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
-----------------------------
Date of fiscal year end: 03-31
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Date of reporting period: 09-30-2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
American Century Investments
SEMIANNUAL REPORT
[photo of grandmother and granddaughter canoeing]
SEPTEMBER 30, 2005
Prime Money Market Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PRIME MONEY MARKET
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholder Fee Example. . . . . . . . . . . . . . . . . . . . . . . . . . 5
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
Approval of Management Agreement for Prime Money Market Fund . . . . . . . 24
Share Class Information. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Index Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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, 2005.
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, 2006, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER
AMERICAN CENTURY COMPANIES, INC.
/s/James E. Stowers III
James E. Stowers III
CHAIRMAN OF THE BOARD
AMERICAN CENTURY COMPANIES, INC.
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1
Prime Money Market - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2005
--------------------------------------
AVERAGE ANNUAL RETURNS
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SINCE INCEPTION
6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
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INVESTOR CLASS 1.36%(2) 2.18% 2.01% 3.60%(2) 3.81%(2) 11/17/93
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90-DAY U.S.
TREASURY BILL INDEX 1.52% 2.63% 2.23% 3.67% 3.85%(3) --
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LIPPER MONEY MARKET
INSTRUMENT FUNDS
AVERAGE RETURN(4) 1.18% 1.85% 1.72% 3.36% 3.56%(3) --
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Fund's Lipper Ranking(4) 72 of 366 82 of 361 63 of 302 45 of 188 27 of 141(3) --
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Advisor Class 1.23% 1.93%(2) 1.76% -- 2.69% 8/28/98
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A Class 1/31/03
No sales charge* 1.25%(2) 1.94% -- -- 1.01%(2)
With sales charge* 0.25%(2) 1.94% -- -- 1.01%(2)
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B Class(2) 1/31/03
No sales charge* 0.86% 1.17% -- -- 0.57%
With sales charge* -4.14% -2.83% -- -- -0.55%
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C Class(2) 5/7/02
No sales charge* 0.98% 1.42% -- -- 0.60%
With sales charge* 0.23% 1.42% -- -- 0.60%
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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) Total returns for periods less than one year are not annualized.
(2) If American Century had not voluntarily waived or reimbursed all or a
portion of certain expenses, class returns would have been lower during
these periods.
(3) Since 11/30/93, the date nearest the Investor Class's inception for which
data are available.
(4) © 2005 Reuters. All rights reserved. Any copying, republication or
redistribution of Lipper content, including by caching, framing or similar
means, is expressly prohibited without the prior written consent of Lipper.
Lipper shall not be liable for any errors or delays in the content, or for
any actions taken in reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
Lipper Rankings -- Rankings are based only on the universe shown. This
listing might not represent the complete universe of funds tracked by
Lipper Inc.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be
reliable. Although carefully verified, data on compilations is not
guaranteed by Lipper Inc. -- A Reuters Company and may be incomplete. No
offer or solicitations to buy or sell any of the securities herein is being
made by Lipper.
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
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PORTFOLIO COMPOSITION BY CREDIT RATING
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/05 3/31/05
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A-1+ 66% 71%
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A-1 34% 29%
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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.
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PORTFOLIO COMPOSITION BY MATURITY
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/05 3/31/05
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1--30 days 60% 62%
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31--90 days 35% 36%
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91--180 days 5% 2%
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More than 180 days -- --
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YIELDS AND WEIGHTED AVERAGE MATURITY*
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INVESTOR CLASS -- 9/30/05
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7-Day Current Yield 3.18%
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7-Day Effective Yield 3.23%
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9/30/05 3/31/05
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Weighted Average
Maturity 32 days 30 days
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*Yields shown are for Investor Class only. Yields for other classes will vary
due to differences in fee structure.
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
Prime Money Market - Portfolio Commentary
PORTFOLIO MANAGER: DENISE LATCHFORD
PERFORMANCE SUMMARY
For the six months ended September 30, 2005, Prime Money Market returned 1.36%,*
ahead of the 1.18% average return of the 366 funds in Lipper Inc.'s money market
instrument funds category. The fund's six-month return ranked in the top 20% of
the Lipper category. Prime Money Market's relative performance has been
consistent over the long term--the fund's one-, five-, and 10-year returns all
rank in the top quarter of the Lipper group. (See page 2 for additional
performance information.)
ECONOMIC AND MARKET REVIEW
After growing by 4.2% in 2004--its fastest calendar-year growth rate since
1999--the U.S. economy slowed modestly during the past six months. U.S. economic
growth came in at a 3.3% annual rate in the second quarter of 2005, and the
preliminary estimate for the third quarter of 2005 was an annual rate of 3.8%.
Meanwhile, inflation continued to pick up--the consumer price index rose by 4.7%
during the 12 months ended September 30, 2005, compared with 3.1% for the 12
months ended March 31, 2005. A 34.8% increase in energy prices and a 14.5% rise
in transportation costs were the main reasons behind the higher inflation rate.
With the economy still growing at a solid pace and inflation on the rise, the
Federal Reserve extended its cycle of short-term interest rate increases. The
Fed raised rates by a quarter-point four times during the six-month period, for
a total of eleven quarter-point rate hikes since June 2004. The Fed's actions
boosted the federal funds rate target during the six month period to 3.75%, its
highest level in more than four years.
Money market rates generally rose along with the federal funds rate; the
three-month Treasury bill yield climbed from 2.79% to 3.55% during the six
months.
PORTFOLIO STRATEGY
Mirroring the general rise in money market yields, Prime Money Market's
seven-day current yield increased from 2.13% to 3.18% during the six-month
period. We maintained a relatively short average maturity of approximately 30-40
days for the portfolio so its yield would more quickly reflect rising money
market rates.
We continued to add to the portfolio's commercial paper (CP) holdings during the
six-month period, boosting our position from 44% to 49% of the portfolio. Yields
grew more attractive as CP issuance experienced its fifth consecutive quarterly
increase in the third quarter of 2005. We also cut back on our exposure to
floating-rate notes and modestly increased our holdings of certificates of
deposit, which offered more attractive yields in the latter part of the
six-month period.
OUR COMMITMENT
We will continue to seek capital preservation and high current income consistent
with an investment in high-quality short-term debt securities.
*All fund returns referenced in this commentary are for Investor Class shares.
Total returns for periods less than one year are not annualized.
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4
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, 2005 to September 30, 2005.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
(continued)
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5
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(1) ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 4/1/05 - EXPENSE
4/1/05 9/30/05 9/30/05 RATIO(1)
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PRIME MONEY MARKET SHAREHOLDER FEE EXAMPLE
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ACTUAL
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Investor Class (after waiver)(2) $1,000 $1,013.60 $2.93 0.58%
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Investor Class (before waiver) $1,000 $1,013.60(3) $3.03 0.60%
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Advisor Class (after waiver)(2) $1,000 $1,012.30 $4.19 0.83%
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Advisor Class (before waiver) $1,000 $1,012.30(3) $4.29 0.85%
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A Class $1,000 $1,012.50 $4.29 0.85%
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B Class (after waiver)(2) $1,000 $1,008.60 $7.96 1.58%
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B Class (before waiver) $1,000 $1,008.60(3) $8.06 1.60%
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C Class (after waiver)(2) $1,000 $1,009.80 $6.75 1.34%
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C Class (before waiver) $1,000 $1,009.80(3) $6.80 1.35%
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HYPOTHETICAL
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Investor Class (after waiver)(2) $1,000 $1,022.16 $2.94 0.58%
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Investor Class (before waiver) $1,000 $1,022.06 $3.04 0.60%
- -----------------------------------------------------------------------------------------------------------
Advisor Class (after waiver)(2) $1,000 $1,020.91 $4.20 0.83%
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Advisor Class (before waiver) $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 (after waiver)(2) $1,000 $1,017.15 $7.99 1.58%
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B Class (before waiver) $1,000 $1,017.05 $8.09 1.60%
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C Class (after waiver)(2) $1,000 $1,018.35 $6.78 1.34%
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C Class (before waiver) $1,000 $1,018.30 $6.83 1.35%
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(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 365, to reflect the one-half year period.
(2) During the six months ended September 30, 2005, the class had received a
partial waiver of its management fees.
(3) Ending account value assumes the return earned after waiver. The return
would have been lower had fees not been waived and would have resulted in a
lower ending account value.
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6
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
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COMMERCIAL PAPER(1) -- 47.4%
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$ 5,750,000 American Family Financial
Services, 3.97%, 1/20/06 $ 5,679,615
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11,500,000 American Family Financial
Services, Inc., 3.35%,
10/20/05 11,479,667
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21,500,000 American Honda Finance,
3.62%, 10/21/05 21,456,761
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29,500,000 American Honda Finance,
3.61%, 10/24/05 29,431,961
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25,000,000 Amstel Funding Corp., 3.53%,
10/18/05 (Acquired 7/15/05,
Cost $24,774,472)(2) 24,958,326
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25,000,000 Amstel Funding Corp., 3.74%,
11/22/05 (Acquired 8/18/05,
Cost $24,761,056)(2) 24,864,944
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9,300,000 Amstel Funding Corp., 3.84%,
12/15/05 (Acquired 9/20/05,
Cost $9,214,688)(2) 9,225,600
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30,000,000 Amsterdam Funding Corp.,
3.61%, 10/6/05 (Acquired
9/2/05, Cost $29,897,717)(2) 29,984,958
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5,049,000 Cedar Springs Capital Co.,
3.70%, 11/10/05 (Acquired
8/11/05, Cost $5,001,778)(2) 5,028,243
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6,511,000 Cedar Springs Capital Co.,
3.72%, 11/28/05 (Acquired
9/2/05, Cost $6,452,466)(2) 6,471,977
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20,000,000 Cedar Springs Capital Co.,
3.90%, 12/13/05 (Acquired
9/26/05, Cost $19,831,000)(2) 19,841,833
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20,228,000 Cedar Springs Capital Co.,
3.93%, 1/6/06 (Acquired
9/26/05, Cost $20,002,761)(2) 20,013,802
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15,000,000 Charta LLC, 3.70%,
11/14/05 (Acquired 8/16/05,
Cost $14,861,250)(2) 14,932,167
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18,500,000 CitiBank Credit Card Issuance
Trust, 3.72%, 10/18/05
(Acquired 9/14/05,
Cost $18,435,003)(2) 18,467,502
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15,000,000 CitiBank Credit Card Issuance
Trust, 3.75%, 11/14/05
(Acquired 9/13/05,
Cost $14,903,125)(2) 14,931,250
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10,000,000 Credit Suisse First Boston,
3.75%, 10/24/05 (Acquired
9/22/05, Cost $9,966,667)(2) 9,976,042
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2,200,000 Crown Point Capital Co.,
3.66%, 10/20/05 (Acquired
8/25/05, Cost $2,187,475)(2) 2,195,750
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7,000,000 Crown Point Capital Co.,
3.88%, 12/15/05 (Acquired
9/26/05, Cost $6,939,644)(2) 6,943,417
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4,490,000 Danske Corporation, 3.72%,
11/14/05 4,469,586
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30,000,000 Danske Corporation, 3.37%,
11/30/05 29,831,500
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Principal Amount Value
- --------------------------------------------------------------------------------
$50,000,000 DEPFA Bank plc, 3.46%,
10/11/05 (Acquired 7/5/05,
Cost $49,529,736)(2) $ 49,952,013
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22,000,000 Emerald Notes of the MBNA,
3.54%, 10/19/05 (Acquired
7/20/05, Cost $21,803,137)(2) 21,961,060
- --------------------------------------------------------------------------------
30,000,000 Emerald Notes of the MBNA,
3.63%, 10/26/05 (Acquired
8/1/05, Cost $29,739,850)(2) 29,924,375
- --------------------------------------------------------------------------------
6,000,000 Emerald Notes of the MBNA,
3.69%, 11/2/05 (Acquired
8/11/05, Cost $5,948,955)(2) 5,980,320
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20,000,000 Govco Incorporated, 3.74%,
11/23/05 (Acquired 8/24/05,
Cost $19,810,922)(2) 19,889,878
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21,000,000 Govco Incorporated, 3.77%,
11/28/05 (Acquired 8/26/05,
Cost $20,793,278)(2) 20,872,448
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6,500,000 Govco Incorporated, 3.70%,
12/7/05 (Acquired 9/7/05,
Cost $6,439,207)(2) 6,455,240
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22,025,000 ING (US) Funding LLC,
3.66%, 12/1/05 21,888,408
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15,300,000 ING (US) Funding LLC,
3.91%, 12/22/05 15,163,737
- --------------------------------------------------------------------------------
30,000,000 Lexington Parker Capital,
3.47%, 10/6/05 (Acquired
7/6/05, Cost $29,733,967)(2) 29,985,542
- --------------------------------------------------------------------------------
10,000,000 Lexington Parker Capital,
3.71%, 11/7/05 (Acquired
8/9/05, Cost $9,907,250)(2) 9,961,870
- --------------------------------------------------------------------------------
16,000,000 Lexington Parker Capital,
3.71%, 11/16/05 (Acquired
8/16/05, Cost $15,848,302)(2) 15,924,151
- --------------------------------------------------------------------------------
566,000 Lexington Parker Capital,
4.04%, 2/14/06 (Acquired
9/27/05, Cost $557,171)(2) 557,362
- --------------------------------------------------------------------------------
343,000 Lexington Parker Capital,
4.04%, 2/15/06 (Acquired
9/27/05, Cost $337,611)(2) 337,727
- --------------------------------------------------------------------------------
8,000,000 Morgan Stanley, 3.70%,
10/14/05 7,989,311
- --------------------------------------------------------------------------------
50,000,000 Morgan Stanley, 3.86%,
11/23/05 49,715,862
- --------------------------------------------------------------------------------
10,000,000 Newcastle Certificates, 3.66%,
10/7/05 (Acquired 9/6/05,
Cost $9,968,483)(2) 9,993,900
- --------------------------------------------------------------------------------
26,000,000 Newcastle Certificates, 3.67%,
10/17/05 (Acquired 8/19/05,
Cost $25,843,617)(2) 25,957,591
- --------------------------------------------------------------------------------
21,000,000 Newcastle Certificates, 3.74%,
11/16/05 (Acquired 8/18/05,
Cost $20,803,650)(2) 20,899,643
- --------------------------------------------------------------------------------
15,000,000 Northwestern University, Series
2005 A, 3.77%, 12/8/05 14,893,278
- --------------------------------------------------------------------------------
30,000,000 Paradigm Funding LLC, 3.90%,
10/3/05 (Acquired 9/30/05,
Cost $29,990,250)(2) 29,993,500
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
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7
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,251,000 Paradigm Funding LLC,
3.70%, 11/28/05 (Acquired
9/2/05, Cost $3,221,931)(2) $ 3,231,620
- --------------------------------------------------------------------------------
7,800,000 Rabobank USA Financial
Corp., 3.72%, 11/28/05 7,753,252
- --------------------------------------------------------------------------------
14,000,000 Societe Generale North
America, 3.86%, 12/19/05 13,881,412
- --------------------------------------------------------------------------------
21,400,000 Societe Generale North
America, 4.00%, 1/27/06 21,119,422
- --------------------------------------------------------------------------------
37,800,000 Spintab AB, 3.64%, 10/28/05 37,696,949
- --------------------------------------------------------------------------------
1,300,000 Spintab AB, 3.70%, 11/10/05 1,294,656
- --------------------------------------------------------------------------------
1,000,000 Spintab AB, 3.70%, 11/18/05 995,067
- --------------------------------------------------------------------------------
53,513,000 Thunder Bay Funding Inc.,
3.71%, 11/15/05 (Acquired
8/15/05, Cost $53,005,637)(2) 53,264,834
- --------------------------------------------------------------------------------
25,000,000 UBS Finance LLC,
3.70%, 12/6/05 24,830,646
- --------------------------------------------------------------------------------
5,500,000 UBS Finance LLC,
4.00%, 1/27/06 5,427,889
- --------------------------------------------------------------------------------
15,000,000 WestLB AG, 3.46%,
10/5/05 (Acquired 7/5/05,
Cost $14,867,558)(2) 14,994,241
- --------------------------------------------------------------------------------
30,000,000 WestLB AG, 3.39%,
11/23/05 (Acquired 5/23/05,
Cost $29,480,200)(2) 29,850,275
- --------------------------------------------------------------------------------
21,000,000 Windmill Funding Corp.,
3.59%, 10/3/05 (Acquired
8/9/05, Cost $20,884,821)(2) 20,995,812
- --------------------------------------------------------------------------------
8,000,000 Windmill Funding Corp.,
3.61%, 10/4/05 (Acquired
9/2/05, Cost $7,974,329)(2) 7,997,593
- --------------------------------------------------------------------------------
16,500,000 Windmill Funding Corp., 3.70%,
10/17/05 (Acquired 9/12/05-
9/13/05, Cost $16,442,188)(2) 16,472,867
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER 978,288,652
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 18.6%
9,700,000 215 Jane Investors LLC,
Series 2002, VRN, 3.80%,
10/5/05 (Acquired 6/11/02,
Cost $9,700,000)(2) 9,700,000
- --------------------------------------------------------------------------------
3,365,000 A&M Hospital Convention
Center, VRN, 3.91%, 10/6/05 3,365,000
- --------------------------------------------------------------------------------
1,315,000 A&M Hospitalities LLC, VRN,
3.91%, 10/6/05 1,315,000
- --------------------------------------------------------------------------------
4,520,000 Chaffee Point Hospitalities LLC,
VRN, 3.91%, 10/6/05 4,520,000
- --------------------------------------------------------------------------------
4,025,000 Colorado Natural Gas Inc.,
VRN, 3.84%, 10/6/05 4,025,000
- --------------------------------------------------------------------------------
3,550,000 Colorado Natural Gas Inc.,
VRN, 3.84%, 10/6/05 3,550,000
- --------------------------------------------------------------------------------
5,250,000 Dormitory Partnership Phase I,
VRN, 3.89%, 10/6/05 5,250,000
- --------------------------------------------------------------------------------
8,250,000 Fiore Capital LLC, VRN,
3.84%, 10/6/05 8,250,000
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$32,500,000 HBOS Treasury Services plc,
VRN, 3.59%, 10/12/05, resets
quarterly off the 3-month
LIBOR plus 0.03% with no
caps (Acquired 2/7/05,
Cost $32,516,933)(2) $ 32,505,192
- --------------------------------------------------------------------------------
1,545,000 Herman & Kittle Capital LLC,
VRN, 3.89%, 10/6/05 1,545,000
- --------------------------------------------------------------------------------
6,000,000 Herman & Kittle Capital LLC,
VRN, 3.89%, 10/6/05 6,000,000
- --------------------------------------------------------------------------------
50,000,000 Landesbank Baden-
Wuerttemberg (New York),
VRN, 3.68%, 10/13/05,
resets monthly off the
1-month LIBOR minus 0.06%
with no caps 49,999,754
- --------------------------------------------------------------------------------
20,000,000 Lloyds TSB Bank plc, VRN,
3.78%, 12/1/05, resets
quarterly off the 3-month
LIBOR minus 0.09%
with no caps 19,998,221
- --------------------------------------------------------------------------------
6,250,000 McMurry Residence
Partnership I Ltd., VRN,
3.89%, 10/6/05
(LOC: LaSalle Bank N.A.) 6,250,000
- --------------------------------------------------------------------------------
7,100,000 Mullenix-St Charles Properties
LP, VRN, 3.83%, 10/6/05 7,100,000
- --------------------------------------------------------------------------------
5,800,000 Oklahoma Christian University
Inc., VRN, 3.89%, 10/6/05 5,800,000
- --------------------------------------------------------------------------------
25,000,000 Paradigm Funding LLC, VRN,
3.80%, 10/31/05 (Acquired
9/26/05, Cost $25,000,000)(2) 25,000,000
- --------------------------------------------------------------------------------
32,000,000 Pfizer Inc., VRN, 3.66%,
11/4/05, resets quarterly off
the 3-month LIBOR minus
0.06% with no caps 32,000,000
- --------------------------------------------------------------------------------
5,450,000 Roman Catholic Bishop of San
Jose, VRN, 3.84%, 10/6/05 5,450,000
- --------------------------------------------------------------------------------
10,000,000 Salvation Army, VRN,
3.84%, 10/6/05 10,000,000
- --------------------------------------------------------------------------------
8,000,000 Salvation Army, VRN,
3.84%, 10/6/05 8,000,000
- --------------------------------------------------------------------------------
31,575,000 Toyota Motor Credit Corp.,
2.80%, 1/18/06 31,469,825
- --------------------------------------------------------------------------------
50,000,000 Transamerica Occidental Life
Insurance Co., VRN, 3.80%,
11/1/05, resets quarterly off
the 3-month LIBOR plus
0.11% with no caps (Acquired
11/9/99, Cost $50,000,000)(2) 50,000,000
- --------------------------------------------------------------------------------
41,000,000 Travelers Insurance Co. Group,
VRN, 3.82%, 11/7/05, 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
- --------------------------------------------------------------------------------
1,500,000 U.S. Bank N.A., VRN, 3.76%,
12/5/05, resets quarterly
off the 3-month LIBOR
with no caps 1,499,968
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$11,690,000 Woodgrain Millwork, VRN,
3.86%, 10/6/05 $ 11,690,000
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS 385,282,960
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 17.0%
- --------------------------------------------------------------------------------
3,520,000 Acworth Downtown
Development Auth. Rev.,
(Cable/Fiber Project),
VRDN, 3.80%, 10/6/05
(Ambac) (SBBPA: Bank of
America N.A.) 3,520,000
- --------------------------------------------------------------------------------
5,010,000 Babylon Industrial
Development Agency Rev.,
Series 2004 A, (Topiderm
Inc.), VRDN, 3.87%, 10/6/05
(LOC: Citibank N.A.) 5,010,000
- --------------------------------------------------------------------------------
5,625,000 Calexico Unified School
District COP, (Refinancing
Project), VRDN, 3.87%,
10/6/05 (XLCA) (SBBPA:
Wachovia Bank N.A.) 5,625,000
- --------------------------------------------------------------------------------
12,800,000 California Statewide
Communities Development
Auth. Rev., Series 2002 B,
(Biola University), VRDN,
3.80%, 10/6/05
(LOC: BNP Paribas) 12,800,000
- --------------------------------------------------------------------------------
7,235,000 California Statewide
Communities Development
Auth. Rev., Series 2005 B,
(Plan Nine), VRDN, 3.86%,
10/6/05 (LOC: Union Bank
of California N.A.) 7,235,000
- --------------------------------------------------------------------------------
3,275,000 Columbus Development
Auth. Rev., (Woodmont
Properties LLC), VRDN,
3.91%, 10/6/05 (LOC:
Columbus Bank & Trust) 3,275,000
- --------------------------------------------------------------------------------
20,000,000 Concordia College Rev.,
VRDN, 3.86%, 10/3/05
(LOC: Bank of America N.A.) 20,000,000
- --------------------------------------------------------------------------------
20,000,000 Cook County GO,
Series 2005 D, (Public
Improvements), VRDN,
3.86%, 10/5/05 (SBBPA:
DEPFA Bank plc) 20,000,000
- --------------------------------------------------------------------------------
15,000,000 Delaware County Auth. Rev.,
Series 2005 B, (Riddle Village),
VRDN, 3.85%, 10/6/05
(LOC: Lloyd's TSB Bank) 15,000,000
- --------------------------------------------------------------------------------
3,035,000 El Monte COP, Series 2003 B,
(Community Improvement),
VRDN, 3.89%, 10/6/05 (LOC:
California State Teacher's
Retirement System) 3,035,000
- --------------------------------------------------------------------------------
5,420,000 Fairfield Rev., Series 2005 A,
VRDN, 3.84%, 10/6/05 (LOC:
Landesbank Hessen-Thurigen
Girozentrale) 5,420,000
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 6,905,000 Gadsden Alabama Airport
Auth. Rev., VRDN, 3.85%,
10/6/05 (LOC: Southtrust
Bank N.A.) $ 6,905,000
- --------------------------------------------------------------------------------
7,880,000 Georgia Municipal Gas Auth.
