430
- --------------------------------------------------------------------------------
DIVERSIFIED -- 8.8%
- --------------------------------------------------------------------------------
137,500 iShares GS $ InvesTop
Corporate Bond Fund(2) 15,420,624
- --------------------------------------------------------------------------------
11,826,000 Lehman Brothers TRAINS(reg.sm),
Series 10-2002, 6.96%, 1/15/12
(Acquired 5/23/02-1/3/03,
Cost $12,528,924)(1) 13,483,614
- --------------------------------------------------------------------------------
7,260,000 Lehman Brothers TRAINS(reg.sm),
Series L-2002, 7.75%, 11/15/31
(Acquired 4/14/03-5/8/03,
Cost $8,595,081)(1) 8,698,112
- --------------------------------------------------------------------------------
6,050,000 Morgan Stanley TRACERS(reg.sm),
7.70%, 3/31/32 (Acquired
3/15/02-8/28/02,
Cost $6,421,740)(1) 7,117,039
- --------------------------------------------------------------------------------
44,719,389
- --------------------------------------------------------------------------------
ELECTRICAL UTILITY -- 1.9%
- --------------------------------------------------------------------------------
1,000,000 Carolina Power & Light Co.,
6.50%, 7/15/12 1,113,601
- --------------------------------------------------------------------------------
1,500,000 Constellation Energy Group Inc.,
4.55%, 6/15/15 1,397,142
- --------------------------------------------------------------------------------
2,300,000 Dominion Resources Inc.,
4.125%, 2/15/08 2,367,815
- --------------------------------------------------------------------------------
1,650,000 Progress Energy Inc.,
7.10%, 3/1/11 1,865,568
- --------------------------------------------------------------------------------
600,000 Tampa Electric Co.,
6.375%, 8/15/12 640,088
- --------------------------------------------------------------------------------
2,000,000 Virginia Electric and
Power Co., 5.75%, 3/31/06 2,169,454
- --------------------------------------------------------------------------------
9,553,668
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 1.1%
- --------------------------------------------------------------------------------
$ 800,000 Anadarko Petroleum Corp.,
7.95%, 4/15/29 $ 1,011,822
- --------------------------------------------------------------------------------
1,500,000 Conoco Funding Co.,
6.35%, 10/15/11 1,697,736
- --------------------------------------------------------------------------------
1,500,000 Occidental Petroleum Corp.,
4.25%, 3/15/10 1,527,402
- --------------------------------------------------------------------------------
1,150,000 XTO Energy Inc.,
6.25%, 4/15/13 1,196,000
- --------------------------------------------------------------------------------
5,432,960
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 1.2%
- --------------------------------------------------------------------------------
2,250,000 Allied Waste North America, Inc.,
Series B, 7.625%, 1/1/06 2,362,500
- --------------------------------------------------------------------------------
1,400,000 Waste Management Inc.,
7.00%, 10/15/06 1,568,788
- --------------------------------------------------------------------------------
2,100,000 Waste Management Inc.,
6.50%, 11/15/08 2,347,888
- --------------------------------------------------------------------------------
6,279,176
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.1%
- --------------------------------------------------------------------------------
1,500,000 American General
Finance Corp., Series H,
4.50%, 11/15/07 1,579,553
- --------------------------------------------------------------------------------
2,700,000 Associates Corp. N.A.,
6.00%, 7/15/05 2,911,528
- --------------------------------------------------------------------------------
2,000,000 Ford Motor Credit Co.,
6.875%, 2/1/06 2,128,761
- --------------------------------------------------------------------------------
1,000,000 Ford Motor Credit Co., VRN,
1.59%, 12/31/03, resets
quarterly off the 3-month
LIBOR plus 0.45% with no caps 982,566
- --------------------------------------------------------------------------------
2,000,000 General Electric Capital Corp.,
2.75%, 9/25/06 2,023,356
- --------------------------------------------------------------------------------
2,000,000 General Electric Co.,
5.00%, 2/1/13 2,054,052
- --------------------------------------------------------------------------------
1,000,000 General Motors Acceptance
Corp., 6.75%, 1/15/06 1,070,083
- --------------------------------------------------------------------------------
1,000,000 General Motors Acceptance
Corp., 6.125%, 8/28/07 1,058,182
- --------------------------------------------------------------------------------
2,050,000 General Motors Acceptance
Corp., VRN, 3.14%, 12/3/03,
resets quarterly off the
3-month LIBOR plus
2.00% with no caps 2,075,814
- --------------------------------------------------------------------------------
15,883,895
- --------------------------------------------------------------------------------
FOOD & BEVERAGE -- 0.3%
- --------------------------------------------------------------------------------
1,500,000 Cadbury Schweppes
US Finance LLC, 5.125%,
10/1/13 (Acquired 9/22/03,
Cost $1,491,540)(1) 1,524,626
- --------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.2%
- --------------------------------------------------------------------------------
1,100,000 Abitibi-Consolidated
Finance L.P., 7.875%, 8/1/09 1,174,722
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
GAS & WATER UTILITIES -- 0.5%
- --------------------------------------------------------------------------------
$ 600,000 CenterPoint Energy Resources
Corp., 6.50%, 2/1/08 $ 638,782
- --------------------------------------------------------------------------------
500,000 Columbia Energy Group,
6.80%, 11/28/05 545,968
- --------------------------------------------------------------------------------
1,100,000 Sempra Energy,
6.00%, 2/1/13 1,188,354
- --------------------------------------------------------------------------------
2,373,104
- --------------------------------------------------------------------------------
GROCERY STORES -- 0.9%
- --------------------------------------------------------------------------------
2,100,000 Delhaize America Inc.,
7.375%, 4/15/06 2,257,500
- --------------------------------------------------------------------------------
2,000,000 Safeway Inc., 6.15%, 3/1/06 2,170,276
- --------------------------------------------------------------------------------
4,427,776
- --------------------------------------------------------------------------------
HEAVY MACHINERY -- 0.4%
- --------------------------------------------------------------------------------
2,000,000 Caterpillar Financial Services
Corp., 2.59%, 7/15/06 2,022,884
- --------------------------------------------------------------------------------
HOME PRODUCTS -- 0.8%
- --------------------------------------------------------------------------------
1,800,000 Dial Corp., 7.00%, 8/15/06 2,014,043
- --------------------------------------------------------------------------------
2,000,000 Newell Rubbermaid Inc.,
2.00%, 5/1/05 1,994,506
- --------------------------------------------------------------------------------
4,008,549
- --------------------------------------------------------------------------------
HOTELS -- 0.6%
- --------------------------------------------------------------------------------
1,700,000 MGM Mirage, 6.00%, 10/1/09 1,717,000
- --------------------------------------------------------------------------------
1,100,000 Mirage Resorts Inc.,
6.75%, 2/1/08 1,163,250
- --------------------------------------------------------------------------------
2,880,250
- --------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 0.2%
- --------------------------------------------------------------------------------
1,000,000 Tyco International Group SA,
6.125%, 1/15/09 1,050,000
- --------------------------------------------------------------------------------
INFORMATION SERVICES -- 0.1%
- --------------------------------------------------------------------------------
455,000 International Business Machines
Corp., 7.125%, 12/1/96 527,251
- --------------------------------------------------------------------------------
LEISURE -- 0.6%
- --------------------------------------------------------------------------------
1,150,000 Mandalay Resort Group,
6.45%, 2/1/06 1,196,000
- --------------------------------------------------------------------------------
1,900,000 Park Place Entertainment
Corp., 7.875%, 12/15/05 2,021,125
- --------------------------------------------------------------------------------
3,217,125
- --------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE -- 0.9%
- --------------------------------------------------------------------------------
2,000,000 Allstate Financial Global
Funding, 4.25%, 9/10/08
(Acquired 9/3/03,
Cost $1,996,080)(1) 2,076,932
- --------------------------------------------------------------------------------
2,200,000 Monumental Global Funding II,
3.85%, 3/3/08 (Acquired
2/5/03, Cost $2,199,956)(1) 2,250,171
- --------------------------------------------------------------------------------
4,327,103
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
MEDIA -- 3.2%
- --------------------------------------------------------------------------------
$ 2,000,000 Clear Channel Communications
Inc., 4.25%, 5/15/09 $ 2,026,664
- --------------------------------------------------------------------------------
700,000 Comcast Cable Communications,
8.375%, 5/1/07 820,170
- --------------------------------------------------------------------------------
1,000,000 Comcast Corp., 5.85%, 1/15/10 1,083,105
- --------------------------------------------------------------------------------
1,500,000 Comcast Corp., 5.50%, 3/15/11 1,580,433
- --------------------------------------------------------------------------------
700,000 COX Communications Inc.,
6.75%, 3/15/11 795,682
- --------------------------------------------------------------------------------
1,000,000 CSC Holdings Inc.,
7.25%, 7/15/08 1,002,500
- --------------------------------------------------------------------------------
500,000 CSC Holdings Inc.,
7.625%, 7/15/18 482,500
- --------------------------------------------------------------------------------
3,850,000 Echostar DBS Corp.,
9.375%, 2/1/09 4,124,312
- --------------------------------------------------------------------------------
2,400,000 Liberty Media Corp., VRN,
2.64%, 12/15/03, resets
quarterly off the 3-month
LIBOR plus 1.50% with no caps 2,389,327
- --------------------------------------------------------------------------------
1,000,000 News America Holdings,
7.75%, 1/20/24 1,170,433
- --------------------------------------------------------------------------------
500,000 Rogers Cable Inc., 6.25%,
6/15/13 (Acquired 6/16/03,
Cost $500,000)(1) 501,875
- --------------------------------------------------------------------------------
15,977,001
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 0.3%
- --------------------------------------------------------------------------------
1,500,000 Beckman Coulter Inc.,
7.45%, 3/4/08 1,734,947
- --------------------------------------------------------------------------------
MINING & METALS -- 0.7%
- --------------------------------------------------------------------------------
2,000,000 Ball Corp., 7.75%, 8/1/06 2,180,000
- --------------------------------------------------------------------------------
1,250,000 IPSCO Inc., 8.75%, 6/1/13
(Acquired 7/1/03,
Cost $1,271,875)(1) 1,312,500
- --------------------------------------------------------------------------------
3,492,500
- --------------------------------------------------------------------------------
OIL SERVICES -- 0.5%
- --------------------------------------------------------------------------------
2,100,000 Pemex Project Funding Master
Trust, 7.375%, 12/15/14 2,268,000
- --------------------------------------------------------------------------------
PROPERTY AND CASUALTY INSURANCE -- 0.3%
- --------------------------------------------------------------------------------
1,500,000 American International Group,
4.25%, 5/15/13 (Acquired
5/8/03, Cost $1,492,515)(1) 1,449,203
- --------------------------------------------------------------------------------
RESTAURANTS -- 0.5%
- --------------------------------------------------------------------------------
2,150,000 Yum! Brands Inc.,
8.875%, 4/15/11 2,515,500
- --------------------------------------------------------------------------------
SECURITIES & ASSET MANAGEMENT -- 1.1%
- --------------------------------------------------------------------------------
1,200,000 Goldman Sachs Group Inc.,
5.70%, 9/1/12 1,285,906
- --------------------------------------------------------------------------------
2,000,000 Merrill Lynch & Co. Inc.,
3.70%, 4/21/08 2,031,850
- --------------------------------------------------------------------------------
2,000,000 Morgan Stanley,
4.25%, 5/15/10 2,022,012
- --------------------------------------------------------------------------------
5,339,768
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
7
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
SPECIALTY STORES -- 0.3%
- --------------------------------------------------------------------------------
$ 1,500,000 Office Depot Inc., 6.25%,
8/15/13 (Acquired 8/6/03,
Cost $1,495,800)(1) $ 1,599,354
- --------------------------------------------------------------------------------
TELEPHONE -- 0.9%
- --------------------------------------------------------------------------------
26,000 AT&T Corp., 6.00%, 3/15/09 28,035
- --------------------------------------------------------------------------------
260,000 Comcast Cable Communications
Holdings Inc., 8.375%, 3/15/13 322,770
- --------------------------------------------------------------------------------
600,000 Sprint Capital Corp.,
6.875%, 11/15/28 587,173
- --------------------------------------------------------------------------------
1,400,000 Verizon New England Inc.,
6.50%, 9/15/11 1,579,377
- --------------------------------------------------------------------------------
1,500,000 Verizon New England Inc.,
4.75%, 10/1/13 1,486,485
- --------------------------------------------------------------------------------
400,000 Verizon Pennsylvania Inc.,
Series A, 5.65%, 11/15/11 429,280
- --------------------------------------------------------------------------------
4,433,120
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 0.8%
- --------------------------------------------------------------------------------
650,000 AT&T Wireless Services Inc.,
7.875%, 3/1/11 757,938
- --------------------------------------------------------------------------------
1,000,000 Deutsche Telekom International
Finance BV, 8.50%, 6/15/10 1,225,163
- --------------------------------------------------------------------------------
1,500,000 Deutsche Telekom International
Finance BV, 8.75%, 6/15/30 1,909,553
- --------------------------------------------------------------------------------
3,892,654
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $163,255,342) 170,123,437
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES(3) -- 24.0%
- --------------------------------------------------------------------------------
111,252 FHLMC, 6.50%, 2/1/09 117,430
- --------------------------------------------------------------------------------
85,099 FHLMC, 6.50%, 12/1/12 89,643
- --------------------------------------------------------------------------------
1,017,877 FHLMC, 6.00%, 1/1/13 1,062,347
- --------------------------------------------------------------------------------
106,713 FHLMC, 7.00%, 11/1/13 113,320
- --------------------------------------------------------------------------------
242,807 FHLMC, 7.00%, 6/1/14 257,881
- --------------------------------------------------------------------------------
492,397 FHLMC, 6.50%, 6/1/16 518,209
- --------------------------------------------------------------------------------
848,015 FHLMC, 6.50%, 6/1/16 892,470
- --------------------------------------------------------------------------------
6,048,948 FHLMC, 5.00%, 11/1/17 6,194,690
- --------------------------------------------------------------------------------
24,050 FHLMC, 8.50%, 10/1/26 26,106
- --------------------------------------------------------------------------------
103,763 FHLMC, 7.00%, 9/1/27 109,833
- --------------------------------------------------------------------------------
176,565 FHLMC, 6.50%, 1/1/28 184,728
- --------------------------------------------------------------------------------
26,462 FHLMC, 7.00%, 2/1/28 28,010
- --------------------------------------------------------------------------------
872,862 FHLMC, 6.50%, 3/1/29 912,704
- --------------------------------------------------------------------------------
683,935 FHLMC, 6.50%, 6/1/29 714,939
- --------------------------------------------------------------------------------
95,572 FHLMC, 7.00%, 8/1/29 101,010
- --------------------------------------------------------------------------------
396,118 FHLMC, 7.50%, 8/1/29 423,942
- --------------------------------------------------------------------------------
23,012 FHLMC, 6.50%, 5/1/31 24,035
- --------------------------------------------------------------------------------
1,186,864 FHLMC, 6.50%, 5/1/31 1,239,594
- --------------------------------------------------------------------------------
520,277 FHLMC, 6.50%, 6/1/31 543,392
- --------------------------------------------------------------------------------
40,302 FHLMC, 6.50%, 6/1/31 42,092
- --------------------------------------------------------------------------------
14,619 FHLMC, 6.50%, 6/1/31 15,268
- --------------------------------------------------------------------------------
14,623 FHLMC, 6.50%, 6/1/31 15,272
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 23,253 FHLMC, 6.50%, 6/1/31 $ 24,286
- --------------------------------------------------------------------------------
26,367 FHLMC, 6.50%, 6/1/31 27,538
- --------------------------------------------------------------------------------
7,000,000 FNMA, 6.00%, settlement
date 10/15/03(4) 7,155,313
- --------------------------------------------------------------------------------
11,500,000 FNMA, 5.00%, settlement
date 10/20/03(4) 11,656,467
- --------------------------------------------------------------------------------
275,712 FNMA, 6.00%, 2/1/09 288,817
- --------------------------------------------------------------------------------
62,277 FNMA, 6.00%, 5/1/13 65,168
- --------------------------------------------------------------------------------
74,251 FNMA, 6.00%, 5/1/13 77,708
- --------------------------------------------------------------------------------
267,200 FNMA, 6.00%, 7/1/13 279,603
- --------------------------------------------------------------------------------
500,088 FNMA, 6.00%, 12/1/13 523,301
- --------------------------------------------------------------------------------
350,931 FNMA, 6.00%, 1/1/14 367,220
- --------------------------------------------------------------------------------
727,034 FNMA, 6.00%, 2/1/14 760,781
- --------------------------------------------------------------------------------
644,248 FNMA, 6.00%, 4/1/14 674,152
- --------------------------------------------------------------------------------
3,286,128 FNMA, 5.50%, 12/1/16 3,403,453
