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
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AMERICAN CENTURY INVESTMENT TRUST
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(Exact name of registrant as specified in charter)
4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
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(Address of principal executive offices) (Zip code)
DAVID C. TUCKER, ESQ., 4500 MAIN STREET, 9TH FLOOR, KANSAS CITY, MISSOURI 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
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Date of fiscal year end: 03-31
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Date of reporting period: 09-30-2004
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ITEM 1. REPORTS TO STOCKHOLDERS
SEPTEMBER 30, 2004
American Century Investments
Semiannual Report
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Prime Money Market Fund
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Table of Contents
Our Message to You...................................................... 1
PRIME MONEY MARKET
Performance............................................................. 2
Shareholder Fee Example................................................. 4
Portfolio Commentary.................................................... 6
Schedule of Investments................................................. 7
FINANCIAL STATEMENTS
Statement of Assets and Liabilities..................................... 12
Statement of Operations................................................. 13
Statement of Changes in Net Assets...................................... 14
Notes to Financial Statements........................................... 15
Financial Highlights.................................................... 19
OTHER INFORMATION
Share Class Information................................................. 24
Additional Information.................................................. 25
Index Definitions....................................................... 26
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 Prime Money
Market fund for the six months ended September 30, 2004.
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.
Through our Web site, americancentury.com, we provide quarterly commentaries on
all American Century portfolios, the views of our senior investment officers,
and other communications about investments, portfolio strategy, and the
markets.
Your next shareholder report for this fund will be the annual report dated March
31, 2005, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER AND CHAIRMAN
/s/James E. Stowers III
James E. Stowers III
CO-CHAIRMAN OF THE BOARD
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1
Prime Money Market - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2004
-----------------------------------
AVERAGE ANNUAL RETURNS
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SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
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INVESTOR CLASS 0.64% 2.72% 3.96% 3.96% 11/17/93
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90-DAY U.S.
TREASURY BILL INDEX 1.11% 2.83% 3.97% 3.96%(1) --
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LIPPER MONEY MARKET
INSTRUMENT FUNDS
AVERAGE RETURN 0.42% 2.42% 3.73% 3.70%(1) --
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Fund's Lipper
Ranking(2) 86 of 400 56 of 298 38 of 168 26 of 156(1) --
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Advisor Class 0.40% 2.46% -- 2.82% 8/28/98
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A Class 0.41% -- -- 0.46%(3) 1/31/03
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B Class(3) 1/31/03
No sales charge* 0.06% -- -- 0.22%
With sales charge* -3.94% -- -- -2.20%
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C Class(3) 0.16% -- -- 0.26% 5/7/02
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*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. (Please see the Share Class Information page
for more about the applicable sales charges for each share class.) The SEC
requires that mutual funds provide performance information net of maximum
sales charges in all cases where charges could be applied.
(1) 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
(Investor Class only) 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.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. To obtain performance data current to the most recent month end, please
call 1-800-345-2021 or visit americancentury.com.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
The 7-day current yield more closely reflects the current earnings of the fund
than the total return.
(continued)
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2
Prime Money Market - Performance
PORTFOLIO COMPOSITION BY CREDIT RATING
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/04 3/31/04
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A-1+ 78% 78%
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A-1 22% 22%
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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.
YIELDS AND WEIGHTED AVERAGE MATURITY
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INVESTOR CLASS -- 9/30/04
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7-Day Current Yield 1.11%
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7-Day Effective Yield 1.12%
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9/30/04 3/31/04
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Weighted Average
Maturity 46 days 70 days
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PORTFOLIO COMPOSITION BY MATURITY
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/04 3/31/04
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1--30 days 53% 51%
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31--90 days 34% 26%
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91--180 days 9% 9%
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More than 180 days 4% 14%
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Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. To obtain performance data current to the most recent month end, please
call 1-800-345-2021 or visit americancentury.com.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
The 7-day current yield more closely reflects the current earnings of the fund
than the total return.
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3
Shareholder Fee Example (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from April 1, 2004 to September 30, 2004.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
(continued)
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4
Shareholder Fee Example (Unaudited)
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
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EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE
4/1/04 9/30/04 9/30/04 RATIO*
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PRIME MONEY MARKET
SHAREHOLDER
FEE EXAMPLE
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ACTUAL
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Investor Class $1,000 $1,003.70 $3.01 0.60%
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Advisor Class $1,000 $1,002.50 $4.27 0.85%
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A Class $1,000 $1,002.60 $4.27 0.85%
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B Class $1,000 $1,000.30 $6.72 1.34%
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C Class $1,000 $1,001.30 $5.47 1.09%
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HYPOTHETICAL
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Investor Class $1,000 $1,022.06 $3.04 0.60%
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Advisor Class $1,000 $1,020.81 $4.31 0.85%
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A Class $1,000 $1,020.81 $4.31 0.85%
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B Class $1,000 $1,018.35 $6.78 1.34%
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C Class $1,000 $1,019.60 $5.52 1.09%
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*Expenses are equal to the fund's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied
by 183, the number of days in the most recent fiscal half-year, divided by
365 which reflects the one-half year period.
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5
Prime Money Market - Portfolio Commentary
PORTFOLIO MANAGER: DENISE LATCHFORD
PERFORMANCE SUMMARY
For the six months ended September 30, 2004, Prime Money Market's total return
of 0.37%* ranked in the top quarter of Lipper Inc.'s money market instrument
funds category (#85 out of 402 funds). Over the long term, the fund has
produced consistently similar results--Prime Money Market's one-, five-, and
10-year returns all ranked in the top quarter of the Lipper group. (See page 2
for additional performance information.)
ECONOMIC AND MARKET REVIEW
Economic data was mixed during the six-month period. The news was initially
positive as job growth increased sharply and retail sales surged in the second
quarter of the year. In the latter part of the period, however, evidence of
moderating economic growth appeared, including slowing manufacturing activity
and a drop in consumer confidence. Soaring oil and commodity prices also served
as a drag on the economy.
Nonetheless, the U.S. economy grew at an annualized rate of more than 3% during
the six-month period, higher than the average annual growth rate over the past
30 years. In June, the Federal Reserve embarked on a series of short-term
interest rate increases. The Fed raised rates by a quarter-point three times
during the period, boosting the federal funds rate target from a 46-year low of
1% to 1.75%--its highest level in two years.
Money market yields tracked the Fed's rate-raising activity--for example, the
three-month Treasury bill yield rose from 0.93% to 1.68% during the six-month
period.
PORTFOLIO STRATEGY
Prime Money Market's seven-day current yield increased from 0.54% at the
beginning of the six-month period to 1.11% as of September 30, 2004. Unlike
yields in the money market, the fund's yield does not immediately reflect Fed
rate hikes; the yield increases gradually as existing securities in the
portfolio mature and are replaced by new, higher-yielding securities.
Consequently, the Fed's last rate increase on September 21 was not fully
reflected in Prime Money Market's yield by the end of the period. It's also
worth remembering that the fund's yield is impacted by expenses.
We shortened the fund's average maturity--from around 70 days at the beginning
of the period to about 45 days by September 30--to enable its yield to more
quickly reflect higher short-term interest rates.
At the end of 2001, commercial paper comprised two-thirds of Prime Money
Market's portfolio, but it has gradually declined to a much smaller portion of
the portfolio since then as a result of reduced commercial paper issuance. We
continued to reduce Prime Money Market's position in commercial paper during
the past six months, from 34% to 30% of the portfolio. We replaced the
commercial paper with certificates of deposit, which increased from 6% to 10%
of the portfolio.
*All fund returns and yields referenced in this commentary are for Investor
Class shares.
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6
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
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COMMERCIAL PAPER(1) -- 30.3%
$ 9,100,000 American Family Financial
Services, Inc., 1.72%,
11/23/04 $ 9,076,957
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18,000,000 Amstel Funding Corp., 1.80%,
12/30/04 (Acquired 8/30/04,
Cost $17,890,200)(2) 17,919,000
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15,000,000 Amstel Funding Corp., 1.96%,
1/24/05 (Acquired 9/24/04,
Cost $14,903,633)(2) 14,906,083
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40,000,000 CRC Funding LLC, 1.51%,
10/12/04 39,981,545
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31,000,000 Crown Point Capital
Company, 1.54%, 10/18/04
(Acquired 7/16/04-7/20/04,
Cost $30,878,939)(2) 30,977,456
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30,000,000 Crown Point Capital
Company, 1.64%, 11/4/04
(Acquired 8/11/04,
Cost $29,883,833)(2) 29,953,534
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12,100,000 CXC LLC, 1.75%, 12/1/04
(Acquired 9/3/04, Cost
$12,047,651)(2) 12,064,120
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40,000,000 Dakota Notes of the Citibank,
1.74%, 12/2/04 (Acquired
9/2/04, Cost $39,824,067)(2) 39,880,133
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23,200,000 Dexia Delaware LLC, 1.50%,
10/7/04 23,194,200
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23,000,000 Emerald Notes of the MBNA,
1.56%, 10/20/04 22,981,064
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20,000,000 Emerald Notes of the MBNA,
1.64%, 11/2/04 19,970,844
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17,000,000 Emerald Notes of the MBNA,
1.72%, 11/18/04 (Acquired
8/27/04, Cost $16,932,586)(2) 16,961,013
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46,600,000 Fortis Funding LLC, 1.75%,
12/29/04 (Acquired 9/1/04,
Cost $46,330,432)(2) 46,398,391
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55,000,000 Govco Incorporated, 1.80%,
12/7/04 (Acquired 9/7/04,
Cost $54,749,750)(2) 54,815,749
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15,000,000 HBOS Treasury Services plc,
1.55%, 10/22/04 14,986,481
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39,000,000 ING (U.S.) Funding LLC,
1.70%, 12/6/04 38,878,449
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14,200,000 Legacy Capital Company
LLC, 1.60%, 10/4/04 14,198,107
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16,000,000 Lexington Parker Capital,
1.51%, 10/12/04 15,992,618
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10,000,000 Lexington Parker Capital,
1.54%, 10/19/04 9,992,300
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35,000,000 Lexington Parker Capital,
1.30%, 11/10/04 34,949,445
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Principal Amount Value
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$41,200,000 Newcastle Certificates,
1.61%, 10/19/04 $ 41,166,834
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29,237,000 Prefco, 1.72%, 11/29/04
(Acquired 8/30/04, Cost
$29,109,884)(2) 29,154,584
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14,000,000 Receivables Capital Co. LLC,
1.78%, 12/1/04 (Acquired
9/3/04, Cost $13,938,392)(2) 13,957,774
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3,600,000 Spintab AB, 1.75%, 12/3/04 3,588,975
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5,100,000 Tannehill Capital Co. LLC,
1.62%, 10/4/04 (Acquired
8/27/04, Cost $5,091,279)(2) 5,099,312
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20,000,000 Thunder Bay Funding Inc.,
1.88%, 12/21/04 (Acquired
9/22/04, Cost $19,906,000)(2) 19,915,400
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37,100,000 UBS Finance Delaware LLC,
1.88%, 10/1/04 37,100,000
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TOTAL COMMERCIAL PAPER 658,060,368
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CORPORATE BONDS -- 20.5%
9,790,000 215 Jane Investors LLC,
Series 2002, VRN, 1.90%,
10/6/04 (Acquired 6/11/02,
Cost $9,790,000)(2) 9,790,000
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16,000,000 American Honda Finance
Corp., VRN, 1.72%, 10/13/04,
resets quarterly off the
3-month LIBOR plus 0.13%
with no caps (Acquired
9/30/04, Cost $16,006,848)(2) 16,006,848
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15,000,000 Banque Nationale de Paris,
VRN, 1.67%, 11/26/04, resets
quarterly off the 3-month
LIBOR minus 0.08%
with no caps 14,997,492
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26,200,000 Barclays Bank plc, VRN,
1.89%, 12/30/04, resets
quarterly off the 3-month
LIBOR minus 0.09%
with no caps 26,194,064
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41,000,000 Blue Heron Funding Limited,
VRN, 1.85%, 10/21/04, resets
monthly off the 1-month
LIBOR minus 0.03% with
no caps (Acquired 5/20/03,
Cost $41,000,000)(2) 41,000,000
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5,710,000 Bowie Assisted Living LLC,
VRN, 1.90%, 10/6/04 5,710,000
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5,370,000 Dormitory Partnership
Phase I, VRN, 1.89%, 10/7/04 5,370,000
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32,000,000 General Electric Capital Corp.,
VRN, 2.01%, 12/15/04,
resets quarterly off the
3-month LIBOR plus 0.13%
with no caps 32,024,988
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See Notes to Financial Statements. (continued)
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7
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
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$ 6,000,000 Herman & Kittle Capital LLC,
VRN, 1.89%, 10/7/04 $ 6,000,000
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1,565,000 Herman & Kittle Capital LLC,
VRN, 1.89%, 10/7/04 1,565,000
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4,150,000 Mark-Lynn Foods Inc., VRN,
1.89%, 10/7/04, resets
weekly with a cap of 15.00% 4,150,000
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7,100,000 Mullenix-St. Charles Properties
LP, VRN, 1.83%, 10/7/04 7,100,000
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6,100,000 Oklahoma Christian University
Inc., VRN, 1.89%, 10/7/04 6,100,000
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20,000,000 Procter & Gamble Co.,
VRN, 1.83%, 12/9/04,
resets quarterly off the
3-month LIBOR minus 0.03%
with no caps 20,000,000
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45,000,000 Rabobank Nederland N.V.,
VRN, 1.62%, 11/8/04, resets
quarterly of the 3-month
LIBOR minus 0.095%
with no caps 44,994,926
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8,000,000 Salvation Army, VRN, 1.84%,
10/7/04 8,000,000
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10,000,000 Salvation Army, VRN, 1.84%,
10/7/04 10,000,000
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40,000,000 Toyota Motor Credit Corp.,
VRN, 1.99%, 10/1/04, resets
daily off the Federal Funds
Rate plus 0.23% with no caps 40,031,660
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20,000,000 Toyota Motor Credit Corp.,
VRN, 1.90%, 12/31/04, resets
quarterly off the 3-month
LIBOR minus 0.08% with
no caps 20,000,000
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50,000,000 Transamerica Occidental Life
Insurance Co., VRN, 1.80%,
11/1/04, 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
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41,000,000 Travelers Insurance Co. Group,
VRN, 1.79%, 11/7/04, 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
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20,000,000 U.S. Bank National Association,
VRN, 1.78%, 10/25/04,
resets monthly off the
1-month LIBOR minus
0.06% with no caps 20,000,000
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15,000,000 Wells Fargo & Co., VRN,
1.98%, 12/24/04, resets
quarterly off the 3-month
plus 0.04% with no caps 15,008,322
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TOTAL CORPORATE BONDS 445,043,300
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Principal Amount Value
- ------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 19.2%
$ 3,725,000 Acworth Downtown
Development Auth. Rev.,
(Cable/Fiber Project),
VRDN, 1.80%, 10/7/04
(AMBAC) (SBBPA: Bank
of America N.A.) $ 3,725,000
- ------------------------------------------------------------------------------
7,115,000 Association of Bay Area
Governments Finance Auth.
for Nonprofit Corporations
Rev., Series 2002 B, (Colma
Bart), VRDN, 1.80%, 10/7/04
(LOC: Bank of America N.A.) 7,115,000
- ------------------------------------------------------------------------------
3,700,000 Athens-Clarke County
Industrial Development Auth.
Rev., (Allen Properties Inc.),
VRDN, 1.80%, 10/6/04
(LOC: SunTrust Bank) 3,700,000
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5,275,000 Babylon Industrial
Development Agency Rev.,
Series 2004 A, (Topiderm
Inc.), VRDN, 1.89%, 10/7/04
(LOC: Citibank N.A.) 5,275,000
- ------------------------------------------------------------------------------
5,990,000 Calexico Unified School
District COP, (Refinancing
Project), VRDN, 1.87%,
10/7/04 (XLCA) (SBBPA:
Wachovia Bank N.A.) 5,990,000
- ------------------------------------------------------------------------------
12,810,000 California Housing Finance
Agency Rev., Series 2000 R,
VRDN, 1.85%, 10/6/04
(AMBAC/FHA) 12,810,000
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15,595,000 California Housing Finance
Agency Rev., Series 2001 H,
VRDN, 1.85%, 10/6/04
(SBBPA: FNMA) 15,595,000
- ------------------------------------------------------------------------------
62,700,000 Catholic Health Initiatives
Rev., Series 1997 C, VRDN,
1.93%, 10/6/04 (SBBPA:
Landesbank Hessen-Thuringen
Girozentrale) 62,700,000
- ------------------------------------------------------------------------------
20,000,000 Concordia College Rev.,
VRDN, 1.84%, 10/1/04
(LOC: Bank of America N.A.) 20,000,000
- ------------------------------------------------------------------------------
5,000,000 Connecticut GO, Series
2000 A, 6.45%, 12/1/04 5,039,896
- ------------------------------------------------------------------------------
20,000,000 Cook County GO,
Series 2004 D, VRDN,
1.87%, 10/6/04 20,000,000
- ------------------------------------------------------------------------------
7,000,000 County of Cuyahoga Rev.,
Series 2004 B, (Gateway),
VRDN, 1.85%, 10/6/04
(SBBPA: Wachovia Bank N.A.) 7,000,000
- ------------------------------------------------------------------------------
3,180,000 El Monte COP, Series 2003 B,
(Community Improvement),
VRDN, 1.92%, 10/7/04 (LOC:
California State Teacher's
Retirement System) 3,180,000
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See Notes to Financial Statements. (continued)
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8
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- ------------------------------------------------------------------------------
$ 6,905,000 Gadsden Airport Auth. Rev.,
VRDN, 1.84%, 10/7/04
(LOC: SouthTrust Bank N.A.) $ 6,905,000
- ------------------------------------------------------------------------------
8,380,000 Georgia Municipal Gas
Auth. Rev., Series 2004 A,
(Gas Portfolio III), VRDN,
1.87%, 10/7/04 (LOC:
Wachovia Bank N.A.) 8,380,000
- ------------------------------------------------------------------------------
7,600,000 Grand Traverse Band
Economic Development Corp.
Rev., VRDN, 1.80%, 10/7/04
(LOC: Bank of America N.A.) 7,600,000
- ------------------------------------------------------------------------------
9,165,000 Houston Higher Education
Finance Corp. Rev., Series
2004 A, (University Parking
Systems), VRDN, 1.94%,
10/7/04 (LOC: BNP
Paribas Group) 9,165,000
- ------------------------------------------------------------------------------
335,000 Houston Higher Education
Finance Corp. Rev., Series
2004 B, (University Parking
Systems), VRDN, 1.94%,
10/7/04 (LOC: BNP
Paribas Group) 335,000
- ------------------------------------------------------------------------------
10,000,000 Illinois Finance Auth. Rev.,
(Windsor Park), VRDN,
1.85%, 10/7/04
(LOC: Lasalle Bank N.A.) 10,000,000
- ------------------------------------------------------------------------------
8,650,000 Jackson Energy Auth. Rev.,
Series 2003 A, VRDN, 1.80%,
10/6/04 (FGIC) (SBBPA:
Bank of America N.A.) 8,650,000
- ------------------------------------------------------------------------------
9,000,000 Jackson Energy Auth. Rev.,
Series 2003 B, VRDN, 1.80%,
10/7/04 (FGIC) (SBBPA:
Bank of America N.A.) 9,000,000
- ------------------------------------------------------------------------------
6,000,000 Kankakee GO, (Exit 308),
VRDN, 1.85%, 10/7/04
(RADIAN) (SBBPA: Bank
One N.A.) 6,000,000
- ------------------------------------------------------------------------------
1,852,000 Kern Water Bank Auth. Rev.,
Series 2003 B, VRDN,
1.85%, 10/7/04 (LOC:
Wells Fargo Bank N.A.) 1,852,000
- ------------------------------------------------------------------------------
2,000,000 Las Cruces Industrial Rev.,
(F&A Dairy Products), VRDN,
1.84%, 12/1/04 (LOC: Wells
Fargo Bank N.A.) 2,000,000
- ------------------------------------------------------------------------------
3,000,000 Long Beach Rev., Series
2004 A, (Towne Center Site),
VRDN, 1.92%, 10/7/04
(LOC: Allied Irish Bank plc) 3,000,000
- ------------------------------------------------------------------------------
10,000,000 Michigan State Housing
Development Auth. Rev.,
Series 2002 C, VRDN, 1.84%,
10/6/04 (MBIA) (SBBPA:
Landesbank Hessen-Thurigen
Girozentrale) 10,000,000
- ------------------------------------------------------------------------------
4,000,000 Michigan State University
Rev., Series 2002 B, VRDN,
1.83%, 10/6/04 (SBBPA:
Dexia Credit Local) 4,000,000
- ------------------------------------------------------------------------------
Principal Amount Value
- ------------------------------------------------------------------------------
$10,000,000 Mississippi Business Finance
Corporation Industrial
Development Rev., (VC
Regional Assembly), VRDN,
1.84%, 10/6/04 (LOC:
JPMorgan Chase Bank) $ 10,000,000
- ------------------------------------------------------------------------------
9,005,000 Montgomery County
Redevelopment Auth.
Multifamily Housing Rev.,
Series 2001 A, (Kingswood
Apartments), VRDN, 1.83%,
10/7/04 (LOC: FNMA) 9,005,000
- ------------------------------------------------------------------------------
4,800,000 Newton Economic
Development Rev., (Medical
Office Plaza), VRDN, 1.80%,
10/7/04 (LOC: Bank of
America N.A.) 4,800,000
- ------------------------------------------------------------------------------
14,305,000 North Carolina Housing
Finance Agency Rev., Series
2003 D, (Multifamily), VRDN,
1.83%, 10/6/04 (SBBPA:
Wachovia Bank N.A.) 14,305,000
- ------------------------------------------------------------------------------
14,475,000 North Miami Special
Obligation Rev., (Pension
Funding), VRDN, 1.80%,
10/7/04 (AMBAC) 14,475,000
- ------------------------------------------------------------------------------
17,766,000 Oaks Christian School Rev.,
VRDN, 1.84%, 10/7/04 (LOC:
U.S. Bank N.A.) 17,766,000
- ------------------------------------------------------------------------------
9,865,000 Oklahoma Development
Finance Auth. Rev., Series
2003 A, (Langston
Development Inc.), VRDN,
1.89%, 10/7/04 (LOC: FHLB) 9,865,000
- ------------------------------------------------------------------------------
1,900,000 Olathe Industrial Rev.,
(Zschoche Family),
VRDN, 1.89%, 10/7/04
(LOC: U.S. Bank N.A.) 1,900,000
- ------------------------------------------------------------------------------
7,000,000 Olathe Industrial Rev., Series
1997 B, (Diamant Boart Inc.),
VRDN, 1.98%, 10/7/04 (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,1.94%, 10/6/04
(AMBAC) (SBBPA: Dexia
Credit Local) 5,000,000
- ------------------------------------------------------------------------------
3,100,000 Orange County Industrial
Development Auth. Rev.,
(Jewish Federation of Greater
Orlando), VRDN, 1.80%,
10/7/04 (LOC: Bank of
America N.A.) 3,100,000
- ------------------------------------------------------------------------------
12,680,000 Pasadena COP, (Los Robles
Avenue Parking Facilities),
VRDN, 1.84%, 10/5/04
(LOC: Bank of New York &
California State Teachers
Retirement System) 12,680,000
- ------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- ------------------------------------------------------------------------------
$ 1,405,000 Plymouth Rev., (Carlson
Center), VRDN, 1.89%,
10/7/04 (LOC: U.S. Bank
Trust N.A.) $ 1,405,000
- ------------------------------------------------------------------------------
6,900,000 Roman Catholic Diocese of
Raleigh Rev., Series 2002 A,
VRDN, 1.89%, 10/7/04
(LOC: Bank of America N.A.) 6,900,000
- ------------------------------------------------------------------------------
8,000,000 San Jose Financing Auth.