Rev., (National Gas Utility
Improvements), VRDN, 3.87%,
10/6/05 (LOC: Wachovia Bank
N.A., Bayerische Landesbank,
and Bank One Kentucky N.A.) 7,880,000
- --------------------------------------------------------------------------------
7,600,000 Grand Traverse Band
Economic Development Corp.
Rev., VRDN, 3.80%, 10/6/05
(LOC: Bank of America N.A.) 7,600,000
- --------------------------------------------------------------------------------
9,800,000 Illinois Financial Auth. Rev.,
VRDN, 3.85%, 10/6/05
(LOC: LaSalle Bank N.A.) 9,800,000
- --------------------------------------------------------------------------------
10,250,000 Irondale GO Warrants, Series
2005, VRDN, 3.85%, 10/6/05
(LOC: Allied Irish Bank plc) 10,250,000
- --------------------------------------------------------------------------------
3,305,000 Irondale Public Building Auth.
Rev., VRDN, 3.85%, 10/6/05
(LOC: Allied Irish Bank plc) 3,305,000
- --------------------------------------------------------------------------------
9,000,000 Jackson Energy Auth. Rev.,
Series 2003 B, VRDN, 3.80%,
10/6/05 (FGIC) (SBBPA: Bank
of America N.A.) 9,000,000
- --------------------------------------------------------------------------------
6,000,000 Kankakee GO, (Exit 308),
VRDN, 3.85%, 10/6/05
(RADIAN) (SBBPA:
JPMorgan Chase Bank) 6,000,000
- --------------------------------------------------------------------------------
1,800,000 Las Cruces Industrial Rev.,
(F&A Dairy Products), VRDN,
3.92%, 12/1/05 (LOC: Wells
Fargo Bank N.A.) 1,800,000
- --------------------------------------------------------------------------------
3,000,000 Long Beach Rev., Series
2004 A, (Towne Center Site),
VRDN, 3.90%, 10/6/05
(LOC: Allied Irish Bank plc) 3,000,000
- --------------------------------------------------------------------------------
10,000,000 Michigan State Housing
Development Auth. Rev.,
Series 2002 C, VRDN, 3.85%,
10/5/05 (MBIA) (SBBPA:
Landesbank Hessen-Thurigen
Girozentrale) 10,000,000
- --------------------------------------------------------------------------------
7,500,000 Mississippi Business Finance
Corporation Rev., Series 2005,
(Future Pipe Industries, Inc.)
VRDN, 3.88%, 10/6/05
(LOC: Mashreqbank and Bank
of New York) 7,500,000
- --------------------------------------------------------------------------------
10,000,000 Mississippi Business Finance
Corporation Industrial
Development Rev.,
(VC Regional Assembly),
VRDN, 3.84%, 10/5/05
(LOC: JPMorgan Chase Bank) 10,000,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 8,605,000 Montgomery County
Redevelopment Auth.
Multifamily Housing Rev.,
Series 2001 A, (Kingswood
Apartments), VRDN, 3.84%,
10/6/05 (LOC: FNMA) $ 8,605,000
- --------------------------------------------------------------------------------
20,000,000 New Orleans Rev., VRDN,
4.10%, 10/6/05 (Ambac)
(SBBPA: Bank One Louisiana) 20,000,000
- --------------------------------------------------------------------------------
4,800,000 Newton Economic
Development Rev., (Medical
Office Plaza), VRDN, 3.80%,
10/6/05 (LOC: Bank of
America N.A.) 4,800,000
- --------------------------------------------------------------------------------
1,935,000 North Carolina Housing
Finance Agency Rev.,
Series 2003 D, (Multifamily),
VRDN, 3.84%, 10/5/05
(SBBPA: Wachovia Bank N.A.) 1,935,000
- --------------------------------------------------------------------------------
17,166,000 Oaks Christian School Rev.,
VRDN, 3.84%, 10/6/05
(LOC: U.S. Bank N.A.) 17,166,000
- --------------------------------------------------------------------------------
1,300,000 Olathe Industrial Rev.,
(Zschoche Family), VRDN,
3.89%, 10/6/05
(LOC: U.S. Bank N.A.) 1,300,000
- --------------------------------------------------------------------------------
5,000,000 Omaha Special Obligation
Rev., (Riverfront
Redevelopment), VRDN,
3.94%, 10/5/05 (Ambac)
(SBBPA: Dexia Credit Local) 5,000,000
- --------------------------------------------------------------------------------
2,000,000 Orange County Industrial
Development Auth. Rev.,
(Jewish Federation of Greater
Orlando), VRDN, 3.80%,
10/6/05 (LOC: Bank of
America N.A.) 2,000,000
- --------------------------------------------------------------------------------
11,780,000 Pasadena COP, (Los Robles
Avenue Parking Facilities),
VRDN, 3.84%, 10/4/05
(LOC: Bank of New York and
California State Teacher's
Retirement System) 11,780,000
- --------------------------------------------------------------------------------
1,295,000 Plymouth Rev., (Carlson
Center), VRDN, 3.89%,
10/6/05 (LOC: U.S. Bank
Trust N.A.) 1,295,000
- --------------------------------------------------------------------------------
1,800,000 Purdue Research Foundation,
3.73%, 11/9/05 (LOC: Bank
One N.A.) (Acquired 9/1/05,
Cost $1,800,000)(2) 1,800,000
- --------------------------------------------------------------------------------
9,990,000 Putnam County Industrial
Development Agency Rev.,
(Sincerity Facility LLC),
VRDN, 3.84%, 10/6/05
(LOC: Bank of New York) 9,990,000
- --------------------------------------------------------------------------------
6,400,000 Roman Catholic Diocese of
Raleigh Rev., Series 2002 A,
VRDN, 3.89%, 10/6/05
(LOC: Bank of America N.A.) 6,400,000
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 8,000,000 San Jose Financing Auth.
Lease Rev., Series 2001 B,
(Hayes Mansion Phase),
VRDN, 3.85%, 10/5/05
(Ambac) (SBBPA: Bank of
Nova Scotia) $ 8,000,000
- --------------------------------------------------------------------------------
19,500,000 Santa Clara Valley Water
District COP, Series 2005 A,
3.85%, 1/3/06 (LOC:
Westdeutshe Landesbank)
(Acquired 9/8/05,
Cost $19,256,006)(2) 19,303,971
- --------------------------------------------------------------------------------
4,870,000 Santa Rosa Pension Obligation
Rev., Series 2003 A, VRDN,
3.84%, 10/6/05 (LOC:
Landesbank Hessen-Thurigen
Girozentrale) 4,870,000
- --------------------------------------------------------------------------------
7,639,994 Savannah College of Art &
Design Inc. Rev., Series 2004
BD, VRDN, 3.84%, 10/6/05
(LOC: Bank of America N.A.) 7,639,994
- --------------------------------------------------------------------------------
13,235,000 Southeast Alabama Gas
District Rev., VRDN, 3.85%,
10/6/05 (XLCA) 13,235,000
- --------------------------------------------------------------------------------
4,245,000 Sterling Tax Allocation Rev.,
(Rock River Redevelopment),
VRDN, 3.91%, 10/5/05
(LOC: Wachovia Bank N.A.) 4,245,000
- --------------------------------------------------------------------------------
8,587,000 Tulare County Public Financing
Auth. Rev., (Millennium Fund
Program), VRDN, 3.70%,
10/3/05 (LOC: Bayerische
Landesbank) 8,587,000
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES 351,911,965
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 10.9%
- --------------------------------------------------------------------------------
50,000,000 American Express Centurion
Bank, 3.63%, 10/7/05
(Acquired 9/6/05,
Cost $50,000,000)(2) 50,000,000
- --------------------------------------------------------------------------------
23,000,000 Canadian Imperial Bank of
Commerce, 3.75%, 11/21/05
(Acquired 8/22/05,
Cost $23,000,000)(2) 23,000,000
- --------------------------------------------------------------------------------
30,000,000 Citibank N.A., 3.49%,
10/5/05 (Acquired 7/5/05,
Cost $30,000,000)(2) 30,000,000
- --------------------------------------------------------------------------------
25,000,000 Citibank N.A., 3.74%,
11/16/05 (Acquired 8/16/05,
Cost $25,000,000)(2) 25,000,000
- --------------------------------------------------------------------------------
32,000,000 Dexia Credit Local, 3.54%,
10/14/05 (Acquired 7/13/05,
Cost $32,000,000)(2) 32,000,000
- --------------------------------------------------------------------------------
25,000,000 First Tennessee Bank N.A.,
3.50%, 10/11/05 (Acquired
7/12/05, Cost $25,000,000)(2) 25,000,000
- --------------------------------------------------------------------------------
30,000,000 First Tennessee Bank N.A.,
3.62%, 10/11/05 (Acquired
8/12/05, Cost $30,000,000)(2) 30,000,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
10
Prime Money Market - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$10,000,000 HBOS Treasury Services
plc, 3.77%, 11/25/05
(Acquired 8/23/05,
Cost $10,000,000)(2) $ 10,000,000
- --------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 225,000,000
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES -- 3.0%
- --------------------------------------------------------------------------------
30,000,000 FHLB, VRN, 3.41%, 10/5/05,
resets quarterly off the
3-month LIBOR minus
0.12% with no caps 29,999,828
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$32,000,000 FNMA, VRN, 3.51%,
10/21/05, resets quarterly
off the 3-month LIBOR
minus 0.07% with no caps $ 31,998,871
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 61,998,699
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 96.9% 2,002,482,276
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 3.1% 64,266,667
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $2,066,748,943
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
Ambac = Ambac Assurance Corporation
COP = Certificates of Participation
FGIC = Financial Guaranty Insurance Co.
FHLB = Federal Home Loan Bank
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, 2005.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective September 30, 2005.
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,
2005, was $1,057,598,836, which represented 51.2% of total net assets.
Restricted securities considered illiquid represent 4.4% of total net
assets.
See Notes to Financial Statements.
- ------
11
Statement of Assets and Liabilities
SEPTEMBER 30, 2005 (UNAUDITED)
- -------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------
Investment securities, at value
(amortized cost and cost for
federal income tax purposes) $2,002,482,276
- ---------------------------------------------------------
Cash 60,586,901
- ---------------------------------------------------------
Receivable for capital shares sold 5,845
- ---------------------------------------------------------
Interest receivable 4,444,262
- ---------------------------------------------------------
Prepaid portfolio insurance 124,456
- -------------------------------------------------------------------------------
2,067,643,740
- -------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------
Accrued management fees 892,782
- ---------------------------------------------------------
Distribution fees payable 804
- ---------------------------------------------------------
Service fees (and distribution fees - A Class) payable 1,211
- -------------------------------------------------------------------------------
894,797
- -------------------------------------------------------------------------------
NET ASSETS $2,066,748,943
===============================================================================
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------
Capital paid in $2,066,770,340
- ---------------------------------------------------------
Accumulated net realized loss on investment transactions (21,397)
- -------------------------------------------------------------------------------
$2,066,748,943
===============================================================================
INVESTOR CLASS
- -------------------------------------------------------------------------------
Net assets $2,063,148,526
- ---------------------------------------------------------
Shares outstanding 2,063,170,450
- ---------------------------------------------------------
Net asset value per share $1.00
- -------------------------------------------------------------------------------
ADVISOR CLASS
- -------------------------------------------------------------------------------
Net assets $2,905,167
- ---------------------------------------------------------
Shares outstanding 2,904,633
- ---------------------------------------------------------
Net asset value per share $1.00
- -------------------------------------------------------------------------------
A CLASS
- -------------------------------------------------------------------------------
Net assets $226,408
- ---------------------------------------------------------
Shares outstanding 226,412
- ---------------------------------------------------------
Net asset value per share $1.00
- -------------------------------------------------------------------------------
B CLASS
- -------------------------------------------------------------------------------
Net assets $113,566
- ---------------------------------------------------------
Shares outstanding 113,572
- ---------------------------------------------------------
Net asset value per share $1.00
- -------------------------------------------------------------------------------
C CLASS
- -------------------------------------------------------------------------------
Net assets $355,276
- ---------------------------------------------------------
Shares outstanding 355,273
- ---------------------------------------------------------
Net asset value per share $1.00
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
12
Statement of Operations
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- --------------------------------------------------
Interest $33,112,695
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------
Management fees 5,778,352
- --------------------------------------------------
Distribution fees:
- --------------------------------------------------
Advisor Class 3,428
- --------------------------------------------------
B Class 387
- --------------------------------------------------
C Class 1,173
- --------------------------------------------------
Service fees:
- --------------------------------------------------
Advisor Class 3,428
- --------------------------------------------------
B Class 128
- --------------------------------------------------
C Class 587
- --------------------------------------------------
Service and distribution fees -- A Class 534
- --------------------------------------------------
Trustees' fees and expenses 53,339
- --------------------------------------------------
Portfolio insurance 185,979
- --------------------------------------------------------------------------------
6,027,335
Amount waived (137,779)
- --------------------------------------------------------------------------------
5,889,556
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 27,223,139
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
ON INVESTMENT TRANSACTIONS (2,025)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $27,221,114
================================================================================
See Notes to Financial Statements.
- ------
13
Statement of Changes in Net Assets
SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MARCH 31, 2005
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2005 MARCH 31, 2005
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 27,223,139 $ 24,723,495
- --------------------------------------------
Net realized gain (loss) (2,025) (11,590)
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 27,221,114 24,711,905
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income:
- --------------------------------------------
Investor Class (27,178,730) (24,691,275)
- --------------------------------------------
Advisor Class (33,694) (28,527)
- --------------------------------------------
A Class (5,445) (690)
- --------------------------------------------
B Class (879) (315)
- --------------------------------------------
C Class (4,391) (2,688)
- --------------------------------------------------------------------------------
Decrease in net assets
from distributions (27,223,139) (24,723,495)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions 99,296,007 (162,215,806)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 99,293,982 (162,227,396)
- --------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 1,967,454,961 2,129,682,357
- --------------------------------------------------------------------------------
End of period $2,066,748,943 $1,967,454,961
================================================================================
See Notes to Financial Statements.
- ------
14
Notes to Financial Statements
SEPTEMBER 30, 2005 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Investment Trust (the trust) is registered
under the Investment Company Act of 1940 (the 1940 Act) as an open-end
management investment company. Prime Money Market Fund (the fund) is one fund in
a series issued by the trust. The fund is diversified under the 1940 Act. The
fund's investment objective is to earn the highest level of current income while
preserving the value of your investment. The following is a summary of the
fund's significant accounting policies.
MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the
Advisor Class, the A Class, the B Class and the C Class. The A Class, B Class
and C Class may be subject to a contingent deferred sales charge. The share
classes differ principally in their respective sales charges and shareholder
servicing and distribution expenses and arrangements. All shares of the fund
represent an equal pro rata interest in the assets of the class to which such
shares belong, and have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except for class specific expenses and
exclusive rights to vote on matters affecting only individual classes. Income,
non-class specific expenses, and realized and unrealized capital gains and
losses of the fund are allocated to each class of shares based on their relative
net assets.
SECURITY VALUATIONS -- Securities are generally valued at amortized cost, which
approximates current market value. When such valuations do not reflect market
value, securities may be valued as determined in accordance with procedures
adopted by the Board of Trustees.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) 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 or American Century Global
Investment Management, Inc. (ACGIM), 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.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the fund. In addition, in the normal course of
business, the fund enters into contracts that provide general indemnifications.
The fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the fund. The risk of material
loss from such claims is considered by management to be remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
- ------
15
Notes to Financial Statements
SEPTEMBER 30, 2005 (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 fund and certain
other accounts managed by the investment advisor 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.
Effective July 29, 2005, ACIM voluntarily agreed to waive 0.039% of its
management fee. The effective annual management fee before waiver for the six
months ended September 30, 2005 was 0.58% for the Investor Class, A Class, B
Class, and C Class, and 0.33% for the Advisor Class. The effective annual
management fee after waiver for the six months ended September 30, 2005 was
0.56%, 0.31%, 0.58%, 0.56%, and 0.57% for the Investor Class, Advisor Class, A
Class, B Class, and C Class, respectively.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a Master
Distribution and Shareholder Services Plan for the Advisor Class (the Advisor
Class plan) and a separate Master Distribution and Individual Shareholder
Services Plan for each of the A Class, B Class and C Class (collectively with
the Advisor Class plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The
plans provide the Advisor Class, B Class and C Class will pay American Century
Investment Services, Inc. (ACIS) the following annual distribution and service
fees:
- --------------------------------------------------------------------------------
ADVISOR B C
- -------------------------------------------------------------------------------
Distribution Fee 0.25% 0.75% 0.50%
- -------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25%
- -------------------------------------------------------------------------------
The plans provide that the A Class will pay ACIS an annual distribution and
service fee of 0.25%. The fees are computed 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. Fees incurred under the plans during
the six months ended September 30, 2005, are detailed in the Statement of
Operations.