- --------------------------------------------------------------------------------
2,175,616 FNMA, 5.50%, 12/1/16 2,253,292
- --------------------------------------------------------------------------------
499,144 FNMA, 6.50%, 1/1/26 522,008
- --------------------------------------------------------------------------------
100,230 FNMA, 7.00%, 12/1/27 106,330
- --------------------------------------------------------------------------------
79,245 FNMA, 6.50%, 1/1/28 82,778
- --------------------------------------------------------------------------------
40,184 FNMA, 7.00%, 1/1/28 42,629
- --------------------------------------------------------------------------------
205,450 FNMA, 7.50%, 4/1/28 219,763
- --------------------------------------------------------------------------------
382,869 FNMA, 7.00%, 5/1/28 405,800
- --------------------------------------------------------------------------------
35,426 FNMA, 7.00%, 6/1/28 37,548
- --------------------------------------------------------------------------------
227,525 FNMA, 6.00%, 9/1/28 235,461
- --------------------------------------------------------------------------------
109,650 FNMA, 6.00%, 12/1/28 113,474
- --------------------------------------------------------------------------------
159,159 FNMA, 6.00%, 12/1/28 164,710
- --------------------------------------------------------------------------------
1,216,009 FNMA, 6.00%, 1/1/29 1,258,423
- --------------------------------------------------------------------------------
110,069 FNMA, 6.50%, 1/1/29 114,904
- --------------------------------------------------------------------------------
331,273 FNMA, 6.50%, 4/1/29 345,718
- --------------------------------------------------------------------------------
235,861 FNMA, 7.00%, 7/1/29 249,849
- --------------------------------------------------------------------------------
151,925 FNMA, 7.00%, 7/1/29 161,024
- --------------------------------------------------------------------------------
414,842 FNMA, 7.50%, 7/1/29 442,943
- --------------------------------------------------------------------------------
100,089 FNMA, 7.00%, 5/1/30 105,965
- --------------------------------------------------------------------------------
456,219 FNMA, 7.50%, 8/1/30 487,018
- --------------------------------------------------------------------------------
384,828 FNMA, 7.50%, 9/1/30 410,807
- --------------------------------------------------------------------------------
3,110,713 FNMA, 7.00%, 9/1/31 3,293,287
- --------------------------------------------------------------------------------
1,772,104 FNMA, 6.00%, 12/1/31 1,829,318
- --------------------------------------------------------------------------------
964,680 FNMA, 6.50%, 1/1/32 1,005,923
- --------------------------------------------------------------------------------
7,216,413 FNMA, 6.00%, 6/1/32 7,449,943
- --------------------------------------------------------------------------------
5,887,497 FNMA, 7.00%, 6/1/32 6,230,008
- --------------------------------------------------------------------------------
3,363,392 FNMA, 6.50%, 8/1/32 3,507,187
- --------------------------------------------------------------------------------
3,549,336 FNMA, 6.00%, 11/1/32 3,663,930
- --------------------------------------------------------------------------------
3,868,527 FNMA, 6.00%, 1/1/33 3,993,716
- --------------------------------------------------------------------------------
6,699,603 FNMA, 5.50%, 6/1/33 6,840,924
- --------------------------------------------------------------------------------
269,653 FNMA, 6.00%, 7/1/33 278,375
- --------------------------------------------------------------------------------
7,163,708 FNMA, 5.50%, 8/1/33 7,314,819
- --------------------------------------------------------------------------------
2,542,953 FNMA, 6.00%, 8/1/33 2,625,202
- --------------------------------------------------------------------------------
1,180,709 FNMA, 6.00%, 8/1/33 1,218,898
- --------------------------------------------------------------------------------
7,250,000 FNMA, 5.50%, 9/1/33 7,402,932
- --------------------------------------------------------------------------------
2,997,173 FNMA, 6.00%, 9/1/33 3,094,113
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 2,997,206 FNMA, 6.00%, 9/1/33 $ 3,094,147
- --------------------------------------------------------------------------------
4,124,476 FNMA, 6.00%, 9/1/33 4,257,878
- --------------------------------------------------------------------------------
2,869,110 FNMA, 6.00%, 9/1/33 2,961,908
- --------------------------------------------------------------------------------
106,950 GNMA, 7.50%, 8/20/17 114,552
- --------------------------------------------------------------------------------
271,378 GNMA, 7.00%, 11/15/22 290,943
- --------------------------------------------------------------------------------
82,436 GNMA, 8.75%, 3/15/25 90,690
- --------------------------------------------------------------------------------
73,031 GNMA, 7.00%, 4/20/26 77,686
- --------------------------------------------------------------------------------
136,252 GNMA, 7.50%, 8/15/26 146,466
- --------------------------------------------------------------------------------
76,015 GNMA, 8.00%, 8/15/26 82,503
- --------------------------------------------------------------------------------
14,489 GNMA, 7.50%, 4/15/27 15,538
- --------------------------------------------------------------------------------
140,163 GNMA, 7.50%, 5/15/27 150,307
- --------------------------------------------------------------------------------
140,535 GNMA, 8.00%, 6/15/27 152,066
- --------------------------------------------------------------------------------
13,735 GNMA, 7.50%, 11/15/27 14,729
- --------------------------------------------------------------------------------
19,194 GNMA, 7.50%, 11/15/27 20,584
- --------------------------------------------------------------------------------
149,433 GNMA, 7.00%, 2/15/28 159,250
- --------------------------------------------------------------------------------
128,673 GNMA, 7.50%, 2/15/28 137,886
- --------------------------------------------------------------------------------
288,810 GNMA, 6.50%, 3/15/28 303,853
- --------------------------------------------------------------------------------
137,276 GNMA, 7.00%, 4/15/28 146,295
- --------------------------------------------------------------------------------
617,590 GNMA, 6.50%, 5/15/28 649,758
- --------------------------------------------------------------------------------
126,465 GNMA, 6.50%, 5/15/28 133,053
- --------------------------------------------------------------------------------
7,667 GNMA, 6.50%, 5/15/28 8,067
- --------------------------------------------------------------------------------
245,631 GNMA, 7.00%, 12/15/28 261,768
- --------------------------------------------------------------------------------
42,235 GNMA, 8.00%, 12/15/29 45,662
- --------------------------------------------------------------------------------
970,972 GNMA, 7.00%, 5/15/31 1,032,980
- --------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $118,044,957) 120,788,310
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 13.4%
- --------------------------------------------------------------------------------
350,000 U.S. Treasury Bonds,
6.375%, 8/16/27 417,772
- --------------------------------------------------------------------------------
10,950,000 U.S. Treasury Bonds,
5.50%, 8/15/28 11,732,761
- --------------------------------------------------------------------------------
100,000 U.S. Treasury Bonds,
5.375%, 2/15/31 107,344
- --------------------------------------------------------------------------------
22,000,000 U.S. Treasury Notes,
1.625%, 3/31/05(5) 22,141,811
- --------------------------------------------------------------------------------
8,500,000 U.S. Treasury Notes,
2.375%, 8/15/06 8,620,530
- --------------------------------------------------------------------------------
7,500,000 U.S. Treasury Notes,
3.125%, 9/15/08 7,606,643
- --------------------------------------------------------------------------------
10,500,000 U.S. Treasury Notes,
4.00%, 11/15/12 10,627,974
- --------------------------------------------------------------------------------
6,100,000 U.S. Treasury Notes,
4.25%, 8/15/13 6,255,123
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES
(Cost $66,218,479) 67,509,958
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS(3) -- 8.1%
- --------------------------------------------------------------------------------
$27,034,837 Commercial Mortgage
Acceptance Corp.
STRIPS - INTEREST,
Series 1998 C2, Class X,
VRN, 1.05%, 10/1/03 $ 1,259,148
- --------------------------------------------------------------------------------
4,300,000 Commercial Mortgage
Acceptance Corp.,
Series 1999 C1, Class A2 SEQ,
7.03%, 6/15/31 4,972,055
- --------------------------------------------------------------------------------
3,650,000 Commercial Mortgage Asset
Trust, Series 1999 C1,
Class A2 SEQ, 6.59%, 1/17/32 4,126,347
- --------------------------------------------------------------------------------
1,326,912 Credit-Based Asset Servicing
and Securitization,
Series 2001 CB2, Class A2F,
5.97%, 3/25/19 1,337,672
- --------------------------------------------------------------------------------
998,511 First Union National Bank
Commercial Mortgage,
Series 2001 C3, Class A1 SEQ,
5.20%, 8/15/33 1,050,043
- --------------------------------------------------------------------------------
108,611 FNMA REMIC, Series 1989-35,
Class G, 9.50%, 7/25/19 123,359
- --------------------------------------------------------------------------------
3,179,025 FNMA, Series 2002-87,
Class AM SEQ, 5.50%, 6/25/31 3,331,183
- --------------------------------------------------------------------------------
4,164,931 FNMA, Series 2002-91,
Class LK SEQ, 4.50%, 6/25/22 4,274,893
- --------------------------------------------------------------------------------
1,646,409 FNMA, Series 2003-9,
Class BC SEQ, 5.00%, 2/25/22 1,713,307
- --------------------------------------------------------------------------------
2,700,000 GMAC Commercial Mortgage
Securities Inc., Series 2000 C3,
Class A2 SEQ, 6.96%, 9/15/35 3,118,775
- --------------------------------------------------------------------------------
2,095,800 GMAC Commercial Mortgage
Securities Inc., Series 2002 C2,
Class A1 SEQ, 4.32%, 10/15/38 2,189,038
- --------------------------------------------------------------------------------
3,000,000 J.P. Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2002 FL1A, Class A2,
VRN, 1.56%, 10/14/03, resets
monthly off the 1-month LIBOR
plus 0.44% with no caps
(Acquired 4/3/02,
Cost $3,000,000)(1) 3,000,942
- --------------------------------------------------------------------------------
3,500,000 Mortgage Capital Funding Inc.,
Series 1998 MC3, Class A2 SEQ,
6.34%, 11/18/31 3,921,642
- --------------------------------------------------------------------------------
1,916,735 Nationslink Funding Corp.,
Series 1998-2, Class A1 SEQ,
6.00%, 8/20/30 2,042,605
- --------------------------------------------------------------------------------
4,250,000 Wachovia Bank Commercial
Mortgage Trust, Series 2003 C4,
Class A2 SEQ, 4.57%, 4/15/35 4,317,714
- --------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $40,512,456) 40,778,723
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
9
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES(3) -- 7.6%
- --------------------------------------------------------------------------------
$ 328,389 AmeriCredit Automobile
Receivables Trust,
Series 1999 D, Class A3 SEQ,
7.02%, 12/12/05 $ 331,518
- --------------------------------------------------------------------------------
4,000,000 Ameriquest Mortgage
Securities Inc., Series 2003-5,
Class A3 SEQ, 3.03%, 7/25/33 4,019,063
- --------------------------------------------------------------------------------
4,500,000 Ameriquest Mortgage
Securities Inc., Series 2003-8,
Class AF2 SEQ, 3.02%,
10/25/33 4,507,393
- --------------------------------------------------------------------------------
480,000 AQ Finance Non-Improvement
Trust, Series 2003 N11A,
Class NOTE, 7.14%, 11/25/33 480,525
- --------------------------------------------------------------------------------
3,000,000 Argent Securities Inc.,
Series 2003 W3,
Class AF3 SEQ,
3.99%, 9/25/30 3,064,922
- --------------------------------------------------------------------------------
566,616 Asset Backed Funding Corp.
Non-Improvement Trust,
Series 2003 Opt. 1, Class N1,
6.90%, 7/26/33 566,616
- --------------------------------------------------------------------------------
1,796,956 Bayview Financial Acquisition
Trust, Series 1998 B, Class M1,
VRN, 2.52%, 10/27/03,
resets monthly off the
1-month LIBOR plus 1.40%
with a cap of 13.00%
(Acquired 6/13/03,
Cost $1,804,116)(1) 1,799,898
- --------------------------------------------------------------------------------
1,099,810 Bayview Financial Acquisition
Trust, Series 2002 DA, Class M1,
VRN, 1.96%, 10/25/03, resets
monthly off the 1-month
LIBOR plus 0.85% with
no caps (Acquired 9/19/03,
Cost $1,102,431)(1) 1,103,978
- --------------------------------------------------------------------------------
1,500,000 Chase Funding Mortgage Loan,
Series 2001-1, Class 2M2, VRN,
2.05%, 10/25/03, resets
monthly off the 1-month LIBOR
plus 0.93% with no caps 1,502,001
- --------------------------------------------------------------------------------
380,488 CIT RV Trust, Series 1997 A,
Class A6 SEQ, 6.35%, 4/15/11 389,946
- --------------------------------------------------------------------------------
375,334 CIT RV Trust, Series 1998 A,
Class A4 SEQ, 6.09%, 2/15/12 381,856
- --------------------------------------------------------------------------------
1,300,000 Detroit Edison Securitization
Funding LLC, Series 2001-1,
Class A4 SEQ, 6.19%, 3/1/13 1,476,197
- --------------------------------------------------------------------------------
1,500,000 Ford Credit Auto Owner Trust,
Series 2002 A, Class B,
4.79%, 11/15/06 1,560,911
- --------------------------------------------------------------------------------
1,748,907 Household Mortgage Loan
Trust, Series 2002 HC1,
Class M, VRN, 1.77%,
10/20/03, resets monthly
off the 1-month LIBOR
plus 0.65% with no caps 1,750,763
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 2,400,000 Long Beach Mortgage Loan
Trust, Series 2001 2, Class M2,
VRN, 2.07%, 10/25/03,
resets monthly off the
1-month LIBOR plus 0.95%
with no caps $ 2,373,905
- --------------------------------------------------------------------------------
4,000,000 Peco Energy Transition Trust,
Series 1999 A, Class A6 SEQ,
6.05%, 3/1/09 4,403,016
- --------------------------------------------------------------------------------
3,500,000 Residential Asset Mortgage
Products Inc., Series 2003 RZ4,
Class A4 SEQ, 4.04%, 12/25/30 3,548,125
- --------------------------------------------------------------------------------
2,500,000 Residential Funding Mortgage
Securities II, Series 2002 HS2,
Class A4 SEQ, 5.24%, 3/25/17 2,514,375
- --------------------------------------------------------------------------------
2,480,000 Saxon Asset Securities Trust,
Series 2003-3, Class AF3,
3.60%, 12/25/33 2,552,418
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $37,705,969) 38,327,426
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
AGENCY SECURITIES -- 4.0%
- --------------------------------------------------------------------------------
5,500,000 FHLB, 1.875%, 6/15/06 5,478,709
- --------------------------------------------------------------------------------
1,500,000 FHLB, 3.875%, 6/14/13 1,439,387
- --------------------------------------------------------------------------------
2,000,000 FHLMC, 4.875%, 3/15/07 2,159,886
- --------------------------------------------------------------------------------
5,000,000 FHLMC, 3.50%, 4/1/08 5,039,000
- --------------------------------------------------------------------------------
3,000,000 FHLMC, 4.50%, 7/15/13 3,035,433
- --------------------------------------------------------------------------------
1,900,000 FNMA, 5.50%, 2/15/06 2,061,025
- --------------------------------------------------------------------------------
1,000,000 FNMA MTN, 5.74%, 1/21/09 1,013,136
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES
(Cost $19,630,460) 20,226,576
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 3.5%
- --------------------------------------------------------------------------------
10,100,000 California Rev. Anticipation
Warrants, Series 2003 B,
2.00%, 6/16/04 10,141,713
- --------------------------------------------------------------------------------
3,650,000 Illinois GO, 5.10%, 6/1/33 3,393,150
- --------------------------------------------------------------------------------
4,000,000 New Jersey Turnpike Auth.
Rev., Series 2003 B,
4.25%, 1/1/16 (AMBAC) 3,858,480
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES
(Cost $17,825,099) 17,393,343
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.4%
- --------------------------------------------------------------------------------
5,000,000 Crown Point Capital Co.,
1.12%, 10/14/03 (Acquired
8/29/03, Cost $4,992,844)(1) 4,997,900
- --------------------------------------------------------------------------------
3,500,000 Ford Motor Credit Co.,
1.24%, 10/20/03 3,497,921
- --------------------------------------------------------------------------------
3,500,000 General Motors Acceptance
Corp., 1.25%, 10/10/03 3,498,947
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $11,994,594) 11,994,768
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
10
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
SOVEREIGN GOVERNMENTS
& AGENCIES -- 1.4%
- --------------------------------------------------------------------------------
$ 2,000,000 Province of Ontario,
3.50%, 9/17/07 $ 2,048,888
- --------------------------------------------------------------------------------
1,500,000 Province of Quebec,
7.50%, 9/15/29 1,910,220
- --------------------------------------------------------------------------------
3,000,000 Republic of Italy,
2.50%, 3/31/06 3,043,893
- --------------------------------------------------------------------------------
TOTAL SOVEREIGN GOVERNMENTS & AGENCIES
(Cost $6,847,818) 7,003,001
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 1.8%
- --------------------------------------------------------------------------------
Repurchase Agreement, Credit Suisse First
Boston Corp. (U.S. Treasury obligations),
in a joint trading account at 0.92%,
dated 9/30/03, due 10/1/03
(Delivery value $9,085,232)
(Cost $9,085,000) 9,085,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $491,120,174) $503,230,542
================================================================================
COLLATERAL RECEIVED
FOR SECURITIES LENDING(6)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, BNP Paribas
Securities Corp., (U.S. Government
Agency obligations), 1.13%,
dated 9/30/03, due 10/1/03
(Delivery value $40,042,509) $40,041,252
- --------------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES
- --------------------------------------------------------------------------------
$4,993,641 Bank of Nova Scotia,
Series YCD, VRN, 1.06%,
10/29/03, resets monthly
off the 1-month LIBOR
minus 0.06% with no caps 4,993,641
- --------------------------------------------------------------------------------
10,000,000 Bear Stearns Companies, Inc.