Lease Rev., Series 2001 B,
(Hayes Mansion Phase),
VRDN, 1.83%, 10/6/04
(AMBAC) (SBBPA: Bank
of Nova Scotia) 8,000,000
- ------------------------------------------------------------------------------
5,250,000 Santa Rosa Pension Obligation
Rev., Series 2003 A, VRDN,
1.92%, 10/7/04 (LOC:
Landesbank Hessen-Thurigen
Girozentrale) 5,250,000
- ------------------------------------------------------------------------------
8,000,000 Savannah College of Art &
Design Inc. Rev., Series 2004
BD, VRDN, 1.84%, 10/7/04
(LOC: Bank of America N.A.) 8,000,000
- ------------------------------------------------------------------------------
14,760,000 Southeast Alabama Gas
District Rev., Series 2003 A,
VRDN, 1.89%, 10/7/04 (XLCA) 14,760,000
- ------------------------------------------------------------------------------
4,245,000 Sterling Tax Allocation Rev.,
(Rock River Redevelopment),
VRDN, 1.91%, 10/6/04
(LOC: Wachovia Bank N.A.) 4,245,000
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES 417,472,896
- ------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES -- 18.9%
30,000,000 FHLB, 1.42%, 11/26/04 30,000,000
- ------------------------------------------------------------------------------
50,000,000 FHLB, 1.50%, 12/3/04 50,000,000
- ------------------------------------------------------------------------------
25,000,000 FHLB, 1.51%, 12/8/04 25,000,000
- ------------------------------------------------------------------------------
25,000,000 FHLB, 1.60%, 12/30/04 25,000,000
- ------------------------------------------------------------------------------
20,000,000 FHLB, 1.50%, 2/4/05 20,000,000
- ------------------------------------------------------------------------------
35,000,000 FHLB, 1.46%, 3/1/05 35,000,000
- ------------------------------------------------------------------------------
15,000,000 FHLB, 1.40%, 4/1/05 15,000,000
- ------------------------------------------------------------------------------
10,000,000 FHLB, 1.40%, 4/4/05 10,000,000
- ------------------------------------------------------------------------------
12,000,000 FHLB, 1.66%, 5/16/05 12,000,000
- ------------------------------------------------------------------------------
30,000,000 FHLB, VRN, 1.48%, 10/5/04,
resets quarterly off the
3-month LIBOR minus 0.12%
with no caps 29,984,006
- ------------------------------------------------------------------------------
Principal Amount Value
- ------------------------------------------------------------------------------
$40,000,000 FHLB, VRN, 1.53%, 10/5/04,
resets quarterly off the
3-month LIBOR minus
0.07% with no caps $ 39,999,473
- ------------------------------------------------------------------------------
20,000,000 FHLMC, VRN, 1.50%,
10/21/04, resets quarterly
off the 3-month LIBOR plus
0.07% with no caps 20,000,000
- ------------------------------------------------------------------------------
20,000,000 FNMA, 1.50%, 2/15/05 20,002,277
- ------------------------------------------------------------------------------
8,000,000 FNMA, 1.61%, 5/13/05 8,000,000
- ------------------------------------------------------------------------------
40,000,000 FNMA, 1.80%, 5/27/05 40,000,000
- ------------------------------------------------------------------------------
32,000,000 FNMA, VRN, 1.51%, 10/21/04,
resets quarterly off the
3-month LIBOR minus 0.13%
with no caps 31,978,248
- ------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 411,964,004
- ------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 10.3%
28,000,000 Canadian Imperial Bank of
Commerce, 1.50%, 10/8/04
(Acquired 7/8/04,
Cost $28,000,000)(2) 28,000,000
- ------------------------------------------------------------------------------
40,000,000 HBOS Treasury Services plc,
1.41%, 1/7/05 (Acquired
1/5/04, Cost $40,000,000)(2) 40,000,000
- ------------------------------------------------------------------------------
42,000,000 Societe Generale, 1.62%,
11/12/04 (Acquired 8/17/04,
Cost $41,996,930)(2) 41,998,517
- ------------------------------------------------------------------------------
25,000,000 Svenska Handelsbanken,
1.19%, 10/15/04 (Acquired
4/15/04, Cost $25,000,000)(2) 25,000,000
- ------------------------------------------------------------------------------
49,800,000 Washington Mutual Bank FA,
1.76%, 10/27/04 (Acquired
9/27/04, Cost $49,800,000)(2) 49,800,000
- ------------------------------------------------------------------------------
10,000,000 Westdeutsche Landesbank,
1.19%, 10/18/04 (Acquired
4/14/04, Cost $10,000,000)(2) 10,000,000
- ------------------------------------------------------------------------------
30,000,000 Westdeutsche Landesbank,
1.60%, 10/26/04 (Acquired
7/26/04, Cost $30,000,000)(2) 30,000,000
- ------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 224,798,517
- ------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 99.2% 2,157,339,085
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 0.8% 18,158,457
- ------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $2,175,497,542
==============================================================================
See Notes to Financial Statements. (continued)
- ------
10
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2004 (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
GO = General Obligation
LIBOR = London Interbank Offered Rate
LOC = Letter of Credit
MBIA = MBIA Insurance Corporation
RADIAN = Radian Asset Assurance, Inc.
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
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective September 30, 2004.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective September 30, 2004.
XLCA = XL Capital Ltd.
(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,
2004, was $721,597,914, which represented 33.2% of net assets. None of the
restricted securities were considered illiquid.
See Notes to Financial Statements.
- ------
11
Statement of Assets and Liabilities
SEPTEMBER 30, 2004 (UNAUDITED)
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (amortized cost
and cost for federal income tax purposes) $2,157,339,085
- ---------------------------------------------------------
Cash 63,917,965
- ---------------------------------------------------------
Receivable for capital shares sold 1,815
- ---------------------------------------------------------
Interest receivable 4,012,544
- ---------------------------------------------------------
Prepaid portfolio insurance 132,021
- --------------------------------------------------------------------------------
2,225,403,430
- --------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------
Payable for investments purchased 48,873,166
- ---------------------------------------------------------
Accrued management fees 1,007,815
- ---------------------------------------------------------
Distribution fees payable 3,373
- ---------------------------------------------------------
Service fees (and distribution fees A Class) payable 2,001
- ---------------------------------------------------------
Dividends payable 19,533
- --------------------------------------------------------------------------------
49,905,888
- --------------------------------------------------------------------------------
NET ASSETS $2,175,497,542
================================================================================
NET ASSETS CONSIST OF:
Capital paid in $2,175,512,672
- ---------------------------------------------------------
Accumulated net realized loss on investment transactions (15,130)
- --------------------------------------------------------------------------------
$2,175,497,542
================================================================================
INVESTOR CLASS
- --------------------------------------------------------------------------------
Net assets $2,171,275,327
- ---------------------------------------------------------
Shares outstanding 2,171,291,018
- ---------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
Net assets $3,412,542
- ---------------------------------------------------------
Shares outstanding 3,411,982
- ---------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
Net assets $165,007
- ---------------------------------------------------------
Shares outstanding 165,007
- ---------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
Net assets $96,588
- ---------------------------------------------------------
Shares outstanding 96,591
- ---------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
Net assets $548,078
- ---------------------------------------------------------
Shares outstanding 548,074
- ---------------------------------------------------------
Net asset value per share $1.00
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
12
Statement of Operations
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- ---------------------------------------------------------
Interest $14,481,985
- --------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------
Management fees 6,284,947
- ---------------------------------------------------------
Distribution fees:
- ---------------------------------------------------------
Advisor Class 4,143
- ---------------------------------------------------------
B Class 301
- ---------------------------------------------------------
C Class 499
- ---------------------------------------------------------
Service fees:
- ---------------------------------------------------------
Advisor Class 4,143
- ---------------------------------------------------------
B Class 100
- ---------------------------------------------------------
C Class 250
- ---------------------------------------------------------
Service and distribution fees -- A Class 71
- ---------------------------------------------------------
Trustees' fees and expenses 44,511
- ---------------------------------------------------------
Portfolio insurance and other expenses 196,508
- --------------------------------------------------------------------------------
6,535,473
Amount waived (360)
- --------------------------------------------------------------------------------
6,535,113
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,946,872
- --------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENT TRANSACTIONS (7,348)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,939,524
================================================================================
See Notes to Financial Statements.
- ------
13
Statement of Changes in Net Assets
SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) AND YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2004 MARCH 31, 2004
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 7,946,872 $ 14,171,419
- ---------------------------------------
Net realized loss (7,348) 437
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 7,939,524 14,171,856
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income:
- ---------------------------------------
Investor Class (7,938,056) (14,154,600)
- ---------------------------------------
Advisor Class (8,324) (16,133)
- ---------------------------------------
A Class (208) (566)
- ---------------------------------------
B Class (14) (55)
- ---------------------------------------
C Class (270) (65)
- --------------------------------------------------------------------------------
Decrease in net assets
from distributions (7,946,872) (14,171,419)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions 45,822,533 (450,533,318)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 45,815,185 (450,532,881)
- --------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 2,129,682,357 2,580,215,238
- --------------------------------------------------------------------------------
End of period $2,175,497,542 $2,129,682,357
================================================================================
See Notes to Financial Statements.
- ------
14
Notes to Financial Statements
SEPTEMBER 30, 2004 (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 may incur
an initial sales charge. The A Class, B Class and C Class may be subject to a
contingent deferred sales charge. The share classes differ principally in their
respective sales charges and shareholder servicing and distribution expenses and
arrangements. All shares of the fund represent an equal pro rata interest in the
assets of the class to which such shares belong, and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
for class specific expenses and exclusive rights to vote on matters affecting
only individual classes. Income, non-class specific expenses, and realized and
unrealized capital gains and losses of the fund are allocated to each class of
shares based on their relative net assets.
SECURITY VALUATIONS -- Securities are valued at amortized cost, which
approximates current market value.
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 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 substantially all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income 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)
- ------
15
Notes to Financial Statements
SEPTEMBER 30, 2004 (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 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 and accrued daily based on the daily net assets of the specific
class of shares of the fund and paid monthly in arrears. The fee consists of (1)
an Investment Category Fee based on the daily net assets of the funds and
certain other accounts managed by the investment manager that are in the same
broad investment category as the fund and (2) a Complex Fee based on the assets
of all the funds in the American Century family of funds. The rates for the
Investment Category Fee range from 0.2370% to 0.3500% and the rates for the
Complex Fee (Investor Class, A Class, B Class and C Class) range from 0.2500% to
0.3100%. The Advisor Class is 0.2500% less at each point within the Complex Fee
range. The effective annual management fee for the fund for the six months ended
September 30, 2004 was 0.58% for the Investor, A, B and C Classes, and 0.33% for
the Advisor Class.
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 and accrued daily based on each
class's daily net assets and paid monthly in arrears. The distribution fee
provides compensation for expenses incurred in connection with distributing
shares of the classes including, but not limited to, payments to brokers,
dealers, and financial institutions that have entered into sales agreements with
respect to shares of the 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, 2004, the B Class and C Class waived $107 and $253, respectively,
of distribution and service fees. Fees incurred under the plans during the six
months ended September 30, 2004, are detailed in the Statement of Operations.
MONEY MARKET INSURANCE -- The fund, along with certain 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 equal to 0.018%
to MBIA based on participating money market funds' market value at January 31,
2004. The premiums are amortized daily over one year.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc., (ACC) the parent of the trust's investment manager, ACIM, the
distributor of the trust, American Century Investment Services, Inc., and the
trust's transfer agent, American Century Services Corporation. JPMorgan Chase
Bank (JPMCB) is a custodian of the fund and is a wholly owned subsidiary of J.P.
Morgan Chase & Co. (JPM). JPM is an equity investor in ACC.
(continued)
- ------
16
Notes to Financial Statements
SEPTEMBER 30, 2004 (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, 2004
- -----------------------------------------
Sold 948,412,740 $ 948,412,740
- -----------------------------------------
Issued in reinvestment of distributions 7,808,520 7,808,520
- -----------------------------------------
Redeemed (911,371,257) (911,371,257)
- -------------------------------------------------------------------------------
Net increase 44,850,003 $ 44,850,003
===============================================================================
YEAR ENDED MARCH 31, 2004
- -----------------------------------------
Sold 2,042,157,206 $ 2,042,157,206
- -----------------------------------------
Issued in reinvestment of distributions 13,903,073 13,903,073
- -----------------------------------------
Redeemed (2,504,322,430) (2,504,322,430)
- -------------------------------------------------------------------------------
Net decrease (448,262,151) $ (448,262,151)
===============================================================================
ADVISOR CLASS
- -----------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2004
- -----------------------------------------
Sold 2,026,205 $ 2,026,205
- -----------------------------------------
Issued in reinvestment of distributions 8,060 8,060
- -----------------------------------------
Redeemed (1,676,873) (1,676,873)
- -------------------------------------------------------------------------------
Net increase 357,392 $ 357,392
===============================================================================
YEAR ENDED MARCH 31, 2004
- -----------------------------------------
Sold 5,004,026 $ 5,004,026
- -----------------------------------------
Issued in reinvestment of distributions 15,828 15,828
- -----------------------------------------
Redeemed (7,395,568) (7,395,568)
- -------------------------------------------------------------------------------
Net decrease (2,375,714) $(2,375,714)
===============================================================================
A CLASS
- -----------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2004
- -----------------------------------------
Sold 148,859 $148,859
- -----------------------------------------
Issued in reinvestment of distributions 208 208
- -----------------------------------------
Redeemed (9,180) (9,180)
- -------------------------------------------------------------------------------
Net increase 139,887 $139,887
===============================================================================
YEAR ENDED MARCH 31, 2004
- -----------------------------------------
Sold 1,738,942 $ 1,738,942
- -----------------------------------------
Issued in reinvestment of distributions 135 135
- -----------------------------------------
Redeemed (1,738,982) (1,738,982)
- -------------------------------------------------------------------------------
Net increase 95 $ 95
===============================================================================
(continued)
- ------
17
Notes to Financial Statements
SEPTEMBER 30, 2004 (UNAUDITED)
3. CAPITAL SHARE TRANSACTIONS (CONTINUED)
SHARES AMOUNT
- ------------------------------------------------------------------------------
B CLASS
- ----------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2004
- ----------------------------------------------
Sold 24,166 $24,166
- ----------------------------------------------
Issued in reinvestment of distributions 8 8
- ----------------------------------------------
Redeemed (1,410) (1,410)
- ------------------------------------------------------------------------------
Net increase 22,764 $22,764
==============================================================================
YEAR ENDED MARCH 31, 2004
- ----------------------------------------------
Sold 69,434 $ 69,434
- ----------------------------------------------
Issued in reinvestment of distributions 54 54
- ----------------------------------------------
Redeemed (20,686) (20,686)
- ------------------------------------------------------------------------------
Net increase 48,802 $ 48,802
==============================================================================
C CLASS
- ----------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2004
- ----------------------------------------------
Sold 648,772 $ 648,772
- ----------------------------------------------
Issued in reinvestment of distributions 270 270
- ----------------------------------------------
Redeemed (196,555) (196,555)
- ------------------------------------------------------------------------------
Net increase 452,487 $ 452,487
==============================================================================
YEAR ENDED MARCH 31, 2004
- ----------------------------------------------
Sold 311,773 $ 311,773
- ----------------------------------------------
Issued in reinvestment of distributions 54 54
- ----------------------------------------------
Redeemed (256,177) (256,177)
- ------------------------------------------------------------------------------
Net increase 55,650 $ 55,650
==============================================================================
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 on the financial statements.
As of March 31, 2004, accumulated net realized capital loss carryovers for
federal income tax purposes of $13,508 (expiring in 2010) may be used to offset
future taxable realized gains.
- ------
18
Prime Money Market - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------------------
2004(1) 2004 2003 2002(2) 2002 2001 2000(3)
- --------------------------------------------------------------------------------------------------------------
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 0.01 --(4) 0.03 0.06 0.05
- --------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------
From Net
Investment
Income --(4) (0.01) (0.01) --(4) (0.03) (0.06) (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) 0.37% 0.58% 1.19% 0.13% 3.16% 6.05% 4.92%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 0.60%(6) 0.61% 0.61% 0.60%(6) 0.60% 0.60% 0.60%
- ------------------------
Ratio of Net
Investment Income
to Average
Net Assets 0.75%(6) 0.58% 1.19% 1.48%(6) 3.13% 5.88% 4.81%
- ------------------------
Net Assets,
End of Period
(in thousands) $2,171,275 $2,126,433 $2,574,694 $2,756,147 $2,796,914 $2,875,876 $2,921,825
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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.
See Notes to Financial Statements.
Prime Money Market - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -----------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------
2004(1) 2004 2003 2002(2) 2002 2001 2000(3)
- -----------------------------------------------------------------------------------------------------
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) --(4) 0.01 --(4) 0.03 0.06 0.05
- -----------------------------------------------------------------------------------------------------
Distributions
- ----------------------
From Net
Investment
Income --(4) --(4) (0.01) --(4) (0.03) (0.06) (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) 0.25% 0.33% 0.93% 0.10% 2.90% 5.79% 4.66%
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.85%(6) 0.86% 0.86% 0.85%(6) 0.85% 0.85% 0.85%
- ----------------------
Ratio of Net
Investment Income
to Average
Net Assets 0.50%(6) 0.33% 0.94% 1.23%(6) 2.88% 5.63% 4.56%
- ----------------------
Net Assets,
End of Period
(in thousands) $3,413 $3,055 $5,431 $14,329 $13,609 $7,784 $4,799
- -----------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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.
See Notes to Financial Statements.
- ------
20
Prime Money Market - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------
Net Investment Income --(3) --(3) --(3)
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------
From Net Investment Income --(3) --(3) --(3)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00 $1.00
================================================================================
TOTAL RETURN(4) 0.26% 0.38% 0.12%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets(5) 0.85%(6) 0.83% 0.61%(6)
- ------------------------------------
Ratio of Operating
Expenses to Average
Net Assets
(Before Expense Waiver) 0.85%(6) 0.86% 0.86%(6)
- ------------------------------------
Ratio of Net Investment
Income to Average Net Assets(5) 0.50%(6) 0.36% 0.76%(6)
- ------------------------------------
Ratio of Net Investment
Income to Average
Net Assets
(Before Expense Waiver) 0.50%(6) 0.33% 0.51%(6)
- ------------------------------------
Net Assets,
End of Period
(in thousands) $165 $25 $25
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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.
- ------
21
Prime Money Market - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -------------------------------------------------------------------------------
B CLASS
- -------------------------------------------------------------------------------
2004(1) 2004 2003(2)
- -------------------------------------------------------------------------------
PER-SHARE DATA
- -------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------
Net Investment Income --(3) --(3) --(3)
- -------------------------------------------------------------------------------
Distributions
- ------------------------------------
From Net
Investment Income --(3) --(3) --(3)
- -------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00
===============================================================================
TOTAL RETURN(4) 0.03% 0.22% 0.12%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets(5) 1.34%(6) 0.99% 0.61%(6)
- ------------------------------------
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.60%(6) 1.61% 1.61%(6)
- ------------------------------------
Ratio of Net Investment
Income to Average Net Assets(5) 0.01%(6) 0.20% 0.76%(6)
- ------------------------------------
Ratio of Net Investment
Loss to Average Net
Assets (Before Expense Waiver) (0.25)%(6) (0.42)% (0.24)%(6)
- ------------------------------------
Net Assets, End of Period
(in thousands) $97 $74 $25
- -------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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 distribution and
service fees.
(6) Annualized.
See Notes to Financial Statements.
- ------
22
Prime Money Market - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -------------------------------------------------------------------------------
C CLASS
- -------------------------------------------------------------------------------
2004(1) 2004 2003(2)
- -------------------------------------------------------------------------------
PER-SHARE DATA
- -------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------
Net Investment Income --(3) --(3) --(3)
- -------------------------------------------------------------------------------
Distributions
- ------------------------------------
From Net
Investment Income --(3) --(3) --(3)
- -------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00
===============================================================================
TOTAL RETURN(4) 0.13% 0.09% 0.40%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets(5) 1.09%(6) 1.10% 1.34%(6)
- ------------------------------------
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.35%(6) 1.36% 1.36%(6)
- ------------------------------------
Ratio of Net Investment
Income to Average Net Assets(5) 0.26%(6) 0.09% 0.47%(6)
- ------------------------------------
Ratio of Net Investment
Income (Loss) to Average
Net Assets (Before Expense Waiver) 0.00%(6) (0.17)% 0.45%(6)
- ------------------------------------
Net Assets, End of Period
(in thousands) $548 $96 $40
- -------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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.
- ------
23
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. If you
purchase A Class shares of the fund directly, a sales charge will apply when you
exchange into the A Class shares of another American Century Advisor Fund, in
accordance with the schedule set forth in that fund's prospectus. 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. 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 0.75%. 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 0.75%.
All classes of shares represent a pro rata interest in the fund and generally
have the same rights and preferences.
- ------
24
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment 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 americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
manager voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q for periods ending on or after July 9, 2004. The fund's Form
N-Q is available on the SEC's Web site at sec.gov, and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings
for the most recent quarter of its fiscal year available on its Web site at
americancentury.com and, upon request, by calling 1-800-345-2021.
- ------
25
Index Definition
The following index is used to illustrate investment market, sector, or style
performance or to serve as fund performance comparisons. It is not an investment
product 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.
- ------
26
Notes
- ------
27
Notes
- ------
28
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY 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.
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
COMPANIES
The American Century Investments logo, American Century
and American Century Investments are service marks
of American Century Services Corporation.
0411 American Century Investment Services, Inc.
SH-SAN-40410S (c)2004 American Century Services Corporation
[front cover]
SEPTEMBER 30, 2004
American Century Investments
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of bridge over creek]
Diversified Bond Fund
High-Yield Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DIVERSIFIED BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . . . 5
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . . . 5
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 6
HIGH-YIELD
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . . .15
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Portfolio Composition by Credit Rating . . . . . . . . . . . . . . . . .16
Top Five Industries. . . . . . . . . . . . . . . . . . . . . . . . . . .16
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . .17
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . . . .21
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . .24
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .26
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . .27
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . .28
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
OTHER INFORMATION
Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .46
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .48
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
The opinions expressed in each of the Portfolio Commentaries reflect those of
the portfolio management team as of the date of the report, and do not
necessarily represent the opinions of American Century or any other person in
the American Century organization. Any such opinions are subject to change at
any time based upon market or other conditions and American Century disclaims
any responsibility to update such opinions. These opinions may not be relied
upon as investment advice and, because investment decisions made by American
Century funds are based on numerous factors, may not be relied upon as an
indication of trading intent on behalf of any American Century fund. Security
examples are used for representational purposes only and are not intended as
recommendations to purchase or sell securities. Performance information for
comparative indices and securities is provided to American Century by third
party vendors. To the best of American Century's knowledge, such information is
accurate at the time of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III
WITH JAMES E. STOWERS, JR.
To help you monitor your investment, we are pleased to provide the semiannual
report for the Diversified Bond and High-Yield funds for the six months ended
September 30, 2004.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, we provide quarterly commentaries on
all American Century portfolios, the views of our senior investment officers,
and other communications about investments, portfolio strategy, and the markets.
We also have many resources available in the Education & Planning section of
our site to help you with your investment strategy.
Your next shareholder report for these funds will be the annual report dated
March 31, 2005, available in approximately six months.
We remain committed to our guiding belief that the ultimate measure of our
performance is our customers' success. Thank you for investing with us.
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, 2004
--------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 2.66% -- -- 4.80% 12/3/01
- --------------------------------------------------------------------------------
LEHMAN BROTHERS U.S.
AGGREGATE INDEX 3.68% -- -- 5.98%(1) --
- --------------------------------------------------------------------------------
Institutional Class 2.86% 6.75% 7.14% 6.18% 4/1/93
- --------------------------------------------------------------------------------
Advisor Class 2.40% -- -- 4.54% 12/3/01
- --------------------------------------------------------------------------------
A Class 1/31/03
No sales charge* 2.40% -- -- 3.45%(2)
With sales charge* -2.17% -- -- 0.62%(2)
- --------------------------------------------------------------------------------
B Class 1/31/03
No sales charge* 1.63% -- -- 2.71%(2)
With sales charge* -2.37% -- -- 0.33%(2)
- --------------------------------------------------------------------------------
C Class 1.70% -- -- 2.83%(2) 1/31/03
- --------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 4.50% maximum initial
sales charge for fixed income funds and may be subject to a maximum CDSC of
1.00%. B Class shares redeemed within six years of purchase are subject to a
CDSC that declines from 5.00% during the first year after purchase to 0.00% the
sixth year after purchase. C Class shares redeemed within 12 months of purchase
are subject to a maximum CDSC of 1.00%. Please see the Share Class Information
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.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
(continued)
- ------
2
Diversified Bond - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made December 3, 2001
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended September 30
- --------------------------------------------------------------------------------
2002* 2003 2004
- --------------------------------------------------------------------------------
Investor Class 5.60% 5.19% 2.66%
- --------------------------------------------------------------------------------
Lehman Brothers U.S. Aggregate Index 7.86% 5.41% 3.68%
- --------------------------------------------------------------------------------
*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.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
- ------
3
Diversified Bond - Portfolio Commentary
PORTFOLIO MANAGER: JEFF HOUSTON
RETURN SUMMARY & PERSPECTIVE
Diversified Bond declined 0.04%* for the six months ended September 30, 2004, as
the U.S. bond market slumped in the second quarter of 2004, then recovered in
the third quarter. The fund's broad market benchmark, the Lehman Brothers U.S.