MONEY MARKET INSURANCE -- The fund, along with other money market funds managed
by ACIM, has entered into an insurance agreement with Ambac Assurance
Corporation (Ambac). Ambac provides limited coverage for certain loss events
including issuer defaults as to payment of principal or interest and insolvency
of a credit enhancement provider. The fund pays annual premiums to Ambac, which
are amortized daily over one year. For the six months ended September 30, 2005,
the annualized ratio of money market insurance expense to average net assets was
0.02%.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment advisor, ACIM, the
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services, LLC. JPMorgan Chase Bank is a custodian of the fund and 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, 2005 (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, 2005
- ------------------------------------------
Sold 1,019,279,787 $1,019,279,787
- ------------------------------------------
Issued in reinvestment of distributions 26,793,805 26,793,805
- ------------------------------------------
Redeemed (947,057,866) (947,057,866)
- --------------------------------------------------------------------------------
Net increase (decrease) 99,015,726 $ 99,015,726
================================================================================
YEAR ENDED MARCH 31, 2005
- ------------------------------------------
Sold 1,784,870,048 $1,784,870,048
- ------------------------------------------
Issued in reinvestment of distributions 24,240,697 24,240,697
- ------------------------------------------
Redeemed (1,971,397,036) (1,971,397,036)
- --------------------------------------------------------------------------------
Net increase (decrease) (162,286,291) $ (162,286,291)
================================================================================
ADVISOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2005
- ------------------------------------------
Sold 994,968 $994,968
- ------------------------------------------
Issued in reinvestment of distributions 33,694 33,694
- ------------------------------------------
Redeemed (683,490) (683,490)
- --------------------------------------------------------------------------------
Net increase (decrease) 345,172 $345,172
================================================================================
YEAR ENDED MARCH 31, 2005
- ------------------------------------------
Sold 3,619,279 $3,619,279
- ------------------------------------------
Issued in reinvestment of distributions 27,452 27,452
- ------------------------------------------
Redeemed (4,141,860) (4,141,860)
- --------------------------------------------------------------------------------
Net increase (decrease) (495,129) $ (495,129)
================================================================================
A CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2005
- ------------------------------------------
Sold 4,381,990 $4,381,990
- ------------------------------------------
Issued in reinvestment of distributions 2,745 2,745
- ------------------------------------------
Redeemed (4,217,930) (4,217,930)
- --------------------------------------------------------------------------------
Net increase (decrease) 166,805 $ 166,805
================================================================================
YEAR ENDED MARCH 31, 2005
- ------------------------------------------
Sold 148,860 $148,860
- ------------------------------------------
Issued in reinvestment of distributions 656 656
- ------------------------------------------
Redeemed (115,029) (115,029)
- --------------------------------------------------------------------------------
Net increase (decrease) 34,487 $ 34,487
================================================================================
(continued)
- ------
17
Notes to Financial Statements
SEPTEMBER 30, 2005 (UNAUDITED)
3. CAPITAL SHARE TRANSACTIONS (CONTINUED)
SHARES AMOUNT
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2005
- ------------------------------------------
Sold 16,594 $16,594
- ------------------------------------------
Issued in reinvestment of distributions 300 300
- --------------------------------------------------------------------------------
Net increase (decrease) 16,894 $16,894
================================================================================
YEAR ENDED MARCH 31, 2005
- ------------------------------------------
Sold 24,166 $24,166
- ------------------------------------------
Issued in reinvestment of distributions 95 95
- ------------------------------------------
Redeemed (1,410) (1,410)
- --------------------------------------------------------------------------
Net increase (decrease) 22,851 $22,851
================================================================================
C CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 2005
- ------------------------------------------
Sold 79,988 $ 79,988
- ------------------------------------------
Issued in reinvestment of distributions 4,176 4,176
- ------------------------------------------
Redeemed (332,754) (332,754)
- --------------------------------------------------------------------------------
Net increase (decrease) (248,590) $(248,590)
================================================================================
YEAR ENDED MARCH 31, 2005
- ------------------------------------------
Sold 868,941 $868,941
- ------------------------------------------
Issued in reinvestment of distributions 2,649 2,649
- ------------------------------------------
Redeemed (363,314) (363,314)
- --------------------------------------------------------------------------------
Net increase (decrease) 508,276 $508,276
================================================================================
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, 2005, the fund had accumulated capital losses of $25,076 which
represent net capital loss carryovers that may be used to offset future realized
capital gains for federal income tax purposes. The capital loss carryovers of
$13,492 and $11,584 expire in 2011 and 2013, respectively.
- ------
18
Prime Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------------------
2005(1) 2005 2004 2003 2002(2) 2002 2001
- --------------------------------------------------------------------------------------------------------------
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 0.01 0.01 0.01 0.01 --(3) 0.03 0.06
- --------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------
From Net
Investment Income (0.01) (0.01) (0.01) (0.01) --(3) (0.03) (0.06)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==============================================================================================================
TOTAL RETURN(4) 1.36% 1.19% 0.58% 1.19% 0.13% 3.16% 6.05%
- --------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Ratio of
Operating
Expenses to
Average
Net Assets 0.58%(5)(6) 0.60% 0.61% 0.61% 0.60%(6) 0.60% 0.60%
- ------------------
Ratio of
Operating
Expenses
to Average
Net Assets
(Before
Expense Waiver) 0.60%(6) 0.60% 0.61% 0.61% 0.60%(6) 0.60% 0.60%
- ------------------
Ratio of Net
Investment
Income to
Average
Net Assets 2.70%(5)(6) 1.17% 0.58% 1.19% 1.48%(6) 3.13% 5.88%
- ------------------
Ratio of Net
Investment
Income to
Average Net
Assets (Before
Expense Waiver) 2.68%(6) 1.17% 0.58% 1.19% 1.48%(6) 3.13% 5.88%
- ------------------
Net Assets,
End of Period
(in thousands) $2,063,149 $1,964,135 $2,126,433 $2,574,694 $2,756,147 $2,796,914 $2,875,876
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) 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.
(5) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(6) Annualized.
- ------
19
Prime Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -------------------------------------------------------------------------------------------------------------
2005(1) 2005 2004 2003 2002(2) 2002 2001
- -------------------------------------------------------------------------------------------------------------
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 0.01 0.01 --(3) 0.01 --(3) 0.03 0.06
- -------------------------------------------------------------------------------------------------------------
Distributions
- -----------------
From Net
Investment Income (0.01) (0.01) --(3) (0.01) --(3) (0.03) (0.06)
- -------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=============================================================================================================
TOTAL RETURN(4) 1.23% 0.94% 0.33% 0.93% 0.10% 2.90% 5.79%
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.83%(5)(6) 0.85% 0.86% 0.86% 0.85%(6) 0.85% 0.85%
- -------------------------
Ratio of Operating
Expenses to Average
Net Assets
(Before Expense Waiver) 0.85%(6) 0.85% 0.86% 0.86% 0.85%(6) 0.85% 0.85%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets 2.45%(5)(6) 0.92% 0.33% 0.94% 1.23%(6) 2.88% 5.63%
- -------------------------
Ratio of Net Investment
Income to Average
Net Assets
(Before Expense Waiver) 2.43%(6) 0.92% 0.33% 0.94% 1.23%(6) 2.88% 5.63%
- -------------------------
Net Assets,
End of Period
(in thousands) $2,905 $2,560 $3,055 $5,431 $14,329 $13,609 $7,784
- -------------------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) 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.
(5) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(6) Annualized.
- ------
20
See Notes to Financial Statements.
Prime Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income 0.01 0.01 --(3) --(3)
- --------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.01) (0.01) --(3) --(3)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00
================================================================================
TOTAL RETURN(4) 1.25% 0.95% 0.38% 0.12%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to
Average Net Assets 0.85%(5) 0.85% 0.83%(6) 0.61%(5)(6)
- --------------------------
Ratio of Operating
Expenses to Average
Net Assets
(Before Expense Waiver) 0.85%(5) 0.85% 0.86% 0.86%(5)
- --------------------------
Ratio of Net
Investment Income to
Average Net Assets 2.43%(5) 0.92% 0.36%(6) 0.76%(5)(6)
- --------------------------
Ratio of Net
Investment Income to
Average Net Assets
(Before Expense Waiver) 2.43%(5) 0.92% 0.33% 0.51%(5)
- --------------------------
Net Assets,
End of Period
(in thousands) $226 $60 $25 $25
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) Annualized.
(6) The distributor voluntarily waived a portion of the service and
distribution fees.
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
- --------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2)
- -------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------
Income From
Investment Operations
- -----------------------------------------
Net Investment Income 0.01 --(3) --(3) --(3)
- -------------------------------------------------------------------------------
Distributions
- -----------------------------------------
From Net
Investment Income (0.01) --(3) --(3) --(3)
- -------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00
===============================================================================
TOTAL RETURN(4) 0.86% 0.34% 0.22% 0.12%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Ratio of Operating
Expenses to
Average Net Assets 1.58%(5)(6) 1.48%(7) 0.99%(7) 0.61%(6)(7)
- ------------------------
Ratio of Operating
Expenses to Average
Net Assets
(Before Expense Waiver) 1.60%(6) 1.60% 1.61% 1.61%(6)
- ------------------------
Ratio of Net
Investment Income to
Average Net Assets 1.70%(5)(6) 0.29%(7) 0.20%(7) 0.76%(6)(7)
- ------------------------
Ratio of Net Investment
Income (Loss) to
Average Net Assets
(Before Expense Waiver) 1.68%(6) 0.17% (0.42)% (0.24)%(6)
- ------------------------
Net Assets,
End of Period
(in thousands) $114 $97 $74 $25
- -------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(6) Annualized.
(7) The distributor voluntarily waived a portion of the service and
distribution fees.
See Notes to Financial Statements.
- ------
22
Prime Money Market - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS END MARCH 31 (EXCEPT AS NOTED)
- ------------------------------------------------------------------------------
C CLASS
- ------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2)
- ------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
Income From
Investment Operations
- ------------------------
Net Investment Income 0.01 0.01 --(3) --(3)
- ------------------------------------------------------------------------------
Distributions
- ------------------------
From Net
Investment Income (0.01) (0.01) --(3) --(3)
- ------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00
==============================================================================
TOTAL RETURN(4) 0.98% 0.57% 0.09% 0.40%
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Ratio of Operating
Expenses to
Average Net Assets 1.34%(5)(6) 1.28%(7) 1.10%(7) 1.34%(6)(7)
- ------------------------
Ratio of Operating
Expenses to
Average Net Assets
(Before Expense Waiver) 1.35%(6) 1.35% 1.36% 1.36%(6)
- ------------------------
Ratio of Net
Investment Income to
Average Net Assets 1.94%(5)(6) 0.49%(7) 0.09%(7) 0.47%(6)(7)
- ------------------------
Ratio of Net Investment
Income (Loss) to
Average Net Assets
(Before Expense Waiver) 1.93%(6) 0.42% (0.17)% 0.45%(6)
- ------------------------
Net Assets,
End of Period
(in thousands) $355 $604 $96 $40
- ------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(6) Annualized.
(7) The distributor voluntarily waived a portion of the service and
distribution fees.
See Notes to Financial Statements.
- ------
23
Approval of Management Agreement for
Prime Money Market Fund
Under Section 15(c) of the Investment Company Act, contracts for investment
advisory services are required to be reviewed, evaluated and approved by a
majority of a fund's independent directors or trustees (the "Directors") each
year. At American Century, this process -- referred to as the "15(c) Process" --
involves at least two board meetings spanning a 30 to 60 day period each year,
as well as meetings of the Corporate Governance Committee (comprised solely of
independent directors), which coordinates the board's 15(c) Process. In addition
to this annual review, the board and its committees oversee and evaluate at
quarterly meetings the nature and quality of significant services performed by
the advisor on behalf of the funds. At these meetings the board reviews fund
performance, provision of shareholder services, audit and compliance
information, and a variety of other reports from the advisor concerning fund
operations. The board, or committees of the board, also holds special meetings,
as needed.
ANNUAL CONTRACT REVIEW PROCESS
As part of the annual 15(c) Process undertaken during the most recent fiscal
half-year, the Directors requested and received extensive data and information
compiled by the advisor and certain independent providers of evaluative data
(the "15(c) Providers") concerning Prime Money Market (the "fund") and the
services provided to the fund under the management agreement. The information
included:
* the nature, extent and quality of investment management, shareholder
services and other services provided to the fund under the management
agreement;
* reports on the advisor's activities relating to the wide range of
programs and services the advisor provides to the fund and its shareholders
on a routine and non-routine basis;
* data comparing the cost of owning the fund to the cost of owning a
similar fund;
* data comparing the fund's performance to appropriate benchmarks
and/or a peer group of other mutual funds with similar investment
objectives and strategies;
* financial data showing the profitability of the fund to the advisor
and the overall profitability of the advisor; and
* data comparing services provided and charges to clients of the
advisor other than the fund.
In addition, the board also reviewed information provided by an independent
consultant retained by the board in connection with the 15(c) Process.
In keeping with its practice, the fund's board held two regularly scheduled
meetings and one special meeting to review and discuss the information provided
by the advisor and to complete its negotiations with the advisor regarding the
renewal of the management agreement, including the setting of the applicable
advisory fee. In addition, the independent directors and the Corporate
Governance Committee met to review and discuss the information provided and
evaluate the advisor's performance as manager of the fund. Working through the
Corporate Governance Committee, the board also retained a consultant to assist
it in its evaluation of the profitability of the fund and the advisor, and in
formulating the board's fee proposals. The board also had the benefit of the
(continued)
- ------
24
Approval of Management Agreement for
Prime Money Market Fund
advice of its independent counsel throughout the period.
FACTORS CONSIDERED
The Directors considered all of the information provided by the advisor, the
15(c) Providers, the board's consultant and its independent counsel, and
evaluated such information for each fund for which the board has responsibility.
The Directors did not identify any single factor as being all-important or
controlling, and each Director may have attributed different levels of
importance to different factors. In deciding to renew the agreement under the
terms ultimately determined by the board to be appropriate, the Directors'
decision was based on the following factors.
NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management
agreement, the advisor is responsible for providing or arranging for all
services necessary for the operation of the fund. The board noted that under the
management agreement, the advisor provides or arranges at its own expense a wide
variety of services including:
* fund construction and design
* portfolio security selection
* initial capitalization/funding
* securities trading
* custody of fund assets
* daily valuation of the fund's portfolio
* shareholder servicing and transfer agency, including shareholder
confirmations, recordkeeping and communications
* legal services
* regulatory and portfolio compliance
* financial reporting
* marketing and distribution
The Directors noted that many of these services have expanded over time both in
terms of quantity and complexity in response to shareholder demands, competition
in the industry and the changing regulatory environment. In performing their
evaluation, the Directors considered information received in connection with the
annual review, as well as information provided on an ongoing basis at their
regularly scheduled board and committee meetings.
INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services
provided is quite complex and allows fund shareholders access to professional
money management, instant diversification of their investments within an asset
class, the opportunity to easily diversify among asset classes, and liquidity.
In evaluating investment performance, the board expects the advisor to manage
the fund in accordance with its investment objectives and approved strategies.
In providing these services, the advisor utilizes teams of investment
professionals (portfolio managers, analysts, research assistants, and securities
traders) who require extensive information technology, research, training,
compliance and other systems to conduct their business. At each quarterly
meeting the board and the Portfolio Committee review investment performance
information for the fund, together with comparative information for appropriate
benchmarks and peer groups of funds managed similarly to the fund. Further, the
Portfolio Committee reports its assessment to the board. If performance concerns
are
(continued)
- ------
25
Approval of Management Agreement for
Prime Money Market Fund
identified, the Directors discuss with the advisor and its portfolio managers
the reasons for such results (e.g., market conditions, security selection) and
any efforts being undertaken to improve performance. The fund's performance was
above the median for its peer group for both one and three year periods.
SHAREHOLDER AND OTHER SERVICES. The advisor provides the fund with a
comprehensive package of transfer agency, shareholder, and other services. The
Quality of Service Committee reviews reports and evaluations of such services at
its regular quarterly meetings, including the annual meeting concerning contract
review, and reports to the board. The Quality of Service Committee reviews
interim reports between regularly scheduled meetings. These reports include, but
are not limited to, information regarding the operational efficiency and
accuracy of the shareholder and transfer agency services provided, staffing
levels, shareholder satisfaction (as measured by external as well as internal
sources), technology support, new products and services offered to fund
shareholders, securities trading activities, portfolio valuation services,
auditing services, and legal and operational compliance activities. Certain
aspects of shareholder and transfer agency service level efficiency and the
quality of securities trading activities are measured by independent third party
providers and are presented in comparison to other fund groups not managed by
the advisor.
COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor
provides detailed information concerning its cost of providing various services
to the fund, its profitability in managing the fund, its overall profitability,
and its financial condition. The Directors have reviewed with the advisor the
methodology used to prepare this financial information. This financial
information regarding the advisor is considered in order to evaluate the
advisor's financial condition, its ability to continue to provide services under
the management agreement, and the reasonableness of the current management fee.
The board has retained a consultant to assist it in this review.
ETHICS OF THE ADVISOR. The Directors generally consider the advisor's commitment
to providing quality services to shareholders and to conducting its business
ethically. They noted that the advisor's practices generally meet or exceed
industry best practices and that the advisor was not implicated in the industry
scandals of 2003 and 2004.
ECONOMIES OF SCALE. The Directors review reports provided by the advisor on
economies of scale for the complex as a whole and the year-over-year changes in
revenue, costs, and profitability. The Directors concluded that economies of
scale are difficult to measure with precision, particularly on a fund-by-fund
basis. This analysis is also complicated by the additional services and content
provided by the advisor and its reinvestment in its ability to provide and
expand those services. Accordingly, the Directors also seek to evaluate
economies of scale by reviewing other information, such as year-over-year
profitability of the advisor generally, the profitability of its management of
the fund specifically, the expenses incurred by the advisor in providing various
functions to the
(continued)
- ------
26
Approval of Management Agreement for
Prime Money Market Fund
fund, and the fee breakpoints of competitive funds not managed by the advisor.
The Directors believe the advisor is appropriately sharing economies of scale
through a competitive fee structure, through breakpoints that reduce fees as the
fund complex and the fund increases in size and through reinvestment in its
business to provide shareholders additional content and services. In particular,
separate breakpoint schedules based on the size of the entire fund complex and
on the size of the fund reflect the complexity of assessing economies of scale.
COMPARISON TO OTHER FUNDS' FEES. The fund pays the advisor a single,
all-inclusive (or unified) management fee for providing all services necessary
for the management and operation of the fund, other than brokerage expenses,
taxes, interest, extraordinary expenses, and the fees and expenses of the fund's
independent directors (including their independent legal counsel). Under the
unified fee structure, the advisor is responsible for providing all investment
advisory, custody, audit, administrative, compliance, recordkeeping, marketing
and shareholder services, or arranging and supervising third parties to provide
such services. By contrast, most other funds are charged a variety of fees,
including an investment advisory fee, a transfer agency fee, an administrative
fee, distribution charges and other expenses. Other than their investment
advisory fees and Rule 12b-1 distribution fees, all other components of the
total fees charged by these other funds may be increased without shareholder
approval. The board believes the unified fee structure is a benefit to fund
shareholders because it clearly discloses to shareholders the cost of owning
fund shares, and, since the unified fee cannot be increased without a vote of
fund shareholders, it shifts to the advisor the increased costs of operating the
fund and the risk of administrative inefficiencies. Part of the Directors'
analysis of fee levels involves comparing the fund's unified fee to the total
expense ratio of other funds in the fund's peer group. The unified fee charged
to shareholders of the fund was below the median of the total expense ratios of
its peer group.
COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The
Directors also requested and received information from the advisor concerning
the nature of the services, fees, and profitability of its advisory services to
advisory clients other than the fund. They observed that these varying types of
client accounts require different services and involve different regulatory and
entrepreneurial risks than the management of the fund. The Directors analyzed
this information and concluded that the fees charged and services provided to
the advisor's other clients did not suggest that the fund's fees were
unreasonable by comparison.
COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information
from the advisor concerning collateral benefits it receives as a result of its
relationship with the fund. They concluded that the advisor's primary business
is managing mutual funds and it generally does not use the fund or shareholder
information to generate profits in other lines of business, and therefore does
not derive any significant collateral benefits from them. The Directors noted
that the advisor receives
(continued)
- ------
27
Approval of Management Agreement for
Prime Money Market Fund
proprietary research from broker dealers that execute fund portfolio
transactions and concluded that this research is likely to benefit fund
shareholders. The Directors also determined that the advisor is able to provide
investment management services to clients other than the fund, at least in
part, due to its existing infrastructure built to serve the fund complex. The
Directors concluded, however, that the assets of those other clients are not
significant and that, in any event, the addition of such other assets to the
assets of the funds that use substantially the same investment management team
and strategy to determine whether breakpoints have been achieved captures for
the shareholders a portion of any benefit that exists.