Master Note, VRN,
1.37%, 10/1/03 10,000,000
- --------------------------------------------------------------------------------
14,993,641
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $ 55,034,893) $55,034,893
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GMAC = General Motors Acceptance Corp.
GNMA = Government National Mortgage Association
GO = General Obligation
LIBOR = London Interbank Offered Rate
MTN = Medium Term Note
REMIC = Real Estate Mortgage Investment Conduit
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
SEQ = Sequential Payer
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TRACERS(reg.sm) = Traded Custody Receipts(reg.sm). Rate indicated is the
weighted-average coupon of the underlying securities held.
TRAINS(reg.sm) = Target Return Index Securities(reg.sm). Rate indicated is
the weighted-average coupon of the underlying securities held.
VRN = Variable Rate Note. Interest reset date is indicated unless otherwise
noted. Rate shown is effective September 30, 2003.
(1) Security was purchased under Rule 144A or Section 4(2) of the
Securities Act of 1933 or is a private placement and, unless registered
under the Act or exempted from registration, may only be sold to qualified
institutional investors. The aggregate value of restricted securities at
September 30, 2003, was $52,458,918, which represented 10.8% of net assets.
None of the restricted securities were considered illiquid.
(2) Security is an exchange-traded bond fund. Quantity indicated reflects
the number of shares owned.
(3) Final maturity indicated, unless otherwise noted.
(4) Forward Commitment.
(5) Security, or a portion thereof, has been segregated for Forward
Commitments.
(6) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
------
11
High-Yield - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2003
--------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------------------------
INVESTOR CLASS 18.81% 2.07% 1.65% 9/30/1997
- --------------------------------------------------------------------------------------------------
CSFB HIGH YIELD INDEX II(1) 28.05% 5.90% 4.77% --
- --------------------------------------------------------------------------------------------------
LIPPER HIGH CURRENT YIELD FUNDS AVERAGE RETURN 24.96% 2.83% 1.81% --
- --------------------------------------------------------------------------------------------------
Fund's Lipper Ranking(2) 333 of 395 166 of 238 105 of 177 --
- --------------------------------------------------------------------------------------------------
Advisor Class(3) 18.76% -- 9.59% 3/8/2002
- --------------------------------------------------------------------------------------------------
A Class(3) 1/31/2003
No sales charge* -- -- 12.16%(4)
With sales charge* -- -- 7.14%(4)
- --------------------------------------------------------------------------------------------------
B Class(3) 1/31/2003
No sales charge* -- -- 11.63%(4)
With sales charge* -- -- 6.63%(4)
- --------------------------------------------------------------------------------------------------
C Class 17.93% -- 8.00% 12/10/2001
- --------------------------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. (A Class shares have an initial sales charge and
CDSC; B and C Class shares have CDSCs. Please see the Share Class Information
pages for more about the applicable sales charges for each share class.) The SEC
requires that mutual funds provide performance information net of maximum sales
charges in all cases where charges could be applied.
(1) On May 31, 2001, the Donaldson, Lufkin, & Jenrette (DLJ) High Yield Index,
the fund's benchmark since inception, became known as the Credit Suisse First
Boston (CSFB) High Yield Index II.
(2) Lipper rankings are based on average annual total returns for the fund in a
given category for the periods indicated.
(3) Class returns would have been lower if American Century had not voluntarily
waived all or a portion of service and distribution fees during the periods.
(4) Returns for periods less than one year are not annualized.
(continued)
- ------
12
High-Yield - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made September 30, 1997
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended September 30
- --------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
- --------------------------------------------------------------------------------
Investor Class -0.45% 3.37% -1.80% -11.54% 3.86% 18.81%
- --------------------------------------------------------------------------------
CSFB High Yield Index II -0.71% 4.48% 1.47% -4.59% 2.85% 28.05%
- --------------------------------------------------------------------------------
The charts on the performance pages give historical return data for the fund.
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. Unless otherwise
indicated, the charts are based on Investor Class shares; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table on the previous page). Past performance does not guarantee future results.
None of these charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
------
13
High-Yield - Portfolio Commentary
By Michael Difley, portfolio manager
PERFORMANCE SUMMARY
High-Yield returned 8.25% for the six months ended September 30, 2003,
reflecting a period during which corporate high-yield bonds enjoyed impressive
gains. However, with lower credit-quality securities generally providing the
biggest returns, the fund's emphasis on better-quality names curtailed its
performance relative to some of its Lipper peers.* (Please see page 12 for
details.)
ECONOMIC & MARKET BACKDROP
Financial markets weathered considerable volatility during the six months, and
geopolitical uncertainties got the ball rolling with a U.S.-led war against Iraq
in early 2003. But international tensions eased by mid-2003, bolstering consumer
confidence and benefiting financial markets.
Mixed economic signals provided another key element behind the markets' ups and
downs. U.S. economic growth held at a 1.4% annualized pace (as measured by
seasonally adjusted gross domestic product) during the first quarter of 2003,
dredging up concerns about the recovery's staying power and starting the six
months off on a downbeat note.
With that environment in mind and with deflation--a decline in prices--thought
to be an outside possibility, the Federal Reserve dropped its short-term
benchmark interest rate to a 45-year low of 1.0% in June. News that the U.S.
economy expanded at a better-than-expected clip during the second quarter
arrived not long thereafter.
But by September, available evidence again pointed to tougher times in the form
of mixed economic activity. A still-weak labor market and only slightly improved
industrial production characterized these mixed signals, while consumer spending
and homebuilding remained bright spots.
High-yield corporate bonds--which tend to act like a mix of stocks and
bonds--provided standout returns in spite of that tumultuous backdrop. Next to
stocks, corporate high-yield bonds were one of the best-performing asset classes
for the six months, topping 10% as a category. Within the corporate high-yield
universe, bonds carrying CCC or lower ratings returned more than upper-tier
bonds with BB and B ratings combined.
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
9/30/03 3/31/03
- --------------------------------------------------------------------------------
Weighted Average
Maturity 6.6 years 5.7 years
- --------------------------------------------------------------------------------
Average Duration 4.5 years 3.6 years
- --------------------------------------------------------------------------------
YIELDS AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor Class 7.17%
- --------------------------------------------------------------------------------
Advisor Class 6.91%
- --------------------------------------------------------------------------------
A Class 6.60%
- --------------------------------------------------------------------------------
B Class 6.16%
- --------------------------------------------------------------------------------
C Class 6.41%
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE (ADR)
- --------------------------------------------------------------------------------
Investor Class 8.37%
- --------------------------------------------------------------------------------
Advisor Class 8.11%
- --------------------------------------------------------------------------------
A Class 8.11%
- --------------------------------------------------------------------------------
B Class 7.35%
- --------------------------------------------------------------------------------
C Class 7.61%
- --------------------------------------------------------------------------------
*All fund returns referenced in this
commentary are for Investor Class shares. (continued)
- ------
14
High-Yield - Portfolio Commentary
On the supply front, global issuance of new corporate high-yield bonds picked up
substantially due to tremendous investor demand for such securities. As a
result, issuance in 2003 has hit a five-year high based on numbers for the first
nine months of this year.
In an additional encouraging sign, Moody's trailing 12-month global default rate
for corporate high-yield bonds continued to generally trend lower. Through
September, the default rate was at 5.7%, down noticeably from 9.2% at the same
point in 2002.
PORTFOLIO STRATEGIES
We continued to look for attractive investments across all industries, utilizing
our bottom-up approach. In doing so, we generally looked for bonds rated B or
better but selectively added some bonds with CCC ratings. Still, we steered
clear of what we perceived were some of the riskiest low-grade names. The
results appear in the accompanying table showing the portfolio's composition by
credit rating. At the end of September, the bulk of the portfolio remained in
bonds rated B.
From an industry-specific standpoint, telecommunications bonds--up more than 18%
as a category for the six months after falling more than 30% in calendar
2002--were some of the period's better performers. Along those lines, the fund
benefited from holdings in Nextel Communications, Nextel Partners, and Qwest.
Bonds issued by utility companies also performed well, and in that category the
fund held securities from companies such as Calpine, Williams, and AES. As a
category, corporate high-yield bonds in the utilities category gained more than
18% for the period, in sharp contrast with a 17% decline in 2002.
Industries that provided solid but less impressive returns included areas such
as Gaming (up more than 7% for the six months) and Chemicals (up more than 6%).
These industries provided returns that exceeded 15% and 4%, respectively, in
2002. Names such as Mandalay Resort and Venetian Casino Resort provide gaming
examples of portfolio holdings, and Huntsman Chemicals provides an example on
the chemicals side.
PORTFOLIO COMPOSITION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/03 3/31/03
- --------------------------------------------------------------------------------
AAA 6% 7%
- --------------------------------------------------------------------------------
BBB -- 4%
- --------------------------------------------------------------------------------
BB 18% 29%
- --------------------------------------------------------------------------------
B 61% 52%
- --------------------------------------------------------------------------------
CCC or lower 15% 8%
- --------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
TOP FIVE INDUSTRIES
AS OF SEPTEMBER 30, 2003*
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/03 3/31/03
- --------------------------------------------------------------------------------
Construction &
Real Property 11.5% 8.5%
- --------------------------------------------------------------------------------
Media 10.7% 11.3%
- --------------------------------------------------------------------------------
Leisure 9.8% 11.6%
- --------------------------------------------------------------------------------
Industrial Services 5.9% 3.3%
- --------------------------------------------------------------------------------
Wireless
Telecommunications 4.7% 3.9%
- --------------------------------------------------------------------------------
*Excludes securities in the Diversified industry category. These securities
represent investments in diversified pools of underlying securities in multiple
industry categories.
------
15
High-Yield - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 92.3%
- --------------------------------------------------------------------------------
APPAREL & TEXTILES -- 2.1%
- --------------------------------------------------------------------------------
$ 800,000 Perry Ellis International Inc.,
12.25%, 4/1/06 $ 853,034
- --------------------------------------------------------------------------------
550,000 Perry Ellis International Inc.,
8.875%, 9/15/13 (Acquired
9/15/03, Cost $550,000)(1) 563,750
- --------------------------------------------------------------------------------
1,416,784
- --------------------------------------------------------------------------------
CHEMICALS -- 3.8%
- --------------------------------------------------------------------------------
850,000 Huntsman ICI Chemicals,
10.125%, 7/1/09 811,750
- --------------------------------------------------------------------------------
1,000,000 Huntsman International
Holdings LLC, 13.17%,
12/31/09(2) 400,000
- --------------------------------------------------------------------------------
750,000 Lyondell Chemical Co.,
9.50%, 12/15/08 697,500
- --------------------------------------------------------------------------------
650,000 Rhodia SA, 8.875%, 6/1/11
(Acquired 5/20/03,
Cost $652,625)(1) 641,875
- --------------------------------------------------------------------------------
2,551,125
- --------------------------------------------------------------------------------
CONSTRUCTION & REAL PROPERTY -- 11.5%
- --------------------------------------------------------------------------------
500,000 Associated Materials Inc.,
9.75%, 4/15/12 531,250
- --------------------------------------------------------------------------------
655,000 Atrium Companies Inc., Series B,
10.50%, 5/1/09 704,125
- --------------------------------------------------------------------------------
250,000 Beazer Homes USA Inc.,
8.375%, 4/15/12 271,250
- --------------------------------------------------------------------------------
400,000 Integrated Electrical Services Inc.,
9.375%, 2/1/09 414,000
- --------------------------------------------------------------------------------
600,000 KB Home, 9.50%, 2/15/11 660,750
- --------------------------------------------------------------------------------
150,000 Meritage Corporation, 9.75%,
6/1/11 (Acquired 9/18/03,
Cost $163,500)(1) 165,000
- --------------------------------------------------------------------------------
500,000 Meritage Corporation,
9.75%, 6/1/11 550,000
- --------------------------------------------------------------------------------
500,000 Nortek Holdings Inc.,
9.25%, 3/15/07 517,500
- --------------------------------------------------------------------------------
500,000 Nortek Holdings Inc.,
9.875%, 6/15/11 531,250
- --------------------------------------------------------------------------------
550,000 Schuler Homes, Inc.,
10.50%, 7/15/11 626,313
- --------------------------------------------------------------------------------
750,000 Standard-Pacific Corp.,
9.25%, 4/15/12 823,125
- --------------------------------------------------------------------------------
1,250,000 WCI Communities Inc.,
10.625%, 2/15/11 1,374,999
- --------------------------------------------------------------------------------
550,000 William Lyon Homes Inc.,
10.75%, 4/1/13 599,500
- --------------------------------------------------------------------------------
7,769,062
- --------------------------------------------------------------------------------
CONSUMER DURABLES -- 1.9%
- --------------------------------------------------------------------------------
500,000 Sealy Mattress Co.,
9.875%, 12/15/07 505,000
- --------------------------------------------------------------------------------
750,000 Sealy Mattress Co., Series B,
10.875%, 12/15/07(3) 770,625
- --------------------------------------------------------------------------------
1,275,625
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
DEFENSE/AEROSPACE -- 0.8%
- --------------------------------------------------------------------------------
$ 500,000 K&F Industries, Series B,
9.625%, 12/15/10 $ 552,500
- --------------------------------------------------------------------------------
DEPARTMENT STORES -- 0.9%
- --------------------------------------------------------------------------------
525,000 Saks Inc., 8.25%, 11/15/08 577,500
- --------------------------------------------------------------------------------
DIVERSIFIED -- 4.9%
- --------------------------------------------------------------------------------
3,060,000 Lehman Brothers TRAINS(reg.sm),
Series 2003-1, 8.67%,
5/15/13 (Acquired 5/7/03,
Cost $3,272,792)(1) 3,284,500
- --------------------------------------------------------------------------------
ELECTRICAL UTILITY -- 3.0%
- --------------------------------------------------------------------------------
500,000 AES Corp. (The), 8.75%, 5/15/13 527,500
- --------------------------------------------------------------------------------
875,000 Calpine Canada Energy Finance,
8.50%, 5/1/08 634,375
- --------------------------------------------------------------------------------
800,000 MSW Energy Holdings LLC,
8.50%, 9/1/10 (Acquired 6/11/03,
Cost $819,250)(1) 840,000
- --------------------------------------------------------------------------------
2,001,875
- --------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 4.0%
- --------------------------------------------------------------------------------
650,000 BRL Universal Equipment,
8.875%, 2/15/08 705,250
- --------------------------------------------------------------------------------
500,000 Chesapeake Energy Corp.,
8.375%, 11/1/08 545,000
- --------------------------------------------------------------------------------
600,000 Magnum Hunter Resources Inc.,
9.60%, 3/15/12 657,000
- --------------------------------------------------------------------------------
242,000 Nuevo Energy Co.,
9.50%, 6/1/08 255,613
- --------------------------------------------------------------------------------
500,000 Range Resources Corp., 7.375%,
7/15/13 (Acquired 7/16/03,
Cost $495,055)(1) 490,000
- --------------------------------------------------------------------------------
2,652,863
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 1.6%
- --------------------------------------------------------------------------------
650,000 Six Flags Inc., 8.875%, 2/1/10 599,625
- --------------------------------------------------------------------------------
500,000 Six Flags Inc., 9.75%,
4/15/13 (Acquired 4/9/03,
Cost $500,000)(1) 472,500
- --------------------------------------------------------------------------------
1,072,125
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 3.7%
- --------------------------------------------------------------------------------
850,000 Allied Waste N.A. Inc., Series B,
10.00%, 8/1/09 925,438
- --------------------------------------------------------------------------------
650,000 Casella Waste Systems Inc.,
9.75%, 2/1/13 708,500
- --------------------------------------------------------------------------------
820,000 Newpark Resources,
8.625%, 12/15/07 848,700
- --------------------------------------------------------------------------------
2,482,638
- --------------------------------------------------------------------------------
FOOD & BEVERAGE -- 0.6%
- --------------------------------------------------------------------------------
350,000 Merisant Co., 9.50%, 7/15/13
(Acquired 6/27/03,
Cost $353,750)(1) 376,250
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
16
High-Yield - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 2.7%
- --------------------------------------------------------------------------------