Aggregate Index (LBA), gained 0.68% for the six months after experiencing a
similar decline-recovery pattern. Diversified Bond's performance resembled that
of the 10-year Treasury note, which fell 0.06%.
It was a volatile period for the bond market. In the first three months, the LBA
declined 2.44%, its worst quarter since the first quarter of 1994. In the
following three months, the LBA gained 3.20%, its best quarter since the third
quarter of 2002. That helped the LBA outperform the major U.S. stock market
indices -- the S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq
Composite Index fell 0.18%, 1.69%, and 4.64%, respectively, for the full six
months.
ECONOMIC & MARKET PERSPECTIVE
The U.S. stock and bond markets dipped and rose as economic and interest rate
outlooks shifted. In the second quarter of 2004, government data caused
revisions to predictions that the Federal Reserve's (the Fed's) overnight rate
target would remain at 1% until year-end 2004. Three consecutive
stronger-than-expected monthly job growth reports and higher consumer prices in
the spring of 2004 contributed to a spike in Treasury yields and influenced the
Fed's decision to start raising interest rates. The 10-year Treasury yield
jumped from 3.84% on March 31, 2004 to 4.87% on June 14, and the Fed's federal
funds rate target rose to 1.25% on June 30.
Remarkably, bonds followed their second-quarter selloff with a rally in the
third quarter of 2004, even though the Fed continued to raise rates. Increasing
energy costs (as crude oil surpassed $50 a barrel) softened the economic outlook
and boosted bond prices.
The Treasury yield curve "twisted" in the third quarter of 2004 -- the
three-month Treasury yield ROSE 44 basis points (0.44 percentage point) as the
Fed raised its overnight interest rate target by another 50 basis points to
1.75%, but the 10-year Treasury yield FELL 46 basis points to finish at 4.12%.
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
9/30/04 3/31/04
- --------------------------------------------------------------------------------
Weighted Average
Maturity 4.6 years 4.8 years
- --------------------------------------------------------------------------------
Average Duration
(modified) 4.2 years 4.2 years
- --------------------------------------------------------------------------------
YIELDS AS OF SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor 2.94%
- --------------------------------------------------------------------------------
Institutional 3.14%
- --------------------------------------------------------------------------------
Advisor 2.69%
- --------------------------------------------------------------------------------
A Class 2.57%
- --------------------------------------------------------------------------------
B Class 1.95%
- --------------------------------------------------------------------------------
C Class 1.93%
- --------------------------------------------------------------------------------
*All fund returns and yields referenced
in this commentary are for Investor Class shares. (continued)
- ------
4
Diversified Bond - Portfolio Commentary
YIELD & SECTOR SUMMARY
Diversified Bond's investment objective is to seek a high level of income by
investing in non-money-market debt securities that may include high- and
medium-grade corporate bonds and notes, government securities, and securities
backed by mortgages or other assets (see the Types of Investments table). During
the six-month reporting period, yields generally rose -- the 10-year Treasury
yield climbed from 3.84% to 4.12%. The fund's 30-day SEC yield rose from 2.76%
on March 31, 2004, to 2.94% on September 30.
Higher-yielding bond sectors, including mortgage-backed and corporate
securities, generally outperformed lower-yielding U.S. government debt. In
addition, longer-maturity/duration bonds generally outperformed shorter
maturity/duration notes.
PORTFOLIO POSITIONING & STRATEGY
Conservative duration management factored into Diversified Bond's
underperformance vs. the LBA during the six months. In anticipation of stronger
economic growth and rising interest rates, we kept the portfolio's duration
shorter than the LBA's to reduce price volatility. That strategy detracted from
performance, particularly when bonds rallied in the third quarter of 2004.
As the Types of Investments table shows, we favored mortgage securities
(mortgage-backeds and CMOs) over corporate bonds or Treasury securities. We
reduced our corporate exposure and increased our CMOs during the reporting
period -- we liked the attractive yields and high credit quality that mortgage
securities offered compared with corporates. Also, compared with the LBA, we
moved from a very underweight position in Treasurys to a slightly
underweight/more neutral position.
In conclusion, we remained committed to pursuing the fund's investment
objective, as demonstrated by our portfolio positioning and strategy during the
reporting period.
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
9/30/04 3/31/04
- --------------------------------------------------------------------------------
Mortgage-Backed
Securities 31.8% 33.1%
- --------------------------------------------------------------------------------
Corporate Bonds 24.5% 29.0%
- --------------------------------------------------------------------------------
U.S. Treasury Securities 23.2% 12.8%
- --------------------------------------------------------------------------------
Asset-Backed Securities 14.7% 5.0%
- --------------------------------------------------------------------------------
U.S. Government
Agency Securities 10.4% 11.6%
- --------------------------------------------------------------------------------
CMOs 8.1% 2.4%
- --------------------------------------------------------------------------------
Sovereign Governments
& Agencies 0.4% 0.3%
- --------------------------------------------------------------------------------
Other(1) 4.6% 28.6%
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES 117.7% 122.8%
- --------------------------------------------------------------------------------
Other Assets
and Liabilities(2) (17.7)% (22.8)%
- --------------------------------------------------------------------------------
(1) Includes Temporary Cash Investments.
(2) Includes payables for forward commitments.
PORTFOLIO COMPOSITION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/04 3/31/04
- --------------------------------------------------------------------------------
AAA 71% 69%
- --------------------------------------------------------------------------------
AA 4% 3%
- --------------------------------------------------------------------------------
A 9% 10%
- --------------------------------------------------------------------------------
BBB 13% 14%
- --------------------------------------------------------------------------------
BB 3% 4%
- --------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
- ------
5
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES(1) -- 31.8%
- --------------------------------------------------------------------------------
$ 9,500,000 FHLMC, 5.00%, settlement
date 10/19/04(2) $ 9,648,437
- --------------------------------------------------------------------------------
67,115 FHLMC, 6.50%, 2/1/09 71,087
- --------------------------------------------------------------------------------
59,209 FHLMC, 6.50%, 12/1/12 62,729
- --------------------------------------------------------------------------------
554,817 FHLMC, 6.00%, 1/1/13 582,941
- --------------------------------------------------------------------------------
80,375 FHLMC, 7.00%, 11/1/13 85,247
- --------------------------------------------------------------------------------
159,602 FHLMC, 7.00%, 6/1/14 169,288
- --------------------------------------------------------------------------------
277,397 FHLMC, 6.50%, 6/1/16 293,635
- --------------------------------------------------------------------------------
431,779 FHLMC, 6.50%, 6/1/16 457,054
- --------------------------------------------------------------------------------
4,861,987 FHLMC, 5.00%, 11/1/17 4,952,430
- --------------------------------------------------------------------------------
7,389,047 FHLMC, 4.50%, 1/1/19 7,382,168
- --------------------------------------------------------------------------------
3,620 FHLMC, 8.50%, 10/1/26 3,981
- --------------------------------------------------------------------------------
53,545 FHLMC, 7.00%, 9/1/27 56,949
- --------------------------------------------------------------------------------
85,631 FHLMC, 6.50%, 1/1/28 90,122
- --------------------------------------------------------------------------------
13,990 FHLMC, 7.00%, 2/1/28 14,879
- --------------------------------------------------------------------------------
480,371 FHLMC, 6.50%, 3/1/29 505,200
- --------------------------------------------------------------------------------
343,266 FHLMC, 6.50%, 6/1/29 360,793
- --------------------------------------------------------------------------------
51,347 FHLMC, 7.00%, 8/1/29 54,546
- --------------------------------------------------------------------------------
236,453 FHLMC, 7.50%, 8/1/29 253,877
- --------------------------------------------------------------------------------
9,434 FHLMC, 6.50%, 5/1/31 9,905
- --------------------------------------------------------------------------------
521,471 FHLMC, 6.50%, 5/1/31 547,465
- --------------------------------------------------------------------------------
16,003 FHLMC, 6.50%, 6/1/31 16,800
- --------------------------------------------------------------------------------
24,133 FHLMC, 6.50%, 6/1/31 25,336
- --------------------------------------------------------------------------------
13,439 FHLMC, 6.50%, 6/1/31 14,109
- --------------------------------------------------------------------------------
5,277 FHLMC, 6.50%, 6/1/31 5,540
- --------------------------------------------------------------------------------
273,660 FHLMC, 6.50%, 6/1/31 287,301
- --------------------------------------------------------------------------------
8,017 FHLMC, 6.50%, 6/1/31 8,416
- --------------------------------------------------------------------------------
4,436,887 FHLMC, 5.50%, 12/1/33 4,507,354
- --------------------------------------------------------------------------------
3,722,300 FNMA, 5.50%, settlement
date 10/14/04(2) 3,772,320
- --------------------------------------------------------------------------------
7,500,000 FNMA, 6.00%, settlement
date 10/14/04(2) 7,757,812
- --------------------------------------------------------------------------------
6,000,000 FNMA, 6.50%, settlement
date 10/14/04(2) 6,294,372
- --------------------------------------------------------------------------------
5,400,000 FNMA, 5.50%, settlement
date 10/19/04(2) 5,580,565
- --------------------------------------------------------------------------------
14,000,000 FNMA, 6.50%, settlement
date 11/15/04(2) 14,651,867
- --------------------------------------------------------------------------------
34,499,700 FNMA, 6.00%, settlement
date 12/13/04(2) 35,438,816
- --------------------------------------------------------------------------------
162,368 FNMA, 6.00%, 2/1/09 170,655
- --------------------------------------------------------------------------------
52,322 FNMA, 6.00%, 5/1/13 54,990
- --------------------------------------------------------------------------------
56,369 FNMA, 6.00%, 5/1/13 59,256
- --------------------------------------------------------------------------------
172,188 FNMA, 6.00%, 7/1/13 181,004
- --------------------------------------------------------------------------------
289,041 FNMA, 6.00%, 12/1/13 303,842
- --------------------------------------------------------------------------------
230,916 FNMA, 6.00%, 1/1/14 242,739
- --------------------------------------------------------------------------------
484,652 FNMA, 6.00%, 2/1/14 509,468
- --------------------------------------------------------------------------------
410,960 FNMA, 6.00%, 4/1/14 432,003
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,419,932 FNMA, 5.50%, 12/1/16 $ 1,471,316
- --------------------------------------------------------------------------------
2,506,272 FNMA, 5.50%, 12/1/16 2,596,969
- --------------------------------------------------------------------------------
272,978 FNMA, 6.50%, 1/1/26 287,567
- --------------------------------------------------------------------------------
50,391 FNMA, 7.00%, 12/1/27 53,581
- --------------------------------------------------------------------------------
16,495 FNMA, 6.50%, 1/1/28 17,356
- --------------------------------------------------------------------------------
22,594 FNMA, 7.00%, 1/1/28 24,024
- --------------------------------------------------------------------------------
91,772 FNMA, 7.50%, 4/1/28 98,512
- --------------------------------------------------------------------------------
215,766 FNMA, 7.00%, 5/1/28 229,281
- --------------------------------------------------------------------------------
18,883 FNMA, 7.00%, 6/1/28 20,066
- --------------------------------------------------------------------------------
63,094 FNMA, 6.50%, 1/1/29 66,340
- --------------------------------------------------------------------------------
206,569 FNMA, 6.50%, 4/1/29 217,083
- --------------------------------------------------------------------------------
112,416 FNMA, 7.00%, 7/1/29 119,492
- --------------------------------------------------------------------------------
112,980 FNMA, 7.00%, 7/1/29 120,026
- --------------------------------------------------------------------------------
186,277 FNMA, 7.50%, 7/1/29 199,775
- --------------------------------------------------------------------------------
74,826 FNMA, 7.00%, 5/1/30 79,416
- --------------------------------------------------------------------------------
313,191 FNMA, 7.50%, 8/1/30 335,680
- --------------------------------------------------------------------------------
177,123 FNMA, 7.50%, 9/1/30 189,841
- --------------------------------------------------------------------------------
1,253,866 FNMA, 7.00%, 9/1/31 1,330,493
- --------------------------------------------------------------------------------
443,286 FNMA, 6.50%, 1/1/32 465,294
- --------------------------------------------------------------------------------
4,031,008 FNMA, 7.00%, 6/1/32 4,276,174
- --------------------------------------------------------------------------------
1,669,879 FNMA, 6.50%, 8/1/32 1,752,785
- --------------------------------------------------------------------------------
5,838,287 FNMA, 5.50%, 6/1/33 5,928,389
- --------------------------------------------------------------------------------
6,222,862 FNMA, 5.50%, 8/1/33 6,318,900
- --------------------------------------------------------------------------------
6,606,591 FNMA, 5.50%, 9/1/33(3) 6,708,551
- --------------------------------------------------------------------------------
11,541,033 FNMA, 5.50%, 1/1/34(3) 11,719,145
- --------------------------------------------------------------------------------
56,351 GNMA, 7.50%, 8/20/17 60,711
- --------------------------------------------------------------------------------
183,968 GNMA, 7.00%, 11/15/22 197,272
- --------------------------------------------------------------------------------
78,977 GNMA, 8.75%, 3/15/25 88,412
- --------------------------------------------------------------------------------
39,574 GNMA, 7.00%, 4/20/26 42,238
- --------------------------------------------------------------------------------
76,394 GNMA, 7.50%, 8/15/26 82,510
- --------------------------------------------------------------------------------
39,976 GNMA, 8.00%, 8/15/26 43,858
- --------------------------------------------------------------------------------
6,366 GNMA, 7.50%, 4/15/27 6,867
- --------------------------------------------------------------------------------
95,809 GNMA, 7.50%, 5/15/27 103,343
- --------------------------------------------------------------------------------
54,010 GNMA, 8.00%, 6/15/27 59,062
- --------------------------------------------------------------------------------
5,495 GNMA, 7.50%, 11/15/27 5,927
- --------------------------------------------------------------------------------
74,689 GNMA, 7.00%, 2/15/28 79,763
- --------------------------------------------------------------------------------
66,550 GNMA, 7.50%, 2/15/28 71,757
- --------------------------------------------------------------------------------
75,908 GNMA, 6.50%, 3/15/28 80,329
- --------------------------------------------------------------------------------
92,131 GNMA, 7.00%, 4/15/28 98,390
- --------------------------------------------------------------------------------
4,219 GNMA, 6.50%, 5/15/28 4,465
- --------------------------------------------------------------------------------
42,112 GNMA, 6.50%, 5/15/28 44,566
- --------------------------------------------------------------------------------
293,964 GNMA, 6.50%, 5/15/28 311,088
- --------------------------------------------------------------------------------
135,540 GNMA, 7.00%, 12/15/28 144,748
- --------------------------------------------------------------------------------
20,565 GNMA, 8.00%, 12/15/29 22,461
- --------------------------------------------------------------------------------
452,205 GNMA, 7.00%, 5/15/31 482,452
- --------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $151,387,807) 152,573,573
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 24.5%
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.5%
- --------------------------------------------------------------------------------
$ 700,000 Dana Corp., 6.50%, 3/1/09 $ 743,750
- --------------------------------------------------------------------------------
600,000 Lear Corp., 8.11%, 5/15/09 693,434
- --------------------------------------------------------------------------------
930,000 Lear Corp., 5.75%, 8/1/14
(Acquired 7/29/04,
Cost $928,121)(4) 959,853
- --------------------------------------------------------------------------------
2,397,037
- --------------------------------------------------------------------------------
AUTOMOBILES -- 0.8%
- --------------------------------------------------------------------------------
3,250,000 DaimlerChrysler N.A. Holding
Corp., 7.30%, 1/15/12 3,696,813
- --------------------------------------------------------------------------------
BEVERAGES -- 0.3%
- --------------------------------------------------------------------------------
1,500,000 Miller Brewing Co.,
4.25%, 8/15/08
(Acquired 8/6/03,
Cost $1,494,855)(4) 1,526,166
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.8%
- --------------------------------------------------------------------------------
1,200,000 Goldman Sachs Group Inc.,
5.70%, 9/1/12 1,270,033
- --------------------------------------------------------------------------------
1,500,000 Goldman Sachs Group Inc.,
5.25%, 10/15/13 1,512,997
- --------------------------------------------------------------------------------
900,000 Morgan Stanley,
4.25%, 5/15/10 905,763
- --------------------------------------------------------------------------------
3,688,793
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 1.4%
- --------------------------------------------------------------------------------
3,100,000 Bank of America Corp.,
4.375%, 12/1/10 3,128,083
- --------------------------------------------------------------------------------
1,500,000 Marshall & Ilsley Bank,
4.125%, 9/4/07 1,542,576
- --------------------------------------------------------------------------------
2,000,000 U.S. Bancorp, Series N, MTN,
2.75%, 3/30/06 2,001,522
- --------------------------------------------------------------------------------
6,672,181
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.8%
- --------------------------------------------------------------------------------
2,250,000 Allied Waste North
America, Inc., Series 1998 B,
7.625%, 1/1/06 2,359,688
- --------------------------------------------------------------------------------
850,000 Quebecor World Capital Corp.,
6.125%, 11/15/13 842,982
- --------------------------------------------------------------------------------
650,000 R.R. Donnelley & Sons Co.,
3.75%, 4/1/09 640,887
- --------------------------------------------------------------------------------
3,843,557
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 0.2%
- --------------------------------------------------------------------------------
900,000 American Express Centurion
Bank, 4.375%, 7/30/09 920,552
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.4%
- --------------------------------------------------------------------------------
2,000,000 Ball Corp., 7.75%, 8/1/06 2,135,000
- --------------------------------------------------------------------------------
DIVERSIFIED -- 1.4%
- --------------------------------------------------------------------------------
5,775,000 Morgan Stanley TRACERS(reg.sm),
7.72%, 3/1/32 (Acquired
3/15/02-8/28/02,
Cost $6,129,842)(4) 6,869,368
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.6%
- --------------------------------------------------------------------------------
$ 1,500,000 American General Finance
Corp., Series 2002 H,
4.50%, 11/15/07 $ 1,544,612
- --------------------------------------------------------------------------------
1,240,000 CIT Group Inc.,
5.125%, 9/30/14 1,240,919
- --------------------------------------------------------------------------------
3,570,000 Citigroup Inc., 5.00%,
9/15/14 (Acquired
5/6/03-9/9/04,
Cost $3,532,073)(4) 3,581,384
- --------------------------------------------------------------------------------
1,500,000 Ford Motor Credit Co.,
5.80%, 1/12/09 1,556,201
- --------------------------------------------------------------------------------
2,000,000 Ford Motor Credit Co.,
7.375%, 10/28/09 2,192,997
- --------------------------------------------------------------------------------
1,100,000 Ford Motor Credit Co.,
7.00%, 10/1/13 1,164,962
- --------------------------------------------------------------------------------
1,550,000 J.P. Morgan Chase & Co.,
6.75%, 2/1/11 1,746,109
- --------------------------------------------------------------------------------
13,027,184
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.9%
- --------------------------------------------------------------------------------
1,400,000 Ameritech Capital Funding,
6.25%, 5/18/09 1,516,644
- --------------------------------------------------------------------------------
1,465,000 British Telecommunications plc,
7.00%, 5/23/07 1,588,787
- --------------------------------------------------------------------------------
600,000 Deutsche Telekom
International Finance BV,
5.25%, 7/22/13 615,076
- --------------------------------------------------------------------------------
650,000 France Telecom,
8.50%, 3/1/11 779,091
- --------------------------------------------------------------------------------
2,600,000 Sprint Capital Corp.,
8.375%, 3/15/12 3,153,466
- --------------------------------------------------------------------------------
1,380,000 Telecom Italia Capital SA,
4.95%, 9/30/14 (Acquired
9/28/04-9/29/04,
Cost $1,372,548)(2)(4) 1,365,647
- --------------------------------------------------------------------------------
9,018,711
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.0%
- --------------------------------------------------------------------------------
1,800,000 CenterPoint Energy
Resources Corp.,
6.50%, 2/1/08 1,937,639
- --------------------------------------------------------------------------------
650,000 Pacific Gas & Electric Co.,
6.05%, 3/1/34 663,859
- --------------------------------------------------------------------------------
600,000 Tampa Electric Co.,
6.375%, 8/15/12(5) 656,547
- --------------------------------------------------------------------------------
1,550,000 Virginia Electric and
Power Co., 5.25%, 12/15/15 1,563,728
- --------------------------------------------------------------------------------
4,821,773
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
7
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.6%
- --------------------------------------------------------------------------------
$ 800,000 CVS Corp., 4.00%, 9/15/09
(Acquired 9/9/04, Cost
$797,880)(4) $ 801,229
- --------------------------------------------------------------------------------
1,700,000 Safeway Inc., 6.50%, 3/1/11 1,860,483
- --------------------------------------------------------------------------------
2,661,712
- --------------------------------------------------------------------------------
GAS UTILITIES -- 0.1%
- --------------------------------------------------------------------------------
500,000 Columbia Energy Group,
6.80%, 11/28/05 520,978
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.4%
- --------------------------------------------------------------------------------
1,500,000 Beckman Coulter Inc.,
7.45%, 3/4/08 1,678,956
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 1.8%
- --------------------------------------------------------------------------------
1,150,000 Mandalay Resort Group,
6.45%, 2/1/06 1,190,250
- --------------------------------------------------------------------------------
1,700,000 MGM Mirage, 6.00%, 10/1/09 1,731,875
- --------------------------------------------------------------------------------
1,900,000 Park Place Entertainment
Corp., 7.875%, 12/15/05 2,004,500
- --------------------------------------------------------------------------------
1,100,000 Royal Caribbean Cruises Ltd.,
6.875%, 12/1/13 1,177,000
- --------------------------------------------------------------------------------
2,150,000 Yum! Brands Inc.,
8.875%, 4/15/11 2,676,662
- --------------------------------------------------------------------------------
8,780,287
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.3%
- --------------------------------------------------------------------------------
1,180,000 KB HOME, 6.375%, 8/15/11
(Acquired 9/24/04,
Cost $1,246,375)(4) 1,244,900
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.4%
- --------------------------------------------------------------------------------
1,800,000 Dial Corp., 7.00%, 8/15/06 1,925,433
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.7%
- --------------------------------------------------------------------------------
1,230,000 General Electric Capital Corp.,
4.25%, 12/1/10 1,236,303
- --------------------------------------------------------------------------------
2,000,000 General Electric Co.,
5.00%, 2/1/13 2,060,370
- --------------------------------------------------------------------------------
3,296,673
- --------------------------------------------------------------------------------
INSURANCE -- 1.5%
- --------------------------------------------------------------------------------
2,000,000 Allstate Financial Global Funding,
4.25%, 9/10/08 (Acquired
9/3/03, Cost $1,996,080)(4) 2,039,784
- --------------------------------------------------------------------------------
1,500,000 American International
Group Inc., 4.25%, 5/15/13 1,448,475
- --------------------------------------------------------------------------------
1,450,000 Genworth Financial Inc.,
5.75%, 6/15/14 1,530,781
- --------------------------------------------------------------------------------
2,200,000 Monumental Global Funding II,
3.85%, 3/3/08 (Acquired 2/5/03,
Cost $2,199,956)(4) 2,236,472
- --------------------------------------------------------------------------------
7,255,512
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 0.1%
- --------------------------------------------------------------------------------
350,000 IAC/InterActiveCorp,
7.00%, 1/15/13 383,643
- --------------------------------------------------------------------------------
MACHINERY -- 0.4%
- --------------------------------------------------------------------------------
2,000,000 Caterpillar Financial Services
Corp., 2.59%, 7/15/06 1,991,124
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
MEDIA -- 1.3%
- --------------------------------------------------------------------------------
$ 700,000 Comcast Cable
Communications,
8.375%, 5/1/07 $ 782,410
- --------------------------------------------------------------------------------
260,000 Comcast Cable
Communications Holdings
Inc., 8.375%, 3/15/13 315,352
- --------------------------------------------------------------------------------
3,000,000 Comcast Corp., 5.50%, 3/15/11 3,131,343
- --------------------------------------------------------------------------------
1,050,000 CSC Holdings Inc.,
6.75%, 4/15/12 (Acquired
3/30/04-8/5/04, Cost
$1,030,750)(4) 1,057,875
- --------------------------------------------------------------------------------
1,000,000 News America Holdings,
7.75%, 1/20/24 1,170,406
- --------------------------------------------------------------------------------
6,457,386
- --------------------------------------------------------------------------------
MULTI-UTILITIES &
UNREGULATED POWER -- 0.5%
- --------------------------------------------------------------------------------
2,300,000 Dominion Resources Inc.,
4.125%, 2/15/08 2,332,359
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.6%
- --------------------------------------------------------------------------------
600,000 May Department Stores
Co. (The), 3.95%, 7/15/07
(Acquired 7/13/04,
Cost $599,202)(4) 605,069
- --------------------------------------------------------------------------------
1,600,000 May Department Stores
Co. (The), 4.80%, 7/15/09
(Acquired 7/13/04-7/15/04,
Cost $1,604,824)(4) 1,632,840
- --------------------------------------------------------------------------------
500,000 Saks Inc., 7.375%, 2/15/19 502,500
- --------------------------------------------------------------------------------
2,740,409
- --------------------------------------------------------------------------------
OIL & GAS -- 1.4%
- --------------------------------------------------------------------------------
800,000 Anadarko Petroleum Corp.,
7.95%, 4/15/29 1,009,328
- --------------------------------------------------------------------------------
1,600,000 Devon Energy Corp.,
2.75%, 8/1/06 1,589,868
- --------------------------------------------------------------------------------
1,400,000 Kerr-McGee Corp.,
6.875%, 9/15/11 1,568,280
- --------------------------------------------------------------------------------
1,400,000 Kinder Morgan Energy
Partners L.P., 5.00%, 12/15/13 1,392,257
- --------------------------------------------------------------------------------
1,150,000 XTO Energy Inc.,
6.25%, 4/15/13 1,261,757
- --------------------------------------------------------------------------------
6,821,490
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.2%
- --------------------------------------------------------------------------------
800,000 Schering-Plough Corp.,
5.30%, 12/1/13 829,392
- --------------------------------------------------------------------------------
ROAD & RAIL -- 1.0%
- --------------------------------------------------------------------------------
1,500,000 Canadian National Railway Co.,
6.25%, 8/1/34 1,587,114
- --------------------------------------------------------------------------------
1,150,000 Norfolk Southern Corp.,
7.80%, 5/15/27 1,410,627
- --------------------------------------------------------------------------------
1,400,000 Norfolk Southern Corp.,
7.05%, 5/1/37 1,588,016
- --------------------------------------------------------------------------------
4,585,757
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 0.3%
- --------------------------------------------------------------------------------
$ 620,000 Home Depot Inc.,
3.75%, 9/15/09
(Acquired 9/13/04,
Cost $616,875)(4) $ 618,190
- --------------------------------------------------------------------------------
750,000 Toys "R" Us, Inc.,
7.375%, 10/15/18 699,375
- --------------------------------------------------------------------------------
1,317,565
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 0.3%
- --------------------------------------------------------------------------------
1,400,000 Washington Mutual Bank FA,
5.65%, 8/15/14 1,454,006
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.5%
- --------------------------------------------------------------------------------
1,850,000 AT&T Wireless Services Inc.,
7.875%, 3/1/11 2,194,692
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $113,442,046) 117,089,409
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 23.2%
- --------------------------------------------------------------------------------
4,700,000 U.S. Treasury Bonds,
8.00%, 11/15/21(3) 6,461,950
- --------------------------------------------------------------------------------
7,300,000 U.S. Treasury Bonds,
6.25%, 8/15/23(3) 8,526,743
- --------------------------------------------------------------------------------
4,650,000 U.S. Treasury Bonds,
5.375%, 2/15/31(5) 4,982,768
- --------------------------------------------------------------------------------
4,722,748 U.S. Treasury Inflation
Indexed Notes,
2.00%, 7/15/14 4,829,015
- --------------------------------------------------------------------------------
35,000,000 U.S. Treasury Notes,
2.00%, 8/31/05(3) 34,957,649
- --------------------------------------------------------------------------------
5,575,000 U.S. Treasury Notes,
1.50%, 3/31/06(3) 5,504,008
- --------------------------------------------------------------------------------
19,500,000 U.S. Treasury Notes,
2.25%, 4/30/06(3) 19,449,728
- --------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes,
2.50%, 5/31/06(3) 10,007,430
- --------------------------------------------------------------------------------
3,750,000 U.S. Treasury Notes,
4.00%, 6/15/09(3) 3,860,453
- --------------------------------------------------------------------------------
4,700,000 U.S. Treasury Notes,
4.375%, 8/15/12(3) 4,846,880
- --------------------------------------------------------------------------------
4,000,000 U.S. Treasury Notes,
4.75%, 5/15/14(3) 4,200,004
- --------------------------------------------------------------------------------
3,300,000 U.S. Treasury Notes,
4.25%, 8/15/14 3,335,581
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES
(Cost $110,250,696) 110,962,209
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES(1) -- 14.7%
- --------------------------------------------------------------------------------
$ 689,713 ABSC Non-Improvement Trust,
Series 2004 HE5, Class A1,
5.00%, 8/27/34 (Acquired
6/22/04, Cost $687,869)(4) $ 689,858
- --------------------------------------------------------------------------------
750,000 ABSC Non-Improvement Trust,
Series 2004 HE7, 5.00%,
10/27/34 (Acquired 9/1/04,
Cost $746,793)(2)(4) 746,790
- --------------------------------------------------------------------------------
2,053,139 Ameriquest Mortgage
Securities Inc., Series 2004 R8,
Class A2, VRN, 2.00%,
10/25/04, resets monthly
off the 1-month LIBOR
plus 0.16% with no caps 2,054,554
- --------------------------------------------------------------------------------
169,379 AQ Finance Non-Improvement
Trust, Series 2003 N11A,
7.14%, 11/25/33 168,969
- --------------------------------------------------------------------------------
603,391 AQ Finance Non-Improvement
Trust, Series 2004 RN4, Class A,
4.60%, 7/25/34 602,616
- --------------------------------------------------------------------------------
438,933 AQ Finance Non-Improvement
Trust, Series 2004 RN5, Class A,
5.19%, 6/29/34 (Acquired
6/24/04, Cost $438,933)(4) 439,233
- --------------------------------------------------------------------------------
339,266 Argent Non-Improvement
Trust, Series 2004 WN2,
Class A, 4.55%, 4/25/34 338,862
- --------------------------------------------------------------------------------
515,750 Argent Non-Improvement
Trust, Series 2004 WN8,
Class A, 4.70%, 7/25/34 515,555
- --------------------------------------------------------------------------------
250,000 Argent Non-Improvement
Trust, Series 2004 WN9,
Class A, 5.19%, 10/25/34
(Acquired 9/9/04,
Cost $249,992)(4) 249,844
- --------------------------------------------------------------------------------
178,460 Asset Backed Funding Corp.