CONCLUSIONS OF THE DIRECTORS
As a result of this process, the independent directors negotiated a one-year
waiver by the advisor of a portion of the management fee. These changes were
proposed by the Directors based on their review of the fund's percentile rank in
its peer group universe and the fact that the Directors seek as a general rule
to have total expense ratios of fixed income and money market funds in the
lowest 25th percentile of the fees of comparable funds. The advisor accepted the
principle of the fee waiver based on the fact that the lower fee will result in
increased competitiveness of the fund within its peer group universe. The fee
waiver, effective July 29, 2005, will result in a lowering of the management fee
of the fund by .039 percentage points below the current management fee.
Following these negotiations with the advisor, the independent directors
concluded that the investment management agreement between the fund and the
advisor is fair and reasonable in light of the services provided and should be
renewed.
- ------
28
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 those of Investor Class
shares.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through certain
financial intermediaries (such as banks, broker-dealers, insurance companies and
investment advisors), which may require payment of a transaction fee to the
financial intermediary.
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. The
prospectus contains information regarding reductions and waivers of sales
charges for A Class shares. The unified management fee for A Class shares is the
same as for Investor Class shares. A Class shares also are subject to a 0.25%
annual Rule 12b-1 service and distribution fee.
B CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. B Class shares redeemed within six years of purchase are
subject to a CDSC that declines from 5.00% during the first year after purchase
to 0.00% after the sixth year. There is no CDSC on shares acquired through
reinvestment of dividends or capital gains. The unified management fee for B
Class shares is the same as for Investor Class shares. B Class shares also are
subject to a 1.00% annual Rule 12b-1 service and distribution fee. B Class
shares automatically convert to A Class shares (with lower expenses) eight years
after their purchase date.
C CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. C Class shares redeemed within 12 months of purchase are
subject to a CDSC of 0.75%. There is no CDSC on shares acquired through
reinvestment of dividends or capital gains. The unified management fee for C
Class shares is the same as for Investor Class shares. C Class shares also are
subject to a Rule 12b-1 service and distribution fee of 0.75%.
All classes of shares represent a pro rata interest in the fund and generally
have the same rights and preferences.
- ------
29
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 advisor, 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 advisor uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century's Web site at americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
advisor voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The 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. 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.
- ------
30
Index Definition
The following index is used to illustrate investment market, sector, or style
performance or to serve as a fund performance comparison. It is not an
investment product available for purchase.
The 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.
- ------
31
Notes
- ------
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL 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 ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments
P.O. Box 419200
Kansas City, MO 64141-6200
PRSRT STD
U.S. POSTAGE PAID
AMERICAN CENTURY
COMPANIES
The American Century Investments logo, American Century
and American Century Investments are service marks
of American Century Proprietary Holdings, Inc.
American Century Investment Services, Inc., Distributor
(c)2005 American Century Proprietary Holdings, Inc. All rights reserved.
0511
SH-SAN-45978S
American Century Investments
SEMIANNUAL REPORT
[photo of boy]
SEPTEMBER 30, 2005
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Portfolio at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Yields. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Portfolio Composition by Credit Rating. . . . . . . . . . . . . . . . . . 18
Schedule of Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Shareholder Fee Examples . . . . . . . . . . . . . . . . . . . . . . . . . . 23
FINANCIAL STATEMENTS
Statement of Assets and Liabilities. . . . . . . . . . . . . . . . . . . . . 26
Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . 29
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 30
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
OTHER INFORMATION
Approval of Management Agreements for Diversified Bond and High-Yield. . . . 51
Share Class Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Index Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
The opinions expressed in each of the Portfolio Commentaries reflect those of
the portfolio management team as of the date of the report, and do not
necessarily represent the opinions of American Century or any other person in
the American Century organization. Any such opinions are subject to change at
any time based upon market or other conditions and American Century disclaims
any responsibility to update such opinions. These opinions may not be relied
upon as investment advice and, because investment decisions made by American
Century funds are based on numerous factors, may not be relied upon as an
indication of trading intent on behalf of any American Century fund. Security
examples are used for representational purposes only and are not intended as
recommendations to purchase or sell securities. Performance information for
comparative indices and securities is provided to American Century by third
party vendors. To the best of American Century's knowledge, such information is
accurate at the time of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III
WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the semiannual report for the American
Century Diversified Bond and High-Yield funds for the six months ended
September 30, 2005.
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 these funds will be the annual report dated
March 31, 2006, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER
AMERICAN CENTURY COMPANIES, INC.
/s/James E. Stowers III
James E. Stowers III
CHAIRMAN OF THE BOARD
AMERICAN CENTURY COMPANIES, INC.
- ------
1
Diversified Bond - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2005
--------------------------------
AVERAGE ANNUAL RETURNS
- -------------------------------------------------------------------------------------------
SINCE INCEPTION
6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------------------
INVESTOR CLASS 2.14% 2.82% -- -- 4.27% 12/3/01
- -------------------------------------------------------------------------------------------
LEHMAN BROTHERS U.S.
AGGREGATE INDEX(2) 2.31% 2.80% 6.62% 6.55% 5.14%(3) --
- -------------------------------------------------------------------------------------------
Institutional Class 2.24% 3.03% 6.07% 5.98% 5.92% 4/1/93
- -------------------------------------------------------------------------------------------
Advisor Class 2.01% 2.57% -- -- 4.01% 12/3/01
- -------------------------------------------------------------------------------------------
A Class 1/31/03
No sales charge* 2.01% 2.57% -- -- 3.12%(4)
With sales charge* -2.62% -2.08% -- -- 1.35%(4)
- -------------------------------------------------------------------------------------------
B Class 1/31/03
No sales charge* 1.63% 1.80% -- -- 2.37%(4)
With sales charge* -3.37% -2.20% -- -- 1.27%(4)
- -------------------------------------------------------------------------------------------
C Class 1/31/03
No sales charge* 1.63% 1.80% -- -- 2.44%(4)
With sales charge* 0.63% 1.80% -- -- 2.44%(4)
- -------------------------------------------------------------------------------------------
R Class -- -- -- -- 0.08%(1) 7/29/05
- -------------------------------------------------------------------------------------------
*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.
Diversified Bond acquired all of the net assets of the American Century
Intermediate-Term Bond Fund, the American Century Bond Fund, and the American
Century Premium Bond Fund on December 3, 2001, pursuant to a plan of
reorganization approved by the acquired funds' shareholders on November 16,
2001. Financial information prior to December 3, 2001 is that of the American
Century Premium Bond Fund and is used in calculating the performance of
Diversified Bond.
(1) Total returns for periods less than one year are not annualized.
(2) © 2005 Reuters. All rights reserved. Any copying, republication or
redistribution of Lipper content, including by caching, framing or similar
means, is expressly prohibited without the prior written consent of Lipper.
Lipper shall not be liable for any errors or delays in the content, or for
any actions taken in reliance thereon.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by
Lipper Inc. -- A Reuters Company and may be incomplete. No offer or
solicitations to buy or sell any of the securities herein is being made
by Lipper.
(3) Since 11/30/01, the date nearest the Investor Class's inception for which
data are available.
(4) Class returns would have been lower if American Century had not voluntarily
waived all or a portion of service and distribution fees.
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 2005
- --------------------------------------------------------------------------------
Investor Class 5.72% 5.19% 2.66% 2.82%
- --------------------------------------------------------------------------------
Lehman Brothers U.S. Aggregate Index 7.86% 5.41% 3.68% 2.80%
- --------------------------------------------------------------------------------
* 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.
Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. 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
PERFORMANCE SUMMARY
Diversified Bond and its broad market benchmark, the Lehman Brothers U.S.
Aggregate Index (Lehman Aggregate) posted total returns of 2.14%* and 2.31%,
respectively, for the six months ended September 30, 2005.
Like the index, the fund's returns were primarily governed by the performance of
the taxable, investment-grade U.S. bond market's largest sectors -- including
mortgage-backed, Treasury, corporate, and agency securities -- which posted
gains for the six months. The U.S. bond market rallied enough in April, May, and
August to more than offset declines in July and September.
RELATIVE PERFORMANCE KEYS
We positioned the fund defensively in anticipation of higher interest rates and
bond price depreciation as the Federal Reserve (the Fed) raised its overnight
rate target. Instead, despite the Fed's actions, longer-term rates fell and
bonds rallied enough to produce positive broad market returns.
In its defensive mode, Diversified Bond underperformed the Lehman Aggregate
during the bond rally months: April, May, and August. This, along with fund
expenses (fund returns were reduced by operating expenses while the index's were
not) contributed to the fund's relative underperformance for the six months.
ECONOMIC REVIEW
The U.S. economy grew at a moderate pace during the six months ended September
30, 2005, despite the devastation and disruption caused by Hurricanes Katrina
and Rita. The annualized real rate of GDP growth was 3.3% in the second quarter
and 3.8% in the third (by initial estimates) as short-term U.S. interest rates
and oil prices rose.
The Fed raised its rate target four times in six months, from 2.75% to 3.75%,
the highest since August 2001. Meanwhile, crude oil jumped 20%, from $55.40 to
$66.24 a barrel, after flirting with $70 a barrel at the end of August, when
Katrina hit the Gulf Coast.
Despite soaring energy costs, "core" inflation (excluding food and energy
prices) was stable -- the year-to-date annualized gain for core CPI as of
September 30, 2005, was 2.0%, compared with the 2.2% rate for 2004.
BOND MARKET REVIEW
Longer-term interest rates and bond yields fell as economic growth remained
moderate and core inflation stayed low,
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
AS OF AS OF
9/30/05 3/31/05
- --------------------------------------------------------------------------------
Weighted Average
Maturity 5.7 years 5.9 years
- --------------------------------------------------------------------------------
Average Duration
(effective) 4.4 years 4.4 years
- --------------------------------------------------------------------------------
YIELDS AS OF SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor 4.04%
- --------------------------------------------------------------------------------
Institutional 4.24%
- --------------------------------------------------------------------------------
Advisor 3.78%
- --------------------------------------------------------------------------------
A Class 3.62%
- --------------------------------------------------------------------------------
B Class 3.02%
- --------------------------------------------------------------------------------
C Class 3.03%
- --------------------------------------------------------------------------------
R Class 3.53%
- --------------------------------------------------------------------------------
*All fund returns and yields referenced in this commentary are for Investor
Class shares. Total returns for periods less than one year are not annualized.
(continued)
- ------
4
Diversified Bond - Portfolio Commentary
even as shorter-term interest rates and yields rose with the Fed's rate hikes.
This caused the Treasury yield curve to "flatten" -- the gap between two- and
10-year Treasury yields narrowed.
The 10-year Treasury note returned 3.01% as its yield fell from 4.49% to 4.33%.
Longer-maturity/duration indices and bonds performed even better -- the 30-year
Treasury bond returned 5.13%. That helped make Treasurys (up 2.47%) the
top-performing major sector of the Lehman Aggregate while mortgage-backed
securities (MBS, up 2.12%) lagged. Corporate securities in the index returned
2.40%.
PORTFOLIO STRATEGY
As mentioned earlier, Diversified Bond was positioned defensively compared with
the Lehman Aggregate, with a focus on yield. The portfolio's biggest exposure,
by far, was in mortgage-related sectors -- MBS and CMOs -- totaling 38.2% of the
portfolio as of September 30. At the same time, compared with the index,
Diversified Bond was significantly underweight in Treasurys (just 10.3% of the
portfolio). Overweights compared with the index included sectors that offered
higher yields than Treasurys (commercial MBS, asset-backed securities, and
agency securities) or offered inflation protection (Treasury inflation-protected
securities).
In anticipation of a flattening Treasury yield curve, we used a Treasury futures
overlay, a portfolio structure that performs well in a curve-flattening
environment, for most of the six months. We removed this structure in September,
when it appeared that the Fed might stop its rate hikes in the wake of Hurricane
Katrina.
OUR COMMITMENT
We remain committed to seeking a high level of income by investing mostly in
investment-grade non-money market debt securities. These securities 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 above). The weighted average maturity of the portfolio must be three and
one-half years or longer.
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/05 3/31/05
- --------------------------------------------------------------------------------
Mortgage-Backed
Securities 26.0% 25.4%
- --------------------------------------------------------------------------------
Corporate Bonds 18.4% 15.9%
- --------------------------------------------------------------------------------
U.S. Government
Agency Securities 14.2% 7.4%
- --------------------------------------------------------------------------------
CMOs 12.2% 9.7%
- --------------------------------------------------------------------------------
U.S. Treasury Securities 10.3% 12.4%
- --------------------------------------------------------------------------------
Asset-Backed Securities 9.6% 15.9%
- --------------------------------------------------------------------------------
Municipal Securities 1.1% 0.2%
- --------------------------------------------------------------------------------
Sovereign Governments
& Agencies 0.8% 0.3%
- --------------------------------------------------------------------------------
Other(1) 2.1% 2.8%
- --------------------------------------------------------------------------------
Collateral Received
for Securities Lending 5.3% 10.0%
- --------------------------------------------------------------------------------
(1) Includes Temporary Cash Investments.
PORTFOLIO COMPOSITION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/05 3/31/05
- --------------------------------------------------------------------------------
AAA 76% 77%
- --------------------------------------------------------------------------------
AA 4% 3%
- --------------------------------------------------------------------------------
A 10% 7%
- --------------------------------------------------------------------------------
BBB 8% 10%
- --------------------------------------------------------------------------------
BB 2% 3%
- --------------------------------------------------------------------------------
- ------
5
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES(1) -- 32.8%
$ 9,500,000 FHLMC, 5.00%,
settlement date 10/18/05(2) $ 9,476,250
- --------------------------------------------------------------------------------
42,030 FHLMC, 6.50%, 2/1/09 43,409
- --------------------------------------------------------------------------------
50,452 FHLMC, 6.50%, 12/1/12 52,110
- --------------------------------------------------------------------------------
393,594 FHLMC, 6.00%, 1/1/13 404,516
- --------------------------------------------------------------------------------
66,478 FHLMC, 7.00%, 11/1/13 69,433
- --------------------------------------------------------------------------------
119,091 FHLMC, 7.00%, 6/1/14 124,379
- --------------------------------------------------------------------------------
499,368 FHLMC, 6.50%, 6/1/16 515,611
- --------------------------------------------------------------------------------
3,946,325 FHLMC, 5.00%, 11/1/17 3,939,983
- --------------------------------------------------------------------------------
6,270,683 FHLMC, 4.50%, 1/1/19 6,151,264
- --------------------------------------------------------------------------------
3,353 FHLMC, 8.50%, 10/1/26 3,653
- --------------------------------------------------------------------------------
36,848 FHLMC, 7.00%, 9/1/27 38,575
- --------------------------------------------------------------------------------
58,797 FHLMC, 6.50%, 1/1/28 60,694
- --------------------------------------------------------------------------------
9,617 FHLMC, 7.00%, 2/1/28 10,068
- --------------------------------------------------------------------------------
334,387 FHLMC, 6.50%, 3/1/29 345,036
- --------------------------------------------------------------------------------
221,553 FHLMC, 6.50%, 6/1/29 228,542
- --------------------------------------------------------------------------------
32,717 FHLMC, 7.00%, 8/1/29 34,198
- --------------------------------------------------------------------------------
102,299 FHLMC, 7.50%, 8/1/29 108,538
- --------------------------------------------------------------------------------
292,435 FHLMC, 6.50%, 5/1/31 301,218
- --------------------------------------------------------------------------------
180,549 FHLMC, 6.50%, 6/1/31 185,971
- --------------------------------------------------------------------------------
3,775,154 FHLMC, 5.50%, 12/1/33 3,779,096
- --------------------------------------------------------------------------------
29,680,438 FNMA, 6.00%,
settlement date 10/13/05(2) 30,181,296
- --------------------------------------------------------------------------------
25,825,000 FNMA, 6.50%,
settlement date 10/13/05(2) 26,583,609
- --------------------------------------------------------------------------------
11,627,500 FNMA, 5.00%,
settlement date 10/18/05(2) 11,598,431
- --------------------------------------------------------------------------------
20,977,500 FNMA, 5.50%,
settlement date 10/18/05(2) 21,285,618
- --------------------------------------------------------------------------------
113,863 FNMA, 6.00%, 2/1/09 116,940
- --------------------------------------------------------------------------------
110,233 FNMA, 6.00%, 5/1/13 75,487
- --------------------------------------------------------------------------------
148,608 FNMA, 6.00%, 7/1/13 152,890
- --------------------------------------------------------------------------------
190,267 FNMA, 6.00%, 12/1/13 195,750
- --------------------------------------------------------------------------------
168,301 FNMA, 6.00%, 1/1/14 173,150
- --------------------------------------------------------------------------------
319,557 FNMA, 6.00%, 2/1/14 328,765
- --------------------------------------------------------------------------------
297,738 FNMA, 6.00%, 4/1/14 306,317
- --------------------------------------------------------------------------------
3,007,308 FNMA, 5.50%, 12/1/16 3,053,387
- --------------------------------------------------------------------------------
6,269,425 FNMA, 4.50%, 5/1/19 6,143,629
- --------------------------------------------------------------------------------
184,949 FNMA, 6.50%, 1/1/26 191,133
- --------------------------------------------------------------------------------
31,285 FNMA, 7.00%, 12/1/27 32,809
- --------------------------------------------------------------------------------
7,482 FNMA, 6.50%, 1/1/28 7,730
- --------------------------------------------------------------------------------
13,254 FNMA, 7.00%, 1/1/28 13,900
- --------------------------------------------------------------------------------
65,246 FNMA, 7.50%, 4/1/28 69,189
- --------------------------------------------------------------------------------
132,198 FNMA, 7.00%, 5/1/28 138,588
- --------------------------------------------------------------------------------
10,318 FNMA, 7.00%, 6/1/28 10,816
- --------------------------------------------------------------------------------
45,202 FNMA, 6.50%, 1/1/29 46,685
- --------------------------------------------------------------------------------
129,093 FNMA, 6.50%, 4/1/29 133,293
- --------------------------------------------------------------------------------
155,728 FNMA, 7.00%, 7/1/29 163,210
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 155,105 FNMA, 7.50%, 7/1/29 $ 164,324
- --------------------------------------------------------------------------------
37,043 FNMA, 7.00%, 5/1/30 38,774
- --------------------------------------------------------------------------------
244,898 FNMA, 7.50%, 8/1/30 259,215
- --------------------------------------------------------------------------------
108,073 FNMA, 7.50%, 9/1/30 114,390
- --------------------------------------------------------------------------------
741,703 FNMA, 7.00%, 9/1/31 776,418
- --------------------------------------------------------------------------------
318,448 FNMA, 6.50%, 1/1/32 328,290
- --------------------------------------------------------------------------------
2,732,118 FNMA, 7.00%, 6/1/32 2,859,883
- --------------------------------------------------------------------------------
1,064,300 FNMA, 6.50%, 8/1/32 1,097,192
- --------------------------------------------------------------------------------
4,843,317 FNMA, 5.50%, 6/1/33 4,845,564
- --------------------------------------------------------------------------------
24,772,552 FNMA, 5.50%, 7/1/33 24,784,047
- --------------------------------------------------------------------------------
4,534,659 FNMA, 5.50%, 8/1/33 4,536,764
- --------------------------------------------------------------------------------
5,413,945 FNMA, 5.50%, 9/1/33 5,416,457
- --------------------------------------------------------------------------------
12,777,263 FNMA, 5.00%, 11/1/33 12,537,715
- --------------------------------------------------------------------------------
10,324,179 FNMA, 5.50%, 1/1/34 10,328,960
- --------------------------------------------------------------------------------
2,161,902 FNMA, 6.00%, 7/1/35 2,198,520
- --------------------------------------------------------------------------------
6,251,767 FNMA, 6.00%, 8/1/35 6,357,660
- --------------------------------------------------------------------------------
53,727 GNMA, 7.50%, 8/20/17 56,920
- --------------------------------------------------------------------------------
117,579 GNMA, 7.00%, 11/15/22 124,300
- --------------------------------------------------------------------------------
74,302 GNMA, 8.75%, 3/15/25 81,320
- --------------------------------------------------------------------------------
25,992 GNMA, 7.00%, 4/20/26 27,280
- --------------------------------------------------------------------------------
51,234 GNMA, 7.50%, 8/15/26 54,530
- --------------------------------------------------------------------------------
25,215 GNMA, 8.00%, 8/15/26 27,034
- --------------------------------------------------------------------------------
2,745 GNMA, 7.50%, 4/15/27 2,920
- --------------------------------------------------------------------------------
71,660 GNMA, 7.50%, 5/15/27 76,218
- --------------------------------------------------------------------------------
39,908 GNMA, 8.00%, 6/15/27 42,775
- --------------------------------------------------------------------------------
5,401 GNMA, 7.50%, 11/15/27 5,744
- --------------------------------------------------------------------------------
27,444 GNMA, 7.00%, 2/15/28 28,892
- --------------------------------------------------------------------------------
44,451 GNMA, 7.50%, 2/15/28 47,248
- --------------------------------------------------------------------------------
26,682 GNMA, 6.50%, 3/15/28 27,825
- --------------------------------------------------------------------------------
32,231 GNMA, 7.00%, 4/15/28 33,931
- --------------------------------------------------------------------------------
184,075 GNMA, 6.50%, 5/15/28 191,954
- --------------------------------------------------------------------------------
53,960 GNMA, 7.00%, 12/15/28 56,808
- --------------------------------------------------------------------------------
7,248 GNMA, 8.00%, 12/15/29 7,765
- --------------------------------------------------------------------------------
272,558 GNMA, 7.00%, 5/15/31 286,659
- --------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $205,415,013) 204,699,462
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 23.2%
AEROSPACE & DEFENSE -- 0.5%
- --------------------------------------------------------------------------------
1,880,000 United Technologies Corp.,
4.375%, 5/1/10 1,861,531
- --------------------------------------------------------------------------------
940,000 United Technologies Corp.,
5.40%, 5/1/35 942,610
- --------------------------------------------------------------------------------
2,804,141
- --------------------------------------------------------------------------------
AUTOMOBILES -- 0.1%
- --------------------------------------------------------------------------------
810,000 DaimlerChrysler N.A.