$ 500,000 Ainsworth Lumber Co. Ltd.,
12.50%, 7/15/07 $ 575,000
- --------------------------------------------------------------------------------
600,000 Pacifica Papers Inc.,
10.00%, 3/15/09 639,000
- --------------------------------------------------------------------------------
250,000 Tembec Industries Inc.,
8.625%, 6/30/09 247,500
- --------------------------------------------------------------------------------
350,000 Tembec Industries Inc.,
7.75%, 3/15/12 330,750
- --------------------------------------------------------------------------------
1,792,250
- --------------------------------------------------------------------------------
GAS & WATER UTILITIES -- 3.5%
- --------------------------------------------------------------------------------
600,000 El Paso Corp., 7.875%, 6/15/12 507,000
- --------------------------------------------------------------------------------
800,000 El Paso Corp., 7.75%, 1/15/32 596,000
- --------------------------------------------------------------------------------
500,000 Williams Cos Inc.,
8.125%, 3/15/12 522,500
- --------------------------------------------------------------------------------
750,000 Williams Cos Inc.,
7.875%, 9/1/21 712,500
- --------------------------------------------------------------------------------
2,338,000
- --------------------------------------------------------------------------------
HOME PRODUCTS -- 1.8%
- --------------------------------------------------------------------------------
250,000 Hines Nurseries Inc., 10.25%,
10/1/11 (Acquired 9/22/03,
Cost $250,000)(1) 262,500
- --------------------------------------------------------------------------------
900,000 United Industries Corp.,
9.875%, 4/1/09 931,500
- --------------------------------------------------------------------------------
1,194,000
- --------------------------------------------------------------------------------
HOTELS -- 0.8%
- --------------------------------------------------------------------------------
500,000 Starwood Hotels & Resorts
Worldwide Inc., 7.875%, 5/1/12 550,000
- --------------------------------------------------------------------------------
INDUSTRIAL SERVICES -- 5.9%
- --------------------------------------------------------------------------------
250,000 CBRE Escrow Inc., 9.75%,
5/15/10 (Acquired 5/8/03,
Cost $250,000)(1) 271,875
- --------------------------------------------------------------------------------
500,000 Graham Packaging Co. Capital,
8.75%, 1/15/08 513,750
- --------------------------------------------------------------------------------
1,250,000 Graham Packaging Co., Series B,
10.75%, 1/15/09(3) 1,287,499
- --------------------------------------------------------------------------------
300,000 United Rentals Inc.,
9.25%, 1/15/09 312,000
- --------------------------------------------------------------------------------
750,000 United Rentals N.A. Inc.,
Series B, 10.75%, 4/15/08 834,375
- --------------------------------------------------------------------------------
750,000 URS Corp., 12.25%, 5/1/09 772,500
- --------------------------------------------------------------------------------
3,991,999
- --------------------------------------------------------------------------------
LEISURE -- 9.8%
- --------------------------------------------------------------------------------
500,000 Ameristar Casinos Inc.,
10.75%, 2/15/09 571,250
- --------------------------------------------------------------------------------
500,000 Aztar Corp., 8.875%, 5/15/07 526,250
- --------------------------------------------------------------------------------
500,000 Bally Total Fitness Holding Corp.,
9.875%, 10/15/07 482,500
- --------------------------------------------------------------------------------
550,000 Bally Total Fitness Holding Corp.,
10.50%, 7/15/11 (Acquired
6/26/03, Cost $550,000)(1) 581,625
- --------------------------------------------------------------------------------
750,000 Isle of Capri Casinos,
8.75%, 4/15/09 798,749
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 600,000 Mandalay Resort Group,
9.375%, 2/15/10 $ 691,500
- --------------------------------------------------------------------------------
650,000 Park Place Entertainment Corp.,
9.375%, 2/15/07 719,874
- --------------------------------------------------------------------------------
250,000 Penn National Gaming Inc.,
11.125%, 3/1/08 281,563
- --------------------------------------------------------------------------------
650,000 Penn National Gaming Inc.,
8.875%, 3/15/10 702,813
- --------------------------------------------------------------------------------
650,000 Resorts International Hotel and
Casino Inc., 11.50%, 3/15/09 647,563
- --------------------------------------------------------------------------------
500,000 Venetian Casino Resort LLC,
11.00%, 6/15/10 572,500
- --------------------------------------------------------------------------------
6,576,187
- --------------------------------------------------------------------------------
MEDIA -- 9.1%
- --------------------------------------------------------------------------------
952,000 Charter Communications
Holdings LLC, 0.00%, 4/1/04(3) 678,300
- --------------------------------------------------------------------------------
550,000 Charter Communications
Holdings LLC., 10.75%, 10/1/09 452,375
- --------------------------------------------------------------------------------
500,000 CSC Holdings Inc.,
7.875%, 12/15/07 513,750
- --------------------------------------------------------------------------------
500,000 CSC Holdings Inc.,
10.50%, 5/15/16 552,500
- --------------------------------------------------------------------------------
550,000 Garden State Newspapers Inc.,
8.625%, 7/1/11 580,250
- --------------------------------------------------------------------------------
1,500,000 Imax Corp., 7.875%, 12/1/05 1,496,249
- --------------------------------------------------------------------------------
700,000 Mediacom LLC, 8.50%, 4/15/08 661,500
- --------------------------------------------------------------------------------
500,000 Mediacom LLC, 9.50%, 1/15/13 476,250
- --------------------------------------------------------------------------------
650,000 Shaw Communications Inc.,
8.25%, 4/11/10 719,875
- --------------------------------------------------------------------------------
6,131,049
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 1.2%
- --------------------------------------------------------------------------------
760,000 Sybron Dental Specialties Inc.,
8.125%, 6/15/12 813,200
- --------------------------------------------------------------------------------
MINING & METALS -- 1.7%
- --------------------------------------------------------------------------------
250,000 BWAY Corp., 10.00%, 10/15/10
(Acquired 11/21/02,
Cost $250,000)(1) 271,250
- --------------------------------------------------------------------------------
800,000 IPSCO Inc., 8.75%, 6/1/13
(Acquired 6/13/03-7/1/03,
Cost $818,375)(1) 840,000
- --------------------------------------------------------------------------------
1,111,250
- --------------------------------------------------------------------------------
MULTI-INDUSTRY -- 1.1%
- --------------------------------------------------------------------------------
750,000 Key Components, Inc.,
10.50%, 6/1/08 753,750
- --------------------------------------------------------------------------------
OIL SERVICES -- 0.5%
- --------------------------------------------------------------------------------
349,000 Pride International Inc.,
9.375%, 5/1/07 361,215
- --------------------------------------------------------------------------------
PUBLISHING -- 2.0%
- --------------------------------------------------------------------------------
500,000 Cadmus Communications Corp.,
9.75%, 6/1/09 530,000
- --------------------------------------------------------------------------------
750,000 Hollinger International Publishing,
9.00%, 12/15/10 794,063
- --------------------------------------------------------------------------------
1,324,063
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
17
High-Yield - Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Shares/Principal Amount Value
- --------------------------------------------------------------------------------
RESTAURANTS -- 1.3%
- --------------------------------------------------------------------------------
$ 850,000 Friendly Ice Cream,
10.50%, 12/1/07 $ 881,875
- --------------------------------------------------------------------------------
RETAIL -- 0.9%
- --------------------------------------------------------------------------------
600,000 Stater Brothers Holdings,
10.75%, 8/15/06 631,500
- --------------------------------------------------------------------------------
SEMICONDUCTOR -- 0.8%
- --------------------------------------------------------------------------------
500,000 Amkor Technology Inc.,
7.75%, 5/15/13 505,000
- --------------------------------------------------------------------------------
SPECIALTY STORES -- 4.0%
- --------------------------------------------------------------------------------
700,000 Asbury Automotive Group Inc.,
9.00%, 6/15/12 703,500
- --------------------------------------------------------------------------------
500,000 Autonation, Inc., 9.00%, 8/1/08 562,500
- --------------------------------------------------------------------------------
850,000 Tuesday Morning Corp., Series B,
11.00%, 12/15/07 880,813
- --------------------------------------------------------------------------------
500,000 United Auto Group, Inc.,
9.625%, 3/15/12 548,750
- --------------------------------------------------------------------------------
2,695,563
- --------------------------------------------------------------------------------
TELEPHONE -- 2.7%
- --------------------------------------------------------------------------------
550,000 Qwest Capital Funding Inc.,
7.90%, 8/15/10 503,250
- --------------------------------------------------------------------------------
750,000 Qwest Capital Funding Inc.,
7.75%, 2/15/31 641,250
- --------------------------------------------------------------------------------
550,000 Qwest Services Corp.,
13.50%, 12/15/10
(Acquired 5/21/03-7/24/03,
Cost $618,500)(1) 643,500
- --------------------------------------------------------------------------------
1,788,000
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 3.7%
- --------------------------------------------------------------------------------
500,000 ACC Escrow Corp., 10.00%,
8/1/11 (Acquired 7/25/03,
Cost $500,000)(1) 540,000
- --------------------------------------------------------------------------------
500,000 Dobson Communications Corp.,
8.875%, 10/1/13 (Acquired
9/12/03, Cost $500,000)(1) 508,125
- --------------------------------------------------------------------------------
500,000 Nextel Communications Inc.,
9.95%, 2/15/08 528,125
- --------------------------------------------------------------------------------
850,000 Nextel Partners Inc.,
11.00%, 3/15/10 932,875
- --------------------------------------------------------------------------------
2,509,125
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $58,748,328) 61,960,873
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS & WARRANTS -- 2.6%
- --------------------------------------------------------------------------------
MEDIA -- 1.6%
- --------------------------------------------------------------------------------
10,000 Cablevision Systems Corp.,
Series H, 11.75%, 10/1/07 1,047,500
- --------------------------------------------------------------------------------
TELEPHONE(4)
- --------------------------------------------------------------------------------
875 Jazztel Plc Warrants(5) --
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 1.0%
- --------------------------------------------------------------------------------
638 Dobson Communications Corp.,
PIK, 12.25%, 1/15/08 $ 678,673
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED
STOCKS & WARRANTS
(Cost $1,546,820) 1,726,173
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 5.1%
- --------------------------------------------------------------------------------
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 0.91%,
dated 9/30/03, due 10/1/03
(Delivery value $3,437,087)
(Cost $3,437,000) 3,437,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $63,732,148) $67,124,046
================================================================================
COLLATERAL RECEIVED
FOR SECURITIES LENDING(6)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, BNP Paribas
Securities Corp., (U.S. Government Agency
obligations), 1.13%, dated 9/30/03,
due 10/1/03 (Delivery value $18,669,864)
(Cost $ 18,669,278) $18,669,278
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
PIK = Payment in Kind. Coupon payments may be in the form of additional
securities.
TRAINS(reg.sm) = Target Return Index Securities(reg.sm). Rate indicated is the
weighted average coupon of the underlying securities held.
(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 September 30, 2003, was
$10,752,750, which represented 15.4% of net assets. None of the restricted
securities were considered illiquid.
(2) Security is a zero-coupon 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.
(3) Step-coupon security. These securities are issued at a substantial
discount from their value at maturity and become interest bearing at a
predetermined rate and future date. Rate shown is effective September 30,
2003.
(4) Category is less than 0.05% of total investment securities.
(5) Non-income producing.
(6) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
- ------
18
Statement of Assets and Liabilities
SEPTEMBER 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (cost of
$491,120,174 and $63,732,148, respectively) -
including $54,159,287 and $18,392,842
of securities loaned, respectively $503,230,542 $67,124,046
- --------------------------------------------------
Collateral received on securities loaned,
at value (cost of $55,034,893 and $18,669,278,
respectively) 55,034,893 18,669,278
- --------------------------------------------------
Cash -- 613,349
- --------------------------------------------------
Receivable for investments sold 1,024,766 660,000
- --------------------------------------------------
Receivable for capital shares sold 85,517 170,130
- --------------------------------------------------
Interest and dividend income receivable 3,548,198 1,540,638
- --------------------------------------------------------------------------------
562,923,916 88,777,441
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for collateral received
on securities loaned 55,034,893 18,669,278
- --------------------------------------------------
Disbursements in excess of demand deposit cash 1,108,834 --
- --------------------------------------------------
Payable for investments purchased 22,517,490 --
- --------------------------------------------------
Accrued management fees 200,148 49,891
- --------------------------------------------------
Distribution fees payable 2,612 1,400
- --------------------------------------------------
Service fees payable 2,630 1,767
- --------------------------------------------------
Dividends payable 425,494 160,339
- --------------------------------------------------------------------------------
79,292,101 18,882,675
- --------------------------------------------------------------------------------
NET ASSETS $483,631,815 $69,894,766
================================================================================
See Notes to Financial Statements. (continued)
------
19
Statement of Assets and Liabilities
SEPTEMBER 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital paid in $466,780,322 $ 82,082,868
- --------------------------------------------------
Accumulated undistributed net realized gain (loss)
on investment transactions 4,741,125 (15,580,000)
- --------------------------------------------------
Net unrealized appreciation on investments 12,110,368 3,391,898
- --------------------------------------------------------------------------------
$483,631,815 $ 69,894,766
================================================================================
INVESTOR CLASS
- --------------------------------------------------------------------------------
Net assets $186,147,062 $60,576,406
- --------------------------------------------------
Shares outstanding 17,728,935 9,491,335
- --------------------------------------------------
Net asset value per share $10.50 $6.38
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
Net assets $284,431,481 N/A
- --------------------------------------------------
Shares outstanding 27,089,915 N/A
- --------------------------------------------------
Net asset value per share $10.50 N/A
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
Net assets $9,048,450 $276,727
- --------------------------------------------------
Shares outstanding 861,789 43,358
- --------------------------------------------------
Net asset value per share $10.50 $6.38
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
Net assets $2,350,586 $6,043,540
- --------------------------------------------------
Shares outstanding 223,875 946,927
- --------------------------------------------------
Net asset value per share $10.50 $6.38
- --------------------------------------------------
Maximum offering price
(net asset value divided by 0.955) $10.99 $6.68
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
Net assets $513,377 $689,879
- --------------------------------------------------
Shares outstanding 48,895 108,093
- --------------------------------------------------
Net asset value per share $10.50 $6.38
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
Net assets $1,140,859 $2,308,214
- --------------------------------------------------
Shares outstanding 108,656 361,663
- --------------------------------------------------
Net asset value per share $10.50 $6.38
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
20
Statement of Operations
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- --------------------------------------------------
Interest and other $10,170,626 $3,376,539
- --------------------------------------------------
Dividends 425,746 78,506
- --------------------------------------------------------------------------------
10,596,372 3,455,045
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------
Management fees 1,260,723 347,463
- --------------------------------------------------
Distribution fees:
- --------------------------------------------------
Advisor Class 13,597 298
- --------------------------------------------------
B Class 1,347 1,687
- --------------------------------------------------
C Class 1,749 4,093
- --------------------------------------------------
Service fees:
- --------------------------------------------------
Advisor Class 13,597 298
- --------------------------------------------------
B Class 449 562
- --------------------------------------------------
C Class 875 2,047
- --------------------------------------------------
Service and distribution fees -- A Class 1,716 5,301
- --------------------------------------------------
Trustees' fees and expenses 9,007 1,454
- --------------------------------------------------
Other expenses 765 136
- --------------------------------------------------------------------------------
1,303,825 363,339
- --------------------------------------------------
Amount waived -- (46)
- --------------------------------------------------------------------------------
1,303,825 363,293
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 9,292,547 3,091,752
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain on investment transactions 4,090,716 2,100,721
- --------------------------------------------------
Change in net unrealized appreciation
on investments (2,837,788) 947,667
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 1,252,928 3,048,388
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $10,545,475 $6,140,140
================================================================================
See Notes to Financial Statements.