Non-Improvement Trust,
Series 2003-1, Class N1,
6.90%, 7/26/33 178,450
- --------------------------------------------------------------------------------
355,210 Asset Backed Funding Corp.
Non-Improvement Trust,
Series 2004 OPT4, Class N1,
4.45%, 5/26/34 354,844
- --------------------------------------------------------------------------------
1,008,743 Bayview Financial Acquisition
Trust, Series 1998 B, Class M1,
VRN, 3.24%, 10/25/04, resets
monthly off the 1-month LIBOR
plus 1.40% with a cap of
13.00% (Acquired 6/13/03,
Cost $1,012,762)(4) 1,011,517
- --------------------------------------------------------------------------------
749,157 Bayview Financial Acquisition
Trust, Series 2002 DA, Class M1,
VRN, 2.69%, 10/25/04, resets
monthly off the 1-month LIBOR
plus 0.85% with no caps
(Acquired 9/19/03,
Cost $750,943)(4) 752,777
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 5,100,000 Capital One Prime Auto
Receivables Trust,
Series 2004-2, Class A4,
VRN, 1.85%, 10/15/04,
resets monthly off the
1-month LIBOR plus
0.06% with no caps $ 5,105,884
- --------------------------------------------------------------------------------
2,794,193 Centex Home Equity,
Series 2004 C, Class AF1,
VRN, 2.82%, 10/1/04 2,793,905
- --------------------------------------------------------------------------------
820,176 Chase Funding Mortgage
Loan, Series 2001-1,
Class 2M2, VRN, 2.69%,
10/25/04, resets monthly off
the 1-month LIBOR
plus 0.93% with no caps 823,220
- --------------------------------------------------------------------------------
86,357 CIT RV Trust, Series 1997 A,
Class A6 SEQ, 6.35%, 4/15/11 86,968
- --------------------------------------------------------------------------------
114,929 CIT RV Trust, Series 1998 A,
Class A4 SEQ, 6.09%, 2/15/12 116,063
- --------------------------------------------------------------------------------
4,900,000 CNH Equipment Trust,
Series 2004 A, Class A3A,
VRN, 1.88%, 10/15/04,
resets monthly off the
1-month LIBOR plus 0.07%
with no caps 4,900,000
- --------------------------------------------------------------------------------
400,458 Countrywide Asset-Backed
Certificates, Series 2004 5N,
Class N1, 5.50%, 10/25/35 400,458
- --------------------------------------------------------------------------------
1,300,000 Detroit Edison Securitization
Funding LLC, Series 2001-1,
Class A4 SEQ, 6.19%, 3/1/13 1,433,907
- --------------------------------------------------------------------------------
351,203 Finance America
Non-Improvement
Trust, Series 2004-1,
Class A, 5.25%, 6/27/34 351,232
- --------------------------------------------------------------------------------
498,084 First Franklin
Non-Improvement Trust,
Series 2004 FF1, Class N1,
4.50%, 9/25/05 497,990
- --------------------------------------------------------------------------------
1,500,000 Ford Credit Auto Owner Trust,
Series 2002 A, Class B,
4.79%, 11/15/06 1,526,306
- --------------------------------------------------------------------------------
14,900,000 Ford Credit Floorplan Master
Owner Trust, Series 2004-1,
Class A, VRN, 1.80%, 10/15/04,
resets monthly off the 1-month
LIBOR plus 0.04%
with no caps(3) 14,912,904
- --------------------------------------------------------------------------------
466,329 Fremont Non-Improvement
Trust, Series 2004 B,
4.70%, 5/25/34
(Acquired 5/20/04,
Cost $466,329)(4) 465,528
- --------------------------------------------------------------------------------
485,000 GSAMP Non-Improvement
Trust, Series 2004, Class N1,
5.50%, 9/25/34 (Acquired
9/20/04, Cost $485,216)(4) 485,218
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 836,219 Household Mortgage Loan Trust,
Series 2002 HC1, Class M,
VRN, 2.28%, 10/20/04,
resets monthly off the
1-month LIBOR plus 0.65%
with no caps $ 837,846
- --------------------------------------------------------------------------------
378,563 Long Beach Asset Holdings
Corporation, Series 2004-5,
Class C and P, 5.00%, 9/25/34
(Acquired 9/15/04,
Cost $379,385)(4) 378,444
- --------------------------------------------------------------------------------
2,400,000 Long Beach Mortgage Loan
Trust, Series 2001-2, Class M2,
VRN, 2.78%, 10/25/04,
resets monthly off the
1-month LIBOR plus 0.95%
with no caps 2,400,650
- --------------------------------------------------------------------------------
189,085 MASTR Non-Improvement
Trust, Series 2004 CI3,
Class N1, 4.45%, 2/26/34
(Acquired 5/18/04,
Cost $189,076)(4) 188,527
- --------------------------------------------------------------------------------
213,873 Merrill Lynch Mortgage
Investors Inc., Series 2003 OP1N,
Class N1, 7.25%, 7/25/34 215,054
- --------------------------------------------------------------------------------
64,296 Morgan Stanley ABS Capital I,
Series 2003 NC9N, Class X
and P, 7.60%, 7/25/33
(Acquired 10/29/03,
Cost $64,296)(4) 64,536
- --------------------------------------------------------------------------------
233,792 Morgan Stanley ABS Capital I,
Series 2004 NC2N, Class X
and P, 6.25%, 12/25/33
(Acquired 3/16/04,
Cost $234,961)(4) 234,013
- --------------------------------------------------------------------------------
594,662 Novastar Non-Improvement
Trust, Series 2004 N2, Class X,
O and P, 4.46%, 6/27/34
(Acquired 7/20/04,
Cost $594,662)(4) 592,948
- --------------------------------------------------------------------------------
590,000 Residential Asset Securities
Corp., Series 2004 KS2,
Class MI1, 4.71%, 3/25/34 585,229
- --------------------------------------------------------------------------------
8,076,753 Residential Asset Securities
Corp., Series 2004 KS7,
Class A2B1, VRN, 1.96%,
10/25/04, resets monthly off
the 1-month LIBOR plus
0.14% with no caps 8,082,496
- --------------------------------------------------------------------------------
422,205 Sail Net Interest Margin Notes,
Series 2004-8A, Class A,
5.00%, 9/27/34 (Acquired
9/13/04, Cost $423,127)(4) 421,941
- --------------------------------------------------------------------------------
332,051 Sail Net Interest Margin Notes,
Series 2004 BNCA, Class A,
5.00%, 9/27/34 331,843
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
10
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 9,700,000 SLMA Student Loan Trust,
Series 2004-8, Class A1,
VRN, 1.69%, 10/25/04,
resets quarterly off the
3-month LIBOR minus 0.01%
with no caps $ 9,696,968
- --------------------------------------------------------------------------------
4,162,135 WFS Financial Owner Trust,
Series 2004-3, Class A1 SEQ,
1.73%, 8/17/05 4,164,012
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $69,985,475) 70,197,959
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
AGENCY SECURITIES -- 10.4%
- --------------------------------------------------------------------------------
7,990,000 FHLMC, 3.75%, 8/3/07 8,046,393
- --------------------------------------------------------------------------------
15,900,000 FNMA, 3.75%, 5/17/07(3) 15,984,143
- --------------------------------------------------------------------------------
2,300,000 FNMA, 3.00%, 8/15/07 2,291,729
- --------------------------------------------------------------------------------
3,500,000 FNMA, 6.625%, 10/15/07 3,844,803
- --------------------------------------------------------------------------------
14,400,000 FNMA, 5.75%, 2/15/08 15,517,656
- --------------------------------------------------------------------------------
4,100,000 FNMA, 3.25%, 8/15/08 4,069,348
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES
(Cost $49,575,654) 49,754,072
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS(1) -- 8.1%
- --------------------------------------------------------------------------------
29,404,150 Banc of America Commercial
Mortgage Inc. STRIPS - INTEREST,
Series 2004-1, Class XP, VRN,
0.83%, 10/1/04 943,609
- --------------------------------------------------------------------------------
8,819,326 Citigroup Commercial Mortgage
Trust, Series 2004 FL1, Class A1,
VRN, 1.89%, 10/15/04 8,824,538
- --------------------------------------------------------------------------------
25,335,609 Commercial Mortgage
Acceptance Corp. STRIPS -
INTEREST, Series 1998 C2,
Class X, VRN, 1.02%, 10/1/04 998,958
- --------------------------------------------------------------------------------
3,800,000 Commercial Mortgage
Pass-Through Certificates,
Series 2004 HTL1, Class A1,
VRN, 2.03%, 10/15/04, resets
monthly off the 1-month LIBOR
plus 0.24% with no caps 3,802,246
- --------------------------------------------------------------------------------
68,051 Fannie Mae REMIC, Series
1989-35, Class G,
9.50%, 7/25/19 74,747
- --------------------------------------------------------------------------------
577,310 First Union National Bank
Commercial Mortgage,
Series 2001 C3, Class A1 SEQ,
5.20%, 8/15/33 589,621
- --------------------------------------------------------------------------------
1,745,503 GMAC Commercial Mortgage
Securities Inc., Series 2002 C2,
Class A1 SEQ, 4.32%, 10/15/38 1,779,521
- --------------------------------------------------------------------------------
5,400,000 LB-UBS Commercial Mortgage
Trust, Series 2003 C5, Class A2
SEQ, 3.48%, 7/15/27 5,363,955
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,678,269 MASTR Alternative Loans Trust,
Series 2003-8, Class 4A1,
7.00%, 12/25/33 $ 1,707,794
- --------------------------------------------------------------------------------
1,328,768 Nationslink Funding Corp.,
Series 1998-2, Class A1 SEQ,
6.00%, 8/20/30 1,364,638
- --------------------------------------------------------------------------------
564,827 Sharps SP I LLC Net Interest
Margin Trust, Series 2004 OP1N,
Class NA, 5.19%, 4/25/34
(Acquired 6/9/04,
Cost $564,812)(4) 564,702
- --------------------------------------------------------------------------------
3,750,000 Washington Mutual, Series
2004 AR4, Class A6,
3.81%, 6/25/34 3,699,900
- --------------------------------------------------------------------------------
3,500,000 Washington Mutual, Series
2004 AR9, Class A6,
4.28%, 8/25/34 3,486,375
- --------------------------------------------------------------------------------
5,500,000 Washington Mutual, Series
2004 AR9, Class A7, VRN,
4.27%, 10/1/04 5,528,177
- --------------------------------------------------------------------------------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $38,512,611) 38,728,781
- --------------------------------------------------------------------------------
SOVEREIGN GOVERNMENTS
& AGENCIES -- 0.4%
- --------------------------------------------------------------------------------
2,000,000 Province of Ontario,
3.50%, 9/17/07
(Cost $1,991,774) 2,014,268
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 0.3%
- --------------------------------------------------------------------------------
1,650,000 Illinois GO, (Taxable Pension),
5.10%, 6/1/33
(Cost $1,650,000) 1,566,362
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 4.1%
- --------------------------------------------------------------------------------
Repurchase Agreement, Goldman Sachs & Co.,
(collateralized by various U.S. Treasury obligations,
8.00%, 11/15/21, valued at $20,277,792), in a
joint trading account at 1.63%, dated 9/30/04,
due 10/1/04 (Delivery value $19,765,895)(3)
(Cost $19,765,000) 19,765,000
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED
FOR SECURITIES LENDING(6) -- 0.2%
- --------------------------------------------------------------------------------
Repurchase Agreement, UBS Securities LLC,
(collateralized by U.S. Government Agency
obligations), 1.875%, dated 9/30/04,
due 10/1/04 (delivery value $832,716)
(Cost $832,672) 832,672
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 117.7%
(Cost $557,393,735) 563,484,305
- --------------------------------------------------------------------------------
OTHER ASSETS
AND LIABILITIES -- (17.7)% (84,794,120)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $478,690,185
================================================================================
See Notes to Financial Statements. (continued)
- ------
11
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
FUTURES CONTRACTS*
Underlying Face Unrealized
Contracts Purchased Expiration Date Amount at Value Loss
- --------------------------------------------------------------------------------
131 U.S. Treasury 10-Year Notes December 2004 $14,753,875 $(83,607)
===============================
*FUTURES CONTRACTS typically are based on an index or specific securities and
tend to track the performance of the index or specific securities while
remaining very liquid (easy to buy and sell). By investing its cash assets in
futures, the fund has increased exposure to certain markets while maintaining
easy access to cash.
SHORT FUTURES CONTRACTS**
Underlying Face Unrealized
Contracts Sold Expiration Date Amount at Value Gain (Loss)
- --------------------------------------------------------------------------------
260 U.S. Treasury 2-Year Notes December 2004 $54,920,938 $ 97,918
- --------------------------------------------------------------------------------
62 U.S. Treasury 5-Year Notes December 2004 6,866,500 (14,671)
- --------------------------------------------------------------------------------
$61,787,438 $ 83,247
===============================
**SHORT FUTURES CONTRACTS typically are based on an index or specific securities
and tend to track the performance of the index or specific securities while
remaining very liquid (easy to buy and sell). By selling futures, the fund
hedges its investments against price fluctuations.
SWAP AGREEMENTS***
Notional Amount Description of Agreement Expiration Date Unrealized Loss
- --------------------------------------------------------------------------------
$9,500,000 Receive semiannually a September 2007 $(2,609)
fixed rate equal =================
to 3.24375% and pay
quarterly a variable
rate based on the
3-month LIBOR with
Deutsche Bank Securities, Inc.
***SWAP AGREEMENTS are contracts in which two parties agree to exchange the
returns earned or realized on predetermined investments or instruments. The
fund may enter into swap agreements in order to manage interest, credit, or
market risk or to gain exposure to certain markets.
NOTES TO SCHEDULE OF INVESTMENTS
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GMAC = General Motors Acceptance Corporation
GNMA = Government National Mortgage Association
GO = General Obligation
LIBOR = London Interbank Offered Rate
MASTR = Mortgage Asset Securitization Transactions, Inc.
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
SLMA = Student Loan Marketing Association
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.
VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise
noted. Rate shown is effective September 30, 2004.
(1) Final maturity indicated, unless otherwise noted.
(2) When-issued security or forward commitment.
(3) Security, or a portion thereof, has been segregated for a when-issued
security, forward commitment, futures contract,
or swap agreement.
(4) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at September 30, 2004, was
$31,824,653, which represented 6.6% of net assets.
(5) Security, or a portion thereof, was on loan as of September 30, 2004.
(6) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See Note 5 in
Notes to Financial Statements.)
See Notes to Financial Statements.
- ------
12
High-Yield - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2004
------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 10.67% 3.47% 2.89% 9/30/97
- --------------------------------------------------------------------------------
CSFB HIGH YIELD INDEX II 13.32% 7.64% 5.95% --
- --------------------------------------------------------------------------------
LIPPER HIGH CURRENT YIELD
FUNDS AVERAGE RETURN 11.26% 4.47% 3.18% --
- --------------------------------------------------------------------------------
Investor Class's
Lipper Ranking 9/30/04(1) 257 of 420 206 of 276 114 of 175 --
- --------------------------------------------------------------------------------
Institutional Class -- -- 2.95%(2) 8/2/04
- --------------------------------------------------------------------------------
Advisor Class(3) 10.39% -- 9.90% 3/8/02
- --------------------------------------------------------------------------------
A Class 1/31/03
No sales charge* 10.39% -- 13.71%(3)
With sales charge* 5.43% -- 10.62%(3)
- --------------------------------------------------------------------------------
B Class 1/31/03
No sales charge* 9.57% -- 12.87%(3)
With sales charge* 5.57% -- 10.64%(3)
- --------------------------------------------------------------------------------
C Class 9.64% -- 8.58% 12/10/01
- --------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a 4.50% maximum initial
sales charge for fixed income funds and may be subject to a maximum CDSC of
1.00%. B Class shares redeemed within six years of purchase are subject to a
CDSC that declines from 5.00% during the first year after purchase to 0.00% the
sixth year after purchase. C Class shares redeemed within 12 months of purchase
are subject to a maximum CDSC of 1.00%. Please see the Share Class Information
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) Lipper rankings are based on average annual total returns for the fund in a
given category for the periods indicated.
(2) Returns for periods less than one year are not annualized.
(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.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline. In
addition, the lower rated securities in which the fund invests are subject to
greater credit risk, default risk, and liquidity risk.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
(continued)
- ------
13
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 2004
- --------------------------------------------------------------------------------
Investor Class -0.45% 3.37% -1.80% -11.54% 3.86% 18.81% 10.67%
- --------------------------------------------------------------------------------
CSFB High Yield
Index II -0.71% 4.48% 1.47% -4.59% 2.85% 28.05% 13.32%
- --------------------------------------------------------------------------------
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. As interest rates rise, bond values will decline. In
addition, the lower rated securities in which the fund invests are subject to
greater credit risk, default risk, and liquidity risk.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
- ------
14
High-Yield - Portfolio Commentary
PORTFOLIO MANAGER: MICHAEL DIFLEY
PERFORMANCE SUMMARY
High-Yield returned 3.69%* for the six months ended September 30, 2004,
reflecting a respectable performance by corporate high-yield bonds during a
volatile stretch for U.S. financial markets. The fund's gain for the performance
period outpaced the 3.43% average total return of the 426 High Current Yield
funds tracked by Lipper. (Please see pages 13 and 14 for additional
performance-related information.)
ECONOMIC & MARKET PERSPECTIVE
The U.S. stock and bond markets dipped and rose as economic and interest rate
outlooks shifted. In the second quarter of 2004, government data caused
revisions to predictions that the Federal Reserve's (the Fed's) overnight rate
target would remain at 1% until year-end 2004. Three consecutive
stronger-than-expected monthly job growth reports and higher consumer prices in
the spring of 2004 contributed to a spike in Treasury yields and influenced the
Fed's decision to start raising interest rates. The 10-year Treasury yield
jumped from 3.84% on March 31, 2004 to 4.87% on June 14, and the Fed's federal
funds rate target rose to 1.25% on June 30.