Holding Corp.,
4.875%, 6/15/10 794,637
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
BEVERAGES -- 0.3%
- --------------------------------------------------------------------------------
$ 640,000 Diageo Capital plc,
4.375%, 5/3/10 $ 630,245
- --------------------------------------------------------------------------------
1,500,000 Miller Brewing Co.,
4.25%, 8/15/08 (Acquired
8/6/03, Cost $1,494,855)(3) 1,479,686
- --------------------------------------------------------------------------------
2,109,931
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.3%
- --------------------------------------------------------------------------------
1,630,000 Genentech, Inc., 4.75%,
7/15/15 (Acquired 7/13/05,
Cost $1,628,973)(3) 1,601,767
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 1.2%
- --------------------------------------------------------------------------------
1,200,000 Goldman Sachs Group Inc.,
5.70%, 9/1/12 1,246,390
- --------------------------------------------------------------------------------
1,500,000 Goldman Sachs Group Inc.,
5.25%, 10/15/13 1,516,000
- --------------------------------------------------------------------------------
1,180,000 Merrill Lynch & Co. Inc.,
4.25%, 2/8/10 1,154,697
- --------------------------------------------------------------------------------
1,000,000 Merrill Lynch & Co. Inc.,
4.79%, 8/4/10 997,608
- --------------------------------------------------------------------------------
1,000,000 Morgan Stanley,
4.00%, 1/15/10(4) 968,732
- --------------------------------------------------------------------------------
900,000 Morgan Stanley,
4.25%, 5/15/10 878,176
- --------------------------------------------------------------------------------
950,000 Morgan Stanley,
4.75%, 4/1/14 918,103
- --------------------------------------------------------------------------------
7,679,706
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 2.0%
- --------------------------------------------------------------------------------
650,000 AmSouth Bancorp.,
5.20%, 4/1/15 658,252
- --------------------------------------------------------------------------------
3,100,000 Bank of America Corp.,
4.375%, 12/1/10 3,046,466
- --------------------------------------------------------------------------------
980,000 Marshall & Ilsley Bank,
4.125%, 9/4/07 973,138
- --------------------------------------------------------------------------------
1,600,000 PNC Bank N.A.,
4.875%, 9/21/17 1,556,163
- --------------------------------------------------------------------------------
1,230,000 SouthTrust Corp.,
5.80%, 6/15/14 1,288,847
- --------------------------------------------------------------------------------
1,330,000 Wachovia Bank N.A.,
4.80%, 11/1/14 1,308,278
- --------------------------------------------------------------------------------
2,080,000 Wachovia Bank N.A.,
4.875%, 2/1/15 2,054,822
- --------------------------------------------------------------------------------
1,840,000 Wells Fargo & Co.,
4.625%, 8/9/10 1,832,796
- --------------------------------------------------------------------------------
12,718,762
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.5%
- --------------------------------------------------------------------------------
650,000 R.R. Donnelley & Sons
Company, 3.75%, 4/1/09 623,576
- --------------------------------------------------------------------------------
960,000 R.R. Donnelley & Sons
Company, 4.95%, 5/15/10
(Acquired 5/18/05-5/19/05,
Cost $957,712)(3) 956,244
- --------------------------------------------------------------------------------
1,100,000 Waste Management, Inc.,
7.00%, 7/15/28 1,242,175
- --------------------------------------------------------------------------------
2,821,995
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 0.4%
- --------------------------------------------------------------------------------
$ 900,000 American Express Centurion
Bank, 4.375%, 7/30/09 $ 890,995
- --------------------------------------------------------------------------------
1,450,000 Capital One Financial Corp.,
4.80%, 2/21/12 1,416,004
- --------------------------------------------------------------------------------
2,306,999
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.3%
- --------------------------------------------------------------------------------
2,000,000 Ball Corp., 7.75%, 8/1/06 2,045,000
- --------------------------------------------------------------------------------
DIVERSIFIED -- 1.0%
- --------------------------------------------------------------------------------
5,225,000 Morgan Stanley TRACERS(reg.sm),
7.71%, 3/1/32 (Acquired
3/15/02-8/28/02,
Cost $5,546,048)(3) 6,239,356
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.6%
- --------------------------------------------------------------------------------
1,500,000 American General Finance
Corp., Series 2002 H,
4.50%, 11/15/07 1,495,382
- --------------------------------------------------------------------------------
3,570,000 Citigroup Inc., 5.00%, 9/15/14 3,557,065
- --------------------------------------------------------------------------------
1,170,000 Ford Motor Credit Co.,
6.50%, 1/25/07 1,171,722
- --------------------------------------------------------------------------------
730,000 Ford Motor Credit Co.,
7.375%, 10/28/09 705,747
- --------------------------------------------------------------------------------
1,500,000 General Motors Acceptance
Corp., 6.125%, 8/28/07 1,477,247
- --------------------------------------------------------------------------------
900,000 General Motors Acceptance
Corp., 6.75%, 12/1/14(4) 784,135
- --------------------------------------------------------------------------------
2,450,000 HSBC Finance Corp.,
4.75%, 4/15/10 2,443,079
- --------------------------------------------------------------------------------
1,270,000 HSBC Finance Corp.,
4.625%, 9/15/10 1,255,090
- --------------------------------------------------------------------------------
1,550,000 J.P. Morgan Chase & Co.,
6.75%, 2/1/11 1,679,112
- --------------------------------------------------------------------------------
1,690,000 Xlliac Global Funding,
4.80%, 8/10/10 (Acquired
8/3/05, Cost $1,684,288)(3) 1,680,884
- --------------------------------------------------------------------------------
16,249,463
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.6%
- --------------------------------------------------------------------------------
1,390,000 AT&T Corp., 9.05%, 11/15/11 1,572,437
- --------------------------------------------------------------------------------
1,465,000 British Telecommunications plc,
7.00%, 5/23/07 1,514,987
- --------------------------------------------------------------------------------
690,000 Deutsche Telekom International
Finance BV, 8.50%, 6/15/10 783,045
- --------------------------------------------------------------------------------
600,000 Deutsche Telekom International
Finance BV, 5.25%, 7/22/13 606,722
- --------------------------------------------------------------------------------
650,000 France Telecom, 7.75%, 3/1/11 738,881
- --------------------------------------------------------------------------------
1,180,000 Sprint Capital Corp.,
8.375%, 3/15/12 1,390,440
- --------------------------------------------------------------------------------
580,000 Sprint Capital Corp.,
8.75%, 3/15/32(4) 780,115
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
7
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 900,000 Telecom Italia Capital SA,
4.00%, 1/15/10 (Acquired
6/29/05-8/19/05,
Cost $873,900)(3) $ 865,031
- --------------------------------------------------------------------------------
1,010,000 Telecom Italia Capital SA,
5.25%, 10/1/15(4) 994,361
- --------------------------------------------------------------------------------
870,000 Verizon Virginia Inc.,
4.625%, 3/15/13 834,080
- --------------------------------------------------------------------------------
10,080,099
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 0.5%
- --------------------------------------------------------------------------------
910,000 Carolina Power & Light Co.,
5.15%, 4/1/15 913,180
- --------------------------------------------------------------------------------
860,000 CenterPoint Energy Resources
Corp., 6.50%, 2/1/08 889,323
- --------------------------------------------------------------------------------
950,000 Florida Power Corp.,
4.50%, 6/1/10 937,441
- --------------------------------------------------------------------------------
600,000 Tampa Electric Co.,
6.375%, 8/15/12(4) 646,544
- --------------------------------------------------------------------------------
3,386,488
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.8%
- --------------------------------------------------------------------------------
800,000 CVS Corp., 4.00%, 9/15/09 778,466
- --------------------------------------------------------------------------------
920,000 Kroger Co. (The), 6.80%, 4/1/11 981,598
- --------------------------------------------------------------------------------
850,000 Safeway Inc., 6.50%, 3/1/11(4) 887,648
- --------------------------------------------------------------------------------
1,600,000 Wal-Mart Stores Inc.,
4.125%, 7/1/10 1,563,008
- --------------------------------------------------------------------------------
720,000 Wal-Mart Stores Inc.,
5.25%, 9/1/35 699,348
- --------------------------------------------------------------------------------
4,910,068
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
880,000 Archer-Daniels-Midland Co.,
5.375%, 9/15/35(4) 855,752
- --------------------------------------------------------------------------------
1,610,000 Cadbury Schweppes U.S.
Finance LLC, 3.875%, 10/1/08
(Acquired 6/14/05-8/18/05,
Cost $1,579,968)(3) 1,571,798
- --------------------------------------------------------------------------------
980,000 WM Wrigley Jr. Co.,
4.30%, 7/15/10 967,664
- --------------------------------------------------------------------------------
3,395,214
- --------------------------------------------------------------------------------
GAS UTILITIES -- 0.1%
- --------------------------------------------------------------------------------
500,000 Columbia Energy Group,
6.80%, 11/28/05 501,875
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT -- 0.3%
- --------------------------------------------------------------------------------
1,710,000 Baxter Financial Corp.,
4.75%, 10/15/10
(Acquired 9/28/05,
Cost $1,704,801)(2)(3) 1,699,492
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 0.3%
- --------------------------------------------------------------------------------
1,500,000 Beckman Coulter Inc.,
7.45%, 3/4/08 1,587,168
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 1.2%
- --------------------------------------------------------------------------------
1,150,000 Mandalay Resort Group,
6.45%, 2/1/06(4) 1,160,063
- --------------------------------------------------------------------------------
1,700,000 MGM Mirage, 6.00%, 10/1/09 1,687,250
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,900,000 Park Place Entertainment
Corp., 7.875%, 12/15/05 $ 1,916,625
- --------------------------------------------------------------------------------
2,150,000 Yum! Brands Inc.,
8.875%, 4/15/11 2,549,538
- --------------------------------------------------------------------------------
7,313,476
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.3%
- --------------------------------------------------------------------------------
1,160,000 D.R. Horton Inc.,
7.875%, 8/15/11 1,272,476
- --------------------------------------------------------------------------------
670,000 KB Home, 6.375%, 8/15/11 674,935
- --------------------------------------------------------------------------------
1,947,411
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.9%
- --------------------------------------------------------------------------------
1,210,000 General Electric Capital Corp.,
6.125%, 2/22/11 1,284,773
- --------------------------------------------------------------------------------
4,310,000 General Electric Co.,
5.00%, 2/1/13 4,352,441
- --------------------------------------------------------------------------------
5,637,214
- --------------------------------------------------------------------------------
INSURANCE -- 1.3%
- --------------------------------------------------------------------------------
2,000,000 Allstate Financial Global
Funding, 4.25%, 9/10/08
(Acquired 9/3/03,
Cost $1,996,080)(3) 1,976,200
- --------------------------------------------------------------------------------
1,450,000 Genworth Financial Inc.,
5.75%, 6/15/14 1,522,087
- --------------------------------------------------------------------------------
950,000 Genworth Financial Inc.,
4.95%, 10/1/15(4) 936,352
- --------------------------------------------------------------------------------
650,000 MetLife, Inc., 5.00%, 6/15/15 642,834
- --------------------------------------------------------------------------------
2,200,000 Monumental Global Funding II,
3.85%, 3/3/08 (Acquired
2/5/03, Cost $2,199,956)(3) 2,160,317
- --------------------------------------------------------------------------------
950,000 Prudential Financial Inc.,
5.40%, 6/13/35 908,686
- --------------------------------------------------------------------------------
8,146,476
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 0.1%
- --------------------------------------------------------------------------------
350,000 IAC/InterActiveCorp,
7.00%, 1/15/13 369,515
- --------------------------------------------------------------------------------
MACHINERY -- 0.6%
- --------------------------------------------------------------------------------
2,000,000 Caterpillar Financial Services
Corp., 2.59%, 7/15/06 1,972,044
- --------------------------------------------------------------------------------
1,840,000 John Deere Capital Corp.,
4.50%, 8/25/08(4) 1,834,053
- --------------------------------------------------------------------------------
3,806,097
- --------------------------------------------------------------------------------
MEDIA -- 1.3%
- --------------------------------------------------------------------------------
260,000 Comcast Cable
Communications Holdings Inc.,
8.375%, 3/15/13 308,062
- --------------------------------------------------------------------------------
3,000,000 Comcast Corp.,
5.50%, 3/15/11(4) 3,060,750
- --------------------------------------------------------------------------------
2,295,000 Cox Communications Inc.,
4.625%, 1/15/10 2,246,087
- --------------------------------------------------------------------------------
1,000,000 News America Holdings,
7.75%, 1/20/24 1,150,089
- --------------------------------------------------------------------------------
1,650,000 Reed Elsevier Capital Inc.,
4.625%, 6/15/12 1,605,153
- --------------------------------------------------------------------------------
8,370,141
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
METALS & MINING -- 0.2%
- --------------------------------------------------------------------------------
$ 1,180,000 Alcan Inc., 4.50%, 5/15/13 $ 1,140,355
- --------------------------------------------------------------------------------
320,000 Alcan Inc., 5.00%, 6/1/15 315,287
- --------------------------------------------------------------------------------
1,455,642
- --------------------------------------------------------------------------------
MULTI-UTILITIES -- 0.9%
- --------------------------------------------------------------------------------
2,300,000 Dominion Resources Inc.,
4.125%, 2/15/08(4) 2,269,447
- --------------------------------------------------------------------------------
920,000 Dominion Resources Inc.,
4.75%, 12/15/10(4) 910,811
- --------------------------------------------------------------------------------
1,660,000 Nisource Finance Corp.,
5.25%, 9/15/17(4) 1,626,091
- --------------------------------------------------------------------------------
960,000 Pacific Gas & Electric Co.,
6.05%, 3/1/34 1,002,224
- --------------------------------------------------------------------------------
5,808,573
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.4%
- --------------------------------------------------------------------------------
600,000 May Department Stores Co.,
3.95%, 7/15/07 591,824
- --------------------------------------------------------------------------------
1,600,000 May Department Stores Co.,
4.80%, 7/15/09 1,595,016
- --------------------------------------------------------------------------------
2,186,840
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 1.1%
- --------------------------------------------------------------------------------
800,000 Anadarko Petroleum Corp.,
7.95%, 4/15/29 1,013,805
- --------------------------------------------------------------------------------
1,600,000 Devon Energy Corp.,
2.75%, 8/1/06 1,573,856
- --------------------------------------------------------------------------------
2,400,000 Enterprise Products
Operating LP, 4.95%, 6/1/10(4) 2,361,214
- --------------------------------------------------------------------------------
370,000 Magellan Midstream Partners,
5.65%, 10/15/16 375,300
- --------------------------------------------------------------------------------
575,000 Nexen Inc., 5.875%, 3/10/35 565,562
- --------------------------------------------------------------------------------
1,220,000 XTO Energy Inc.,
5.30%, 6/30/15 1,222,025
- --------------------------------------------------------------------------------
7,111,762
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.1%
- --------------------------------------------------------------------------------
800,000 Schering-Plough Corp.,
5.55%, 10/3/05 826,249
- --------------------------------------------------------------------------------
REAL ESTATE -- 0.1%
- --------------------------------------------------------------------------------
900,000 ERP Operating L.P.,
5.125%, 3/15/16(4) 888,311
- --------------------------------------------------------------------------------
ROAD & RAIL -- 0.5%
- --------------------------------------------------------------------------------
1,500,000 Canadian National Railway Co.,
6.25%, 8/1/34 1,667,658
- --------------------------------------------------------------------------------
43,000 Norfolk Southern Corp.,
7.80%, 5/15/27 54,633
- --------------------------------------------------------------------------------
1,107,000 Norfolk Southern Corp.,
5.64%, 5/17/29 1,113,941
- --------------------------------------------------------------------------------
2,836,232
- --------------------------------------------------------------------------------
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT -- 0.2%
- --------------------------------------------------------------------------------
1,000,000 Chartered Semiconductor
Manufacturing Ltd.,
6.375%, 8/3/15 979,004
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
SOFTWARE -- 0.2%
- --------------------------------------------------------------------------------
$ 1,340,000 Computer Associates
International Inc., 4.75%,
12/1/09 (Acquired 12/9/04,
Cost $1,359,216)(3) $ 1,315,920
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.5%
- --------------------------------------------------------------------------------
1,500,000 Nextel Communications Inc.,
5.95%, 3/15/14 1,537,542
- --------------------------------------------------------------------------------
1,530,000 Vodafone Group plc,
5.00%, 9/15/15 1,521,314
- --------------------------------------------------------------------------------
3,058,856
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $144,372,632) 144,989,880
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
AGENCY SECURITIES -- 17.9%
5,000,000 FHLB, 4.43%, 4/7/08 4,974,515
- --------------------------------------------------------------------------------
23,890,000 FHLB, 4.60%, 4/11/08(5) 23,825,831
- --------------------------------------------------------------------------------
24,695,000 FHLMC, 4.25%, 2/28/07(5) 24,664,255
- --------------------------------------------------------------------------------
10,000,000 FHLMC, 6.625%, 9/15/09 10,767,420
- --------------------------------------------------------------------------------
12,000,000 FHLMC, 7.00%, 3/15/10 13,202,591
- --------------------------------------------------------------------------------
1,515,000 FHLMC, 6.75%, 9/15/29 1,893,612
- --------------------------------------------------------------------------------
5,100,000 FNMA, 5.75%, 2/15/08 5,252,822
- --------------------------------------------------------------------------------
9,500,000 FNMA, 2.50%, 6/15/08(5) 9,033,845
- --------------------------------------------------------------------------------
5,200,000 FNMA, 6.125%, 3/15/12(4) 5,652,816
- --------------------------------------------------------------------------------
5,575,000 FNMA, 4.625%, 10/15/14(4) 5,586,997
- --------------------------------------------------------------------------------
5,700,000 FNMA, 6.625%, 11/15/30(4) 7,059,992
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES
(Cost $112,823,031) 111,914,696
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS(1) -- 15.4%
27,116,633 Bank of America Commercial
Mortgage Inc. STRIPS -
COUPON, Series 2004-1,
Class XP, VRN, 0.73%, 10/1/05 698,362
- --------------------------------------------------------------------------------
7,656,000 Bank of America Mortgage
Securities, Series 2004 F,
Class 2A5, VRN, 4.16%,
10/1/05(5) 7,484,444
- --------------------------------------------------------------------------------
6,000,000 Bear Stearns Adjustable
Rate Mortgage Trust,
Series 2005-4, Class 2A2,
4.57%, 8/25/35 5,881,255
- --------------------------------------------------------------------------------
35,019,000 Bear Stearns Commercial
Mortgage Securities STRIPS -
COUPON, Series 2004 T16,
Class X2, VRN, 0.81%, 10/1/05 1,330,197