------
21
Statement of Changes in Net Assets
SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)
AND YEAR ENDED MARCH 31, 2003 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- -------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE)
IN NET ASSETS SEPT. 30, 2003 MARCH 31, 2003 SEPT. 30, 2003 2003(1) 2002(2)
- -------------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income $ 9,292,547 $ 21,048,556 $ 3,091,752 $ 2,049,318 $ 3,540,644
- -------------------------------
Net realized gain (loss) 4,090,716 4,267,278 2,100,721 170,612 (10,266,173)
- -------------------------------
Change in net
unrealized appreciation (2,837,788) 16,216,033 947,667 3,837,003 6,969,610
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 10,545,475 41,531,867 6,140,140 6,056,933 244,081
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net investment income:
- -------------------------------
Investor Class (3,611,193) (8,792,995) (2,843,439) (2,043,284) (3,538,405)
- -------------------------------
Institutional Class (5,612,727) (11,773,083) -- -- --
- -------------------------------
Advisor Class (186,511) (480,715) (9,444) (32) (215)
- -------------------------------
A Class (23,878) (588) (163,571) (3,921) --
- -------------------------------
B Class (4,897) (226) (15,757) (324) --
- -------------------------------
C Class (10,549) (949) (59,541) (1,757) (2,024)
- -------------------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (9,449,755) (21,048,556) (3,091,752) (2,049,318) (3,540,644)
- -------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
capital share transactions (10,583,343) 89,162,915 (12,480,311) 24,997,106 19,468,245
- -------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (9,487,623) 109,646,226 (9,431,923) 29,004,721 16,171,682
NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Beginning of period 493,119,438 383,473,212 79,326,689 50,321,968 34,150,286
- -------------------------------------------------------------------------------------------------------------
End of period $483,631,815 $493,119,438 $69,894,766 $79,326,689 $ 50,321,968
=============================================================================================================
(1) November 1, 2002 through March 31, 2003. High-Yield's fiscal year end was
changed from October 31 to March 31, resulting in a five-month annual
reporting period.
(2) Year ended October 31, 2002.
See Notes to Financial Statements.
- ------
22
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. Diversified Bond Fund (Diversified) and
High-Yield Fund (High-Yield) (the funds) are two funds in a series issued by the
trust. The funds are diversified under the 1940 Act. Diversified's investment
objective is to obtain a high level of income by investing primarily in
non-money market debt securities. High-Yield's investment objective is to seek
high current income by investing in a diversified portfolio of high-yielding
corporate bonds, debentures and notes. High-Yield invests primarily in
lower-rated debt securities, which are subject to greater credit risk and
consequently offer higher yield. Securities of this type are subject to
substantial risks including price volatility, liquidity risk and default risk.
The following is a summary of the funds' significant accounting policies.
MULTIPLE CLASS -- Diversified is authorized to issue the Investor Class, the
Institutional Class, the Advisor Class, the A Class, the B Class and the C
Class. High-Yield is authorized to issue the Investor Class, the Advisor Class,
the A Class, the B Class and the C Class. The A Class may incur an initial sales
charge. The A Class, B Class and C Class may be subject to a contingent deferred
sales charge. The share classes differ principally in their respective sales
charges and shareholder servicing and distribution expenses and arrangements.
All shares of the funds represent an equal pro rata interest in the net assets
of the class to which such shares belong, and have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except for class
specific expenses and exclusive rights to vote on matters affecting only
individual classes. Income, non-class specific expenses, and realized and
unrealized capital gains and losses of the funds are allocated to each class of
shares based on their relative net assets.
SECURITY VALUATIONS -- Securities are valued through a commercial pricing
service or at the mean of the most recent bid and asked prices. When valuations
are not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Trustees. Securities traded
primarily on a principal securities exchange are valued at the last reported
sales price, or at the mean of the latest bid and asked prices where no last
sales price is available. Depending on local convention or regulation,
securities traded over-the-counter are valued at the mean of the latest bid and
asked prices, the last sales price, or the official close price.
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. Dividend income
less foreign taxes withheld, if any, is recorded as of the ex-dividend date.
SECURITIES ON LOAN -- The funds may lend portfolio securities through the
lending agent to certain approved borrowers in order to earn additional income.
The funds continue to recognize any gain or loss in the market price of the
securities loaned and record any interest earned or dividends declared.
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.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that the funds' investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at cost.
The funds require that the collateral, represented by securities, received in a
repurchase transaction be transferred to the custodian in a manner sufficient to
enable the funds to obtain those securities in the event of a default under the
repurchase agreement. ACIM monitors, on a daily basis, the securities
transferred to ensure the value, including accrued interest, of the securities
under each repurchase agreement is equal to or greater than amounts owed to the
funds under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, the funds, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
INCOME TAX STATUS -- It is the funds' policy to distribute all net investment
income and net realized gains to shareholders and to otherwise
(continued)
------
23
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 for
the funds are declared daily and paid monthly. Distributions from net realized
gains for the funds, if any, are generally declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with ACIM,
under which ACIM provides the funds with investment advisory and management
services in exchange for a single, unified management fee per class. The
Agreement provides that all expenses of the funds, except brokerage commissions,
taxes, portfolio insurance, interest, fees and expenses of those trustees who
are not considered "interested persons" as defined in the 1940 Act (including
counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is
computed daily and paid monthly in arrears. It consists of an Investment
Category Fee based on the average net assets of the funds in a specific fund's
investment category and a Complex Fee based on the average net assets of all the
funds managed by ACIM. The rates for the Investment Category Fee range from
0.2925% to 0.4100% for Diversified Bond and from 0.5425% to 0.6600% for
High-Yield. The rates for the Complex Fee (Investor Class and A, B and C
Classes) range from 0.2900% to 0.3100%. The Institutional Class is 0.2000% less
and the Advisor Class is 0.2500% less at each point within the Complex Fee
range. For the six months ended September 30, 2003, the effective annual
management fees for the funds were as follows:
- --------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- --------------------------------------------------------------------------------
Investor Class 0.63% 0.88%
- --------------------------------------------------------------------------------
Institutional Class 0.43% N/A
- --------------------------------------------------------------------------------
Advisor Class 0.38% 0.63%
- --------------------------------------------------------------------------------
A Class 0.63% 0.88%
- --------------------------------------------------------------------------------
B Class 0.63% 0.88%
- --------------------------------------------------------------------------------
C Class 0.63% 0.88%
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a Master
Distribution and Shareholder Services Plan for the Advisor Class (the Advisor
Class plan) and a separate Master Distribution and Individual Shareholder
Services Plan for each of the A Class, B Class and C Class (collectively with
the Advisor Class plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The
plans provide the Advisor Class, B Class and C Class will pay American Century
Investment Services, Inc. (ACIS) the following annual distribution and service
fees:
- --------------------------------------------------------------------------------
ADVISOR B C
- --------------------------------------------------------------------------------
Distribution Fee 0.25% 0.75% 0.50%
- --------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 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 daily and paid monthly in arrears
based on each class's average daily closing net assets during the previous
month. The distribution fee provides compensation for expenses incurred in
connection with distributing shares of the classes including, but not limited
to, payments to brokers, dealers, and financial institutions that have entered
into sales agreements with respect to shares of the funds. The service fee
provides compensation for shareholder and administrative services rendered by
ACIS, its affiliates or independent third party providers for Advisor Class
shares and for individual shareholder services rendered by broker/dealers or
other independent financial intermediaries for A, B and C Class shares. All or a
portion of the fees may have been voluntarily waived during the period. For the
six months ended September 30, 2003, High-Yield's Advisor Class waived $46 of
distribution and service fees. Fees incurred under the plans during the six
months ended September 30, 2003, are detailed in the Statement of Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment manager, ACIM, the
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services Corporation.
The funds have a bank line of credit agreement with J.P. Morgan Chase & Co.
(JPM). JPM is an equity investor in ACC.
(continued)
------
24
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended September 30, 2003, were as follows:
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
PURCHASES
- --------------------------------------------------------------------------------
U.S. Treasury & Government Agency Obligations $473,628,766 --
- --------------------------------------------------------------------------------
Investment securities other than U.S. Treasury
& Government Agency Obligations $142,614,907 $33,873,715
- --------------------------------------------------------------------------------
PROCEEDS FROM SALES
- --------------------------------------------------------------------------------
U.S. Treasury & Government Agency Obligations $557,824,392 --
- --------------------------------------------------------------------------------
Investment securities other than U.S. Treasury
& Government Agency Obligations $ 80,277,911 $42,552,145
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows (unlimited number of shares
authorized):
- ------------------------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- ------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ----------------------------------------
Sold 1,068,768 $ 11,235,315 4,114,270 $ 25,908,482
- ----------------------------------------
Issued in reinvestment of distributions 317,349 3,325,206 272,325 1,721,607
- ----------------------------------------
Redeemed (2,645,816) (27,676,918) (7,661,460) (48,147,552)
- ------------------------------------------------------------------------------------------------
Net decrease (1,259,699) $(13,116,397) (3,274,865) $(20,517,463)
================================================================================================
YEAR ENDED MARCH 31, 2003(1)
- ----------------------------------------
Sold 6,009,549 $ 61,708,699 7,815,230 $ 46,538,835
- ----------------------------------------
Issued in reinvestment of distributions 784,198 8,068,307 203,423 1,221,665
- ----------------------------------------
Redeemed (4,901,709) (50,326,575) (3,986,344) (23,814,437)
- ------------------------------------------------------------------------------------------------
Net increase 1,892,038 $ 19,450,431 4,032,309 $ 23,946,063
================================================================================================
YEAR ENDED OCTOBER 31, 2002
- ----------------------------------------
Sold N/A N/A 12,457,086 $ 75,389,099
- ----------------------------------------
Issued in reinvestment of distributions 382,091 2,328,425
- ----------------------------------------
Redeemed (9,633,980) (58,286,748)
- ------------------------------------------------------------------------------------------------
Net increase 3,205,197 $ 19,430,776
================================================================================================
(1) November 1, 2002 through March 31, 2003 for High-Yield. High-Yield's fiscal
year end was changed from October 31 to March 31, resulting in a five-month
annual reporting period.
(continued)
------
25
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ------------------------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- ------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ------------------------------------------
Sold 5,674,859 $ 59,699,287 N/A N/A
- ------------------------------------------
Issued in reinvestment of distributions 324,630 3,401,466
- ------------------------------------------
Redeemed (5,840,402) (61,373,033)
- ------------------------------------------------------------------------------------------------
Net increase 159,087 $ 1,727,720
================================================================================================
YEAR ENDED MARCH 31, 2003
- ------------------------------------------
Sold 16,019,070 $ 164,475,363 N/A N/A
- ------------------------------------------
Issued in reinvestment of distributions 779,023 8,017,647
- ------------------------------------------
Redeemed (10,145,253) (104,277,671)
- ------------------------------------------------------------------------------------------------
Net increase 6,652,840 $ 68,215,339
================================================================================================
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ------------------------------------------
Sold 208,404 $ 2,193,939 57,762 $ 367,376
- ------------------------------------------
Issued in reinvestment of distributions 15,239 159,658 1,349 8,524
- ------------------------------------------
Redeemed (466,485) (4,857,957) (15,931) (101,321)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) (242,842) $(2,504,360) 43,180 $ 274,579
================================================================================================
YEAR ENDED MARCH 31, 2003(1)
- ------------------------------------------
Sold 642,225 $ 6,615,472 173 $ 1,002
- ------------------------------------------
Issued in reinvestment of distributions 36,097 371,272 5 31
- ------------------------------------------
Redeemed (604,306) (6,209,207) (733) (4,231)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) 74,016 $ 777,537 (555) $(3,198)
================================================================================================
PERIOD ENDED OCTOBER 31, 2002(2)
- ------------------------------------------
Sold N/A N/A 804 $5,000
- ------------------------------------------
Issued in reinvestment of distributions 35 213
- ------------------------------------------
Redeemed (106) (664)
- ------------------------------------------------------------------------------------------------
Net increase 733 $4,549
================================================================================================
(1) November 1, 2002 through March 31, 2003 for High-Yield. High-Yield's
fiscal year end was changed from October 31 to March 31, resulting in a
five-month annual reporting period.
(2) March 8, 2002 (commencement of sale) through October 31, 2002 for High
Yield.
(continued)
- ------
26
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ---------------------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- ---------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
A CLASS
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ------------------------------------------
Sold 389,428 $ 4,119,608 1,271,725 $ 8,008,000
- ------------------------------------------
Issued in reinvestment of distributions 1,913 19,929 23,398 147,985
- ------------------------------------------
Redeemed (195,506) (2,061,105) (472,737) (3,004,071)
- ---------------------------------------------------------------------------------------------
Net increase 195,835 $ 2,078,432 822,386 $ 5,151,914
=============================================================================================
PERIOD ENDED MARCH 31, 2003(1)
- ------------------------------------------
Sold 27,984 $292,128 124,047 $748,225
- ------------------------------------------
Issued in reinvestment of distributions 56 588 625 3,823
- ------------------------------------------
Redeemed -- -- (131) (803)
- ---------------------------------------------------------------------------------------------
Net increase 28,040 $292,716 124,541 $751,245
=============================================================================================
B CLASS
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ------------------------------------------
Sold 47,754 $504,576 102,526 $646,567
- ------------------------------------------
Issued in reinvestment of distributions 285 2,976 1,594 10,082
- ------------------------------------------
Redeemed (7,210) (75,035) (5,254) (33,004)
- ---------------------------------------------------------------------------------------------
Net increase 40,829 $432,517 98,866 $623,645
=============================================================================================
PERIOD ENDED MARCH 31, 2003(1)
- ------------------------------------------
Sold 8,051 $84,388 9,184 $55,258
- ------------------------------------------
Issued in reinvestment of distributions 15 160 50 304
- ------------------------------------------
Redeemed -- -- (7) (43)
- ---------------------------------------------------------------------------------------------
Net increase 8,066 $84,548 9,227 $55,519
=============================================================================================
C CLASS
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2003
- ------------------------------------------
Sold 79,641 $836,492 356,839 $2,243,540
- ------------------------------------------
Issued in reinvestment of distributions 481 5,026 2,964 18,755
- ------------------------------------------
Redeemed (4,110) (42,773) (44,254) (275,281)
- ---------------------------------------------------------------------------------------------
Net increase 76,012 $798,745 315,549 $1,987,014
=============================================================================================
PERIOD ENDED MARCH 31, 2003(2)
- ------------------------------------------
Sold 32,596 $341,845 40,698 $246,819
- ------------------------------------------
Issued in reinvestment of distributions 48 499 109 658
- ------------------------------------------
Redeemed -- -- -- --
- ---------------------------------------------------------------------------------------------
Net increase 32,644 $342,344 40,807 $247,477
=============================================================================================
PERIOD ENDED OCTOBER 31, 2002(3)
- ------------------------------------------
Sold N/A N/A 16,483 $101,502
- ------------------------------------------
Issued in reinvestment of distributions 80 481
- ------------------------------------------
Redeemed (11,256) (69,063)
- ---------------------------------------------------------------------------------------------
Net increase 5,307 $ 32,920
=============================================================================================
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) January 31, 2003 (commencement of sale) through March 31, 2003 for
Diversified Bond, and November 1, 2002 through March 31, 2003 for High-Yield.
High-Yield's fiscal year end was changed from October 31 to March 31,
resulting in a five-month annual reporting period.
(3) December 10, 2001 (commencement of sale) through October 31, 2002 for
High-Yield.
(continued)
------
27
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
5. SECURITIES LENDING
As of September 30, 2003, securities in Diversified Bond and High-Yield, valued
at $54,159,287 and $18,392,842, respectively, were on loan through the lending
agent, Chase, to certain approved borrowers. Chase receives and maintains
collateral in the form of cash and/or acceptable securities as approved by ACIM.
Cash collateral is invested in authorized investments by the lending agent in a
pooled account. The value of cash collateral received at period end is disclosed
in the Statement of Assets and Liabilities and investments made with the cash by
the lending agent are listed in the Schedule of Investments. The total value of
all collateral received, at this date, was $55,034,893, and $18,669,278,
respectively. The funds' risks in securities lending are that the borrower may
not provide additional collateral when required or return the securities when
due. If the borrower defaults, receipt of the collateral by the funds may be
delayed or limited.
6. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM, have a $620,000,000
unsecured bank line of credit agreement with JPM. 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 September 30,
2003.
7. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of September 30, 2003, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
Federal tax cost of investments $491,330,191 $63,732,202
================================================================================
Gross tax appreciation of investments $12,926,994 $3,779,649
- --------------------------------------------------
Gross tax depreciation of investments (1,026,643) (387,805)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $11,900,351 $3,391,844
================================================================================
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
High-Yield had capital loss carryovers of $(17,680,665) as of March 31, 2003,
which may be used to offset future realized capital gains for federal income tax
purposes. The capital loss carryovers expire in 2007 through 2010.
- ------
28
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -------------------------------------------------------------------------------------
INVESTOR CLASS
- -------------------------------------------------------------------------------------
2003(1) 2003 2002(2)
- -------------------------------------------------------------------------------------
PER-SHARE DATA
- -------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.47 $9.98 $10.25
- -------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------
Net Investment Income 0.19 0.48 0.17
- -----------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.03 0.49 (0.27)
- -------------------------------------------------------------------------------------
Total From Investment Operations 0.22 0.97 (0.10)
- -------------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------
From Net Investment Income (0.19) (0.48) (0.17)
- -------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.50 $10.47 $9.98
=====================================================================================
TOTAL RETURN(3) 2.16% 9.93% (0.99)%
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.63%(4) 0.64% 0.63%(4)
- -----------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 3.64%(4) 4.67% 5.19%(4)
- -----------------------------------------------------
Portfolio Turnover Rate 132% 151% 136%(5)
- -----------------------------------------------------
Net Assets, End of Period (in thousands) $186,147 $198,835 $170,707
- -------------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) December 3, 2001 (acquisition date) through March 31, 2002.