Remarkably, bonds followed their second-quarter selloff with a rally in the
third quarter of 2004, even though the Fed continued to raise rates. Increasing
energy costs (as crude oil surpassed $50 a barrel) softened the economic outlook
and boosted bond prices.
The Treasury yield curve "twisted" in the third quarter of 2004 -- the
three-month Treasury yield ROSE 44 basis points (0.44 percentage point) as the
Fed raised its overnight interest rate target by another 50 basis points to
1.75%, but the 10-year Treasury yield FELL 46 basis points to finish at 4.12%.
HIGH-YIELD MARKET PERSPECTIVE
Corporate high-yield bonds--which tend to act like a mix of stocks and
bonds--provided respectable returns. Within the corporate high-yield universe,
bonds carrying C or lower ratings returned approximately 4.5% for the six
months, outpacing corporate high-yield bonds with single-B ratings by
approximately 30 basis points (0.30%). Both categories turned in better
performances than bonds rated double-B, which returned approximately 2.7%.
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
9/30/04 3/31/04
- --------------------------------------------------------------------------------
Weighted Average
Maturity 6.8 years 6.8 years
- --------------------------------------------------------------------------------
Average Duration
(modified) 4.8 years 4.7 years
- --------------------------------------------------------------------------------
YIELDS AS OF SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor 6.39%
- --------------------------------------------------------------------------------
Institutional 6.87%
- --------------------------------------------------------------------------------
Advisor 6.13%
- --------------------------------------------------------------------------------
A Class 5.85%
- --------------------------------------------------------------------------------
B Class 5.39%
- --------------------------------------------------------------------------------
C Class 5.38%
- --------------------------------------------------------------------------------
*All fund returns and yields referenced
in this commentary are for Investor Class shares. (continued)
- ------
15
High-Yield - Portfolio Commentary
Defaults by corporate high-yield issuers remained at low levels, reflecting the
accommodative credit environment, while the supply of newly issued bonds grew.
Moody's trailing 12-month global bond default rate finished at 2.3% in
September, down from 5.2% at the end of 2003. On the supply front, the amount of
new corporate high-yield securities grew at the fastest year-to-date rate since
1998.
PORTFOLIO POSITIONING & STRATEGIES
High-Yield seeks high current income by investing in a diversified portfolio of
high-yield corporate bonds and other debt instruments with an emphasis on
securities that are rated below investment grade.
From an industry standpoint, one of our best calls was to avoid airlines. As a
group, corporate high-yield bonds in this category tumbled more than 20% for the
six months. On the other end of the performance spectrum, bonds issued by
textile/apparel companies posted gains of approximately 14%, while
chemical-related bonds gained more than 7%. Within those industries, we owned
securities from Perry Ellis International, Huntsman ICI Chemicals, and Lyondell
Chemical Co.
The results of our strategies on the portfolio's composition by credit rating
show up in the accompanying table at bottom left. As the table illustrates,
corporate high-yield bonds with single-B ratings represented approximately 55%
of the portfolio at the end of September, while bonds with either C or BB
ratings represented approximately 36%.
In conclusion, we remained committed to meeting the fund's investment objective
by investing in a diversified portfolio of high-yield corporate bonds and other
debt securities.
PORTFOLIO COMPOSITION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/04 3/31/04
- --------------------------------------------------------------------------------
AAA 8% 8%
- --------------------------------------------------------------------------------
BBB 1% --
- --------------------------------------------------------------------------------
BB 28% 22%
- --------------------------------------------------------------------------------
B 55% 59%
- --------------------------------------------------------------------------------
CCC or lower 8% 11%
- --------------------------------------------------------------------------------
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, 2004
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
9/30/04 3/31/04
- --------------------------------------------------------------------------------
Hotels, Restaurants
& Leisure 11.9% 11.5%
- --------------------------------------------------------------------------------
Media 10.0% 10.0%
- --------------------------------------------------------------------------------
Household Durables 6.6% 9.1%
- --------------------------------------------------------------------------------
Oil & Gas 5.9% 2.7%
- --------------------------------------------------------------------------------
Chemicals 5.0% 4.3%
- --------------------------------------------------------------------------------
*Excludes securities in the Diversified industry category. These securities
represent investments in diversified pools of underlying securities in
multiple industry categories.
- ------
16
High-Yield - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 89.3%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.9%
- --------------------------------------------------------------------------------
$ 500,000 K&F Industries, Series B,
9.625%, 12/15/10 $ 558,750
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 1.2%
- --------------------------------------------------------------------------------
500,000 Maax Corp., 9.75%, 6/15/12
(Acquired 5/27/04,
Cost $512,500)(1) 532,500
- --------------------------------------------------------------------------------
250,000 THL Buildco Inc., 8.50%,
9/1/14 (Acquired 8/12/04,
Cost $250,000)(1) 263,125
- --------------------------------------------------------------------------------
795,625
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.8%
- --------------------------------------------------------------------------------
500,000 Refco Finance Holdings LLC,
9.00%, 8/1/12 (Acquired
7/22/04, Cost $500,000)(1) 536,250
- --------------------------------------------------------------------------------
CHEMICALS -- 5.0%
- --------------------------------------------------------------------------------
850,000 Huntsman ICI Chemicals,
10.125%, 7/1/09(2) 896,750
- --------------------------------------------------------------------------------
1,000,000 Huntsman International
Holdings LLC, 13.17%,
12/31/09(3) 535,000
- --------------------------------------------------------------------------------
750,000 Lyondell Chemical Co.,
9.50%, 12/15/08 822,188
- --------------------------------------------------------------------------------
900,000 United Industries Corp.,
9.875%, 4/1/09 945,000
- --------------------------------------------------------------------------------
3,198,938
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 4.1%
- --------------------------------------------------------------------------------
500,000 Allied Waste North America,
6.375%, 4/15/11 488,750
- --------------------------------------------------------------------------------
650,000 Casella Waste Systems Inc.,
9.75%, 2/1/13(2) 711,750
- --------------------------------------------------------------------------------
600,000 Cenveo Corp., 7.875%, 12/1/13 588,000
- --------------------------------------------------------------------------------
900,000 United Rentals North
America Inc., 6.50%, 2/15/12 870,750
- --------------------------------------------------------------------------------
2,659,250
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING -- 1.2%
- --------------------------------------------------------------------------------
182,000 Integrated Electrical
Services Inc., Series 1999 B,
9.375%, 2/1/09 179,270
- --------------------------------------------------------------------------------
400,000 Integrated Electrical
Services Inc., Series 2001 C,
9.375%, 2/1/09 394,000
- --------------------------------------------------------------------------------
160,000 URS Corp., 12.25%, 5/1/09 171,200
- --------------------------------------------------------------------------------
744,470
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.9%
- --------------------------------------------------------------------------------
500,000 Associated Materials Inc.,
9.75%, 4/15/12 576,250
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 1.6%
- --------------------------------------------------------------------------------
$ 250,000 BWAY Corp., 10.00%, 10/15/10 $ 275,000
- --------------------------------------------------------------------------------
250,000 Graham Packaging Co. Inc.,
8.50%, 10/15/12 (Acquired
9/29/04, Cost $250,000)(1)(4) 256,250
- --------------------------------------------------------------------------------
500,000 Graham Packaging Co. Inc.,
9.875%, 10/15/14 (Acquired
9/29/04, Cost $505,625)(1)(4) 514,375
- --------------------------------------------------------------------------------
1,045,625
- --------------------------------------------------------------------------------
DISTRIBUTORS -- 0.8%
- --------------------------------------------------------------------------------
500,000 Amscan Holdings Inc.,
8.75%, 5/1/14 (Acquired
4/27/04, Cost $503,438)(1) 512,500
- --------------------------------------------------------------------------------
DIVERSIFIED -- 6.7%
- --------------------------------------------------------------------------------
3,953,488 Lehman Brothers TRAINS(reg.sm),
Series 2004-1, 8.21%, 8/1/15
(Acquired 4/28/04,
Cost $4,235,214)(1) 4,259,563
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.7%
- --------------------------------------------------------------------------------
250,000 Intelsat Ltd., 6.50%, 11/1/13 205,330
- --------------------------------------------------------------------------------
250,000 Qwest Capital Funding Inc.,
7.75%, 8/15/06 252,188
- --------------------------------------------------------------------------------
550,000 Qwest Services Corp.,
14.00%, 12/15/04 (Acquired
5/21/03-7/24/03,
Cost $618,500)(1) 644,875
- --------------------------------------------------------------------------------
1,102,393
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.4%
- --------------------------------------------------------------------------------
800,000 MSW Energy Holdings LLC,
8.50%, 9/1/10 880,000
- --------------------------------------------------------------------------------
600,000 NRG Energy Inc., 8.00%,
12/15/13 (Acquired
12/17/03-12/19/03,
Cost $603,500)(1) 645,750
- --------------------------------------------------------------------------------
1,525,750
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT
& INSTRUMENTS -- 0.7%
- --------------------------------------------------------------------------------
400,000 Solectron Corp.,
9.625%, 2/15/09 445,000
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 3.8%
- --------------------------------------------------------------------------------
650,000 BRL Universal Equipment,
8.875%, 2/15/08 695,500
- --------------------------------------------------------------------------------
600,000 Hanover Compressor Co.,
8.625%, 12/15/10 654,000
- --------------------------------------------------------------------------------
1,070,000 Newpark Resources,
8.625%, 12/15/07 1,096,750
- --------------------------------------------------------------------------------
2,446,250
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.8%
- --------------------------------------------------------------------------------
500,000 Stater Brothers Holdings,
8.125%, 6/15/12 523,750
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.8%
- --------------------------------------------------------------------------------
500,000 Hines Nurseries Inc.,
10.25%, 10/1/11 532,500
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
17
High-Yield - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 2.3%
- --------------------------------------------------------------------------------
$ 760,000 Sybron Dental Specialties Inc.,
8.125%, 6/15/12 $ 826,500
- --------------------------------------------------------------------------------
650,000 Universal Hospital Services Inc.,
10.125%, 11/1/11 663,000
- --------------------------------------------------------------------------------
1,489,500
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 3.0%
- --------------------------------------------------------------------------------
500,000 Alliance Imaging Inc.,
10.375%, 4/15/11 545,625
- --------------------------------------------------------------------------------
750,000 Genesis HealthCare Corp.,
8.00%, 10/15/13 821,250
- --------------------------------------------------------------------------------
500,000 Mariner Health Care Inc.,
8.25%, 12/15/13 (Acquired
2/6/04, Cost $501,875)(1) 540,000
- --------------------------------------------------------------------------------
1,906,875
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 11.9%
- --------------------------------------------------------------------------------
500,000 Equinox Holdings Inc.,
9.00%, 12/15/09 517,500
- --------------------------------------------------------------------------------
550,000 Friendly Ice Cream Corp.,
8.375%, 6/15/12 530,750
- --------------------------------------------------------------------------------
500,000 Herbst Gaming Inc.,
8.125%, 6/1/12 (Acquired
9/15/04, Cost $511,250)(1) 515,000
- --------------------------------------------------------------------------------
500,000 Intrawest Corp., 7.50%,
10/15/13 (Acquired 9/22/04,
Cost $514,218)(1)(4) 520,625
- --------------------------------------------------------------------------------
650,000 Park Place Entertainment Corp.,
9.375%, 2/15/07 726,375
- --------------------------------------------------------------------------------
250,000 Penn National Gaming Inc.,
11.125%, 3/1/08 271,250
- --------------------------------------------------------------------------------
650,000 Penn National Gaming Inc.,
8.875%, 3/15/10 715,813
- --------------------------------------------------------------------------------
650,000 Poster Financial Group Inc.,
8.75%, 12/1/11 680,063
- --------------------------------------------------------------------------------
900,000 Resorts International Hotel
and Casino Inc.,
11.50%, 3/15/09 1,039,499
- --------------------------------------------------------------------------------
500,000 Starwood Hotels & Resorts
Worldwide Inc., 7.875%, 5/1/12 568,125
- --------------------------------------------------------------------------------
850,000 Trump Holdings & Funding,
12.625%, 3/15/10 888,250
- --------------------------------------------------------------------------------
500,000 Venetian Casino Resort LLC,
11.00%, 6/15/10 581,250
- --------------------------------------------------------------------------------
7,554,500
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 6.6%
- --------------------------------------------------------------------------------
655,000 Atrium Companies Inc.,
Series B, 10.50%, 5/1/09 691,025
- --------------------------------------------------------------------------------
250,000 Beazer Homes USA Inc.,
8.375%, 4/15/12 277,500
- --------------------------------------------------------------------------------
500,000 KB HOME, 6.375%, 8/15/11
(Acquired 9/24/04,
Cost $528,125)(1) 527,500
- --------------------------------------------------------------------------------
650,000 Meritage Corporation,
9.75%, 6/1/11 732,875
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 500,000 Sealy Mattress Co.,
8.25%, 6/15/14 $ 506,250
- --------------------------------------------------------------------------------
750,000 WCI Communities Inc.,
10.625%, 2/15/11 849,375
- --------------------------------------------------------------------------------
550,000 William Lyon Homes Inc.,
10.75%, 4/1/13 638,000
- --------------------------------------------------------------------------------
4,222,525
- --------------------------------------------------------------------------------
MACHINERY -- 1.2%
- --------------------------------------------------------------------------------
750,000 Key Components, Inc.,
10.50%, 6/1/08 772,500
- --------------------------------------------------------------------------------
MEDIA -- 10.0%
- --------------------------------------------------------------------------------
200,000 Cablevision Systems Corp.,
8.00%, 4/15/12 (Acquired
3/30/04, Cost $200,000)(1) 210,000
- --------------------------------------------------------------------------------
350,000 Cadmus Communications Corp.,
8.375%, 6/15/14 (Acquired
6/9/04, Cost $350,000)(1) 378,875
- --------------------------------------------------------------------------------
250,000 Charter Communications
Holdings LLC/Charter
Capital, 0.00%, 1/15/05(5) 203,125
- --------------------------------------------------------------------------------
952,000 Charter Communications
Holdings LLC/Charter Capital,
9.92%, 4/1/11(5) 737,800
- --------------------------------------------------------------------------------
500,000 Cinemark Inc., 0.00%, 3/15/09(5) 346,250
- --------------------------------------------------------------------------------
500,000 CSC Holdings Inc.,
7.875%, 12/15/07 533,125
- --------------------------------------------------------------------------------
250,000 CSC Holdings Inc.,
6.75%, 4/15/12 (Acquired
8/5/04, Cost $241,250)(1) 251,875
- --------------------------------------------------------------------------------
500,000 Dex Media Inc.,
0.00%, 11/15/08(5) 368,750
- --------------------------------------------------------------------------------
500,000 Dex Media Inc.,
8.00%, 11/15/13 527,500
- --------------------------------------------------------------------------------
500,000 Echostar DBS Corp.,
6.375%, 10/1/11 508,750
- --------------------------------------------------------------------------------
250,000 Fisher Communications Inc.,
8.625%, 9/15/14 (Acquired
9/15/04, Cost $250,000)(1) 261,250
- --------------------------------------------------------------------------------
800,000 Imax Corp., 9.625%, 12/1/10
(Acquired 11/19/03,
Cost $803,125)(1) 802,000
- --------------------------------------------------------------------------------
500,000 Mediacom LLC,
9.50%, 1/15/13(2) 483,750
- --------------------------------------------------------------------------------
500,000 PanAmSat Corp.,
9.00%, 8/15/14 (Acquired
9/24/04, Cost $528,750)(1) 522,500
- --------------------------------------------------------------------------------
250,000 Primedia Inc., 8.875%, 5/15/11 251,250
- --------------------------------------------------------------------------------
6,386,800
- --------------------------------------------------------------------------------
METALS & MINING -- 1.6%
- --------------------------------------------------------------------------------
550,000 IPSCO Inc., 8.75%, 6/1/13 629,750
- --------------------------------------------------------------------------------
400,000 Massey Energy Co.,
6.625%, 11/15/10 419,000
- --------------------------------------------------------------------------------
1,048,750
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
18
High-Yield - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER -- 1.6%
- --------------------------------------------------------------------------------
$ 400,000 AES Corp. (The),
8.875%, 2/15/11 $ 447,000
- --------------------------------------------------------------------------------
500,000 AES Corp. (The), 8.75%,
5/15/13 (Acquired
5/1/03, Cost $500,000)(1) 566,250
- --------------------------------------------------------------------------------
1,013,250
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.8%
- --------------------------------------------------------------------------------
500,000 Saks Inc., 7.375%, 2/15/19 502,500
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS -- 0.8%
- --------------------------------------------------------------------------------
500,000 Xerox Corp., 6.875%, 8/15/11 525,000
- --------------------------------------------------------------------------------
OIL & GAS -- 5.9%
- --------------------------------------------------------------------------------
850,000 El Paso Corp., 7.875%, 6/15/12 847,875
- --------------------------------------------------------------------------------
650,000 Forest Oil Corp., 7.75%, 5/1/14 710,125
- --------------------------------------------------------------------------------
390,000 Magnum Hunter Resources Inc.,
9.60%, 3/15/12 442,650
- --------------------------------------------------------------------------------
400,000 Pacific Energy Partners L.P. /
Pacific Energy Finance Corp.,
7.125%, 6/15/14 (Acquired
6/10/04, Cost $393,016)(1) 435,000
- --------------------------------------------------------------------------------
500,000 Range Resources Corp.,
7.375%, 7/15/13 527,500
- --------------------------------------------------------------------------------
500,000 Williams Cos Inc.,
8.125%, 3/15/12(2) 578,750
- --------------------------------------------------------------------------------
250,000 Williams Cos Inc.,
7.875%, 9/1/21 278,750
- --------------------------------------------------------------------------------
3,820,650
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 1.8%
- --------------------------------------------------------------------------------
500,000 Georgia-Pacific Corp.,
7.70%, 6/15/15 572,500
- --------------------------------------------------------------------------------
250,000 Tembec Industries Inc.,
8.625%, 6/30/09(2) 257,500
- --------------------------------------------------------------------------------
350,000 Tembec Industries Inc.,
7.75%, 3/15/12 353,500
- --------------------------------------------------------------------------------
1,183,500
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 1.0%
- --------------------------------------------------------------------------------
600,000 WH Holdings Ltd./WH Capital
Corp., 9.50%, 4/1/11 652,500
- --------------------------------------------------------------------------------
REAL ESTATE -- 0.3%
- --------------------------------------------------------------------------------
162,000 CB Richard Ellis Services Inc.,
9.75%, 5/15/10 (Acquired
5/8/03, Cost $162,000)(1) 184,275
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 4.2%
- --------------------------------------------------------------------------------
700,000 Asbury Automotive Group Inc.,
9.00%, 6/15/12 742,000
- --------------------------------------------------------------------------------
600,000 Couche-Tard U.S. L.P./
Couche-Tard Finance Corp.,
7.50%, 12/15/13 642,000
- --------------------------------------------------------------------------------
Principal Amount/Shares Value
- --------------------------------------------------------------------------------
$ 850,000 Toys "R" Us, Inc.,
7.375%, 10/15/18 $ 792,625
- --------------------------------------------------------------------------------
500,000 United Auto Group, Inc.,
9.625%, 3/15/12 553,750
- --------------------------------------------------------------------------------
2,730,375
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.9%
- --------------------------------------------------------------------------------
550,000 Perry Ellis International Inc.,
8.875%, 9/15/13 585,750
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 2.0%
- --------------------------------------------------------------------------------
500,000 Nextel Communications Inc.,
7.375%, 8/1/15 540,000
- --------------------------------------------------------------------------------
400,000 Nextel Partners Inc.,
8.125%, 7/1/11 426,000
- --------------------------------------------------------------------------------
300,000 Ubiquitel Inc., 9.875%, 3/1/11 313,875
- --------------------------------------------------------------------------------
1,279,875
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $54,224,155) 57,321,989
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES(6) -- 0.8%
- --------------------------------------------------------------------------------
500,000 ABSC Non-Improvement Trust,
Series 2004 HE7, 5.00%,
10/27/34 (Acquired 9/1/04,
Cost $497,862)(1)(4)
(Cost $497,862) 497,860
- --------------------------------------------------------------------------------
WARRANTS(7)
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES(7)
- --------------------------------------------------------------------------------
875 Jazztel Plc Warrants(8)
(Cost $-) --
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 8.0%
- --------------------------------------------------------------------------------
Repurchase Agreement, Goldman Sachs & Co.,
(collateralized by various U.S. Treasury
obligations, 8.00%, 11/15/21, valued at
$3,295,334), in a joint trading account
at 1.63%, dated 9/30/04, due 10/1/04
(Delivery value $3,212,145)(9) 3,212,000
- --------------------------------------------------------------------------------
Repurchase Agreement, Merrill Lynch
& Co., Inc., (collateralized by various
U.S. Treasury obligations, 8.125%, 8/15/21,
valued at $1,977,877), in a joint trading
account at 1.62%, dated 9/30/04,
due 10/1/04 (Delivery value $1,944,087) 1,944,000
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $5,156,000) 5,156,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
19
High-Yield - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Value
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED
FOR SECURITIES LENDING(10) -- 4.4%
- --------------------------------------------------------------------------------
Repurchase Agreement, UBS Securities LLC,
(collateralized by U.S. Government Agency
obligations), 1.875%, dated 9/30/04,
due 10/1/04 (delivery value $2,846,298)
(Cost $2,846,150) $ 2,846,150
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 102.5%
(Cost $62,724,167) 65,821,999
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- (2.5)% (1,586,523)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $64,235,476
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
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,
2004, was $14,378,198, which represented 22.4% of net assets. None of the
securities were considered illiquid.
(2) Security, or a portion thereof, was on loan as of September 30, 2004.
(3) 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.
(4) When-issued security.
(5) Step-coupon security. These securities are issued with a zero-coupon
and become interest bearing at a predetermined rate and date and are
issued at a substantial discount from their value at maturity. Rate
shown is effective September 30, 2004.
(6) The rate indicated is the yield to maturity at purchase.
(7) Category is less than 0.05% of net assets.
(8) Non-income producing.
(9) Security, or a portion thereof, has been segregated for a when-issued
security.
(10) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See Note 5
in Notes to Financial Statements.)
See Notes to Financial Statements.