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,718,812 Bear Stearns Commercial
Mortgage Securities,
Series 2004 BA5A, Class A1,
VRN, 3.90%, 10/17/05, resets
monthly off the 1-month
LIBOR plus 0.13% with
no caps (Acquired 12/15/04,
Cost $3,718,812)(3) $ 3,721,192
- --------------------------------------------------------------------------------
2,686,635 Citigroup Commercial
Mortgage Trust, Series
2004 FL1, Class A1, VRN,
3.90%, 10/17/05, resets
monthly off the 1-month
LIBOR plus 0.13% with no
caps, Final Maturity 7/15/08 2,689,209
- --------------------------------------------------------------------------------
21,790,346 Commercial Mortgage
Acceptance Corp. STRIPS -
COUPON, Series 1998 C2,
Class X, VRN, 1.01%, 10/1/05 742,855
- --------------------------------------------------------------------------------
1,529,726 Commercial Mortgage
Pass-Through Certificates,
Series 2004 HTL1, Class A1,
VRN, 4.01%, 10/17/05, resets
monthly off the 1-month
LIBOR plus 0.24% with no caps 1,531,305
- --------------------------------------------------------------------------------
4,724,287 Commercial Mortgage
Pass-Through Certificates,
Series 2005 F10A, Class A1,
VRN, 3.87%, 10/17/05, resets
monthly off the 1-month
LIBOR plus 0.10% with no
caps (Acquired 3/18/05,
Cost $4,724,287)(3) 4,726,484
- --------------------------------------------------------------------------------
4,971,968 FHLMC, Series 2937,
Class KA, 4.50%, 12/15/14 4,961,661
- --------------------------------------------------------------------------------
52,543 FNMA, Series 1989-35,
Class G SEQ, 9.50%, 7/25/19 56,234
- --------------------------------------------------------------------------------
6,686,039 FNMA, Series 2004 T1,
Class 1A2, 6.50%, 1/25/44 6,891,093
- --------------------------------------------------------------------------------
1,361,802 GMAC Commercial Mortgage
Securities, Inc., Series 2002
C2, Class A1 SEQ, 4.32%,
10/15/38 1,358,665
- --------------------------------------------------------------------------------
7,600,000 GMAC Commercial Mortgage
Securities, Inc., Series 2005
C1, Class A2 SEQ, 4.47%,
5/10/43(5) 7,489,222
- --------------------------------------------------------------------------------
8,030,000 Greenwich Capital Commercial
Funding Corp., Series 2005
GG3, Class A2 SEQ, 4.31%,
8/10/42(5) 7,876,627
- --------------------------------------------------------------------------------
5,400,000 LB-UBS Commercial Mortgage
Trust, Series 2003 C5, Class A2
SEQ, 3.48%, 7/15/27 5,231,898
- --------------------------------------------------------------------------------
6,400,000 LB-UBS Commercial Mortgage
Trust, Series 2005 C3,
Class A3, 4.65%, 7/30/30 6,299,891
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,674,822 Lehman Brothers Floating
Rate Commercial Mortgage
Trust, Series 2005 LLFA,
Class A1, VRN, 3.87%,
10/17/05, resets monthly
off the 1-month LIBOR
plus 0.10% with no caps
(Acquired 7/25/05,
Cost $3,674,822)(3) $ 3,673,100
- --------------------------------------------------------------------------------
519,313 MASTR Alternative Loans
Trust, Series 2003-8,
Class 4A1, 7.00%, 12/25/33 524,364
- --------------------------------------------------------------------------------
2,992,744 Wachovia Bank Commercial
Mortgage Trust, Series 2005
WL5A, Class A1, VRN,
3.87%, 10/17/05, resets
monthly off the 1-month
LIBOR plus 0.10% with no
caps, Final Maturity 1/15/18
(Acquired 3/24/05,
Cost $2,992,744)(3) 2,993,600
- --------------------------------------------------------------------------------
4,805,000 Washington Mutual, Series
2005 AR4, Class A4B,
4.68%, 4/25/35 4,743,436
- --------------------------------------------------------------------------------
3,750,000 Washington Mutual,
Series 2004 AR4, Class A6,
3.81%, 6/25/34 3,631,905
- --------------------------------------------------------------------------------
3,500,000 Washington Mutual,
Series 2004 AR9, Class A6,
4.28%, 8/25/34 3,425,772
- --------------------------------------------------------------------------------
5,500,000 Washington Mutual,
Series 2004 AR9, Class A7,
VRN, 4.19%, 10/1/05 5,411,472
- --------------------------------------------------------------------------------
2,891,140 Washington Mutual, Series
2005 AR11, Class A1C1, VRN,
4.03%, 10/25/05, resets
monthly off the 1-month
LIBOR plus 0.20%
with a cap of 10.50% 2,891,140
- --------------------------------------------------------------------------------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $97,452,112) 96,265,383
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES(1) -- 12.2%
148,538 ABSC Net Interest Margin,
Series 2004 HE5, Class A1,
5.00%, 8/27/34 (Acquired
6/22/04, Cost $148,141)(3) 147,698
- --------------------------------------------------------------------------------
1,567,663 Accredited Mortgage Loan
Trust, Series 2004-4,
Class A2A, VRN, 3.98%,
10/25/05, resets monthly
off the 1-month LIBOR
plus 0.15% with no caps 1,568,988
- --------------------------------------------------------------------------------
78,836 AQ Finance Net Interest
Margin, Series 2004 RN4,
Class A, 4.60%, 7/25/34
(Acquired 6/9/04,
Cost $78,776)(3) 78,691
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
10
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 110,924 AQ Finance Net Interest
Margin, Series 2004 RN5,
Class A, 5.19%, 6/29/34
(Acquired 6/24/04,
Cost $110,924)(3) $ 110,481
- --------------------------------------------------------------------------------
56,409 Argent Net Interest Margin,
Series 2004 WN8, Class A,
4.70%, 7/25/34 (Acquired
6/18/04, Cost $56,357)(3) 56,338
- --------------------------------------------------------------------------------
81,653 Argent Net Interest Margin,
Series 2004 WN9, Class A,
5.19%, 10/25/34 (Acquired
9/9/04, Cost $81,650)(3) 81,548
- --------------------------------------------------------------------------------
132,399 Argent Net Interest Margin,
Series 2004 WN10, Class A,
4.21%, 11/25/34 (Acquired
10/19/04, Cost $132,399)(3) 132,109
- --------------------------------------------------------------------------------
107,780 Asset Backed Funding Corp.
Net Interest Margin,
Series 2004 OPT4, Class N1,
4.45%, 5/26/34 107,171
- --------------------------------------------------------------------------------
5,100,000 Capital One Prime Auto
Receivables Trust, Series
2004-2, Class A4, VRN,
3.83%, 10/17/05, resets
monthly off the 1-month
LIBOR plus 0.06% with no caps 5,107,206
- --------------------------------------------------------------------------------
563,199 Centex Home Equity,
Series 2004 C, Class AF1,
VRN, 2.82%, 10/1/05 560,926
- --------------------------------------------------------------------------------
9,900,000 CNH Equipment Trust,
Series 2004 A, Class A3A,
VRN, 3.84%, 10/17/05,
resets monthly off the
1-month LIBOR plus 0.07%
with no caps, Final Maturity
10/15/18(5) 9,909,821
- --------------------------------------------------------------------------------
122,284 Countrywide Asset-Backed
Certificates, Series 2004-5N,
Class N1, 5.50%, 10/25/35 121,868
- --------------------------------------------------------------------------------
38,596 Countrywide Asset-Backed
Certificates, Series 2004-11,
Class A1, VRN, 4.02%,
10/25/05, resets monthly
off the 1-month LIBOR
plus 0.19% with no caps 38,618
- --------------------------------------------------------------------------------
119,072 Countrywide Asset-Backed
Certificates, Series 2004-11N,
Class N, 5.25%, 4/25/36
(Acquired 10/27/04,
Cost $119,008)(3) 118,479
- --------------------------------------------------------------------------------
1,940,494 Countrywide Asset-Backed
Certificates, Series 2004-13,
Class AV1, VRN, 3.97%,
10/25/05, resets monthly
off the 1-month LIBOR
plus 0.14% with no caps 1,942,061
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 5,924,533 Countrywide Asset-Backed
Certificates, Series 2005-7,
Class 3AV1, VRN, 3.95%,
10/25/05, resets monthly
off the 1-month LIBOR
plus 0.12% with no caps $ 5,927,277
- --------------------------------------------------------------------------------
4,501,393 Countrywide Asset-Backed
Certificates, Series 2005-8,
Class 2A1, VRN, 3.96%,
10/25/05, resets monthly
off the 1-month LIBOR
plus 0.13% with no caps 4,503,689
- --------------------------------------------------------------------------------
1,300,000 Detroit Edison Securitization
Funding LLC, Series 2001-1,
Class A4 SEQ, 6.19%, 3/1/13 1,378,970
- --------------------------------------------------------------------------------
1,196,883 Equifirst Mortgage Loan Trust,
Series 2004-3, Class A1,
VRN, 3.99%, 10/25/05,
resets monthly off the
1-month LIBOR plus 0.16%
with no caps 1,197,725
- --------------------------------------------------------------------------------
111,800 Finance America Net Interest
Margin, Series 2004-1,
Class A, 5.25%, 6/27/34 111,744
- --------------------------------------------------------------------------------
1,972,077 First Franklin Mortgage Loan
Asset Backed Certificates,
Series 2004 FF11, Class 2A1,
VRN, 3.98%, 10/25/05,
resets monthly off the
1-month LIBOR plus 0.15%
with no caps 1,973,268
- --------------------------------------------------------------------------------
2,591,795 First Franklin Mortgage Loan
Asset Backed Certificates,
Series 2005 FF4, Class 2A1,
VRN, 3.91%, 10/25/05,
resets monthly off the
1-month LIBOR plus 0.08%
with no caps 2,593,788
- --------------------------------------------------------------------------------
11,175,000 Ford Credit Floorplan Master
Owner Trust, Series 2004-1,
Class A, VRN, 3.81%,
10/17/05, resets monthly
off the 1-month LIBOR
plus 0.04% with no caps(5) 11,188,566
- --------------------------------------------------------------------------------
28,445 Fremont Net Interest Margin,
Series 2004 B, 4.70%,
5/25/34 (Acquired 5/20/04,
Cost $28,445)(3) 28,422
- --------------------------------------------------------------------------------
137,193 GSAMP Net Interest Margin,
Series 2004, Class N1,
5.50%, 9/25/34 (Acquired
9/20/04, Cost $137,254)(3) 137,361
- --------------------------------------------------------------------------------
108,450 Long Beach Asset Holdings
Corp., Series 2004-5, Class C
and P, 5.00%, 9/25/34
(Acquired 9/15/04,
Cost $108,686)(3) 108,007
- --------------------------------------------------------------------------------
524,173 Long Beach Asset Holdings
Corp., Series 2005-1, Class N1,
4.12%, 2/25/35 (Acquired
1/19/05, Cost $524,173)(3) 522,630
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
11
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,294,642 NovaStar Home Equity Loan,
Series 2004-4, Class A2A,
VRN, 4.02%, 10/25/05,
resets monthly off the
1-month LIBOR plus 0.19%
with a cap of 11.00% $ 1,295,572
- --------------------------------------------------------------------------------
4,351,428 NovaStar Home Equity Loan,
Series 2005-1, Class A2A,
VRN, 3.95%, 10/25/05,
resets monthly off the
1-month LIBOR plus 0.12%
with a cap of 11.00% 4,354,957
- --------------------------------------------------------------------------------
94,271 NovaStar Net Interest Margin,
Series 2004 N2, Class X, O
and P, 4.46%, 6/26/34
(Acquired 7/20/04,
Cost $94,271)(3) 93,969
- --------------------------------------------------------------------------------
2,955,410 Park Place Securities Inc.,
Series 2004 WHQ2, Class
A3B, VRN, 3.99%, 10/25/05,
resets monthly off the
1-month LIBOR plus 0.16%
with no caps 2,957,449
- --------------------------------------------------------------------------------
5,092,455 Popular ABS Mortgage
Pass-Through Trust, Series
2005-4, Class AV1, VRN,
3.94%, 10/25/05, resets
monthly off the 1-month
LIBOR plus 0.11% with
a cap of 14.00% 5,094,451
- --------------------------------------------------------------------------------
1,773,210 Residential Asset Mortgage
Products Inc., Series 2004
RS10, Class AII1, VRN,
4.00%, 10/25/05, resets
monthly off the 1-month
LIBOR plus 0.17% with a
cap of 14.00%, Final
Maturity 5/25/27 1,774,682
- --------------------------------------------------------------------------------
590,000 Residential Asset Securities
Corp., Series 2004 KS2,
Class MI1, 4.71%, 3/25/34 575,971
- --------------------------------------------------------------------------------
1,376,012 Residential Asset Securities
Corp., Series 2004 KS7,
Class A2B1, VRN, 3.97%,
10/25/05, resets monthly
off the 1-month LIBOR
plus 0.14% with no caps 1,377,002
- --------------------------------------------------------------------------------
128,882 Sail Net Interest Margin Notes,
Series 2004-8A, Class A,
5.00%, 9/27/34 (Acquired
9/13/04, Cost $129,164)(3) 128,239
- --------------------------------------------------------------------------------
88,795 Sail Net Interest Margin Notes,
Series 2004 BNCA, Class A,
5.00%, 9/27/34 (Acquired
8/5/04, Cost $88,664)(3) 88,733
- --------------------------------------------------------------------------------
120,535 Sharps SP I LLC Net Interest
Margin Trust, Series 2004
OP1N, Class NA, 5.19%,
4/25/34 (Acquired 6/9/04,
Cost $120,532)(3) 120,443
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,763,023 SLM Student Loan Trust,
Series 2005-2, Class A1, VRN,
3.63%, 10/25/05, resets
quarterly off the 3-month
LIBOR minus 0.02%
with no caps $ 3,764,178
- --------------------------------------------------------------------------------
4,726,700 Structured Asset Securities
Corp., Series 2005 WF2,
Class A1, VRN, 3.91%,
10/25/05, resets monthly
off the 1-month LIBOR
plus 0.08% with no caps,
Final Maturity 5/25/35 4,726,516
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $75,998,851) 76,105,612
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 13.0%
4,700,000 U.S. Treasury Bonds,
8.00%, 11/15/21(4) 6,507,667
- --------------------------------------------------------------------------------
12,615,000 U.S. Treasury Bonds,
6.25%, 8/15/23(4) 15,088,234
- --------------------------------------------------------------------------------
3,619,000 U.S. Treasury Bonds,
5.375%, 2/15/31(4) 4,055,545
- --------------------------------------------------------------------------------
10,974,660 U.S. Treasury Inflation
Indexed Notes,
3.00%, 7/15/12(5) 11,946,093
- --------------------------------------------------------------------------------
18,531,549 U.S. Treasury Inflation
Indexed Notes,
1.875%, 7/15/15(5) 18,700,945
- --------------------------------------------------------------------------------
4,600,000 U.S. Treasury Notes,
3.875%, 5/15/10(4) 4,534,777
- --------------------------------------------------------------------------------
5,000,000 U.S. Treasury Notes,
4.125%, 8/15/10(4) 4,979,105
- --------------------------------------------------------------------------------
1,300,000 U.S. Treasury Notes,
4.75%, 5/15/14(4) 1,339,711
- --------------------------------------------------------------------------------
12,850,000 U.S. Treasury Notes,
4.25%, 8/15/14(4) 12,773,710
- --------------------------------------------------------------------------------
1,500,000 U.S. Treasury Notes,
4.125%, 5/15/15(4) 1,474,629
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES
(Cost $80,865,900) 81,400,416
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 1.4%
6,100,000 Commonwealth of
Massachusetts Rev.,
5.50%, 1/1/34 (FGIC) 7,162,132
- --------------------------------------------------------------------------------
1,650,000 Illinois GO, (Taxable Pension),
5.10%, 6/1/33 1,631,537
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES
(Cost $9,077,911) 8,793,669
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
12
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
SOVEREIGN GOVERNMENTS
& AGENCIES -- 1.0%
$ 2,050,000 Province of Quebec,
5.00%, 7/17/09 $ 2,083,801
- --------------------------------------------------------------------------------
1,890,000 Republic of Italy,
4.00%, 6/16/08(4) 1,869,735
- --------------------------------------------------------------------------------
1,500,000 United Mexican States,
5.875%, 1/15/14(4) 1,554,750
- --------------------------------------------------------------------------------
390,000 United Mexican States,
6.75%, 9/27/34(4) 416,325
- --------------------------------------------------------------------------------
TOTAL SOVEREIGN
GOVERNMENTS & AGENCIES
(Cost $5,934,781) 5,924,611
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 2.6%
Repurchase Agreement, Merrill Lynch
& Co., Inc., (collateralized by various
U.S. Treasury obligations, 6.25%, 8/15/23,
valued at $16,674,545), in a joint trading
account at 3.10%, dated 9/30/05,
due 10/3/05 (Delivery value $16,326,217)(5)
(Cost $16,322,000) 16,322,000
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED
FOR SECURITIES LENDING(6) -- 6.7%
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, Merrill Lynch
& Co., Inc., (collateralized by various
U.S Government Agency obligations
in a pooled account at the lending agent),
3.88%, dated 9/30/05, due 10/3/05
(Delivery value $12,029,731) $ 12,025,843
- --------------------------------------------------------------------------------
Repurchase Agreement, UBS AG,
(collateralized by various U.S. Government
Agency obligations in a pooled account
at the lending agent), 3.94%,
dated 9/30/05, due 10/3/05
(Delivery value $30,009,850) 30,000,000
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $42,025,843) 42,025,843
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 126.2%
(Cost $790,288,074) 788,441,572
- --------------------------------------------------------------------------------
OTHER ASSETS
AND LIABILITIES -- (26.2)% (163,960,830)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $ 624,480,742
================================================================================
FUTURES CONTRACTS*
Underlying Face Unrealized
Contracts Sold Expiration Date Amount at Value Gain (Loss)
- --------------------------------------------------------------------------------
149 U.S. Treasury 2-Year Notes December 2005 $30,677,703 $ 64,852
- --------------------------------------------------------------------------------
63 U.S. Treasury 5-Year Notes December 2005 6,732,141 41,514
- --------------------------------------------------------------------------------
40 U.S. Treasury 10-Year Notes December 2005 4,396,875 58,973
- --------------------------------------------------------------------------------
$41,806,719 $165,339
==============================
*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.
See Notes to Financial Statements. (continued)
- ------
13
Diversified Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
ABSC = Asset-Backed Securities Corp.
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FGIC = Financial Guaranty Insurance Co.
FNMA = Federal National Mortgage Association
GMAC = General Motors Acceptance Corporation
GNMA = Government National Mortgage Association
GO = General Obligation
GSAMP = Goldman Sachs Mortgage Pass-through
LB-UBS = Lehman Brothers Inc. -- UBS AG
LIBOR = London Interbank Offered Rate
MASTR = Mortgage Asset Securitization Transactions, 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.
SEQ = Sequential Payer
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TRACERS(reg.sm) = Traded Custody Receipts(reg.sm). Rate indicated is the
weighted-average coupon of the underlying securities held.
VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise
noted. Rate shown is effective September 30, 2005.
(1) Final maturity indicated, unless otherwise noted.
(2) When-issued security or forward commitment.
(3) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at September 30, 2005, was
$38,614,219, which represented 6.2% of total net assets.
(4) Security, or a portion thereof, was on loan as of September 30, 2005.
(5) Security, or a portion thereof, has been segregated for a when-issued
security, forward commitment, and/or futures contracts.
(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.
- ------
14
High-Yield - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2005
------------------------
AVERAGE ANNUAL RETURNS
- ----------------------------------------------------------------------------------------------
SINCE INCEPTION
6 MONTHS(1) 1 YEAR 5 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------
INVESTOR CLASS 3.04%(2) 4.51%(2) 4.77% 3.09% 9/30/97
- ----------------------------------------------------------------------------------------------
CSFB HIGH YIELD INDEX II 2.82% 6.31% 8.64% 6.00% --
- ----------------------------------------------------------------------------------------------
LIPPER HIGH CURRENT YIELD
FUNDS AVERAGE RETURN(3) 3.19% 6.06% 5.80% 3.65% --
- ----------------------------------------------------------------------------------------------
Investor Class's
Lipper Ranking(3) -- 342 of 424 219 of 297 116 of 164 --
- ----------------------------------------------------------------------------------------------
Institutional Class(2) 3.14% 4.73% -- 6.70% 8/2/04
- ----------------------------------------------------------------------------------------------
Advisor Class(2) 2.91% 4.25% -- 8.28% 3/8/02
- ----------------------------------------------------------------------------------------------
A Class(2) 1/31/03
No sales charge* 2.91% 4.25% -- 10.05%
With sales charge* -1.68% -0.47% -- 8.18%
- ----------------------------------------------------------------------------------------------
B Class(2) 1/31/03
No sales charge* 2.53% 3.47% -- 9.24%
With sales charge* -2.47% -0.53% -- 8.27%
- ----------------------------------------------------------------------------------------------
C Class(2) 12/10/01
No sales charge* 2.53% 3.47% -- 7.21%
With sales charge* 1.53% 3.47% -- 7.21%
- ----------------------------------------------------------------------------------------------
R Class -- -- -- -0.64%(1)(2) 7/29/05
- ----------------------------------------------------------------------------------------------
*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) Total returns for periods less than one year are not annualized.