(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 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 March 31, 2002.
See Notes to Financial Statements.
------
29
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------------------------------------------------
2003(1) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.47 $9.98 $10.12 $9.62 $10.10 $10.15
- -----------------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------
Net Investment Income 0.21 0.50 0.56 0.62 0.61 0.59
- -------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.03 0.49 (0.09) 0.50 (0.48) --
- -----------------------------------------------------------------------------------------------
Total From Investment Operations 0.24 0.99 0.47 1.12 0.13 0.59
- -----------------------------------------------------------------------------------------------
Distributions
- -------------------------------------
From Net Investment Income (0.21) (0.50) (0.56) (0.62) (0.61) (0.59)
- -------------------------------------
From Net Realized Gains -- -- (0.05) -- --(2) (0.05)
- -----------------------------------------------------------------------------------------------
Total Distributions (0.21) (0.50) (0.61) (0.62) (0.61) (0.64)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.50 $10.47 $9.98 $10.12 $9.62 $10.10
===============================================================================================
TOTAL RETURN(3) 2.27% 10.15% 4.76% 12.03% 1.30% 5.88%
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.43%(4) 0.44% 0.44% 0.45% 0.45% 0.45%
- -------------------------------------
Ratio of Net Investment Income
to Average Net Assets 3.84%(4) 4.87% 5.46% 6.31% 6.15% 5.70%
- -------------------------------------
Portfolio Turnover Rate 132% 151% 136% 139% 64% 71%
- -------------------------------------
Net Assets, End of Period
(in thousands) $284,431 $281,998 $202,476 $140,497 $103,192 $105,284
- -----------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) Per-share amount was less than $0.005.
(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 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.
See Notes to Financial Statements.
- ------
30
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- ---------------------------------------------------------------------------------------
ADVISOR CLASS
- ---------------------------------------------------------------------------------------
2003(1) 2003 2002(2)
- ---------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.47 $9.98 $10.25
- ---------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------
Net Investment Income 0.18 0.46 0.16
- -----------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.03 0.49 (0.27)
- ---------------------------------------------------------------------------------------
Total From Investment Operations 0.21 0.95 (0.11)
- ---------------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------
From Net Investment Income (0.18) (0.46) (0.16)
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.50 $10.47 $9.98
=======================================================================================
TOTAL RETURN(3) 2.04% 9.66% (1.07)%
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.88%(4) 0.89% 0.88%(4)
- -----------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 3.39%(4) 4.42% 4.94%(4)
- -----------------------------------------------------
Portfolio Turnover Rate 132% 151% 136%(5)
- -----------------------------------------------------
Net Assets, End of Period (in thousands) $9,048 $11,567 $10,291
- ---------------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) December 3, 2001 (acquisition date) through March 31, 2002.
(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 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 March 31, 2002.
See Notes to Financial Statements.
------
31
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Periods Indicated
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2003(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.47 $10.40
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------
Net Investment Income 0.18 0.06
- ------------------------------------------------------
Net Realized and Unrealized Gain 0.03 0.07
- --------------------------------------------------------------------------------
Total From Investment Operations 0.21 0.13
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------
From Net Investment Income (0.18) (0.06)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $10.50 $10.47
================================================================================
TOTAL RETURN(3) 2.03% 1.27%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.88%(4) 0.88%(4)
- ------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 3.39%(4) 3.69%(4)
- ------------------------------------------------------
Portfolio Turnover Rate 132% 151%(5)
- ------------------------------------------------------
Net Assets, End of Period (in thousands) $2,351 $294
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect 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 March 31, 2003.
See Notes to Financial Statements.
- ------
32
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Periods Indicated
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2003(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.47 $10.40
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------
Net Investment Income 0.14 0.05
- ------------------------------------------------------
Net Realized and Unrealized Gain 0.03 0.07
- --------------------------------------------------------------------------------
Total From Investment Operations 0.17 0.12
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------
From Net Investment Income (0.14) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $10.50 $10.47
================================================================================
TOTAL RETURN(3) 1.65% 1.20%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets(4) 1.63%(5) 1.61%(5)
- ------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver) 1.63%(5) 1.63%(5)
- ------------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(4) 2.64%(5) 2.98%(5)
- ------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets
(Before Expense Waiver) 2.64%(5) 2.96%(5)
- ------------------------------------------------------
Portfolio Turnover Rate 132% 151%(6)
- ------------------------------------------------------
Net Assets, End of Period (in thousands) $513 $84
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect 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) During the period ended March 31, 2003, the distributor voluntarily waived
a portion of the distribution and service fees.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2003.
See Notes to Financial Statements.
------
33
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Periods Indicated
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2003(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.47 $10.40
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------
Net Investment Income 0.16 0.05
- ------------------------------------------------------
Net Realized and Unrealized Gain 0.03 0.07
- --------------------------------------------------------------------------------
Total From Investment Operations 0.19 0.12
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------
From Net Investment Income (0.16) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $10.50 $10.47
================================================================================
TOTAL RETURN(3) 1.78% 1.20%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.38%(4) 1.38%(4)
- ------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.89%(4) 3.23%(4)
- ------------------------------------------------------
Portfolio Turnover Rate 132% 151%(5)
- ------------------------------------------------------
Net Assets, End of Period (in thousands) $1,141 $342
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect 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 March 31, 2003.
See Notes to Financial Statements.
- ------
34
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -----------------------------------------------------------------------------------------------
INVESTOR CLASS
- -----------------------------------------------------------------------------------------------
2003(1) 2003(2) 2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Period $6.13 $5.76 $6.18 $7.20 $8.54 $8.73 $9.91
- -----------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income 0.25 0.18 0.52 0.74 0.85 0.80 0.83
- --------------------------
Net Realized and
Unrealized Gain (Loss) 0.25 0.37 (0.42) (0.97) (1.39) (0.18) (1.18)
- -----------------------------------------------------------------------------------------------
Total From
Investment Operations 0.50 0.55 0.10 (0.23) (0.54) 0.62 (0.35)
- -----------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.25) (0.18) (0.52) (0.79) (0.80) (0.80) (0.83)
- --------------------------
From Net
Realized Gains -- -- -- -- -- (0.01) --
- -----------------------------------------------------------------------------------------------
Total Distributions (0.25) (0.18) (0.52) (0.79) (0.80) (0.81) (0.83)
- -----------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.38 $6.13 $5.76 $6.18 $7.20 $8.54 $8.73
===============================================================================================
TOTAL RETURN(3) 8.25% 9.61% 1.43% (3.56)% (7.08)% 7.03% (4.09)%
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.88%(4) 0.88%(4) 0.90% 0.90% 0.90% 0.90% 0.90%
- --------------------------
Ratio of Net Investment
Income to Average
Net Assets 7.85%(4) 7.22%(4) 8.37% 10.88% 10.09% 8.90% 8.41%
- --------------------------
Portfolio Turnover Rate 47% 9% 80% 131% 77% 95% 85%
- --------------------------
Net Assets,
End of Period
(in thousands) $60,576 $78,223 $50,287 $34,150 $25,126 $33,537 $32,229
- -----------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) November 1, 2002 through March 31, 2003. The fund's fiscal year was changed
from October 31 to March 31, resulting in a five-month annual reporting
period. For the years before 2003, the fund's fiscal year end was October 31.
(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 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.
See Notes to Financial Statements.
------
35
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Periods Indicated
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
2003(1) 2003(2) 2002(3)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.13 $5.76 $6.22
- --------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------
Net Investment Income 0.25 0.18 0.30
- --------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.25 0.37 (0.46)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.50 0.55 (0.16)
- --------------------------------------------------------------------------------
Distributions
- --------------------------------------------
From Net Investment Income (0.25) (0.18) (0.30)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.38 $6.13 $5.76
================================================================================
TOTAL RETURN(4) 8.21% 9.63% (2.72)%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets(5) 1.09%(6) 0.84%(6) 1.15%(6)
- --------------------------------------------
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.13%(6) 1.13%(6) --
- --------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(5) 7.64%(6) 7.27%(6) 7.63%(6)
- --------------------------------------------
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) 7.60%(6) 6.98%(6) --
- --------------------------------------------
Portfolio Turnover Rate 47% 9% 80%(7)
- --------------------------------------------
Net Assets, End of Period
(in thousands) $277 $1 $4
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) November 1, 2002 through March 31, 2003. The fund's fiscal year was changed
from October 31 to March 31, resulting in a five-month annual reporting
period.
(3) March 8, 2002 (commencement of sale) through October 31, 2002.
(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) During the periods ended September 30, 2003 and March 31, 2003, the
distributor voluntarily waived a portion of the distribution and service
fees.
(6) Annualized.
(7) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2002.
See Notes to Financial Statements.
- ------
36
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Periods Indicated
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2003(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.13 $5.98
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------
Net Investment Income 0.24 0.07
- -------------------------------------------------------
Net Realized and Unrealized Gain 0.25 0.15
- --------------------------------------------------------------------------------
Total From Investment Operations 0.49 0.22
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------
From Net Investment Income (0.24) (0.07)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.38 $6.13
================================================================================
TOTAL RETURN(3) 8.11% 3.74%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.13%(4) 1.13%(4)
- -------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 7.60%(4) 8.01%(4)
- -------------------------------------------------------
Portfolio Turnover Rate 47% 9%(5)
- -------------------------------------------------------
Net Assets, End of Period (in thousands) $6,044 $763
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect 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 5-month period ended March 31, 2003.
See Notes to Financial Statements.
------
37
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Periods Indicated
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2003(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.13 $5.98
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------
Net Investment Income 0.22 0.07
- ------------------------------------------------------
Net Realized and Unrealized Gain 0.25 0.15
- --------------------------------------------------------------------------------
Total From Investment Operations 0.47 0.22
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------
From Net Investment Income (0.22) (0.07)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.38 $6.13
================================================================================
TOTAL RETURN(3) 7.71% 3.64%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets(4) 1.88%(5) 1.86%(5)
- ------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver) 1.88%(5) 1.88%(5)
- ------------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(4) 6.85%(5) 7.27%(5)
- ------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets
(Before Expense Waiver) 6.85%(5) 7.25%(5)
- ------------------------------------------------------
Portfolio Turnover Rate 47% 9%(6)
- ------------------------------------------------------
Net Assets, End of Period (in thousands) $690 $57
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect 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) During the period ended March 31, 2003, the distributor voluntarily waived
a portion of the distribution and service fees.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the 5-month period ended March 31, 2003.
See Notes to Financial Statements.
- ------
38
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Periods Indicated
- -----------------------------------------------------------------------------------
C CLASS
- -----------------------------------------------------------------------------------
2003(1) 2003(2) 2002(3)
- -----------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.13 $5.76 $6.32
- -----------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------
Net Investment Income 0.23 0.16 0.41
- -----------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.25 0.37 (0.56)
- -----------------------------------------------------------------------------------
Total From Investment Operations 0.48 0.53 (0.15)
- -----------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------
From Net Investment Income (0.23) (0.16) (0.41)
- -----------------------------------------------------------------------------------
Net Asset Value, End of Period $6.38 $6.13 $5.76
===================================================================================
TOTAL RETURN(4) 7.84% 9.28% (2.49)%
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.63%(5) 1.63%(5) 1.65%(5)
- -----------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 7.10%(5) 6.48%(5) 7.78%(5)
- -----------------------------------------------------
Portfolio Turnover Rate 47% 9% 80%(6)
- -----------------------------------------------------
Net Assets, End of Period (in thousands) $2,308 $283 $31
- -----------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) November 1, 2002 through March 31, 2003. The fund's fiscal year was changed
from October 31 to March 31, resulting in a five-month annual reporting
period.
(3) December 10, 2001 (commencement of sale) through October 31, 2002.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect 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.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2002.
See Notes to Financial Statements.
------
39
Proxy Voting Results
A special meeting of High-Yield C Class shareholders was held on October 17,
2003, to vote on the following proposal. The proposal received the required
majority of votes and was adopted. The proposal will become effective January 4,
2004.
A summary of voting results is listed below the proposal.
PROPOSAL
To vote on approval of the Amendment to the Master Distribution and Individual
Shareholder Services Plan for High-Yield C Class.
- --------------------------------------------------------------------------------
HIGH-YIELD C CLASS
- --------------------------------------------------------------------------------
For: 128,912
- --------------------------------------------------------------------------------
Against: 24,954
- --------------------------------------------------------------------------------
Abstain: 29,300
- --------------------------------------------------------------------------------
- ------
40
Share Class Information
Six classes of shares are authorized for sale by Diversified Bond: Investor
Class, Institutional Class, Advisor Class, A Class, B Class, C Class. Five
classes of shares are authorized for sale by High-Yield: Investor Class, Advisor
Class, A Class, B Class, and C Class. The total expense ratios of Advisor, A, B,
and C Class shares are higher than those of Investor Class shares; the total
expense ratio of Institutional Class shares is lower. ON JANUARY 31, 2003,
INVESTOR CLASS SHARES BECAME UNAVAILABLE TO NEW INVESTORS.
INVESTOR CLASS shares are available for purchase BY EXISTING SHAREHOLDERS in two
ways: 1) directly from American Century without any commissions or other fees;
or 2) through a broker-dealer, which may require payment of a transaction fee to
the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) in an American Century fund or at least $10
million in multiple funds. In recognition of the larger investments and account
balances and comparatively lower transaction costs, the total expense ratio of
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
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.
A CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. A Class shares are sold at their offering price, which is
net asset value plus an initial sales charge that ranges from 4.50% to 0.00% for
fixed-income funds and 5.75% to 0.00% for equity funds, depending on the amount
invested. The initial sales charge is deducted from the purchase amount before
it is invested. A Class shares may be subject to a contingent deferred sales
charge (CDSC). There is no CDSC on shares acquired through reinvestment of
dividends or capital gains. The prospectus contains information regarding
reductions and waivers of sales charges for A Class shares. A Class shares also
are subject to a 0.25% annual Rule 12b-1 service and distribution fee.
(continued)
------
41
Share Class Information
B CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. B Class shares redeemed within six years of purchase are
subject to a CDSC that declines from 5.00% during the first year after purchase
to 0.00% the sixth year after purchase. There is no CDSC on shares acquired
through reinvestment of dividends or capital gains. B Class shares also are
subject to a 1.00% annual Rule 12b-1 service and distribution fee. B Class
shares automatically convert to A Class shares (with lower expenses) eight years
after their purchase date.
C CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. C Class shares redeemed within 12 months of purchase are
subject to a CDSC of 1.00%. There is no CDSC on shares acquired through
reinvestment of dividends or capital gains. C Class shares also are subject to a
Rule 12b-1 service and distribution fee of up to 1.00%.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- ------
42
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b)
and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' manager, is responsible
for exercising the voting rights associated with the securities purchased and/or
held by the fund. A description of the policies and procedures the manager uses
in fulfilling this responsibility is available without charge, upon request, by
calling 1-800-345-2021. It is also available on American Century's Web site at
www.americancentury.com and on the Securities and Exchange Commission's Web site
at www.sec.gov.
------
43
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 CREDIT SUISSE FIRST BOSTON (CSFB) HIGH YIELD INDEX II is designed to mirror
the investable universe of the U.S. dollar-denominated high-yield debt market.
Prior to October 2001, the index was known as the Donaldson, Lufkin, &
Jenrette (DLJ) High-Yield Index.
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 NASDAQ COMPOSITE INDEX is a market-value weighted index of all domestic and
international common stocks listed on the Nasdaq stock market.
The S&P 500 INDEX is a market-value weighted index of the stocks of 500
publicly traded U.S. companies chosen for market size, liquidity, and industry
group representation that are considered to be leading firms in dominant
industries. Each stock's weight in the index is proportionate to its market
value. Created by Standard & Poor's, it is considered to be a broad measure of
U.S. stock market performance.
- ------
44
[back cover]
0311 American Century Investment Services, Inc.
SH-SAN-36286N (c)2003 American Century Services Corporation
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY INVESTMENT TRUST
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
[front cover]
September 30, 2003
American Century
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of covered bridge]
Premium Money Market
[american century logo and text logo {reg.sm)]
Table of Contents
Our Message to You....................................................... 1
PREMIUM MONEY MARKET
Performance.............................................................. 2
Portfolio Commentary..................................................... 3
Schedule of Investments.................................................. 4
FINANCIAL STATEMENTS
Statement of Assets and Liabilities...................................... 8
Statement of Operations.................................................. 9
Statement of Changes in Net Assets....................................... 10
Notes to Financial Statements............................................ 11
Financial Highlights..................................................... 13
OTHER INFORMATION
Additional Information................................................... 14
Index Definition......................................................... 15
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III
with James E. Stowers, Jr.