- ------
20
Shareholder Fee Example (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from April 1, 2004 to September 30, 2004.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
personal accounts (including American Century Brokerage accounts) registered
under your Social Security number. Personal accounts include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively
online. If you are subject to the Account Maintenance Fee, your account value
could be reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
(continued)
- ------
21
Shareholder Fee Example (Unaudited)
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE
4/1/04 9/30/04 9/30/04 RATIO*
- --------------------------------------------------------------------------------
DIVERSIFIED BOND SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $999.60 $3.16 0.63%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,000.60 $2.16 0.43%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $998.40 $4.41 0.88%
- --------------------------------------------------------------------------------
A Class $1,000 $998.40 $4.41 0.88%
- --------------------------------------------------------------------------------
B Class $1,000 $994.60 $8.15 1.63%
- --------------------------------------------------------------------------------
C Class $1,000 $994.60 $8.15 1.63%
- --------------------------------------------------------------------------------
HYPOTHETICAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,021.91 $3.19 0.63%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,022.91 $2.18 0.43%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,020.66 $4.46 0.88%
- --------------------------------------------------------------------------------
A Class $1,000 $1,020.66 $4.46 0.88%
- --------------------------------------------------------------------------------
B Class $1,000 $1,016.90 $8.24 1.63%
- --------------------------------------------------------------------------------
C Class $1,000 $1,016.90 $8.24 1.63%
- --------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
183, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
(continued)
- ------
22
Shareholder Fee Example (Unaudited)
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE
4/1/04 9/30/04 9/30/04 RATIO*
- --------------------------------------------------------------------------------
HIGH-YIELD SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,036.90 $4.49 0.88%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,029.50 $3.46 0.68%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,035.60 $5.77 1.13%
- --------------------------------------------------------------------------------
A Class $1,000 $1,035.60 $5.77 1.13%
- --------------------------------------------------------------------------------
B Class $1,000 $1,031.80 $9.58 1.88%
- --------------------------------------------------------------------------------
C Class $1,000 $1,031.70 $9.58 1.88%
- --------------------------------------------------------------------------------
HYPOTHETICAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,020.66 $4.46 0.88%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,021.66 $3.45 0.68%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,019.40 $5.72 1.13%
- --------------------------------------------------------------------------------
A Class $1,000 $1,019.40 $5.72 1.13%
- --------------------------------------------------------------------------------
B Class $1,000 $1,015.64 $9.50 1.88%
- --------------------------------------------------------------------------------
C Class $1,000 $1,015.64 $9.50 1.88%
- --------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
183, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
- ------
23
Statement of Assets and Liabilities
SEPTEMBER 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value
(cost of $556,561,063 and $59,878,017,
respectively) -- including $812,625 and
$2,769,998 of securities
loaned, respectively $562,651,633 $62,975,849
- -----------------------------------------------
Investments made with cash
collateral received for securities
on loan, at value (cost of $832,672
and $2,846,150, respectively) 832,672 2,846,150
- --------------------------------------------------------------------------------
Total investment securities,
at value (cost of $557,393,735
and $62,724,167, respectively) 563,484,305 65,821,999
- -----------------------------------------------
Cash -- 78,047
- -----------------------------------------------
Receivable for investments sold 1,702,924 1,780,935
- -----------------------------------------------
Receivable for capital shares sold 21,485 12,250
- -----------------------------------------------
Interest receivable 3,575,585 1,307,615
- --------------------------------------------------------------------------------
568,784,299 69,000,846
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Disbursements in excess
of demand deposit cash 785,484 --
- -----------------------------------------------
Payable for collateral received
on securities loaned 832,672 2,846,150
- -----------------------------------------------
Payable for investments purchased 87,801,735 1,767,704
- -----------------------------------------------
Payable for variation margin
on futures contracts 59,515 --
- -----------------------------------------------
Unrealized depreciation
on swap agreements 2,609 --
- -----------------------------------------------
Accrued management fees 192,646 45,756
- -----------------------------------------------
Distribution fees payable 2,582 2,728
- -----------------------------------------------
Service fees (and distribution
fees A Class) payable 2,506 4,037
- -----------------------------------------------
Dividends payable 414,365 98,995
- --------------------------------------------------------------------------------
90,094,114 4,765,370
- --------------------------------------------------------------------------------
NET ASSETS $478,690,185 $64,235,476
================================================================================
See Notes to Financial Statements. (continued)
- ------
24
Statement of Assets and Liabilities
SEPTEMBER 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital paid in $469,968,477 $ 74,803,335
- -----------------------------------------------
Accumulated undistributed
net realized gain (loss)
on investment transactions 2,639,049 (13,665,691)
- -----------------------------------------------
Net unrealized appreciation
on investments 6,082,659 3,097,832
- --------------------------------------------------------------------------------
$478,690,185 $ 64,235,476
================================================================================
INVESTOR CLASS
- --------------------------------------------------------------------------------
Net assets $161,898,727 $44,320,219
- -----------------------------------------------
Shares outstanding 15,687,383 6,781,734
- -----------------------------------------------
Net asset value per share $10.32 $6.54
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
Net assets $304,410,237 $214,244
- -----------------------------------------------
Shares outstanding 29,496,333 32,783
- -----------------------------------------------
Net asset value per share $10.32 $6.54
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
Net assets $6,464,301 $476,208
- -----------------------------------------------
Shares outstanding 626,367 72,868
- -----------------------------------------------
Net asset value per share $10.32 $6.54
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
Net assets $3,782,363 $14,826,498
- -----------------------------------------------
Shares outstanding 366,498 2,268,700
- -----------------------------------------------
Net asset value per share $10.32 $6.54
- -----------------------------------------------
Maximum offering price
(net asset value divided by 0.955) $10.81 $6.85
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
Net assets $659,677 $1,037,253
- -----------------------------------------------
Shares outstanding 63,920 158,717
- -----------------------------------------------
Net asset value per share $10.32 $6.54
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
Net assets $1,474,880 $3,361,054
- -----------------------------------------------
Shares outstanding 142,910 514,298
- -----------------------------------------------
Net asset value per share $10.32 $6.54
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
25
Statement of Operations
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- -----------------------------------------------
Interest $ 8,781,940 $ 2,669,082
- -----------------------------------------------
Securities lending 5,808 6,592
- --------------------------------------------------------------------------------
8,787,748 2,675,674
- --------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------
Management fees 1,176,504 277,424
- -----------------------------------------------
Distribution fees:
- -----------------------------------------------
Advisor Class 8,217 482
- -----------------------------------------------
B Class 2,264 3,381
- -----------------------------------------------
C Class 5,119 12,554
- -----------------------------------------------
Service fees:
- -----------------------------------------------
Advisor Class 8,217 482
- -----------------------------------------------
B Class 755 1,127
- -----------------------------------------------
C Class 1,706 4,185
- -----------------------------------------------
Service and distribution
fees -- A Class 4,404 16,999
- -----------------------------------------------
Trustees' fees and expenses 9,827 1,357
- -----------------------------------------------
Other expenses 604 82
- --------------------------------------------------------------------------------
1,217,617 318,073
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,570,131 2,357,601
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss)
on investment transactions (2,615,932) 785,344
- -----------------------------------------------
Change in net unrealized
appreciation on investments (5,067,525) (1,091,807)
- --------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED LOSS (7,683,457) (306,463)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ (113,326) $ 2,051,138
================================================================================
See Notes to Financial Statements.
- ------
26
Statement of Changes in Net Assets
SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) AND YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- --------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2004 MARCH 31, 2004 SEPT. 30, 2004 MARCH 31, 2004
- --------------------------------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------------------------------
Net investment income $ 7,570,131 $ 17,098,620 $ 2,357,601 $ 5,967,638
- ----------------------------------
Net realized gain (loss) (2,615,932) 10,512,736 785,344 3,229,686
- ----------------------------------
Change in net
unrealized appreciation (5,067,525) (3,793,030) (1,091,807) 1,745,408
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations (113,326) 23,818,326 2,051,138 10,942,732
- --------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------
From net investment income:
- ----------------------------------
Investor Class (2,629,219) (6,662,832) (1,705,062) (5,211,165)
- ----------------------------------
Institutional Class (4,928,583) (10,853,638) (927) --
- ----------------------------------
Advisor Class (96,005) (304,268) (14,101) (20,150)
- ----------------------------------
A Class (51,455) (69,043) (497,712) (529,918)
- ----------------------------------
B Class (6,550) (12,067) (29,636) (42,287)
- ----------------------------------
C Class (14,778) (26,496) (110,163) (164,118)
- ----------------------------------
From net realized gains:
- ---------------------------------
Investor Class -- (1,916,400) -- --
- ----------------------------------
Institutional Class -- (3,041,361) -- --
- ----------------------------------
Advisor Class -- (78,187) -- --
- ----------------------------------
A Class -- (28,699) -- --
- ----------------------------------
B Class -- (6,365) -- --
- ----------------------------------
C Class -- (13,119) -- --
- --------------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (7,726,590) (23,012,475) (2,357,601) (5,967,638)
- --------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from capital
share transactions (13,532,585) 6,137,397 (6,667,526) (13,092,318)
- --------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (21,372,501) 6,943,248 (6,973,989) (8,117,224)
- --------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------
Beginning of period 500,062,686 493,119,438 71,209,465 79,326,689
- --------------------------------------------------------------------------------------------------------
End of period $478,690,185 $500,062,686 $64,235,476 $ 71,209,465
========================================================================================================
See Notes to Financial Statements.
- ------
27
Notes to Financial Statements
SEPTEMBER 30, 2004 (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) (collectively, 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 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 and other debt securities. High-Yield invests
primarily in lower-rated debt securities, which are subject to greater credit
risk and consequently offer higher yield. The following is a summary of the
funds' significant accounting policies.
MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the
Institutional 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.
Sale of High-Yield's Institutional Class commenced on August 2, 2004. On
January 31, 2003, the Investor Class became unavailable to new investors.
SECURITY VALUATIONS -- Securities are valued through a commercial pricing
service or at the mean of the most recent bid and asked prices. Debt securities
maturing within 60 days may be valued at cost, plus or minus any amortized
discount or premium. If the investment manager, American Century Investment
Management, Inc. (ACIM), determines that the current market price of a security
owned by a non-money market fund is not readily available, the investment
manager may determine its fair value in accordance with procedures adopted by
the Board of Trustees if such fair value determination would materially impact a
fund's net asset value. Valuations may not be readily available if, for example:
an event occurred after the close of the exchange on which a portfolio security
principally trades (but before the close of the New York Stock Exchange) that
was likely to have changed the value of the security; a security has been
declared in default; trading in a security has been halted during the trading
day; or the demand for the security (as reflected by its trading volume) is
insufficient for quoted prices to be reliable.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes paydown gain/loss and accretion of discounts and amortization of
premiums.
SECURITIES ON LOAN -- The funds may lend portfolio securities through their
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. In these
transactions, the securities' prices and yields are fixed on the date of the
commitment. In a when-issued transaction the payment and delivery are scheduled
for a future date and during this period, securities are subject to market
fluctuations. In a forward commitment transaction, the funds may sell a security
and at the same time make a commitment to purchase the same security at a future
date at a specified price. Conversely, the funds may purchase a security and at
the same time make a commitment to sell the same security at a future date at a
specified price. These types of transactions are executed simultaneously in what
are known as "roll" transactions. The funds will segregate cash, cash
equivalents or other appropriate liquid securities on their records in amounts
sufficient to meet the purchase price. The funds account for "roll" transactions
as purchases and sales; as such these transactions may increase portfolio
turnover.
TRACERS(reg.sm)/TRAINS(reg.sm) -- The funds may invest in TRACERS and TRAINS
which represent ownership of a specified percentage of each security in an
underlying pool of securities. Owners are entitled to receive a pro rata share
of distributions from the underlying securities. In the event an underlying
security is downgraded by a rating agency, that portion of the investment
product will be redeemed and the underlying security will be distributed to
the owner pro rata or the
(continued)
- ------
28
Notes to Financial Statements
SEPTEMBER 30, 2004 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
owner may receive cash proceeds. The risk of owning these products are the same
as owning the individual securities, but enable each fund to be more diversified
by owning a single security.
FUTURES CONTRACTS -- The funds may enter into futures contracts in order to
manage the funds' exposure to changes in market conditions. One of the risks of
entering into futures contracts is the possibility that the change in value of
the contract may not correlate with the changes in value of the underlying
securities. Upon entering into a futures contract, the funds are required to
deposit either cash or securities in an amount equal to a certain percentage of
the contract value (initial margin). Subsequent payments (variation margin) are
made or received daily, in cash, by the funds. The variation margin is equal to
the daily change in the contract value and is recorded as unrealized gains and
losses. The funds recognize a realized gain or loss when the contract is closed
or expires. Net realized and unrealized gains or losses occurring during the
holding period of futures contracts are a component of realized gain (loss) on
investment transactions and unrealized appreciation (depreciation) on
investments, respectively.
SWAP AGREEMENTS -- The funds may enter into a swap agreement in order to attempt
to obtain or preserve a particular return or spread at a lower cost than
obtaining a return or spread through purchases and/or sales of instruments in
other markets; protect against currency fluctuations; attempt to manage duration
to protect against any increase in the price of securities the funds anticipate
purchasing at a later date; or gain exposure to certain markets in the most
economical way possible. A swap agreement is a contract in which two parties
agree to exchange the returns earned or realized on predetermined investments or
instruments. The funds will segregate cash, cash equivalents or other
appropriate liquid securities on their records in amounts sufficient to meet
requirements. Unrealized gains are reported as an asset and unrealized losses
are reported as a liability on the Statement of Assets and Liabilities. Swap
agreements are valued daily and changes in value, including the periodic amounts
of interest to be paid or received on swaps are recorded as unrealized
appreciation (depreciation). Realized gain or loss is recorded upon receipt or
payment of a periodic settlement or termination of swap agreements. The risks of
entering into swap agreements include the possible lack of liquidity, failure of
the counterparty to meets its obligations, and that there may be unfavorable
changes in the underlying investments and instruments.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that ACIM has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at cost.
Each fund requires that the collateral, represented by securities, received in a
repurchase transaction be transferred to the custodian in a manner sufficient to
enable each 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 each
fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, each 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.
INCOME TAX STATUS -- It is each fund's policy to distribute substantially all
net investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income 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 (the fee) per class.
The Agreement provides that all expenses
(continued)
- ------
29
Notes to Financial Statements
SEPTEMBER 30, 2004 (UNAUDITED)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
of the funds, except brokerage commissions, taxes, interest, fees and expenses
of those trustees who are not considered "interested persons" as defined in the
1940 Act (including counsel fees) and extraordinary expenses, will be paid by
ACIM. The fee is computed and accrued daily based on the daily net assets of the
specific class of shares of each fund and paid monthly in arrears. The fee
consists of (1) an Investment Category Fee based on the daily net assets of
the funds and certain other accounts managed by the investment manager that are
in the same broad investment category as each fund and (2) a Complex Fee based
on the assets of all the funds in the American Century family of funds. The
rates for the Investment Category Fee range from 0.2925% to 0.4100% for
Diversified Bond and from 0.5425% to 0.6600% for High-Yield. The rates for the
Complex Fee (Investor, A, B and C Classes) range from 0.2500% 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. The effective annual management fees
for the funds for the six months ended September 30, 2004 were as follows:
- --------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- --------------------------------------------------------------------------------
Investor, A, B & C 0.63% 0.88%
- --------------------------------------------------------------------------------
Institutional 0.43% 0.68%
- --------------------------------------------------------------------------------
Advisor 0.38% 0.63%
- --------------------------------------------------------------------------------
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 that 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%
- --------------------------------------------------------------------------------
Service Fee 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 and accrued daily based on each
class's daily net assets and paid monthly in arrears. The distribution fee
provides compensation for expenses incurred in connection with distributing
shares of the classes including, but not limited to, payments to brokers,
dealers, and financial institutions that have entered into sales agreements with
respect to shares of the funds. The service fee provides compensation for
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. Fees incurred under the plans during
the six months ended September 30, 2004, are detailed in the Statement of
Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment manager, ACIM, the
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services Corporation.
The funds have a bank line of credit and securities lending agreement with
JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds and a wholly
owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in
ACC.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended September 30, 2004, were as follows:
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
PURCHASES
- --------------------------------------------------------------------------------
U.S. Treasury & Government Agency Obligations $860,708,444 --
- --------------------------------------------------------------------------------
Investment securities other than U.S. Treasury
& Government Agency Obligations $67,768,778 $18,294,731
- --------------------------------------------------------------------------------
PROCEEDS FROM SALES
- --------------------------------------------------------------------------------
U.S. Treasury & Government
Agency Obligations $833,879,250 $510,000
- --------------------------------------------------------------------------------
Investment securities other than U.S. Treasury
& Government Agency Obligations $83,015,830 $24,192,757
- --------------------------------------------------------------------------------
(continued)
- ------
30
Notes to Financial Statements
SEPTEMBER 30, 2004 (UNAUDITED)
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, 2004
- ---------------------------
Sold 576,135 $ 5,888,651 862,213 $ 5,566,092
- ---------------------------
Issued in reinvestment
of distributions 240,321 2,454,879 181,538 1,170,999
- ---------------------------
Redeemed (2,077,767) (21,204,600) (2,517,658) (16,167,460)
- ----------------------------------------------------------------------------------------------
Net decrease (1,261,311) $(12,861,070) (1,473,907) $ (9,430,369)
==============================================================================================
YEAR ENDED MARCH 31, 2004
- ---------------------------
Sold 1,852,110 $ 19,392,206 5,931,340 $ 37,797,154
- ---------------------------
Issued in reinvestment
of distributions 762,689 7,936,133 495,304 3,182,662
- ---------------------------
Redeemed (4,654,739) (48,567,724) (10,937,203) (69,665,181)
- ----------------------------------------------------------------------------------------------
Net decrease (2,039,940) $(21,239,385) (4,510,559) $(28,685,365)
==============================================================================================
INSTITUTIONAL CLASS
- ----------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2004(1)
- ---------------------------
Sold 3,197,373 $ 32,679,306 32,734 $213,063
- ---------------------------
Issued in reinvestment
of distributions 266,223 2,719,991 49 318
- ---------------------------
Redeemed (3,479,367) (35,968,147) -- --
- ----------------------------------------------------------------------------------------------
Net increase (decrease) (15,771) $ (568,850) 32,783 $213,381
==============================================================================================
YEAR ENDED MARCH 31, 2004
- ---------------------------
Sold 10,543,306 $110,321,330 N/A N/A
- ---------------------------
Issued in reinvestment
of distributions 767,772 7,990,686
- ---------------------------
Redeemed (8,729,802) (91,395,707)
- ----------------------------------------------------------------------------------------------
Net increase 2,581,276 $ 26,916,309
==============================================================================================
ADVISOR CLASS
- ----------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2004
- ---------------------------
Sold 124,642 $ 1,273,260 55,627 $ 356,793
- ---------------------------
Issued in reinvestment
of distributions 8,665 88,499 751 4,839
- ---------------------------
Redeemed (184,417) (1,884,742) (20,396) (129,723)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) (51,110) $ (522,983) 35,982 $ 231,909
==============================================================================================
YEAR ENDED MARCH 31, 2004
- ---------------------------
Sold 385,420 $ 4,037,688 66,830 $ 427,059
- ---------------------------
Issued in reinvestment
of distributions 33,030 343,787 2,427 15,585
- ---------------------------
Redeemed (845,604) (8,803,119) (32,549) (210,807)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) (427,154) $(4,421,644) 36,708 $ 231,837
==============================================================================================
(1) August 2, 2004 (commencement of sale) through September 30, 2004 for High-Yield.
(continued)
- ------
31
Notes to Financial Statements
SEPTEMBER 30, 2004 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ----------------------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- ----------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------
A CLASS
- ----------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2004
- ---------------------------
Sold 87,383 $ 893,884 736,208 $ 4,737,913
- ---------------------------
Issued in reinvestment
of distributions 4,536 46,344 68,994 445,112
- ---------------------------
Redeemed (70,970) (722,447) (437,040) (2,827,832)
- ----------------------------------------------------------------------------------------------
Net increase 20,949 $ 217,781 368,162 $ 2,355,193
==============================================================================================
YEAR ENDED MARCH 31, 2004
- ---------------------------
Sold 536,873 $ 5,655,209 2,689,799 $17,282,661
- ---------------------------
Issued in reinvestment
of distributions 8,552 88,682 71,715 464,931
- ---------------------------
Redeemed (227,916) (2,398,519) (985,517) (6,368,479)
- ----------------------------------------------------------------------------------------------
Net increase 317,509 $ 3,345,372 1,775,997 $11,379,113
==============================================================================================
B CLASS
- ----------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2004
- ---------------------------
Sold 17,562 $ 179,569 32,643 $210,976
- ---------------------------
Issued in reinvestment
of distributions 451 4,607 3,695 23,828
- ---------------------------
Redeemed (12,688) (129,930) (8,079) (51,840)
- ----------------------------------------------------------------------------------------------
Net increase 5,325 $ 54,246 28,259 $182,964
==============================================================================================
YEAR ENDED MARCH 31, 2004
- ---------------------------
Sold 66,161 $ 696,095 131,925 $ 839,143
- ---------------------------
Issued in reinvestment
of distributions 1,052 10,912 4,994 32,362
- ---------------------------
Redeemed (16,684) (174,135) (15,688) (101,245)
- ----------------------------------------------------------------------------------------------
Net increase 50,529 $ 532,872 121,231 $ 770,260
==============================================================================================
C CLASS
- ----------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2004
- ---------------------------
Sold 32,522 $ 331,484 91,473 $ 589,651
- ---------------------------
Issued in reinvestment
of distributions 677 6,917 5,907 38,105
- ---------------------------
Redeemed (18,718) (190,110) (131,233) (848,360)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) 14,481 $ 148,291 (33,853) $(220,604)
==============================================================================================
YEAR ENDED MARCH 31, 2004
- ---------------------------
Sold 119,284 $1,249,494 549,735 $3,510,217
- ---------------------------
Issued in reinvestment
of distributions 1,618 16,794 8,357 54,101
- ---------------------------
Redeemed (25,117) (262,415) (56,055) (352,481)
- ----------------------------------------------------------------------------------------------
Net increase 95,785 $1,003,873 502,037 $3,211,837
==============================================================================================
(continued)
- ------
32
Notes to Financial Statements
SEPTEMBER 30, 2004 (UNAUDITED)
5. SECURITIES LENDING
As of September 30, 2004, securities in Diversified Bond and High-Yield valued
at $812,625 and $2,769,998, respectively, were on loan through the lending
agent, JPMCB, to certain approved borrowers. JPMCB 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. Any
deficiencies or excess of collateral must be delivered or transferred by the
member firms no later than the close of business on the next business day. The
total value of all collateral received, at this date, was $832,672 and
$2,846,150, 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 $650,000,000
unsecured bank line of credit agreement with JPMCB. The funds may borrow money
for temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The
funds did not borrow from the line during the six months ended September 30,
2004.
7. RISK FACTORS
High-Yield invests primarily in lower-rated debt securities, which are subject
to substantial risks including price volatility, liquidity risk, and default
risk.
8. 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 paydown losses, certain income items and net realized gains and losses for
financial statement and tax purposes, and may result in reclassification among
certain capital accounts on the financial statements. Reclassifications between
income and realized gain in Diversified Bond relate primarily to the character
of paydown gains and losses.
As of September 30, 2004, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
Federal tax cost of investments $557,526,186 $62,724,221
================================================================================
Gross tax appreciation of investments $6,851,657 $3,353,766
- --------------------------------------------
Gross tax depreciation of investments (893,538) (255,988)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $5,958,119 $3,097,778
================================================================================
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.
As of March 31, 2004, High-Yield had net capital losses of $1,413,568,
$2,746,739, and $10,290,674 expiring in 2008, 2009 and 2010, respectively, that
may be used to offset future realized capital gains for federal income tax
purposes.
- ------
33
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003 2002(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.49 $10.47 $9.98 $10.25
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------
Net Investment
Income 0.16(3) 0.36(3) 0.48 0.17
- ---------------------------
Net Realized and
Unrealized Gain (Loss) (0.17) 0.14 0.49 (0.27)
- --------------------------------------------------------------------------------
Total From
Investment Operations (0.01) 0.50 0.97 (0.10)
- --------------------------------------------------------------------------------
Distributions
- ---------------------------
From Net
Investment Income (0.16) (0.37) (0.48) (0.17)
- ---------------------------
From Net
Realized Gains -- (0.11) -- --
- --------------------------------------------------------------------------------
Total Distributions (0.16) (0.48) (0.48) (0.17)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.32 $10.49 $10.47 $9.98
================================================================================
TOTAL RETURN(4) (0.04)% 4.92% 9.93% (0.99)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.63%(5) 0.64% 0.64% 0.63%(5)
- ---------------------------
Ratio of Net
Investment Income
to Average Net Assets 3.10%(5) 3.38% 4.67% 5.19%(5)
- ---------------------------
Portfolio Turnover Rate 204% 324% 151% 136%(6)
- ---------------------------
Net Assets,
End of Period
(in thousands) $161,899 $177,791 $198,835 $170,707
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (unaudited).
(2) December 3, 2001 (acquisition date) through March 31, 2002.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
34
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------
2004(1) 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------
PER-SHARE DATA
- -------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.49 $10.47 $9.98 $10.12 $9.62 $10.10
- -------------------------------------------------------------------------------------------
Income From
Investment
Operations
- ------------------------
Net Investment
Income 0.17(2) 0.38(2) 0.50 0.56 0.62 0.61
- ------------------------
Net Realized
and Unrealized
Gain (Loss) (0.17) 0.14 0.49 (0.09) 0.50 (0.48)
- -------------------------------------------------------------------------------------------
Total From
Investment
Operations -- 0.52 0.99 0.47 1.12 0.13
- -------------------------------------------------------------------------------------------
Distributions
- ------------------------
From Net
Investment Income (0.17) (0.39) (0.50) (0.56) (0.62) (0.61)
- ------------------------
From Net
Realized Gains -- (0.11) -- (0.05) -- --(3)
- -------------------------------------------------------------------------------------------
Total Distributions (0.17) (0.50) (0.50) (0.61) (0.62) (0.61)
- -------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.32 $10.49 $10.47 $9.98 $10.12 $9.62
===========================================================================================
TOTAL RETURN(4) 0.06% 5.13% 10.15% 4.76% 12.03% 1.30%
- -------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.43%(5) 0.44% 0.44% 0.44% 0.45% 0.45%
- ------------------------
Ratio of Net
Investment Income
to Average
Net Assets 3.30%(5) 3.58% 4.87% 5.46% 6.31% 6.15%
- ------------------------
Portfolio Turnover Rate 204% 324% 151% 136% 139% 64%
- ------------------------
Net Assets,
End of Period
(in thousands) $304,410 $309,579 $281,998 $202,476 $140,497 $103,192
- -------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
- ------
35
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003 2002(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.49 $10.47 $9.98 $10.25
- --------------------------------------------------------------------------------
Income From
Investment
Operations
- ---------------------------
Net Investment
Income 0.15(3) 0.33(3) 0.46 0.16
- ---------------------------
Net Realized
and Unrealized
Gain (Loss) (0.17) 0.14 0.49 (0.27)
- --------------------------------------------------------------------------------
Total From
Investment Operations (0.02) 0.47 0.95 (0.11)
- --------------------------------------------------------------------------------
Distributions
- ---------------------------
From Net
Investment Income (0.15) (0.34) (0.46) (0.16)
- ---------------------------
From Net
Realized Gains -- (0.11) -- --
- --------------------------------------------------------------------------------
Total Distributions (0.15) (0.45) (0.46) (0.16)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.32 $10.49 $10.47 $9.98
================================================================================
TOTAL RETURN(4) (0.16)% 4.66% 9.66% (1.07)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.88%(5) 0.89% 0.89% 0.88%(5)
- ---------------------------
Ratio of Net
Investment Income
to Average Net Assets 2.85%(5) 3.13% 4.42% 4.94%(5)
- ---------------------------
Portfolio Turnover Rate 204% 324% 151% 136%(6)
- ---------------------------
Net Assets,
End of Period
(in thousands) $6,464 $7,107 $11,567 $10,291
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (unaudited).