(2) Class returns may have been lower if American Century had not voluntarily
waived all or a portion of its management fee and reimbursed a portion of
its service and distribution fees.
(3) © 2005 Reuters. All rights reserved. Any copying, republication or
redistribution of Lipper content, including by caching, framing or similar
means, is expressly prohibited without the prior written consent of Lipper.
Lipper shall not be liable for any errors or delays in the content, or for
any actions taken in reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
Lipper Rankings -- Rankings are based only on the universe shown. This
listing might not represent the complete universe of funds tracked by
Lipper Inc.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by
Lipper Inc. -- A Reuters Company and may be incomplete. No offer or
solicitations to buy or sell any of the securities herein is being made
by Lipper.
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)
- ------
15
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 2005
- -------------------------------------------------------------------------------------------------
Investor Class -0.45% 3.37% -1.80% -11.54% 3.86% 18.81% 10.67% 4.51%
- -------------------------------------------------------------------------------------------------
CSFB High Yield Index II -0.71% 4.48% 1.47% -4.59% 2.85% 28.05% 13.32% 6.31%
- -------------------------------------------------------------------------------------------------
Lipper High Current Yield
Funds Average Return -1.07% 4.71% 1.35% -8.36% -1.74% 25.19% 11.24% 6.06%
- -------------------------------------------------------------------------------------------------
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.
- ------
16
High-Yield - Portfolio Commentary
PORTFOLIO MANAGER: MICHAEL DIFLEY
RETURN SUMMARY
High-Yield returned 3.04%* for the six months ended September 30, 2005,
outperforming its benchmark, the CSFB High Yield Index II, which returned 2.82%.
By comparison, the average return of Lipper's High Current Yield Funds was
3.19%. (Please see pages 15 and 16.)
Top-tier corporate high-yield bonds (securities rated BB) outperformed
lower-tier ones for the six months as global defaults by issuers held at low
levels and as the U.S. bond market rallied enough in April, May, and August to
more than offset declines in July and September. We talk about the strategies
that we employed in that environment in the Portfolio Strategy section on the
next page.
ECONOMIC REVIEW
The U.S. economy grew at a moderate pace during the six months ended September
30, 2005, despite the devastation and disruption caused by Hurricanes Katrina
and Rita. The annualized real rate of GDP growth was 3.3% in the second quarter
and 3.8% in the third (by initial estimates) as short-term U.S. interest rates
and oil prices rose.
The Fed raised its rate target four times in six months, from 2.75% to 3.75%,
the highest since August 2001. Meanwhile, crude oil jumped 20%, from $55.40 to
$66.24 a barrel, after flirting with $70 a barrel at the end of August, when
Katrina hit the Gulf Coast.
Despite soaring energy costs, "core" inflation (excluding food and energy
prices) was stable--the year-to-date annualized gain for core CPI as of
September 30, 2005, was 2.0%, compared with the 2.2% rate for 2004.
BOND MARKET REVIEW
Longer-term interest rates and bond yields fell as economic growth remained
moderate and core inflation stayed low, even as shorter-term interest rates and
yields rose with the Fed's rate hikes. This caused the Treasury yield curve to
"flatten"--the gap between two- and 10-year Treasury yields narrowed.
The 10-year Treasury note returned 3.01% as its yield fell from 4.49% to 4.33%.
Longer-maturity/duration indices and bonds performed even better--the 30-year
Treasury bond returned 5.13%. That helped make Treasurys (up 2.47%) the
top-performing major sector of the Lehman Aggregate while mortgage-backed
securities (MBS, up 2.12%)
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
AS OF AS OF
9/30/05 3/31/05
- --------------------------------------------------------------------------------
Weighted Average
Maturity 6.8 years 6.6 years
- --------------------------------------------------------------------------------
Average Duration
(effective) 4.0 years 4.1 years
- --------------------------------------------------------------------------------
YIELDS AS OF SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor 6.75%
- --------------------------------------------------------------------------------
Institutional 6.96%
- --------------------------------------------------------------------------------
Advisor 6.49%
- --------------------------------------------------------------------------------
A Class 6.19%
- --------------------------------------------------------------------------------
B Class 5.73%
- --------------------------------------------------------------------------------
C Class 5.72%
- --------------------------------------------------------------------------------
R Class 6.24%
- --------------------------------------------------------------------------------
*All fund returns and yields referenced in this commentary are for Investor
Class shares. Total returns for periods less than one year are not annualized.
(continued)
- ------
17
High-Yield - Portfolio Commentary
lagged. Corporate securities in the index returned 2.40%.
PORTFOLIO STRATEGY
As was the case with the U.S. economy, corporate high-yield bonds--which tend to
act like a mix of stocks and bonds--performed moderately well. Within the asset
class, securities rated BBB posted a collective gain of just north of 4.0%, more
than double the returns of bonds with CCC or lower ratings, while corporate
high-yield bonds rated B finished in between the two.
The accompanying table concerning the portfolio's composition by credit rating
illustrates our continued focus on bonds with BB or B ratings. Corporate
high-yield bonds with CCC or lower ratings comprised only a small portion of the
portfolio, and that generally paid off during the six months.
Avoiding air transportation names also helped. As a group, bonds in this sector
tumbled approximately 9%, significantly underperforming the broader corporate
high-yield securities market amid soaring fuel prices that crimped profit
margins and as Delta and Northwest warned of tough financial times.
Lastly, we limited the portfolio's holdings in the auto sector (while generally
steering clear of auto-parts suppliers in particular), which finished narrowly
lower for the six months. It's also worth noting that the portfolio's bonds
issued by Ford Motor Credit Co. and General Motors Acceptance Corp.--companies
that represent Ford's and GM's financing arms, respectively--classify as
diversified financial services securities (not as auto-sector bonds) and enjoy
considerably better underlying fundamentals than debt directly issued by their
parent companies.
OUR COMMITMENT
High-Yield seeks high current income by investing in a diversified portfolio of
high-yield corporate bonds and other debt instruments. We remain committed to
High-Yield's objective and will endeavor to do so by continuing to emphasize
high-yield corporate bonds and other debt instruments for the portfolio.
TOP FIVE INDUSTRIES
AS OF SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
9/30/05 3/31/05
- --------------------------------------------------------------------------------
Media 10.7% 9.0%
- --------------------------------------------------------------------------------
Hotels, Restaurants
& Leisure 9.9% 11.7%
- --------------------------------------------------------------------------------
Oil, Gas, &
Consumable Fuels 8.8% 7.6%
- --------------------------------------------------------------------------------
Diversified
Telecommunication
Services 6.1% 4.5%
- --------------------------------------------------------------------------------
Wireless
Telecommunication
Services 5.3% 4.3%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/05 3/31/05
- --------------------------------------------------------------------------------
AAA 1% 7%
- --------------------------------------------------------------------------------
BBB 1% 1%
- --------------------------------------------------------------------------------
BB 39% 31%
- --------------------------------------------------------------------------------
B 54% 54%
- --------------------------------------------------------------------------------
CCC or lower 5% 6%
- --------------------------------------------------------------------------------
Unrated -- 1%
- --------------------------------------------------------------------------------
- ------
18
High-Yield - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 96.2%
AEROSPACE & DEFENSE -- 0.9%
- --------------------------------------------------------------------------------
$350,000 L-3 Communications Corp.,
6.125%, 7/15/13 $ 350,000
- --------------------------------------------------------------------------------
250,000 L-3 Communications Corp.,
6.375%, 10/15/15 (Acquired
7/27/05, Cost $247,725)(1) 253,125
- --------------------------------------------------------------------------------
603,125
- --------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT(2)
- --------------------------------------------------------------------------------
21,341 Dura Operating Corp.,
8.625%, 4/15/12 19,100
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 1.0%
- --------------------------------------------------------------------------------
500,000 MAAX Corp., 9.75%, 6/15/12 437,500
- --------------------------------------------------------------------------------
250,000 Nortek Inc., 8.50%, 9/1/14 231,250
- --------------------------------------------------------------------------------
668,750
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.6%
- --------------------------------------------------------------------------------
324,000 Refco Finance Holdings LLC,
9.00%, 8/1/12 353,970
- --------------------------------------------------------------------------------
CHEMICALS -- 3.4%
- --------------------------------------------------------------------------------
850,000 Huntsman ICI Chemicals,
10.125%, 7/1/09(3) 878,688
- --------------------------------------------------------------------------------
46,000 IMC Global Inc.,
10.875%, 6/1/08 52,210
- --------------------------------------------------------------------------------
750,000 Lyondell Chemical Co.,
9.50%, 12/15/08 789,375
- --------------------------------------------------------------------------------
46,000 Millennium America Inc.,
9.25%, 6/15/08 49,680
- --------------------------------------------------------------------------------
400,000 Nell AF SARL, 8.375%, 8/15/15
(Acquired 8/4/05,
Cost $400,000)(1)(3) 393,000
- --------------------------------------------------------------------------------
2,162,953
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES
& SUPPLIES -- 4.3%
- --------------------------------------------------------------------------------
750,000 Allied Waste North America, Inc.,
6.375%, 4/15/11(3) 721,875
- --------------------------------------------------------------------------------
650,000 Casella Waste Systems Inc.,
9.75%, 2/1/13 705,250
- --------------------------------------------------------------------------------
600,000 Cenveo Corp., 7.875%,
12/1/13(3) 582,000
- --------------------------------------------------------------------------------
250,000 Corrections Corp. of America,
6.25%, 3/15/13 248,750
- --------------------------------------------------------------------------------
450,000 FTI Consulting Inc., 7.625%,
6/15/13 (Acquired 7/28/05,
Cost $456,125)(1) 461,250
- --------------------------------------------------------------------------------
2,719,125
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.4%
- --------------------------------------------------------------------------------
250,000 Lucent Technologies Inc.,
6.45%, 3/15/29 220,000
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 0.8%
- --------------------------------------------------------------------------------
500,000 Xerox Corp., 6.875%, 8/15/11 525,000
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.4%
- --------------------------------------------------------------------------------
$400,000 ACIH Inc., VRN, 0.00%,
12/15/07 (Acquired 12/21/04,
Cost $287,164)(1)(4) $ 272,000
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 2.9%
- --------------------------------------------------------------------------------
350,000 Ball Corp., 7.75%, 8/1/06 357,875
- --------------------------------------------------------------------------------
500,000 Ball Corp., 6.875%, 12/15/12 512,500
- --------------------------------------------------------------------------------
250,000 BWAY Corp., 10.00%, 10/15/10 266,250
- --------------------------------------------------------------------------------
250,000 Graham Packaging Co. Inc.,
8.50%, 10/15/12(3) 250,000
- --------------------------------------------------------------------------------
500,000 Graham Packaging Co. Inc.,
9.875%, 10/15/14(3) 482,500
- --------------------------------------------------------------------------------
1,869,125
- --------------------------------------------------------------------------------
DEPARTMENT STORES -- 0.6%
- --------------------------------------------------------------------------------
350,000 Neiman Marcus Group Inc.,
10.375%, 10/15/15 (Acquired
9/28/05, Cost $350,000)(1)(5) 350,000
- --------------------------------------------------------------------------------
DISTRIBUTORS -- 0.7%
- --------------------------------------------------------------------------------
500,000 Amscan Holdings Inc.,
8.75%, 5/1/14(3) 440,000
- --------------------------------------------------------------------------------
DIVERSIFIED -- 2.5%
- --------------------------------------------------------------------------------
1,579,272 Lehman Brothers TRAINS(reg.sm),
Series 2005-1, 7.651%,
6/15/15, (Acquired 7/20/05,
Cost $1,659,025)(1)(3) 1,611,570
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 3.5%
- --------------------------------------------------------------------------------
500,000 Ford Motor Credit Co.,
6.50%, 1/25/07 500,736
- --------------------------------------------------------------------------------
350,000 Ford Motor Credit Co.,
7.25%, 10/25/11 332,612
- --------------------------------------------------------------------------------
750,000 General Motors Acceptance
Corp., 6.15%, 4/5/07 744,548
- --------------------------------------------------------------------------------
750,000 General Motors Acceptance
Corp., 6.75%, 12/1/14(3) 653,446
- --------------------------------------------------------------------------------
2,231,342
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 6.1%
- --------------------------------------------------------------------------------
586,000 AT&T Corp., 9.05%, 11/15/11 662,912
- --------------------------------------------------------------------------------
300,000 Cincinnati Bell Inc.,
8.375%, 1/15/14(3) 297,000
- --------------------------------------------------------------------------------
250,000 Intelsat Bermuda Ltd.,
8.25%, 1/15/13 (Acquired
1/24/05, Cost $250,000)(1) 252,813
- --------------------------------------------------------------------------------
250,000 Intelsat Bermuda Ltd.,
8.625%, 1/15/15 (Acquired
1/24/05, Cost $250,000)(1)(3) 256,250
- --------------------------------------------------------------------------------
250,000 Intelsat Ltd., 6.50%, 11/1/13 193,750
- --------------------------------------------------------------------------------
400,000 MCI Inc., 7.69%, 5/1/09 416,000
- --------------------------------------------------------------------------------
300,000 MCI Inc., 8.74%, 5/1/14 335,250
- --------------------------------------------------------------------------------
300,000 Qwest Communications
International Inc., 7.50%,
2/15/14 (Acquired 6/24/05,
Cost $283,500)(1) 286,500
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
19
High-Yield - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$550,000 Qwest Corp., 7.875%, 9/1/11(3) $ 576,125
- --------------------------------------------------------------------------------
550,000 Qwest Services Corp.,
14.00%, 12/15/10 632,500
- --------------------------------------------------------------------------------
3,909,100
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 3.0%
- --------------------------------------------------------------------------------
800,000 MSW Energy Holdings LLC,
8.50%, 9/1/10 862,000
- --------------------------------------------------------------------------------
481,000 NRG Energy Inc.,
8.00%, 12/15/13(3) 514,634
- --------------------------------------------------------------------------------
500,000 Texas Genco LLC, 6.875%,
12/15/14 (Acquired 12/8/04,
Cost $514,500)(1)(3) 511,250
- --------------------------------------------------------------------------------
1,887,884
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT
& INSTRUMENTS -- 1.2%
- --------------------------------------------------------------------------------
250,000 Celestica Inc., 7.625%, 7/1/13 250,625
- --------------------------------------------------------------------------------
500,000 Flextronics International Ltd.,
6.50%, 5/15/13 512,500
- --------------------------------------------------------------------------------
763,125
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 2.6%
- --------------------------------------------------------------------------------
600,000 Hanover Compressor Co.,
8.625%, 12/15/10 649,500
- --------------------------------------------------------------------------------
570,000 Newpark Resources,
8.625%, 12/15/07 570,000
- --------------------------------------------------------------------------------
400,000 Universal Compression Inc.,
7.25%, 5/15/10 416,000
- --------------------------------------------------------------------------------
1,635,500
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.8%
- --------------------------------------------------------------------------------
500,000 Ingles Markets, Inc.,
8.875%, 12/1/11(3) 507,500
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.8%
- --------------------------------------------------------------------------------
13,000 Dole Food Company, Inc.,
8.875%, 3/15/11 13,553
- --------------------------------------------------------------------------------
500,000 Hines Nurseries Inc.,
10.25%, 10/1/11(3) 510,000
- --------------------------------------------------------------------------------
523,553
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 3.0%
- --------------------------------------------------------------------------------
400,000 Fisher Scientific International Inc.,
6.75%, 8/15/14 421,000
- --------------------------------------------------------------------------------
760,000 Sybron Dental Specialties Inc.,
8.125%, 6/15/12 817,000
- --------------------------------------------------------------------------------
650,000 Universal Hospital Services Inc.,
10.125%, 11/1/11 669,500
- --------------------------------------------------------------------------------
1,907,500
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS
& SERVICES -- 2.7%
- --------------------------------------------------------------------------------
500,000 Alliance Imaging, Inc.,
7.25%, 12/15/12(3) 460,000
- --------------------------------------------------------------------------------
585,000 Genesis HealthCare Corp.,
8.00%, 10/15/13(3) 633,263
- --------------------------------------------------------------------------------
600,000 HCA Inc., 6.95%, 5/1/12 620,181
- --------------------------------------------------------------------------------
1,713,444
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 9.9%
- --------------------------------------------------------------------------------
$500,000 Equinox Holdings Inc.,
9.00%, 12/15/09(3) $ 515,625
- --------------------------------------------------------------------------------
500,000 Herbst Gaming Inc.,
8.125%, 6/1/12 525,000
- --------------------------------------------------------------------------------
650,000 Intrawest Corp.,
7.50%, 10/15/13 668,687
- --------------------------------------------------------------------------------
34,000 Mandalay Resort Group,
9.375%, 2/15/10 37,655
- --------------------------------------------------------------------------------
500,000 MGM Mirage, 8.50%, 9/15/10 546,250
- --------------------------------------------------------------------------------
400,000 Park Place Entertainment Corp.,
7.875%, 12/15/05 403,500
- --------------------------------------------------------------------------------
350,000 Penn National Gaming Inc.,
8.875%, 3/15/10 371,000
- --------------------------------------------------------------------------------
400,000 Penn National Gaming, Inc.,
6.875%, 12/1/11 404,000
- --------------------------------------------------------------------------------
400,000 Resorts International Hotel
and Casino Inc.,
11.50%, 3/15/09 450,000
- --------------------------------------------------------------------------------
300,000 Royal Caribbean Cruises Ltd.,
6.875%, 12/1/13 312,750
- --------------------------------------------------------------------------------
250,000 Six Flags Inc., 8.875%, 2/1/10(3) 248,750
- --------------------------------------------------------------------------------
250,000 Six Flags Inc., 9.75%, 4/15/13 247,500
- --------------------------------------------------------------------------------
500,000 Starwood Hotels & Resorts
Worldwide Inc., 7.875%, 5/1/12 547,500
- --------------------------------------------------------------------------------
200,000 Starwood Hotels & Resorts
Worldwide Inc., 7.375%,
11/15/15 218,000
- --------------------------------------------------------------------------------
350,000 Trump Entertainment
Resorts, Inc., 8.50%, 6/1/15 339,500
- --------------------------------------------------------------------------------
500,000 Wynn Las Vegas LLC,
6.625%, 12/1/14(3) 480,625
- --------------------------------------------------------------------------------
6,316,342
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 5.0%
- --------------------------------------------------------------------------------
250,000 Beazer Homes USA Inc.,
8.375%, 4/15/12 265,000
- --------------------------------------------------------------------------------
500,000 D.R. Horton Inc., 7.875%, 8/15/11 548,481
- --------------------------------------------------------------------------------
500,000 KB Home, 6.375%, 8/15/11 503,683
- --------------------------------------------------------------------------------
500,000 Sealy Mattress Co.,
8.25%, 6/15/14 505,000
- --------------------------------------------------------------------------------
750,000 WCI Communities Inc.,
10.625%, 2/15/11(3) 800,625
- --------------------------------------------------------------------------------
550,000 William Lyon Homes Inc.,
10.75%, 4/1/13 595,375
- --------------------------------------------------------------------------------
3,218,164
- --------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS
& ENERGY TRADERS -- 1.6%
- --------------------------------------------------------------------------------
450,000 AES Corporation (The),
8.875%, 2/15/11 490,500
- --------------------------------------------------------------------------------
500,000 AES Corporation (The),
8.75%, 5/15/13 (Acquired
5/1/03, Cost $500,000)(1) 550,000
- --------------------------------------------------------------------------------
1,040,500
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
20
High-Yield - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
IT SERVICES -- 0.7%
- --------------------------------------------------------------------------------
$450,000 Sungard Data Systems Inc.,
9.125%, 8/15/13 (Acquired
7/27/05, Cost $466,688)(1) $ 468,563
- --------------------------------------------------------------------------------
MACHINERY(2)
- --------------------------------------------------------------------------------
21,341 Terex Corp., 7.375%, 1/15/14 21,661
- --------------------------------------------------------------------------------
MEDIA -- 10.7%
- --------------------------------------------------------------------------------
200,000 Cablevision Systems Corp.,
8.00%, 4/15/12 195,000
- --------------------------------------------------------------------------------
350,000 Cadmus Communications Corp.,
8.375%, 6/15/14 363,125
- --------------------------------------------------------------------------------
248,625 Charter Communications
Holdings I LLC, 11.00%,
10/1/15 (Acquired 9/28/05,
Cost $238,913)(1) 243,653
- --------------------------------------------------------------------------------
350,000 Charter Communications
Holdings II LLC, 10.25%,
9/15/10 360,500