We are pleased to provide you with the semiannual report for the American
Century Premium Money Market Fund for the six months ended September 30, 2003.
The report includes comparative performance figures, 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.
Many of you have called or written to express your concern about allegations of
wrongdoing by other mutual fund investment management firms. We share your
concern--fund companies must put investors first and do everything possible to
maintain investor trust. Through the Investment Company Institute, the mutual
fund trade association, American Century has advocated industry-wide proposals
that strengthen protections for fund investors. We believe that decisive action
is needed to show that we are committed, as an industry, to the interests of the
95 million investors we serve.
As information about alleged trading abuses in the mutual fund industry has come
to light, we have posted messages and commentary about these issues on
www.americancentury.com. Beyond what's currently in the headlines, American
Century has been a champion of many important investor and industry issues,
which are outlined in a document titled Putting Investors First. We invite you
to visit our Web site and read about how our values have influenced these
positions.
As always, we deeply appreciate your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
Founder and Chairman
/s/James E. Stowers III
James E. Stowers III
Co-Chairman of the Board
------
1
Premium Money Market - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2003
--------------------------------------
AVERAGE ANNUAL RETURNS
- -----------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -----------------------------------------------------------------------------------------------
PREMIUM MONEY MARKET 0.95% 3.69% 4.33% 4.25% 4/1/1993
- -----------------------------------------------------------------------------------------------
90-DAY U.S.
TREASURY BILL INDEX 1.12% 3.51% 4.23% 4.18%(1) --
- -----------------------------------------------------------------------------------------------
LIPPER MONEY MARKET
INSTRUMENT FUNDS
AVERAGE RETURN 0.56% 3.23% 4.01% 3.97%(2) --
- -----------------------------------------------------------------------------------------------
Fund's Lipper
Ranking(3) 42 of 400 26 of 280 19 of 160 26 of 167(2) --
- -----------------------------------------------------------------------------------------------
(1) Since 3/31/93, the date nearest the fund's inception for which data are
available.
(2) Since 4/30/93, the date nearest the fund's inception for which data are
available.
(3) Lipper rankings are based on average annual total returns for the fund in a
given category for the periods indicated.
PORTFOLIO COMPOSITION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/03 3/31/03
- --------------------------------------------------------------------------------
A-1+ 68% 67%
- --------------------------------------------------------------------------------
A-1 32% 33%
- --------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
YIELDS AND WEIGHTED AVERAGE MATURITY
- --------------------------------------------------------------------------------
9/30/03
- --------------------------------------------------------------------------------
7-Day Current Yield 0.68%
- --------------------------------------------------------------------------------
7-Day Effective Yield 0.68%
- --------------------------------------------------------------------------------
9/30/03 3/31/03
- --------------------------------------------------------------------------------
Weighted Average
Maturity 68 days 69 days
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY MATURITY
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/03 3/31/03
- --------------------------------------------------------------------------------
1-30 days 45% 43%
- --------------------------------------------------------------------------------
31-90 days 35% 34%
- --------------------------------------------------------------------------------
91-180 days 5% 12%
- --------------------------------------------------------------------------------
More than 180 days 15% 11%
- --------------------------------------------------------------------------------
Past performance does not guarantee future results.
Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.
Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund. The 7-day current yield more closely reflects the current earnings of the
fund than the total return.
- ------
2
Premium Money Market -- Portfolio Commentary
By Denise Tabacco, portfolio manager.
PERFORMANCE SUMMARY
For the six months ended September 30, 2003, Premium Money Market's 0.38% total
return ranked in the top 15% of Lipper Inc.'s money market funds category (#46
out of 408 funds.) The fund's longer-term results are consistent with its recent
performance--Premium Money Market's three-year (#29 out of 354 funds) and
five-year returns ranked in the top 10% of the Lipper category, while its
ten-year return ranked in the top 15% of the Lipper group. (See the previous
page for additional performance information.)
ECONOMIC AND MARKET REVIEW
Money market rates continued to decline during the past six months. A
lackluster economic environment, characterized by rising unemployment and a weak
manufacturing sector, led the Federal Reserve (the Fed) to cut short-term
interest rates in June. The Fed's 13th rate cut since the end of 2000 brought
the federal funds rate target down to a 45-year low of 1%. Investors anticipated
the Fed's action, pushing money market yields lower in the weeks leading up to
the rate cut.
In addition to the sluggish economy, the Fed cited the threat of deflation, or
falling prices, as a reason for its latest rate cut. Fed Chairman Alan Greenspan
reinforced this view during a July appearance before Congress, noting that the
Fed could maintain this accommodative interest rate policy for a considerable
period of time, even if economic growth accelerates.
The economy picked up steam in the third quarter, growing at an estimated 7.2%
rate. However, persistent weakness in the labor market cast doubts on the
underlying strength of the economy's recovery. As a result, money market rates
were relatively steady over the last half of the period.
PORTFOLIO STRATEGY
Echoing the general decline in money market rates, Premium Money Market's
seven-day current yield fell from 0.86% to 0.68% during the period. The
portfolio's average maturity was a relatively long 65-75 days for most of the
period, reflecting our expectation of stable or declining rates. Yields on
commercial paper, which historically comprised a majority of the portfolio,
remained at low levels because of limited issuance, so we focused on longer-term
corporate securities maturing in six months to one year.
A NOTE ABOUT THE FUND'S YIELD
The sharp decline in interest rates over the past several years has brought
money market yields down to very low levels. Nonetheless, we expect Premium
Money Market to maintain a positive yield unless the Fed cuts interest rates
significantly in the future. Should that happen, American Century will examine
all possible ways to maintain yields that are competitive and positive,
including the waiver of management fees.
------
3
Premium Money Market -
Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
COMMERCIAL PAPER(1) - 44.5%
$5,000,000 Alcon Capital Corp., 1.23%,
10/3/03 (Acquired 3/7/03,
Cost $4,964,125)(2) $ 4,999,658
- --------------------------------------------------------------------------------
4,650,000 American Family Financial
Services, Inc., 1.01%, 10/7/03 4,649,217
- --------------------------------------------------------------------------------
3,483,000 American Family Financial
Services, Inc., 1.03%, 10/24/03 3,480,708
- --------------------------------------------------------------------------------
5,000,000 Amstel Funding Corp., 1.08%,
11/5/03 (Acquired 8/6/03,
Cost $4,986,350)(2) 4,994,750
- --------------------------------------------------------------------------------
4,500,000 Amstel Funding Corp., 0.93%,
12/12/03 (Acquired 6/25/03,
Cost $4,480,354)(2) 4,491,630
- --------------------------------------------------------------------------------
10,000,000 Amsterdam Funding Corp.,
1.04%, 10/9/03 (Acquired
7/2/03, Cost $9,971,400)(2) 9,997,689
- --------------------------------------------------------------------------------
7,000,000 Chevron UK Investment plc,
1.03%, 10/1/03 (Acquired
9/9/03, Cost $6,995,594)(2) 7,000,000
- --------------------------------------------------------------------------------
9,500,000 CRC Funding LLC, 1.06%,
11/17/03 (Acquired 9/22/03,
Cost $9,484,336)(2) 9,486,853
- --------------------------------------------------------------------------------
8,000,000 Credit Suisse First Boston
U.S.A., Inc., 1.07%,
11/10/03 (Acquired 9/8/03,
Cost $7,985,020)(2) 7,990,489
- --------------------------------------------------------------------------------
1,030,000 Crown Point Capital Co., 1.06%,
10/6/03 (Acquired 9/19/03,
Cost $1,029,484)(2) 1,029,848
- --------------------------------------------------------------------------------
5,000,000 Crown Point Capital Co., 1.04%,
10/14/03 (Acquired 7/11/03,
Cost $4,986,278)(2) 4,998,122
- --------------------------------------------------------------------------------
8,000,000 Crown Point Capital Co., 1.10%,
11/21/03 (Acquired 8/26/03,
Cost $7,978,733)(2) 7,987,533
- --------------------------------------------------------------------------------
2,425,000 Dakota Notes of the Citibank,
1.07%, 10/27/03 (Acquired
9/10/03, Cost $2,421,612)(2) 2,423,126
- --------------------------------------------------------------------------------
11,375,000 Dakota Notes of the Citibank,
1.06%, 11/14/03 (Acquired
9/19/03, Cost $11,356,244)(2) 11,360,263
- --------------------------------------------------------------------------------
3,300,000 Danske Corporation, 1.08%,
10/14/03 3,298,716
- --------------------------------------------------------------------------------
5,000,000 Emerald Notes, 1.08%, 11/20/03
(Acquired 9/10/03,
Cost $4,989,350)(2) 4,992,500
- --------------------------------------------------------------------------------
10,000,000 Emerald Notes, 1.09%,
11/20/03 (Acquired 9/4/03,
Cost $9,976,686)(2) 9,984,861
- --------------------------------------------------------------------------------
3,500,000 Fortis Funding LLC, 1.05%,
10/9/03 (Acquired 9/10/03,
Cost $3,497,040)(2) 3,499,183
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$5,000,000 Fortis Funding LLC, 1.05%,
11/14/03 (Acquired 8/14/03,
Cost $4,986,729)(2) $ 4,993,583
- --------------------------------------------------------------------------------
5,500,000 General Electric Capital Corp.,
1.07%, 11/19/03 5,491,990
- --------------------------------------------------------------------------------
5,000,000 General Electric Financial
Assurance Holdings, 0.99%,
12/15/03 (Acquired 6/10/03,
Cost $4,974,289)(2) 4,989,743
- --------------------------------------------------------------------------------
5,000,000 HBOS Treasury Services
plc, 1.07%, 10/10/03 4,998,662
- --------------------------------------------------------------------------------
10,000,000 HBOS Treasury Services
plc, 1.08%, 12/5/03 9,980,500
- --------------------------------------------------------------------------------
3,000,000 Lexington Parker Capital,
1.06%, 10/6/03 (Acquired
9/12/03, Cost $2,997,880)(2) 2,999,558
- --------------------------------------------------------------------------------
7,000,000 Lexington Parker Capital,
1.03%, 10/8/03 (Acquired
7/11/03, Cost $6,982,175)(2) 6,998,598
- --------------------------------------------------------------------------------
13,000,000 Network Rail CP Finance
plc, 1.07%, 11/17/03
(Acquired 9/5/03,
Cost $12,971,794)(2) 12,981,840
- --------------------------------------------------------------------------------
2,000,000 Network Rail CP Finance plc,
1.07%, 12/3/03 (Acquired
9/19/03, Cost $1,995,542)(2) 1,996,255
- --------------------------------------------------------------------------------
5,000,000 Newcastle Certificates, 1.07%,
10/24/03 (Acquired
8/22/03, Cost $4,990,638)(2) 4,996,582
- --------------------------------------------------------------------------------
5,000,000 Newcastle Certificates, 1.07%,
11/18/03 (Acquired 9/12/03,
Cost $4,990,043)(2) 4,992,867
- --------------------------------------------------------------------------------
5,000,000 Newcastle Certificates, 1.09%,
11/19/03 (Acquired 9/3/03,
Cost $4,988,343)(2) 4,992,582
- --------------------------------------------------------------------------------
10,000,000 Old Line Funding Corp., 1.05%,
10/7/03 (Acquired 8/14/03,
Cost $9,984,250)(2) 9,998,250
- --------------------------------------------------------------------------------
5,000,000 Schlumberger Technology, 1.07%,
12/1/03 (Acquired 9/4/03,
Cost $4,986,922)(2) 4,990,935
- --------------------------------------------------------------------------------
9,000,000 Spintab-Swedmortgage AB,
1.08%, 12/3/03 8,982,990
- --------------------------------------------------------------------------------
7,600,000 Stadshypotek Inc., 1.03%,
10/14/03 (Acquired 7/14/03,
Cost $7,579,995)(2) 7,597,173
- --------------------------------------------------------------------------------
15,000,000 Tannehill Capital Co. LLC, 1.07%,
10/20/03 (Acquired
9/18/03-9/24/03,
Cost $14,986,162)(2) 14,991,567
- --------------------------------------------------------------------------------
10,000,000 Toyota Motor Credit Corp.,
1.04%, 11/19/03 (Acquired
7/25/03, Cost $9,966,200)(2) 9,985,845
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER 233,624,666
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
(continued)
- ------
4
Premium Money Market -
Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES - 19.0%
$1,750,000 Albuquerque Industrial Rev.,
(Ktech Corp.), VRDN, 1.25%,
10/2/03 (LOC: Wells
Fargo Bank N.A.) $ 1,750,000
- --------------------------------------------------------------------------------
7,575,000 Baltimore County Multifamily
Housing Rev., Series 1999 B,
(Oak Crest Village),
VRDN, 1.13%, 10/2/03
(LOC: First Union National Bank) 7,575,000
- --------------------------------------------------------------------------------
1,000,000 Board Trustees Morgan County
Hospital Rev., (Johnson County),
VRDN, 1.29%, 10/2/03
(LOC: Fifth Third Bank) 1,000,000
- --------------------------------------------------------------------------------
6,000,000 California Rev. Anticipation
Warrants, Series 2003
A, 2.00%, 6/16/04 6,037,868
- --------------------------------------------------------------------------------
1,255,000 Colorado Health Facilities
Auth. Rev., (Visiting Nurse),
VRDN, 1.22%, 10/1/03
(LOC: Wells Fargo Bank N.A.) 1,255,000
- --------------------------------------------------------------------------------
5,105,000 Cook County Industrial
Development Rev.,
Series 1999 B, (Devorahco LLC),
VRDN, 1.22%, 10/2/03
(LOC: LaSalle Bank N.A.)
(Acquired 3/23/01,
Cost $5,105,000)(2) 5,105,000
- --------------------------------------------------------------------------------
4,500,000 Everett Clinic, VRDN,
1.15%, 10/2/03
(LOC: Bank of America N.A.) 4,500,000
- --------------------------------------------------------------------------------
1,100,000 Greenville South Carolina
Memorial Auditorium
District COP, Series 1996 C,
(BI-LO Center), VRDN,
1.25%, 10/1/03 (LOC:
Bank of America N.A.) 1,100,000
- --------------------------------------------------------------------------------
6,500,000 Gwinnett County Development
Auth. Rev., (Hopewell
Christian Academy),
VRDN, 1.15%, 10/2/03
(LOC: Bank of America N.A.) 6,500,000
- --------------------------------------------------------------------------------
3,000,000 Hale County Industrial
Development Corp. Rev.,
(Struikmans), VRDN,
1.15%, 10/2/03 3,000,000
- --------------------------------------------------------------------------------
3,075,000 Homestead Special
Obligation Rev.,
(Speedway), VRDN, 1.15%,
10/1/03 (LOC: Suntrust Bank) 3,075,000
- --------------------------------------------------------------------------------
900,000 Indiana Health Facility Financing
Auth. Rev., Series 2002 B,
(Golden Years), VRDN, 1.25%,
10/2/03 (LOC: Wells
Fargo Bank N.A.) 900,000
- --------------------------------------------------------------------------------
7,425,000 Kansas City Missouri Tax
Increment Rev., Series 2003 B,
(Chouteau Development
Company LLC), VRDN, 1.37%,
10/2/03 (MBIA) (SBBPA:
JPMorgan Chase Bank) 7,425,000
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$2,500,000 Mercer County Improvement
Auth. Rev., 1.38%, 9/23/04
(County Guaranteed) $ 2,500,000
- --------------------------------------------------------------------------------
8,360,000 Montebello COP, VRDN, 1.30%,
10/1/03 (LOC: Union Bank of
California N.A. & California
State Teachers
Retirement System) 8,360,000
- --------------------------------------------------------------------------------
8,560,000 Montgomery County
Redevelopment Auth.
Multifamily Housing Rev.,
Series 2001 A,
(Brookside Manor),
VRDN, 1.10%, 10/2/03
(LOC: Fannie Mae) 8,560,000
- --------------------------------------------------------------------------------
6,305,000 Montgomery County
Redevelopment Auth.