(2) December 3, 2001 (acquisition date) through March 31, 2002.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
36
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.49 $10.47 $10.40
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------------
Net Investment Income 0.15(3) 0.33(3) 0.06
- ---------------------------------
Net Realized and
Unrealized Gain (Loss) (0.17) 0.14 0.07
- --------------------------------------------------------------------------------
Total From
Investment Operations (0.02) 0.47 0.13
- --------------------------------------------------------------------------------
Distributions
- ---------------------------------
From Net
Investment Income (0.15) (0.34) (0.06)
- ---------------------------------
From Net Realized Gains -- (0.11) --
- --------------------------------------------------------------------------------
Total Distributions (0.15) (0.45) (0.06)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.32 $10.49 $10.47
================================================================================
TOTAL RETURN(4) (0.16)% 4.65% 1.27%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.88%(5) 0.89% 0.88%(5)
- ---------------------------------
Ratio of Net
Investment Income
to Average Net Assets 2.85%(5) 3.13% 3.69%(5)
- ---------------------------------
Portfolio Turnover Rate 204% 324% 151%(6)
- ---------------------------------
Net Assets,
End of Period
(in thousands) $3,782 $3,625 $294
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Computed using average shares outstanding throughout the period.
(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 March 31, 2003.
See Notes to Financial Statements.
- ------
37
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------
Net Asset Value,
Beginning of Period $10.49 $10.47 $10.40
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------------
Net Investment
Income 0.11(3) 0.26(3) 0.05
- ---------------------------------
Net Realized and
Unrealized Gain (Loss) (0.17) 0.14 0.07
- --------------------------------------------------------------------------------
Total From
Investment Operations (0.06) 0.40 0.12
- --------------------------------------------------------------------------------
Distributions
- ---------------------------------
From Net
Investment Income (0.11) (0.27) (0.05)
- ---------------------------------
From Net
Realized Gains -- (0.11) --
- --------------------------------------------------------------------------------
Total Distributions (0.11) (0.38) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.32 $10.49 $10.47
================================================================================
TOTAL RETURN(4) (0.54)% 3.87% 1.20%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.63%(5) 1.64% 1.61%(5)
- ---------------------------------
Ratio of Operating
Expenses to Average
Net Assets
(Before Expense Waiver) 1.63%(5) 1.64% 1.63%(5)(6)
- ---------------------------------
Ratio of Net Investment
Income to Average Net Assets 2.10%(5) 2.38% 2.98%(5)
- ---------------------------------
Ratio of Net Investment
Income to Average
Net Assets
(Before Expense Waiver) 2.10%(5) 2.38% 2.96%(5)(6)
- ---------------------------------
Portfolio Turnover Rate 204% 324% 151%(7)
- ---------------------------------
Net Assets,
End of Period
(in thousands) $660 $615 $84
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Computed using average shares outstanding throughout the period.
(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) During the period ended March 31, 2003, the distributor voluntarily waived
a portion of the distribution and service fees.
(7) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2003.
See Notes to Financial Statements.
- ------
38
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.49 $10.47 $10.40
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------------
Net Investment Income 0.11(3) 0.28(3) 0.05
- ---------------------------------
Net Realized and
Unrealized Gain (Loss) (0.17) 0.14 0.07
- --------------------------------------------------------------------------------
Total From
Investment Operations (0.06) 0.42 0.12
- --------------------------------------------------------------------------------
Distributions
- ---------------------------------
From Net
Investment Income (0.11) (0.29) (0.05)
- ---------------------------------
From Net Realized Gains -- (0.11) --
- --------------------------------------------------------------------------------
Total Distributions (0.11) (0.40) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.32 $10.49 $10.47
================================================================================
TOTAL RETURN(4) (0.54)% 4.07% 1.20%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.63%(5) 1.47% 1.38%(5)
- ---------------------------------
Ratio of Net Investment
Income to Average Net Assets 2.10%(5) 2.55% 3.23%(5)
- ---------------------------------
Portfolio Turnover Rate 204% 324% 151%(6)
- ---------------------------------
Net Assets, End of Period
(in thousands) $1,475 $1,347 $342
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (unaudited).
(2) January 31, 2003 (commencement of sale) through March 31, 2003.
(3) Computed using average shares outstanding throughout the period.
(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 March 31, 2003.
See Notes to Financial Statements.
- ------
39
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- ---------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------
2004(1) 2004 2003(2) 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.55 $6.13 $5.76 $6.18 $7.20 $8.54 $8.73
- ---------------------------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------
Net Investment Income 0.24 0.50 0.18 0.52 0.74 0.85 0.80
- ---------------------------
Net Realized and
Unrealized Gain (Loss) (0.01) 0.42 0.37 (0.42) (0.97) (1.39) (0.18)
- ---------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.23 0.92 0.55 0.10 (0.23) (0.54) 0.62
- ---------------------------------------------------------------------------------------------------
Distributions
- -----------------
From Net
Investment Income (0.24) (0.50) (0.18) (0.52) (0.79) (0.80) (0.80)
- ---------------------------
From Net
Realized Gains -- -- -- -- -- -- (0.01)
- ---------------------------------------------------------------------------------------------------
Total Distributions (0.24) (0.50) (0.18) (0.52) (0.79) (0.80) (0.81)
- ---------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.54 $6.55 $6.13 $5.76 $6.18 $7.20 $8.54
===================================================================================================
TOTAL RETURN(3) 3.69% 15.53% 9.61% 1.43% (3.56)% (7.08)% 7.03%
- ---------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.88%(4) 0.89% 0.88%(4) 0.90% 0.90% 0.90% 0.90%
- ---------------------------
Ratio of Net Investment
Income to Average
Net Assets 7.55%(4) 7.82% 7.22%(4) 8.37% 10.88% 10.09% 8.90%
- ---------------------------
Portfolio Turnover Rate 33% 80% 9% 80% 131% 77% 95%
- ---------------------------
Net Assets,
End of Period
(in thousands) $44,320 $54,074 $78,223 $50,287 $34,150 $25,126 $33,537
- ---------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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.
- ------
40
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Period Indicated
- --------------------------------------------------------------------------------
INSTITUTIONAL
CLASS
- --------------------------------------------------------------------------------
2004(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.43
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------------------
Net Investment Income 0.08
- -----------------------------------------------------------------
Net Realized and Unrealized Gain 0.11
- --------------------------------------------------------------------------------
Total From Investment Operations 0.19
- --------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------------------
From Net Investment Income (0.08)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.54
================================================================================
TOTAL RETURN(2) 2.95%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.68%(3)
- -----------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 7.87%(3)
- -----------------------------------------------------------------
Portfolio Turnover Rate 33%(4)
- -----------------------------------------------------------------
Net Assets, End of Period (in thousands) $214
- --------------------------------------------------------------------------------
(1) August 2, 2004 (commencement of sale) through September 30, 2004
(unaudited).
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(3) Annualized.
(4) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the six months ended September 30, 2004.
See Notes to Financial Statements.
- ------
41
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003(2) 2002(3)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.55 $6.13 $5.76 $6.22
- --------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------------
Net Investment Income 0.24 0.49 0.18 0.30
- -------------------------------
Net Realized and
Unrealized Gain (Loss) (0.01) 0.42 0.37 (0.46)
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.23 0.91 0.55 (0.16)
- --------------------------------------------------------------------------------
Distributions
- -------------------------------
From Net
Investment Income (0.24) (0.49) (0.18) (0.30)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.54 $6.55 $6.13 $5.76
================================================================================
TOTAL RETURN(4) 3.56% 15.35% 9.63% (2.72)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.13%(5) 1.12% 0.84%(5) 1.15%(5)
- -------------------------------
Ratio of Operating
Expenses to Average
Net Assets
(Before Expense Waiver) 1.13%(5) 1.14%(6) 1.13%(5)(6) 1.15%(5)
- -------------------------------
Ratio of Net
Investment Income
to Average Net Assets 7.30%(5) 7.59% 7.27%(5) 7.63%(5)
- -------------------------------
Ratio of Net Investment
Income to Average Net Assets
(Before Expense Waiver) 7.30%(5) 7.57%(6) 6.98%(5)(6) 7.63%(5)
- -------------------------------
Portfolio Turnover Rate 33% 80% 9% 80%(7)
- -------------------------------
Net Assets,
End of Period
(in thousands) $476 $242 $1 $4
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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) Annualized.
(6) During the period ended March 31, 2003, and the year ended March 31, 2004
the distributor voluntarily waived a portion of the distribution and service
fees.
(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.
- ------
42
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.55 $6.13 $5.98
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------------
Net Investment Income 0.24 0.49 0.07
- ---------------------------------
Net Realized and
Unrealized Gain (Loss) (0.01) 0.42 0.15
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.23 0.91 0.22
- --------------------------------------------------------------------------------
Distributions
- ---------------------------------
From Net
Investment Income (0.24) (0.49) (0.07)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.54 $6.55 $6.13
================================================================================
TOTAL RETURN(3) 3.56% 15.24% 3.74%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.13%(4) 1.14% 1.13%(4)
- ---------------------------------
Ratio of Net
Investment Income
to Average Net Assets 7.30%(4) 7.57% 8.01%(4)
- ---------------------------------
Portfolio Turnover Rate 33% 80% 9%(5)
- ---------------------------------
Net Assets,
End of Period
(in thousands) $14,826 $12,449 $763
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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.
- ------
43
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.55 $6.13 $5.98
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------------
Net Investment Income 0.21 0.44 0.07
- ---------------------------------
Net Realized and
Unrealized Gain (Loss) (0.01) 0.42 0.15
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.20 0.86 0.22
- --------------------------------------------------------------------------------
Distributions
- ---------------------------------
From Net
Investment Income (0.21) (0.44) (0.07)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.54 $6.55 $6.13
================================================================================
TOTAL RETURN(3) 3.18% 14.38% 3.64%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.88%(4) 1.89% 1.86%(4)
- ---------------------------------
Ratio of Operating
Expenses to Average
Net Assets
(Before Expense Waiver) 1.88%(4) 1.89% 1.88%(4)(5)
- ---------------------------------
Ratio of Net Investment
Income to Average Net Assets 6.55%(4) 6.82% 7.27%(4)
- ---------------------------------
Ratio of Net Investment
Income to Average Net Assets
(Before Expense Waiver) 6.55%(4) 6.82% 7.25%(4)(5)
- ---------------------------------
Portfolio Turnover Rate 33% 80% 9%(6)
- ---------------------------------
Net Assets, End of Period
(in thousands) $1,037 $855 $57
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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) During the period ended March 31, 2003, the distributor voluntarily waived
a portion of the distribution and service fees.
(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.
- ------
44
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2004(1) 2004 2003(2) 2002(3)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.55 $6.13 $5.76 $6.32
- --------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------------
Net Investment Income 0.21 0.45 0.16 0.41
- -------------------------------
Net Realized and
Unrealized Gain (Loss) (0.01) 0.42 0.37 (0.56)
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.20 0.87 0.53 (0.15)
- --------------------------------------------------------------------------------
Distributions
- -------------------------------
From Net
Investment Income (0.21) (0.45) (0.16) (0.41)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.54 $6.55 $6.13 $5.76
================================================================================
TOTAL RETURN(4) 3.17% 14.60% 9.28% (2.49)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.88%(5) 1.72% 1.63%(5) 1.65%(5)
- -------------------------------
Ratio of Net
Investment Income
to Average Net Assets 6.55%(5) 6.99% 6.48%(5) 7.78%(5)
- -------------------------------
Portfolio Turnover Rate 33% 80% 9% 80%(6)
- -------------------------------
Net Assets,
End of Period
(in thousands) $3,361 $3,590 $283 $31
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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.
- ------
45
Share Class Information
Six classes of shares are authorized for sale by the funds: Investor Class,
Institutional Class, Advisor Class, A Class, B Class, C Class. The total
expense ratios of Advisor, A, B, and C Class shares are higher than that of
Investor Class shares; the total expense ratio of Institutional Class shares is
lower than that of Investor Class shares. 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, depending on the amount invested. The initial sales charge
is deducted from the purchase amount before it is invested. A Class shares may
be subject to a contingent deferred sales charge (CDSC). There is no CDSC on
shares acquired through reinvestment of dividends or capital gains. The
prospectus contains information regarding reductions and waivers of sales
charges for A Class shares. A Class shares also are subject to a 0.25% annual
Rule 12b-1 service and distribution fee.
B CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. B Class shares redeemed within six years of purchase are
subject to a CDSC that declines from 5.00% during the first year after purchase
to 0.00% the sixth year after purchase. There is no CDSC on shares acquired
through reinvestment of dividends or capital gains. B Class shares also are
subject to a 1.00% annual Rule 12b-1 service and distribution fee. B Class
shares automatically convert to A Class shares (with lower expenses) eight years
after their purchase date.
(continued)
- ------
46
Share Class Information
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 1.00%.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- ------
47
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' investment manager, is
responsible for exercising the voting rights associated with the securities
purchased and/or held by the funds. A description of the policies and procedures
the manager uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century's Web site at americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
manager voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
(continued)
- ------
48
Additional Information
QUARTERLY PORTFOLIO DISCLOSURE
The funds file their complete schedules of portfolio holdings with the
Securities and Exchange Commission (SEC) for the first and third quarters of
each fiscal year on Form N-Q for periods ending on or after July 9, 2004. The
funds' Forms N-Q are available on the SEC's Web site at sec.gov, and may be
reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. The funds also make their complete schedules of
portfolio holdings for the most recent quarter of its fiscal year available on
its Web site at americancentury.com and, upon request, by calling
1-800-345-2021.
- ------
49
Index Definitions
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The LEHMAN BROTHERS 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 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 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.
The DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
- ------
50
Notes
- ------
51
Notes
- ------
52
[back cover]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY 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.
The American Century Investments logo, American Century and American Century
Investments are service marks of American Century Services Corporation.
0411 American Century Investment Services, Inc.
SH-SAN-40415N (c)2004 American Century Services Corporation
[front cover]
SEPTEMBER 30, 2004
[graphic of chart]
American Century Investments
Semiannual Report
[graphic of starfish on beach]
[graphic of covered bridge]
Premium Money Market Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You...................................................... 1
PREMIUM MONEY MARKET
Performance............................................................. 2
Shareholder Fee Example................................................. 3
Portfolio Commentary.................................................... 5
Schedule of Investments................................................. 6
FINANCIAL STATEMENTS
Statement of Assets and Liabilities..................................... 10
Statement of Operations................................................. 11
Statement of Changes in Net Assets...................................... 12
Notes to Financial Statements........................................... 13
Financial Highlights.................................................... 15
OTHER INFORMATION
Additional Information.................................................. 16
Index Definition........................................................ 18
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 Premium Money
Market fund for the six months ended September 30, 2004.
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.
Through our Web site, americancentury.com, we provide quarterly commentaries on
all American Century portfolios, the views of our senior investment officers,
and other communications about investments, portfolio strategy, and the markets.
Your next shareholder report for this fund will be the annual report dated March
31, 2005, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/ of James E. Stowers, Jr.
James E. Stowers, Jr. FOUNDER AND CHAIRMAN
/s/ of James E. Stowers III
James E. Stowers III CO-CHAIRMAN OF THE BOARD
- ------
1
Premium Money Market - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2004
----------------------
AVERAGE ANNUAL RETURNS
- ----------------------------------------------------------------------------------------
INCEPTION
1 YEAR 5 YEARS 10 YEARS DATE
- ----------------------------------------------------------------------------------------
PREMIUM MONEY MARKET 0.80% 2.88% 4.06% 4/1/93
- ----------------------------------------------------------------------------------------
90-DAY U.S. TREASURY BILL INDEX 1.11% 2.83% 3.97% --
- ----------------------------------------------------------------------------------------
LIPPER MONEY MARKET INSTRUMENT
FUNDS AVERAGE RETURN 0.42% 2.42% 3.73% --
- ----------------------------------------------------------------------------------------
Fund's Lipper Ranking(1) 35 of 400 25 of 298 18 of 168 --
- ----------------------------------------------------------------------------------------
(1) Lipper rankings are based on average annual total returns for the fund in a given
category for the periods indicated.
PORTFOLIO COMPOSTION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/04 3/31/04
- --------------------------------------------------------------------------------
A-1+ 75% 72%
- --------------------------------------------------------------------------------
A-1 25% 28%
- --------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
PORTFOLIO COMPOSTION BY MATURITY
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/04 3/31/04
- --------------------------------------------------------------------------------
1 - 30 days 53% 46%
- --------------------------------------------------------------------------------
31 - 90 days 33% 31%
- --------------------------------------------------------------------------------
91 - 180 days 10% 11%
- --------------------------------------------------------------------------------
More than 180 days 4% 12%
- --------------------------------------------------------------------------------
YIELDS AND WEIGHTED AVERAGE MATURITY
- --------------------------------------------------------------------------------
Current performance may be higher or lower 9/30/04
- --------------------------------------------------------------------------------
7-Day Current Yield 1.23%
- --------------------------------------------------------------------------------
7-Day Effective Yield 1.24%
- --------------------------------------------------------------------------------
9/30/04 3/31/04
- --------------------------------------------------------------------------------
Weighted Average
Maturity 45 days 66 days
- --------------------------------------------------------------------------------
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. To obtain performance data current to the most recent month end, please
call 1-800-345-2021 or visit americancentury.com.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the fund.
The 7-day current yield more closely reflects the current earnings of the fund
than the total return.Shareholder Fee Example (Unaudited)
- ------
2
Shareholder Fee Example (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from April 1, 2004 to September 30, 2004.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for the fund. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. Simply divide
your account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number under the heading
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of your fund and an
assumed rate of return of 5% per year before expenses, which is not the actual
return of a fund's share class. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in your fund and other funds. To do so,
(continued)
- ------
3
Shareholder Fee Example (Unaudited)
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE
4/1/04 9/30/04 9/30/04 RATIO*
PREMIUM MONEY MARKET
SHAREHOLDER FEE EXAMPLE
Actual $1,000 $1,004.40 $2.41 0.48%
- --------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,022.66 $2.43 0.48%
- --------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
183, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
- ------
4
Premium Money Market - Portfolio Commentary
PORTFOLIO MANAGER: LYNN PASCHEN
PERFORMANCE SUMMARY
For the six months ended September 30, 2004, Premium Money Market's total return
of 0.44% ranked in the top 10% of Lipper Inc.'s money market instrument funds
category (#39 out of 402 funds). Over the long term, the fund has produced
consistently similar results Premium Money Market's one- and five-year returns
ranked in the top 10% of its Lipper category, while its 10-year return ranked
in the top 11% of the Lipper group. (See page 2 for additional
performance information.)
ECONOMIC AND MARKET REVIEW
Economic data was mixed during the six-month period. The news was initially
positive as job growth increased sharply and retail sales surged in the second
quarter of the year. In the latter part of the period, however, evidence of
moderating economic growth appeared, including slowing manufacturing activity
and a drop in consumer confidence. Soaring oil and commodity prices also served
as a drag on the economy.
Nonetheless, the U.S. economy grew at an annualized rate of more than 3% during
the six-month period, higher than the average annual growth rate over the past
30 years. In June, the Federal Reserve embarked on a series of short-term
interest rate increases. The Fed raised rates by a quarter-point three times
during the period, boosting the federal funds rate target from a 46-year low of
1% to 1.75%--its highest level in two years.
Money market yields tracked the Fed's rate-raising activity--for example, the
three-month Treasury bill yield rose from 0.93% to 1.68% during the six-month
period.
PORTFOLIO STRATEGY
Premium Money Market's seven-day current yield increased from 0.70% at the
beginning of the six-month period to 1.23% as of September 30, 2004. Unlike
yields in the money market, the fund's yield does not immediately reflect Fed
rate hikes; the yield increases gradually as existing securities in the
portfolio mature and are replaced by new, higher-yielding securities.
Consequently, the Fed's last rate increase on September 21 was not fully
reflected in Premium Money Market's yield by the end of the period. It's also
worth remembering that the fund's yield is impacted by expenses.
We shortened the fund's average maturity--from around 65 days at the beginning
of the period to about 45 days by September 30--to enable its yield to more
quickly reflect higher short-term interest rates.
As recently as March 2002, commercial paper comprised two-thirds of Premium
Money Market's portfolio, but it has gradually declined to a much smaller
portion of the portfolio since then as a result of reduced commercial paper
issuance. We actually increased the portfolio's position in commercial paper
slightly over the past six months, from 36% to 38% of the portfolio. The
remaining segments of the portfolio also changed little during the period.