Multifamily Housing
Rev., Series 2001 A,
(Kingswood Apartments),
VRDN, 1.10%, 10/2/03
(LOC: Fannie Mae) 6,305,000
- --------------------------------------------------------------------------------
400,000 Nebraska Investment Finance
Auth. Multifamily Rev.,
Series 2001 B, (Riverbend
Apartments), VRDN, 1.27%,
10/2/03 (LOC: LaSalle Bank
N.A.) (Acquired 9/5/01,
Cost $400,000)(2) 400,000
- --------------------------------------------------------------------------------
2,000,000 Olathe Industrial Rev.,
Series 1997 B,
(Diamant Boart Inc.), VRDN,
1.25%, 10/2/03 (LOC:
Svenska Handelsbanken)
(Acquired 12/2/02,
Cost $2,000,000)(2) 2,000,000
- --------------------------------------------------------------------------------
2,000,000 Oregon State Facilities
Auth. Rev., (Hazelden
Springbrook), VRDN,
1.30%, 10/2/03
(LOC: Allied Irish Bank plc) 2,000,000
- --------------------------------------------------------------------------------
2,500,000 Osceola County Housing
Finance Auth. Rev., Series
2002 B, (Regatta Bay
Apartments), VRDN,
1.25%, 10/1/03 (LOC:
JPMorgan Chase Bank) 2,500,000
- --------------------------------------------------------------------------------
1,000,000 Palm Beach County Florida
Housing Finance Auth.
Rev., Series 2003 B,
(Renaissance), VRDN, 1.25%,
10/1/03 (FNMA) 1,000,000
- --------------------------------------------------------------------------------
3,300,000 South Carolina Public Service
Auth. Rev., Series 1999 B,
6.85%, 1/1/04 (MBIA) 3,346,386
- --------------------------------------------------------------------------------
2,900,000 State of New York GO, Series
2000 C, VRDN, 1.40%, 2/9/04
(LOC: Dexia Credit Local) 2,900,000
- --------------------------------------------------------------------------------
3,000,000 Texas Public Finance Auth.
Special Tax Rev., 1.15%, 2/4/04 3,000,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
5
Premium Money Market --
Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$2,965,000 Washington State Housing
Finance Commission
Rev., Series 1997 B,
(Glenbrooke Apartments),
VRDN, 1.13%, 10/2/03
(LOC: Bank One
Arizona, N.A.) $ 2,965,000
- --------------------------------------------------------------------------------
2,690,000 West Covina Public Financing
Auth. Rev., Series 2002 A, VRDN,
1.32%, 10/1/03 (LOC: Union
Bank of California N.A.) 2,690,000
- --------------------------------------------------------------------------------
2,200,000 Winder-Barrow Industrial
Building Auth. Rev., Series
2003 B, (Bankhead Highway),
VRDN, 1.15%, 10/2/03
(LOC: Bank of America N.A.) 2,200,000
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES 99,949,254
- --------------------------------------------------------------------------------
CORPORATE BONDS - 15.5%
10,000,000 American Express Credit Corp.,
VRN, 1.17%, 10/17/03, resets
monthly off the 1-month
LIBOR plus 0.05% with no caps 10,002,138
- --------------------------------------------------------------------------------
1,250,000 Bank of America Corp. MTN,
5.75%, 3/1/04 1,274,026
- --------------------------------------------------------------------------------
4,433,000 Bank of America N.A.,
9.50%, 6/1/04 4,675,264
- --------------------------------------------------------------------------------
9,000,000 Blue Heron Funding Limited,
1.15%, 10/21/03
(Acquired 5/20/03,
Cost $9,000,000)(2) 9,000,000
- --------------------------------------------------------------------------------
2,085,000 Grand Central Inc., VRN,
1.15%, 10/2/03 2,085,000
- --------------------------------------------------------------------------------
7,000,000 Lee Group Inc./County
Materials Inc./Lees
Aggregate & Trucking Inc.,
VRN, 1.23%, 10/2/03 7,000,000
- --------------------------------------------------------------------------------
6,650,000 Metropolitan Life Insurance
Company, 6.30%, 11/1/03 6,677,605
- --------------------------------------------------------------------------------
10,000,000 Paradigm Funding LLC, VRN,
1.08%, 10/15/03, resets
monthly off the 1-month LIBOR
minus 0.04% (Acquired 7/15/03,
Cost $10,000,000)(2) 10,000,000
- --------------------------------------------------------------------------------
5,000,000 Transamerica Occidental Life
Insurance Co., VRN, 1.23%,
11/3/03, resets quarterly off
the 3-month LIBOR plus 0.11%
with no caps (Acquired 11/9/99,
Cost $5,000,000)(2) 5,000,000
- --------------------------------------------------------------------------------
9,000,000 Travelers Insurance Co. Group, VRN,
1.21%, 11/7/03, resets quarterly
off the 3-month LIBOR plus
0.08% with no caps (Acquired
8/7/03, Cost $9,000,000)(2) 9,000,000
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$4,000,000 U.S. Bank National Association,
VRN, 1.17%, 10/21/03, resets
monthly off the 1-month
LIBOR plus 0.05%
with no caps $ 4,000,000
- --------------------------------------------------------------------------------
5,000,000 U.S. Bank National Association,
VRN, 1.06%, 10/27/03, resets
monthly off the 1-month
LIBOR minus 0.06%
with no caps 5,000,000
- --------------------------------------------------------------------------------
7,600,000 Unilever Capital Corp.,
6.75%, 11/1/03 7,634,670
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS 81,348,703
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
AGENCY SECURITIES - 11.9%
1,110,000 FFCB, 1.38%, 2/3/04 1,111,259
- ------------------------------------------------------------------------------
9,000,000 FHLB, 1.32%, 4/14/04 9,000,000
- ------------------------------------------------------------------------------
5,000,000 FHLB, 3.75%, 4/15/04 5,064,955
- ------------------------------------------------------------------------------
10,000,000 FHLB, 1.375%, 5/12/04 10,000,000
- ------------------------------------------------------------------------------
6,000,000 FHLB, 1.08%, 7/16/04 6,000,000
- ------------------------------------------------------------------------------
5,000,000 FHLB, 1.125%, 7/21/04 4,999,197
- ------------------------------------------------------------------------------
3,000,000 FHLB, 3.875%, 9/15/04 3,071,226
- ------------------------------------------------------------------------------
5,000,000 FNMA, 4.75%, 11/14/03 5,021,617
- ------------------------------------------------------------------------------
3,000,000 FNMA, 5.125%, 2/13/04 3,044,098
- ------------------------------------------------------------------------------
5,000,000 FNMA, 1.20%, 8/17/04 5,000,000
- ------------------------------------------------------------------------------
5,000,000 FNMA, 1.30%, 8/30/04 5,000,000
- ------------------------------------------------------------------------------
5,000,000 SLMA, 4.75%, 4/23/04 5,093,659
- ------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 62,406,011
- ------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 6.1%
5,000,000 Canadian Imperial Bank of
Commerce (New York),
1.06%, 3/26/04 5,000,000
- ------------------------------------------------------------------------------
10,500,000 Svenska Handelsbanken
AB, 1.20%, 10/8/03 10,500,000
- ------------------------------------------------------------------------------
5,000,000 Toronto Dominion Bank,
1.07%, 10/31/03 5,000,000
- ------------------------------------------------------------------------------
8,200,000 UBS AG, 1.24%, 3/22/04 8,199,611
- ------------------------------------------------------------------------------
3,500,000 Westdeutsche Landesbank AG,
1.32%, 4/15/04 3,500,000
- ------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 32,199,611
- ------------------------------------------------------------------------------
U.S. GOVERNMENT
AGENCY DISCOUNT NOTES - 1.9%
10,000,000 FHLMC Discount Notes,
1.08%, 11/17/03(1) 9,985,900
- ------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Premium Money Market --
Schedule of Investments
SEPTEMBER 30, 2003 (UNAUDITED)
Principal Amount Value
- -----------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY
SECURITIES AND EQUIVALENTS - 1.1%
$525,000 FHLMC STRIPS -- COUPON,
1.47%, 2/15/04(1) $ 522,146
- ------------------------------------------------------------------------------
5,000,000 TR, 1.22%, 8/15/04(1) 4,947,182
- ------------------------------------------------------------------------------
146,000 TVA STRIPS -- COUPON,
1.55%, 4/15/04(1) 144,791
- ------------------------------------------------------------------------------
TOTAL ZERO-COUPON
U.S. TREASURY SECURITIES
AND EQUIVALENTS 5,614,119
- ------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES - 100.0% $525,128,264
==============================================================================
NOTES TO SCHEDULE OF INVESTMENTS
COP = Certificates of Participation
FFCB = Federal Farm Credit Bank
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GO = General Obligation
LIBOR = London Interbank Offered Rate
LOC = Letter of Credit
MBIA = MBIA Insurance Corp.
MTN = Medium Term Note
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a security
resets, the less risk the investor is taking that the coupon will vary
significantly from current market rates.
SBBPA = Standby Bond Purchase Agreement
SLMA = Student Loan Marketing Association
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TR = Treasury Receipt
TVA = Tennessee Valley Authority
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective September 30, 2003.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective September 30, 2003.
(1) The rate indicated is the yield to maturity at purchase.
(2) Security was purchased under Rule 144A or Section 4(2) of the Securities
Act of 1933 or is a private placement and, unless registered under the Act or
exempted from registration, may only be sold to qualified institutional
investors. The aggregate value of restricted securities at September 30,
2003, was $233,246,883, which represented 44.8% of net assets. Restricted
securities considered illiquid represent 2.7% of net assets.
See Notes to Financial Statements.
------
7
Statement of Assets and Liabilities
SEPTEMBER 30, 2003 (UNAUDITED)
ASSETS
Investment securities, at value
(amortized cost and cost for federal income tax purposes) $525,128,264
- -------------------------------------------------------------
Interest receivable 1,391,485
- -------------------------------------------------------------
Prepaid portfolio insurance 20,511
- --------------------------------------------------------------------------------
526,540,260
- --------------------------------------------------------------------------------
LIABILITIES
Disbursements in excess of demand deposit cash 5,474,922
- --------------------------------------------------------------
Accrued management fees 197,591
- --------------------------------------------------------------
Dividends payable 25,577
- --------------------------------------------------------------------------------
5,698,090
- --------------------------------------------------------------------------------
NET ASSETS $520,842,170
================================================================================
CAPITAL SHARES
Outstanding (unlimited number of shares authorized) 520,848,425
================================================================================
NET ASSET VALUE PER SHARE $1.00
================================================================================
NET ASSETS CONSIST OF:
Capital paid in $520,842,241
- --------------------------------------------------------------
Accumulated net realized loss on investment transactions (71)
- --------------------------------------------------------------------------------
$520,842,170
================================================================================
See Notes to Financial Statements.
- ------
8
Statement of Operations
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)
INVESTMENT INCOME
INCOME:
- --------------------------------------------------------------
Interest $3,294,275
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------
Management fees 1,212,048
- --------------------------------------------------------------
Trustees' fees and expenses 9,674
- --------------------------------------------------------------
Portfolio insurance and other expenses 31,028
- --------------------------------------------------------------------------------
1,252,750
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,041,525
- --------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENT TRANSACTIONS (71)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,041,454
================================================================================
See Notes to Financial Statements.
------
9
Statement of Changes in Net Assets
SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) AND YEAR ENDED MARCH 31, 2003
- --------------------------------------------------------------------------------
DECREASE IN NET ASSETS SEPT. 30, 2003 MARCH 31, 2003
OPERATIONS
Net investment income $ 2,041,525 $ 7,409,13
- ----------------------------------------------
Net realized gain (loss) (71) 2,400
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 2,041,454 7,411,539
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (2,041,525) (7,409,139)
- ----------------------------------------------
From net realized gains -- (4,705)
- --------------------------------------------------------------------------------
Decrease in net assets
from distributions (2,041,525) (7,413,844)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 179,946,761 447,790,568
- ----------------------------------------------
Proceeds from reinvestment
of distributions 1,868,854 6,990,046
- ----------------------------------------------
Payments for shares redeemed (221,964,353) (469,175,890)
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital share transactions (40,148,738) (14,395,276)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS (40,148,809) (14,397,581)
NET ASSETS
Beginning of period 560,990,979 575,388,560
- --------------------------------------------------------------------------------
End of period $520,842,170 $560,990,979
================================================================================
TRANSACTIONS IN SHARES OF THE FUND
Sold 179,946,761 447,790,568
- ----------------------------------------------
Issued in reinvestment
of distributions 1,868,854 6,990,046
- ----------------------------------------------
Redeemed (221,964,353) (469,175,890)
- --------------------------------------------------------------------------------
Net decrease in
shares of the fund (40,148,738) (14,395,276)
================================================================================
See Notes to Financial Statements.
- ------
10
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. Premium Money Market Fund (the fund) is one fund
in a series issued by the trust. The fund is diversified under the 1940 Act. The
fund's investment objective is to earn the highest level of current income while
preserving the value of your investment. The following is a summary of the
fund's significant accounting policies.
SECURITY VALUATIONS -- Securities are valued at amortized cost, which
approximates current market value. When such valuations do not reflect current
market value, securities may be valued at fair value as determined in
accordance with procedures adopted by the Board of Trustees.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at cost.
The fund requires that the collateral, represented by securities, received in a
repurchase transaction be transferred to the custodian in a manner sufficient
to enable the fund to obtain those securities in the event of a default under
the repurchase agreement. ACIM monitors, on a daily basis, the securities
transferred to ensure the value, including accrued interest, of the securities
under each repurchase agreement is equal to or greater than amounts owed to the
fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The fund 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 fund will
segregate cash, cash equivalents or other appropriate liquid securities on its
records in amounts sufficient to meet the purchase price.
INCOME TAX STATUS -- It is the fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under 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 and
short-term capital gains, if any, are declared daily and paid monthly. The fund
does not expect to realize any long-term capital gains, and accordingly, does
not expect to pay any capital gains distributions.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
------
11
Notes to Financial Statements
SEPTEMBER 30, 2003 (UNAUDITED)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with ACIM,
under which ACIM provides the fund with investment advisory and management
services in exchange for a single, unified management fee. The Agreement
provides that all expenses of the fund, except brokerage commissions, taxes,
portfolio insurance, interest, fees and expenses of those trustees who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee is computed
daily and paid monthly in arrears. It consists of an Investment Category Fee
based on the average net assets of the funds in a specific fund's investment
category and a Complex Fee based on the average net assets of all the funds
managed by ACIM. The rates for the Investment Category Fee range from 0.1170% to
0.2300% and the rates for the Complex Fee range from 0.2900% to 0.3100%. For the
six months ended September 30, 2003, the effective annual management fee was
0.45%.
MONEY MARKET INSURANCE -- The fund, along with other money market funds managed
by ACIM, has entered into an insurance agreement with MBIA Insurance Corporation
(MBIA). MBIA provides limited coverage for certain loss events including issuer
defaults as to payment of principal or interest and insolvency of a credit
enhancement provider. The fund pays annual premiums to MBIA, which are amortized
daily over one year.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the trust's investment manager, ACIM, the
distributor of the trust, American Century Investment Services, Inc., and the
trust's transfer agent, American Century Services Corporation.
3. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
- ------
12
Premium Money Market - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
2003(1) 2003 2002 2001 2000 1999
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 --(2) 0.01 0.03 0.06 0.05 0.05
- ---------------------------------------------------------------------------------------------------------
Distributions
- -------------------------------
From Net Investment
Income --(2) (0.01) (0.03) (0.06) (0.05) (0.05)
- ---------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=========================================================================================================
TOTAL RETURN(3) 0.38% 1.32% 3.03% 6.18% 5.18% 5.14%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.47%(4) 0.47% 0.46% 0.45% 0.45% 0.45%
- -------------------------------
Ratio of Net Investment Income
to Average Net Assets 0.76%(4) 1.32% 2.91% 5.99% 5.09% 4.99%
- -------------------------------
Net Assets, End of Period
(in thousands) $520,842 $560,991 $575,389 $526,794 $378,719 $276,048
- ---------------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2003 (unaudited).
(2) Per-share amount is less than $0.005.
(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.
(4) Annualized.
See Notes to Financial Statements.
------
13
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b)
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 fund's manager, is
responsible for exercising the voting rights associated with the securities
purchased and/or held by the fund. A description of the policies and
procedures the manager uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's Web site at www.americancentury.com and on the Securities
and Exchange Commission's Web site at www.sec.gov.
- ------
14
Index Definition
The following index is 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 90-DAY U.S. TREASURY BILL INDEX is derived from secondary market interest
rates as published by the Federal Reserve Bank and includes three-month,
six-month, and one-year instruments.
------
15
Notes
- ------
16
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY INVESTMENT TRUST
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
0311 American Century Investment Services, Inc.
SH-SAN-36282N (c)2003 American Century Services Corporation
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 prior to annual filings for fiscal years ending after
December 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) are effective based on their evaluation of these controls and
procedures as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the registrant's last fiscal half-year that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) Not applicable for semiannual report filings.
(b) 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.
(c) 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 Investment Trust
By: /s/ William M. Lyons
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Name: William M. Lyons
Title: President
Date: November 24, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ William M. Lyons
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Name: William M. Lyons
Title: President
(principal executive officer)
Date: November 24, 2003
By: /s/ Maryanne L. Roepke
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Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer, and
Chief Accounting Officer
(principal financial officer)
Date: November 24, 2003