- ------
5
Premium Money Market - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------------
COMMERCIAL PAPER(1) - 37.7%
$ 4,000,000 American Family Financial
Services, Inc., 1.62%, 11/9/04 $ 3,992,980
- --------------------------------------------------------------------------------------
2,051,000 Amstel Funding Corp.,
1.66%, 10/15/04 (Acquired 9/3/04,
Cost $2,047,028)(2) 2,049,676
- -------------------------------------------------------------------------------------
5,000,000 Amstel Funding Corp.,
1.26%, 10/27/04 4,995,450
- -------------------------------------------------------------------------------------
9,900,000 Charta, LLC, 1.53%, 10/13/04 9,894,951
- -------------------------------------------------------------------------------------
5,700,000 Crown Point Capital Company,
1.66%, 10/4/04 (Acquired 9/7/04,
Cost $5,692,904)(2) 5,699,211
- -------------------------------------------------------------------------------------
8,000,000 Crown Point Capital Company,
1.60%, 10/18/04
(Acquired 8/16/04,
Cost $7,977,600)(2) 7,993,956
- -------------------------------------------------------------------------------------
6,000,000 Dakota Notes of the Citibank,
1.74%, 10/22/04
(Acquired 9/15/04,
Cost $5,989,270)(2) 5,993,910
- -------------------------------------------------------------------------------------
7,500,000 Dakota Notes of the Citibank,
1.64%, 10/25/04
(Acquired 8/26/04,
Cost $7,479,500)(2) 7,491,800
- -------------------------------------------------------------------------------------
3,000,000 Danske Corporation,
1.72%, 11/19/04 2,992,977
- -------------------------------------------------------------------------------------
4,700,000 Depfa Bank plc,
1.50%, 10/4/04 4,699,412
- -------------------------------------------------------------------------------------
3,600,000 Depfa Bank plc,
1.58%, 10/25/04 3,596,208
- -------------------------------------------------------------------------------------
5,000,000 Depfa Bank plc,
1.65%, 11/16/04 4,989,458
- -------------------------------------------------------------------------------------
5,500,000 Emerald Notes,
1.61%, 10/12/04 5,497,294
- -------------------------------------------------------------------------------------
6,300,000 Goldman Sachs Group Inc.,
1.60%, 11/8/04 6,289,360
- -------------------------------------------------------------------------------------
7,000,000 Govco Incorporated,
1.65%, 11/15/04 6,985,562
- -------------------------------------------------------------------------------------
7,700,000 Govco Incorporated,
1.86%, 12/17/04
(Acquired 9/21/04,
Cost $7,665,389)(2) 7,669,367
- -------------------------------------------------------------------------------------
4,900,000 HBOS Treasury Services plc,
1.65%, 11/10/04 4,891,017
- -------------------------------------------------------------------------------------
5,000,000 HBOS Treasury Services plc,
1.71%, 12/9/04 4,983,613
- -------------------------------------------------------------------------------------
7,000,000 ING (US) Funding LLC,
1.52%, 10/18/04 6,994,976
- -------------------------------------------------------------------------------------
5,000,000 ING America Insurance Holdings,
1.66%, 11/2/04 4,992,622
- -------------------------------------------------------------------------------------
5,000,000 Legacy Capital Company LLC,
1.60%, 10/4/04 4,999,333
- -------------------------------------------------------------------------------------
10,000,000 Lexington Parker Capital,
1.52%, 10/12/04 9,995,355
- -------------------------------------------------------------------------------------
4,000,000 Lexington Parker Capital,
1.65%, 11/16/04 3,991,567
- -------------------------------------------------------------------------------------
Principal Amount Value
- -------------------------------------------------------------------------------------
$10,000,000 Newcastle Certificates,
1.61%, 10/19/04 $ 9,991,951
- -------------------------------------------------------------------------------------
4,000,000 Newcastle Certificates,
1.88%, 12/14/04 (Acquired 9/23/04,
Cost $3,982,871)(2) 3,984,542
- -------------------------------------------------------------------------------------
4,500,000 Paradigm Funding LLC, 1.76%,
10/15/04 (Acquired 9/17/04,
Cost $4,493,840)(2) 4,496,920
- -------------------------------------------------------------------------------------
10,000,000 Paradigm Funding LLC,
1.66%, 11/16/04 9,978,789
- -------------------------------------------------------------------------------------
7,000,000 Ranger Funding Company LLC,
1.80%, 12/6/04 (Acquired 9/8/04,
Cost $6,968,850)(2) 6,976,900
- -------------------------------------------------------------------------------------
1,775,000 Receivables Capital Co. LLC,
1.62%, 10/1/04 (Acquired 9/3/04,
Cost $1,772,764)(2) 1,775,000
- -------------------------------------------------------------------------------------
4,828,000 Receivables Capital Co. LLC,
1.78%, 12/1/04 (Acquired 9/3/04,
Cost $4,806,754)(2) 4,813,438
- -------------------------------------------------------------------------------------
5,000,000 Spintab AB, 1.69%, 11/10/04 4,990,622
- -------------------------------------------------------------------------------------
1,002,000 Thunder Bay Funding Inc.,
1.75%, 10/1/04
(Acquired 9/17/04,
Cost $1,001,318)(2) 1,002,000
- -------------------------------------------------------------------------------------
2,300,000 UBS Finance Delaware LLC,
1.88%, 10/1/04 2,300,000
- -------------------------------------------------------------------------------------
3,770,000 UBS Finance Delaware LLC,
1.73%, 11/30/04 3,759,130
- -------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER 185,749,347
- -------------------------------------------------------------------------------------
CORPORATE BONDS - 23.3%
3,250,000 2880 Stevens Creek LLC, VRN,
1.92%, 10/6/04 3,250,000
- -------------------------------------------------------------------------------------
4,000,000 American Honda Finance Corp.,
VRN, 1.72%, 10/13/04, resets
quarterly off the 3-month LIBOR
plus 0.13% with no caps
(Acquired 9/30/04,
Cost $4,001,712)(2) 4,001,712
- -------------------------------------------------------------------------------------
5,000,000 Banque Nationale de Paris, VRN,
1.67%, 11/26/04, resets quarterly
off the 3-month LIBOR minus
0.08% with no caps 4,999,164
- -------------------------------------------------------------------------------------
6,550,000 Barclays Bank plc, VRN, 1.89%,
12/30/04, resets quarterly off the
3-month LIBOR minus 0.09%
with no caps 6,548,516
- -------------------------------------------------------------------------------------
9,000,000 Blue Heron Funding Limited,
VRN, 1.85%, 10/21/04, resets
monthly off the 1-month LIBOR
minus 0.03% with no caps
(Acquired 5/20/03,
Cost $9,000,000)(2) 9,000,000
- -------------------------------------------------------------------------------------
4,445,000 Building 3 LLC, VRN, 1.92%,
10/7/04 (Acquired 4/21/04,
Cost $4,445,000)(2) 4,445,000
- -------------------------------------------------------------------------------------
See Notes to Financial Statements.
(continued)
- ------
6
Premium Money Market - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------------
$ 8,000,000 General Electric Capital Corp.,
VRN, 2.01%, 12/15/04, resets
quarterly off the 3-month LIBOR
plus 0.13% with no caps $ 8,006,247
- -------------------------------------------------------------------------------------
5,200,000 Green Island Country Club Inc.,
VRN, 1.89%, 10/7/04 5,200,000
- -------------------------------------------------------------------------------------
5,000,000 HBOS Treasury Services plc,
VRN, 1.92%, 12/15/04, resets
quarterly off the 3-month LIBOR
plus 0.05% with no caps
(Acquired 3/11/04,
Cost $5,005,530)(2) 5,002,492
- -------------------------------------------------------------------------------------
6,650,000 Lee Group Inc./County Materials
Inc./Lees Aggregate & Trucking
Inc., VRN, 1.95%, 10/7/04 6,650,000
- -------------------------------------------------------------------------------------
1,420,000 PCP Investors LLC, VRN, 1.85%,
10/7/04 1,420,000
- -------------------------------------------------------------------------------------
5,000,000 Procter & Gamble Co., VRN,
1.83%, 12/9/04, resets quarterly
off the 3-month LIBOR minus
0.03% with no caps 5,000,000
- -------------------------------------------------------------------------------------
10,000,000 Rabobank Nederland N.V., VRN,
1.62%, 11/8/04, resets quarterly
off the 3-month LIBOR minus
0.095% with no caps 9,998,871
- ------------------------------------------------------------------------------------
2,000,000 Salvation Army, VRN,
1.84%, 10/7/04 2,000,000
- -------------------------------------------------------------------------------------
4,000,000 Six Ten Properties LLC,
1.86%, 11/4/04 4,000,000
- -------------------------------------------------------------------------------------
1,145,000 St. Mary's Congregation, VRN,
1.99%, 10/7/04 1,145,000
- -------------------------------------------------------------------------------------
10,000,000 Toyota Motor Credit Corp., VRN,
1.90%, 12/31/04, resets quarterly
off the 3-month LIBOR minus
0.08% with no caps 10,000,000
- -------------------------------------------------------------------------------------
5,000,000 Transamerica Occidental Life
Insurance Co., VRN, 1.80%,
11/1/04, 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, 1.79%, 11/7/04, 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
- -------------------------------------------------------------------------------------
5,000,000 U.S. Bank National Association,
VRN, 1.78%, 10/25/04, resets
monthly off the 1-month LIBOR
minus 0.06% with no caps 5,000,000
- -------------------------------------------------------------------------------------
5,000,000 Wells Fargo & Co., VRN, 1.98%,
12/24/04, resets quarterly off
the 3-month LIBOR plus 0.04%
with no caps 5,002,774
- -------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS 114,669,776
- -------------------------------------------------------------------------------------
Principal Amount Value
- -------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES - 21.0%
$ 4,000,000 FHLB, 2.00%, 11/15/04 $ 4,002,827
- -------------------------------------------------------------------------------------
10,000,000 FHLB, 1.42%, 11/26/04 10,000,000
- -------------------------------------------------------------------------------------
5,000,000 FHLB, 1.60%, 12/30/04 5,000,000
- -------------------------------------------------------------------------------------
10,000,000 FHLB, 1.50%, 2/4/05 10,000,000
- -------------------------------------------------------------------------------------
10,000,000 FHLB, 1.40%, 3/29/05 10,000,000
- -------------------------------------------------------------------------------------
5,000,000 FHLB, 1.40%, 4/4/05 5,000,000
- -------------------------------------------------------------------------------------
5,000,000 FHLB, 1.66%, 5/16/05 5,000,000
- -------------------------------------------------------------------------------------
10,000,000 FHLB, VRN, 1.48%,
10/5/04, resets quarterly
off the 3-month LIBOR
minus 0.12% with no caps 9,994,669
- -------------------------------------------------------------------------------------
10,000,000 FHLB, VRN, 1.53%,
10/5/04, resets quarterly
off the 3-month LIBOR
minus 0.07% with no caps 10,000,000
- -------------------------------------------------------------------------------------
4,620,000 FHLMC, 3.25%, 11/15/04 4,628,340
- -------------------------------------------------------------------------------------
10,000,000 FNMA, 1.50%, 2/15/05 10,001,138
- -------------------------------------------------------------------------------------
2,000,000 FNMA, 1.61%, 5/13/05 2,000,000
- -------------------------------------------------------------------------------------
10,000,000 FNMA, 1.80%, 5/27/05 10,000,000
- -------------------------------------------------------------------------------------
8,000,000 FNMA, VRN, 1.51%,
10/21/04, resets quarterly off
the 3-month LIBOR minus
0.13% with no caps 7,994,561
- -------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 103,621,535
- -------------------------------------------------------------------------------------
MUNICIPAL SECURITIES - 18.4%
2,500,000 American National Fish &
Wildlife Museum District Rev.,
Series 2004 B, VRDN, 1.94%,
10/7/04 (LOC: Commerce Bank N.A.) 2,500,000
- -------------------------------------------------------------------------------------
2,490,000 Arizona Health Facilities Auth.
Rev., Series 2003 C, (Terraces),
VRDN, 1.94%, 10/7/04 (LOC:
Sovereign Bank FSB) 2,490,000
- -------------------------------------------------------------------------------------
905,000 Board Trustees Morgan County
Memorial Hospital Rev., (Johnson
County), VRDN, 2.01%, 10/7/04
(LOC: Fifth Third Bank) 905,000
- -------------------------------------------------------------------------------------
1,860,000 Calexico Unified School District
COP, (Refinancing Project),
VRDN, 1.87%, 10/7/04 (XLCA)
(SBBPA: Wachovia Bank N.A.) 1,860,000
- -------------------------------------------------------------------------------------
900,000 California Statewide Communities
Development Auth. Rev., Series
2001 B, (American Modular),
VRDN, 1.95%, 10/7/04 (LOC:
Bank of the West) 900,000
- -------------------------------------------------------------------------------------
See Notes to Financial Statements.
(continued)
- ------
7
Premium Money Market - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- ------------------------------------------------------------------------------------
$ 350,000 Chesterfield County Industrial
Development Auth. Rev., Series
2002 B, (Virginia State
University), VRDN, 1.65%, 10/1/04 (LOC:
Bank of America N.A.) $ 350,000
- ------------------------------------------------------------------------------------
4,400,000 Cobb County Development Auth.
Rev., (Leeman Construction
Company), VRDN, 1.80%,
10/6/04 (LOC: SunTrust Bank) 4,400,000
- ------------------------------------------------------------------------------------
1,050,000 Colorado Health Facilities
Auth. Rev., Series 2004 B,
(Arapahoe House), VRDN, 1.85%,
10/7/04 (LOC: Wells
Fargo Bank N.A.) 1,050,000
- ------------------------------------------------------------------------------------
950,000 Colorado Housing & Finance
Auth. Rev., Series 2004 B,
(Corey Building), VRDN, 1.94%,
10/7/04 (LOC: Wells
Fargo Bank N.A.) 950,000
- ------------------------------------------------------------------------------------
3,250,000 Columbus Development Auth.
Rev., VRDN, 1.89%, 10/7/04
(LOC: Columbus Bank & Trust) 3,250,000
- ------------------------------------------------------------------------------------
5,000,000 Cook County GO, Series
2004 D, VRDN, 1.87%, 10/6/04 5,000,000
- ------------------------------------------------------------------------------------
5,105,000 Cook County Industrial
Development Rev., Series
1999 B, (Devorahco LLC), VRDN,
1.91%, 10/7/04 (LOC:
LaSalle Bank N.A.)(Acquired
3/23/01, Cost $5,105,000)(2) 5,105,000
- ------------------------------------------------------------------------------------
2,000,000 County of Cuyahoga Rev.,
Series 2004 B, (Gateway),
VRDN, 1.85%, 10/6/04
(SBBPA: Wachovia Bank N.A.) 2,000,000
- ------------------------------------------------------------------------------------
1,000,000 Greenville South Carolina
Memorial Auditorium District
COP, Series 1996 C, (BI-LO
Center), VRDN, 1.94%, 10/6/04
(LOC: Bank of America N.A.) 1,000,000
- ------------------------------------------------------------------------------------
4,345,000 Guam International Airport Auth.
Rev., Series 2003 D, 1.45%,
10/1/04 (MBIA) 4,345,000
- ------------------------------------------------------------------------------------
6,500,000 Gwinnett County Development
Auth. Rev., (Hopewell Christian
Academy), VRDN, 1.80%,
10/7/04 (LOC: Bank of America N.A.) 6,500,000
- ------------------------------------------------------------------------------------
3,000,000 Hale County Industrial
Development Corp. Rev.,
(Struikmans), VRDN, 2.00%, 10/7/04
(LOC: Bank of
the West) 3,000,000
- ------------------------------------------------------------------------------------
3,075,000 Homestead Special Obligation
Rev., (Speedway), VRDN, 1.80%,
10/6/04 (LOC: SunTrust Bank) 3,075,000
- ------------------------------------------------------------------------------------
750,000 Indiana Health Facility Financing
Auth. Rev., Series 2002 B,
(Golden Years), VRDN, 1.85%,
10/7/04 (LOC: Wells Fargo
Bank N.A.) 750,000
- ------------------------------------------------------------------------------------
Principal Amount Value
- ------------------------------------------------------------------------------------
$ 7,425,000 Kansas City Missouri Tax
Increment Rev., Series 2003 B,
(Chouteau Development
Company LLC), VRDN, 2.09%,
10/7/04 (MBIA) (SBBPA:
JPMorgan Chase Bank) $ 7,425,000
- ------------------------------------------------------------------------------------
7,145,000 Maryland State Health & Higher
Educational Facilities Auth. Rev.,
Series 1999 B, (Glen
Meadows Retirement), VRDN, 1.85%,
10/6/04 (LOC: First Union
National Bank) 7,145,000
- ----------------------------------------------------------------------------------
8,125,000 Montebello COP, VRDN, 1.92%,
10/6/04 (LOC: Union Bank of
California N.A. & California State
Teachers Retirement System) 8,125,000
- ----------------------------------------------------------------------------------
360,000 Nebraska Investment Finance
Auth. Multifamily Rev., Series
2001 B, (Riverbend
Apartments), VRDN, 1.96%,
10/7/04 (LOC: LaSalle Bank N.A.)
(Acquired 9/5/01,
Cost $360,000)(2) 360,000
- ----------------------------------------------------------------------------------
2,000,000 Olathe Industrial Rev., Series
1997 B, (Diamant Boart Inc.),
VRDN, 1.98%, 10/7/04 (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, 2.00%, 10/7/04 (LOC:
Allied Irish Bank plc) 2,000,000
- ----------------------------------------------------------------------------------
2,100,000 Osceola County Housing
Finance Auth. Rev., Series
2002 B, (Regatta Bay Apartments),
VRDN, 1.94%, 10/6/04 (LOC: JPMorgan
Chase Bank) 2,100,000
- ----------------------------------------------------------------------------------
100,000 Palm Beach County Florida
Housing Finance Auth. Rev.,
Series 2003 B,
(Renaissance), VRDN, s
1.94%, 10/6/04 (FNMA) 100,000
- ----------------------------------------------------------------------------------
3,625,000 Washington Higher
Education Facilities Auth.
Rev., Series 2003 B, (Cornish
College), VRDN,
1.80%, 10/6/04 (LOC: Bank
of America N.A.) 3,625,000
- ----------------------------------------------------------------------------------
2,690,000 West Covina Public
Financing Auth. Rev., Series
2002 A, VRDN, 1.92%, 10/6/04
(LOC: Union Bank
of California N.A.) 2,690,000
- ----------------------------------------------------------------------------------
1,930,000 Winder-Barrow Industrial
Building Auth. Rev., Series
2003 B, (Bankhead Highway),
VRDN, 1.80%, 10/7/04 (LOC: Bank of
America N.A.) 1,930,000
- ------------------------------------------------------------------------------------
See Notes to Financial Statements.
(continued)
- ------
8
Premium Money Market - Schedule of Investments
SEPTEMBER 30, 2004 (UNAUDITED)
Principal Amount Value
- ----------------------------------------------------------------------------------
$ 3,660,000 Wisconsin State Health &
Educational Facilities Auth.
Rev., Series 2004 C,
(Southwest Health), VRDN,
1.84%, 10/6/04 (LOC: Fifth
Third Bank) $ 3,660,000
- ----------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES 90,590,000
- ----------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 1.6%
8,000,000 Societe Generale, 1.62%,
11/12/04 (Acquired
8/17/04, Cost $7,999,415)(2) 7,999,718
- ----------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY
SECURITIES AND EQUIVALENTS - 1.0%
5,000,000 FHLMC STRIPS - COUPON,
1.50%, 1/15/05(1) 4,978,489
- ----------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES - 103.0% 507,608,865
- ----------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES - (3.0)% (14,728,306)
- ----------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $492,880,559
==================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
COP = Certificates of Participation
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 Corporation
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
STRIPS = Separate Trading of Registered Interest and Principal of Securities
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective September 30, 2004.
VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise
noted. Rate shown is effective September 30, 2004.
XLCA = XL Capital Ltd.
(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, 2004, was $111,860,642, which represented 22.7% of net
assets. Restricted securities considered illiquid represent 2.8% of net
assets.
See Notes to Financial Statements.
- ------
9
Statement of Assets and Liabilities
SEPTEMBER 30, 2004 (UNAUDITED)
ASSETS
Investment securities, at value
(amortized cost and cost for
federal income tax purposes) $507,608,865
- ------------------------------------------------------------
Receivable for capital shares sold 1,209
- ------------------------------------------------------------
Interest receivable 776,387
- ------------------------------------------------------------
Prepaid portfolio insurance 29,235
- --------------------------------------------------------------------------------
508,415,696
- --------------------------------------------------------------------------------
LIABILITIES
Disbursements in excess of demand deposit cash 11,272,176
- ------------------------------------------------------------
Payable for investments purchased 4,017,001
- ------------------------------------------------------------
Accrued management fees 186,095
- ------------------------------------------------------------
Dividends payable 59,865
- --------------------------------------------------------------------------------
15,535,137
- --------------------------------------------------------------------------------
NET ASSETS $492,880,559
================================================================================
CAPITAL SHARES
Outstanding (unlimited number of shares authorized) 492,887,184
================================================================================
NET ASSET VALUE PER SHARE $1.00
================================================================================
NET ASSETS CONSIST OF:
Capital paid in $492,881,000
- ------------------------------------------------------------
Accumulated net realized loss on investment transactions (441)
- --------------------------------------------------------------------------------
$492,880,559
================================================================================
See Notes to Financial Statements.
- ------
10
Statement of Operations
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)
INVESTMENT INCOME
INCOME:
- ---------------------------------------------------------------
Interest $3,392,099
- --------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------
Management fees 1,131,858
- ---------------------------------------------------------------
Trustees' fees and expenses 10,248
- ---------------------------------------------------------------
Portfolio insurance 43,495
- --------------------------------------------------------------------------------
1,185,601
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,206,498
- --------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENT TRANSACTIONS (441)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,206,057
================================================================================
See Notes to Financial Statements.
- ------
11
Statement of Changes in Net Assets
SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) AND YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2004 MARCH 31, 2004
OPERATIONS
Net investment income $ 2,206,498 $ 3,789,982
- ---------------------------------------
Net realized gain (loss) (441) 571
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 2,206,057 3,790,553
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (2,206,498) (3,789,982)
- ---------------------------------------
From net realized gains -- (571)
- --------------------------------------------------------------------------------
Decrease in net assets
from distributions (2,206,498) (3,790,553)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 138,775,408 360,682,687
- ---------------------------------------
Proceeds from reinvestment
of distributions 1,919,072 3,413,210
- ---------------------------------------
Payments for shares redeemed (127,153,986) (445,746,370)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions 13,540,494 (81,650,473)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 13,540,053 (81,650,473)
NET ASSETS
Beginning of period 479,340,506 560,990,979
- --------------------------------------------------------------------------------
End of period $492,880,559 $479,340,506
================================================================================
TRANSACTIONS IN SHARES OF THE FUND
Sold 138,775,408 360,682,687
- ---------------------------------------
Issued in reinvestment of distributions 1,919,072 3,413,210
- ---------------------------------------
Redeemed (127,153,986) (445,746,370)
- --------------------------------------------------------------------------------
Net increase (decrease) in
shares of the fund 13,540,494 (81,650,473)
================================================================================
See Notes to Financial Statements.
- ------
12
Notes to Financial Statements
SEPTEMBER 30, 2004 (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.
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 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 substantially all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS-- Distributions from net investment income 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)
- ------
13
Notes to Financial Statements
SEPTEMBER 30, 2004 (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 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 and accrued daily based on the daily net assets of the fund and paid
monthly in arrears. The fee consists of (1) an Investment Category Fee based on
the daily net assets of the funds and certain other accounts managed by the
investment manager that are in the same broad investment category as the fund
and (2) a Complex Fee based on the assets of all the funds in the American
Century family of funds. The rates for the Investment Category Fee range from
0.1170% to 0.2300% and the rates for the Complex Fee range from 0.2500% to
0.3100%. The effective annual management fee for the fund for the six months
ended September 30, 2004 was 0.46%.
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 equal to 0.018% to MBIA
based on participating money market funds' market value at January 31, 2004. The
premiums are amortized daily over one year.
Related Parties -- -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc., (ACC) the parent of the trust's investment manager, ACIM, the
distributor of the trust, American Century Investment Services, Inc., and the
trust's transfer agent, American Century Services Corporation. JPMorgan Chase
Bank is a custodian of the fund and is a wholly owned subsidiary of J.P. Morgan
Chase & Co. (JPM). JPM is an equity investor in ACC.
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 on the financial statements.
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14
Premium Money Market - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- ----------------------------------------------------------------------------------------------------
2004(1) 2004 2003 2002 2001 2000
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 0.01 0.03 0.06 0.05
- -----------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income --(2) (0.01) (0.01) (0.03) (0.06) (0.05)
- -----------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=====================================================================================================
TOTAL RETURN(3) 0.44% 0.74% 1.32% 3.03% 6.18% 5.18%
RATIOS/SUPPLEMENTAL DATA
Ratio of
Operating Expenses
to Average Net Assets 0.48%(4) 0.47% 0.47% 0.46% 0.45% 0.45%
- --------------------------
Ratio of Net
Investment Income
to Average Net Assets 0.89%(4) 0.73% 1.32% 2.91% 5.99% 5.09%
- --------------------------
Net Assets, End of Period
(in thousands) $492,881 $479,341 $560,991 $575,389 $526,794 $378,719
- -----------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2004 (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.
(4) Annualized.
See Notes to Financial Statements.
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15
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment 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 americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
manager voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
(continued)
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16
Additional Information
QUARTERLY PORTFOLIO DISCLOSURE
The fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q for periods ending on or after July 9, 2004. The fund's Form
N-Q is available on the SEC's Web site at sec.gov, and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings
for the most recent quarter of its fiscal year available on its Web site at
americancentury.com and, upon request, by calling 1-800-345-2021.
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17
Index Definition
The following index is used to illustrate investment market, sector, or style
performance or to serve as fund performance comparisons. It is not an investment
product 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.
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18
Notes
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19
Notes
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20
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY 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.
The American Century Investments logo, American Century
and American Century Investments are service marks
of American Century Services Corporation.
0410 American Century Investment Services, Inc.
SH-SAN-40411N (c)2004 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 for semiannual report filings.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedule of investments is included as part of the report to
stockholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant does not currently have in place procedures by which
shareholders may recommend nominees to the registrant's board.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) are effective based on their evaluation of these controls
and procedures as of a date within 90 days of the filing date of this
report.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) that occurred during the registrant's last fiscal
half-year that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Not applicable for semiannual report filings.
(a)(2) Separate certifications by the registrant's principal executive
officer and principal financial officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are filed and attached hereto as Exhibit
99.302CERT.
(a)(3) Not applicable.
(b) A certification by the registrant's chief executive officer and chief
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: American Century Investment Trust
By: /s/ William M. Lyons
--------------------------------------------
Name: William M. Lyons
Title: President
Date: December 3, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ William M. Lyons
--------------------------------------------
Name: William M. Lyons
Title: President
(principal executive officer)
Date: December 3, 2004
By: /s/ Maryanne L. Roepke
--------------------------------------------
Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer, and
Chief Accounting Officer
(principal financial officer)
Date: December 3, 2004