- --------------------------------------------------------------------------------
500,000 Cinemark Inc., VRN,
0.00%, 3/15/09(3)(4) 352,500
- --------------------------------------------------------------------------------
500,000 CSC Holdings Inc.,
7.875%, 12/15/07 516,250
- --------------------------------------------------------------------------------
250,000 CSC Holdings Inc., 6.75%,
4/15/12 (Acquired 8/5/04,
Cost $241,250)(1)(3) 237,500
- --------------------------------------------------------------------------------
500,000 Dex Media Inc., 8.00%, 11/15/13 516,250
- --------------------------------------------------------------------------------
500,000 DirecTV Holdings LLC,
8.375%, 3/15/13 548,125
- --------------------------------------------------------------------------------
500,000 Echostar DBS Corp.,
6.375%, 10/1/11(3) 498,125
- --------------------------------------------------------------------------------
250,000 Fisher Communications, Inc.,
8.625%, 9/15/14 268,125
- --------------------------------------------------------------------------------
550,000 Imax Corp., 9.625%, 12/1/10 591,249
- --------------------------------------------------------------------------------
500,000 Mediacom LLC, 9.50%, 1/15/13(3) 498,750
- --------------------------------------------------------------------------------
300,000 MediaNews Group, Inc.,
6.875%, 10/1/13 299,250
- --------------------------------------------------------------------------------
275,000 PanAmSat Corp.,
9.00%, 8/15/14 291,500
- --------------------------------------------------------------------------------
500,000 Primedia Inc.,
7.625%, 4/1/08(3) 506,250
- --------------------------------------------------------------------------------
500,000 Primedia Inc.,
8.875%, 5/15/11 526,250
- --------------------------------------------------------------------------------
6,812,402
- --------------------------------------------------------------------------------
METALS & MINING -- 1.0%
- --------------------------------------------------------------------------------
550,000 IPSCO Inc., 8.75%, 6/1/13 610,500
- --------------------------------------------------------------------------------
MULTI-UTILITIES -- 0.8%
- --------------------------------------------------------------------------------
500,000 CMS Energy Corp.,
7.50%, 1/15/09 526,250
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 8.8%
- --------------------------------------------------------------------------------
600,000 Chesapeake Energy Corp.,
7.50%, 6/15/14 643,500
- --------------------------------------------------------------------------------
500,000 Citgo Petroleum Corp.,
6.00%, 10/15/11(3) 502,500
- --------------------------------------------------------------------------------
600,000 El Paso Corp., 7.875%, 6/15/12(3) 624,000
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$300,000 El Paso Corp., 7.80%, 8/1/31 $ 302,250
- --------------------------------------------------------------------------------
650,000 Forest Oil Corp.,
7.75%, 5/1/14(3) 693,874
- --------------------------------------------------------------------------------
390,000 Magnum Hunter
Resources Inc., 9.60%, 3/15/12 425,100
- --------------------------------------------------------------------------------
400,000 Massey Energy Co.,
6.625%, 11/15/10(3) 410,000
- --------------------------------------------------------------------------------
400,000 Pacific Energy Partners L.P./
Pacific Energy Finance Corp.,
7.125%, 6/15/14 417,000
- --------------------------------------------------------------------------------
500,000 Range Resources Corp.,
7.375%, 7/15/13 532,500
- --------------------------------------------------------------------------------
500,000 Williams Companies Inc.,
8.125%, 3/15/12(3) 548,750
- --------------------------------------------------------------------------------
500,000 Williams Companies Inc.,
7.875%, 9/1/21 552,500
- --------------------------------------------------------------------------------
5,651,974
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 3.1%
- --------------------------------------------------------------------------------
400,000 Abitibi-Consolidated Inc.,
6.95%, 4/1/08 405,000
- --------------------------------------------------------------------------------
550,000 Boise Cascade LLC,
7.125%, 10/15/14 523,875
- --------------------------------------------------------------------------------
500,000 Georgia-Pacific Corp.,
7.70%, 6/15/15(3) 554,375
- --------------------------------------------------------------------------------
500,000 Norske Skog Canada Ltd.,
7.375%, 3/1/14 477,500
- --------------------------------------------------------------------------------
1,960,750
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 1.0%
- --------------------------------------------------------------------------------
610,000 WH Holdings Ltd./WH Capital
Corp., 9.50%, 4/1/11 660,325
- --------------------------------------------------------------------------------
REAL ESTATE -- 0.9%
- --------------------------------------------------------------------------------
162,000 CB Richard Ellis Services Inc.,
9.75%, 5/15/10 179,415
- --------------------------------------------------------------------------------
400,000 Host Marriott L.P.,
7.00%, 8/15/12 407,500
- --------------------------------------------------------------------------------
586,915
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 3.3%
- --------------------------------------------------------------------------------
450,000 Asbury Automotive Group Inc.,
9.00%, 6/15/12 454,500
- --------------------------------------------------------------------------------
250,000 Asbury Automotive Group Inc.,
8.00%, 3/15/14(3) 238,750
- --------------------------------------------------------------------------------
600,000 Couche-Tard U.S. L.P./
Couche-Tard Finance Corp.,
7.50%, 12/15/13(3) 621,000
- --------------------------------------------------------------------------------
350,000 Toys "R" Us, Inc.,
7.375%, 10/15/18 281,750
- --------------------------------------------------------------------------------
500,000 United Auto Group, Inc.,
9.625%, 3/15/12 522,500
- --------------------------------------------------------------------------------
2,118,500
- --------------------------------------------------------------------------------
TEXTILES, APPAREL
& LUXURY GOODS -- 0.9%
- --------------------------------------------------------------------------------
550,000 Perry Ellis International Inc.,
8.875%, 9/15/13 566,500
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
21
High-Yield - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount/Shares Value
- --------------------------------------------------------------------------------
TRADING COMPANIES
& DISTRIBUTORS -- 1.0%
- --------------------------------------------------------------------------------
$400,000 United Rentals North
America Inc., 6.50%, 2/15/12 $ 388,000
- --------------------------------------------------------------------------------
271,000 United Rentals North
America Inc., 7.75%,
11/15/13(3) 262,870
- --------------------------------------------------------------------------------
650,870
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION
SERVICES -- 5.3%
- --------------------------------------------------------------------------------
200,000 Dobson Communications
Corp., 8.875%, 10/1/13(3) 201,000
- --------------------------------------------------------------------------------
500,000 Nextel Communications Inc.,
7.375%, 8/1/15(3) 535,729
- --------------------------------------------------------------------------------
400,000 Nextel Partners Inc.,
8.125%, 7/1/11 434,000
- --------------------------------------------------------------------------------
650,000 Rogers Wireless
Communications Inc.,
7.25%, 12/15/12 690,625
- --------------------------------------------------------------------------------
300,000 Rogers Wireless
Communications Inc.,
7.50%, 3/15/15(3) 324,750
- --------------------------------------------------------------------------------
500,000 SBA Communications Corp.,
8.50%, 12/1/12(3) 546,250
- --------------------------------------------------------------------------------
300,000 Syniverse Technologies Inc.,
7.75%, 8/15/13 (Acquired
8/18/05, Cost $300,000)(1) 303,750
- --------------------------------------------------------------------------------
300,000 UbiquiTel Inc., 9.875%, 3/1/11 334,500
- --------------------------------------------------------------------------------
3,370,604
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $60,463,784) 61,474,486
- --------------------------------------------------------------------------------
COMMON STOCKS -- 0.1%
HOTELS, RESTAURANTS & LEISURE -- 0.1%
- --------------------------------------------------------------------------------
4,076 Trump Entertainment
Resorts, Inc.(3)(6)
(Cost $40,020) 73,123
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 2.3%
1,487,000 FHLB Discount Notes,
3.18%, 10/3/05(7)(8)
(Cost $1,486,737) 1,487,000
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED
FOR SECURITIES LENDING(9) -- 25.6%
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, Merrill Lynch
& Co., Inc., (collateralized by various
U.S Government Agency obligations
in a pooled account at the lending agent),
3.88%, dated 9/30/05, due 10/3/05
(Delivery value $6,335,961) 6,333,913
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
Repurchase Agreement, UBS AG,
(collateralized by various U.S. Government
Agency obligations in a pooled account
at the lending agent), 3.94%,
dated 9/30/05, due 10/3/05
(Delivery value $10,003,283) $ 10,000,000
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $16,333,913) 16,333,913
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 124.2%
(Cost $78,324,454) 79,368,522
- --------------------------------------------------------------------------------
OTHER ASSETS
AND LIABILITIES -- (24.2)% (15,464,863)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $ 63,903,659
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
TRAINS(reg.sm) = Target Return Index Securities(reg.sm). Rate indicated is the
weighted average coupon of the underlying securities held.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective September 30, 2005.
(1) Security was purchased under Rule 144A of the Securities Act of 1933
or is a private placement and, unless registered under the Act or exempted
from registration, may only be sold to qualified institutional investors.
The aggregate value of restricted securities at September 30, 2005, was
$6,451,224, which represented 10.1% of total net assets. None of the
restricted securities were considered illiquid.
(2) Industry is less than 0.05% of total net assets.
(3) Security, or a portion thereof, was on loan as of September 30, 2005.
(4) 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, 2005.
(5) When-issued security.
(6) Non-income producing.
(7) The rate indicated is the yield to maturity at purchase.
(8) Security, or a portion thereof, has been segregated for a when-issued
security.
(9) 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.
- ------
22
Shareholder Fee Examples (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from April 1, 2005 to September 30, 2005
(except as noted).
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
(continued)
- ------
23
Shareholder Fee Examples (Unaudited)
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD(1) ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 4/1/05 - EXPENSE
4/1/05 9/30/05 9/30/05 RATIO(1)
- --------------------------------------------------------------------------------
DIVERSIFIED BOND SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,021.40 $3.14 0.62%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,022.40 $2.13 0.42%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,020.10 $4.41 0.87%
- --------------------------------------------------------------------------------
A Class $1,000 $1,020.10 $4.41 0.87%
- --------------------------------------------------------------------------------
B Class $1,000 $1,016.30 $8.19 1.62%
- --------------------------------------------------------------------------------
C Class $1,000 $1,016.30 $8.19 1.62%
- --------------------------------------------------------------------------------
R Class $1,000 $1,000.80(2) $1.93(3) 1.12%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,021.96 $3.14 0.62%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,022.96 $2.13 0.42%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,020.71 $4.41 0.87%
- --------------------------------------------------------------------------------
A Class $1,000 $1,020.71 $4.41 0.87%
- --------------------------------------------------------------------------------
B Class $1,000 $1,016.95 $8.19 1.62%
- --------------------------------------------------------------------------------
C Class $1,000 $1,016.95 $8.19 1.62%
- --------------------------------------------------------------------------------
R Class $1,000 $1,019.45(4) $5.67(4) 1.12%
- --------------------------------------------------------------------------------
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 365, to reflect the one-half year period.
(2) Ending account value based on actual return from July 29, 2005
(commencement of sale) through September 30, 2005.
(3) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 63, the number of days in the period from July 29, 2005
(commencement of sale) through September 30, 2005, divided by 365, to
reflect the period. Had the class been available for the full period, the
expenses paid during the period would have been higher.
(4) Ending account value and expenses paid during the period assume the class
had been available throughout the entire period and are calculated using the
class's annualized expense ratio listed in the table above.
(continued)
- ------
24
Shareholder Fee Examples (Unaudited)
- ------------------------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD(1) ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 4/1/05 - EXPENSE
4/1/05 9/30/05 9/30/05 RATIO(1)
- ------------------------------------------------------------------------------------------------
HIGH-YIELD SHAREHOLDER FEE EXAMPLE
- ------------------------------------------------------------------------------------------------
ACTUAL
- ------------------------------------------------------------------------------------------------
Investor Class
(after reimbursement)(2) $1,000 $1,030.40 $4.28 0.84%
- ------------------------------------------------------------------------------------------------
Investor Class
(before reimbursement) $1,000 $1,030.40(3) $4.43 0.87%
- ------------------------------------------------------------------------------------------------
Institutional Class
(after reimbursement)(2) $1,000 $1,031.40 $3.21 0.63%
- ------------------------------------------------------------------------------------------------
Institutional Class
(before reimbursement) $1,000 $1,031.40(3) $3.41 0.67%
- ------------------------------------------------------------------------------------------------
Advisor Class
(after reimbursement)(2) $1,000 $1,029.10 $5.54 1.09%
- ------------------------------------------------------------------------------------------------
Advisor Class
(before reimbursement) $1,000 $1,029.10(3) $5.70 1.12%
- ------------------------------------------------------------------------------------------------
A Class
(after reimbursement)(2) $1,000 $1,029.10 $5.54 1.09%
- ------------------------------------------------------------------------------------------------
A Class
(before reimbursement) $1,000 $1,029.10(3) $5.70 1.12%
- ------------------------------------------------------------------------------------------------
B Class
(after reimbursement)(2) $1,000 $1,025.30 $9.34 1.84%
- ------------------------------------------------------------------------------------------------
B Class
(before reimbursement) $1,000 $1,025.30(3) $9.49 1.87%
- ------------------------------------------------------------------------------------------------
C Class
(after reimbursement)(2) $1,000 $1,025.30 $9.34 1.84%
- ------------------------------------------------------------------------------------------------
C Class
(before reimbursement) $1,000 $1,025.30(3) $9.49 1.87%
- ------------------------------------------------------------------------------------------------
R Class
(after reimbursement)(2) $1,000 $993.60(4) $2.20(5) 1.28%
- ------------------------------------------------------------------------------------------------
R Class
(before reimbursement) $1,000 $993.60(3)(4) $2.36(5) 1.37%
- ------------------------------------------------------------------------------------------------
HYPOTHETICAL
- ------------------------------------------------------------------------------------------------
Investor Class
(after reimbursement)(2) $1,000 $1,020.86 $4.26 0.84%
- ------------------------------------------------------------------------------------------------
Investor Class
(before reimbursement) $1,000 $1,020.71 $4.41 0.87%
- ------------------------------------------------------------------------------------------------
Institutional Class
(after reimbursement)(2) $1,000 $1,021.91 $3.19 0.63%
- ------------------------------------------------------------------------------------------------
Institutional Class
(before reimbursement) $1,000 $1,021.71 $3.40 0.67%
- ------------------------------------------------------------------------------------------------
Advisor Class
(after reimbursement)(2) $1,000 $1,019.60 $5.52 1.09%
- ------------------------------------------------------------------------------------------------
Advisor Class
(before reimbursement) $1,000 $1,019.45 $5.67 1.12%
- ------------------------------------------------------------------------------------------------
A Class
(after reimbursement)(2) $1,000 $1,019.60 $5.52 1.09%
- ------------------------------------------------------------------------------------------------
A Class
(before reimbursement) $1,000 $1,019.45 $5.67 1.12%
- ------------------------------------------------------------------------------------------------
B Class
(after reimbursement)(2) $1,000 $1,015.84 $9.30 1.84%
- ------------------------------------------------------------------------------------------------
B Class
(before reimbursement) $1,000 $1,015.69 $9.45 1.87%
- ------------------------------------------------------------------------------------------------
C Class
(after reimbursement)(2) $1,000 $1,015.84 $9.30 1.84%
- ------------------------------------------------------------------------------------------------
C Class
(before reimbursement) $1,000 $1,015.69 $9.45 1.87%
- ------------------------------------------------------------------------------------------------
R Class
(after reimbursement)(2) $1,000 $1,018.65 $6.48 1.28%
- ------------------------------------------------------------------------------------------------
R Class
(before reimbursement) $1,000 $1,018.20(6) $6.93(6) 1.37%
- ------------------------------------------------------------------------------------------------
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 365, to reflect the one-half year period.
(2) During the period ended September 30, 2005, the class had received a
partial reimbursement of its distribution and service fees.
(3) Ending account value assumes the return earned after reimbursement. The
return would have been lower had fees not been reimbursed and would have
resulted in a lower ending account value.
(4) Ending account value based on actual return from July 29, 2005
(commencement of sale) through September 30, 2005.
(5) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 63, the number of days in the period from July 29, 2005
(commencement of sale) through September 30, 2005, divided by 365, to
reflect the period. Had the class been available for the full period, the
expenses paid during the period would have been higher.
(6) Ending account value and expenses paid during the period assume the class
had been available throughout the entire period and are calculated using the
class's annualized expense ratio listed in the table above.
- ------
25
Statement of Assets and Liabilities
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value
(cost of $748,262,231 and $61,990,541,
respectively) -- including $84,158,801
and $15,756,101 of securities on loan,
respectively $746,415,729 $63,034,609
- --------------------------------------------
Investments made with cash collateral
received for securities on loan,
at value (cost of $42,025,843 and
$16,333,913, respectively) 42,025,843 16,333,913
- --------------------------------------------------------------------------------
Total investment securities, at value
(cost of $790,288,074 and $78,324,454,
respectively) 788,441,572 79,368,522
- --------------------------------------------
Cash -- 52,468
- --------------------------------------------
Receivable for investments sold 1,897,921 --
- --------------------------------------------
Receivable for capital shares sold 8,220 4,230
- --------------------------------------------
Receivable for variation margin
on futures contracts 63,432 --
- --------------------------------------------
Interest receivable 4,866,710 1,325,638
- --------------------------------------------------------------------------------
795,277,855 80,750,858
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for collateral received
for securities on loan 42,025,843 16,333,913
- --------------------------------------------
Disbursements in excess
of demand deposit cash 1,083,301 --
- --------------------------------------------
Payable for investments purchased 126,448,112 350,000
- --------------------------------------------
Accrued management fees 248,798 40,138
- --------------------------------------------
Distribution fees payable 2,661 2,783
- --------------------------------------------
Service fees (and distribution fees --
A Class) payable 3,065 3,866
- --------------------------------------------
Dividends payable 985,333 116,499
- --------------------------------------------------------------------------------
170,797,113 16,847,199
- --------------------------------------------------------------------------------
NET ASSETS $624,480,742 $63,903,659
================================================================================
See Notes to Financial Statements. (continued)
- ------
26
Statement of Assets and Liabilities
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------
Capital paid in $626,627,233 $75,848,871
- --------------------------------------------
Accumulated net realized loss
on investment transactions (465,328) (12,989,280)
- --------------------------------------------
Net unrealized appreciation (depreciation)
on investments (1,681,163) 1,044,068
- --------------------------------------------------------------------------------
$624,480,742 $63,903,659
================================================================================
INVESTOR CLASS
- --------------------------------------------------------------------------------
Net assets $202,421,092 $39,665,031
- --------------------------------------------
Shares outstanding 20,007,136 6,199,654
- --------------------------------------------
Net asset value per share $10.12 $6.40
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
Net assets $407,144,156 $5,782,645
- --------------------------------------------
Shares outstanding 40,241,954 903,827
- --------------------------------------------
Net asset value per share $10.12 $6.40
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
Net assets $5,737,719 $414,196
- --------------------------------------------
Shares outstanding 567,111 64,739
- --------------------------------------------
Net asset value per share $10.12 $6.40
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
Net assets $6,833,525 $13,756,015
- --------------------------------------------
Shares outstanding 675,422 2,150,065
- --------------------------------------------
Net asset value per share $10.12 $6.40
- --------------------------------------------
Maximum offering price
(net asset value divided by 0.955) $10.60 $6.70
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
Net assets $757,298 $1,189,576
- --------------------------------------------
Shares outstanding 74,851 185,931
- --------------------------------------------
Net asset value per share $10.12 $6.40
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
Net assets $1,561,934 $3,071,356
- --------------------------------------------
Shares outstanding 154,380 480,054
- --------------------------------------------
Net asset value per share $10.12 $6.40
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
Net assets $25,018 $24,840
- --------------------------------------------
Shares outstanding 2,473 3,882
- --------------------------------------------
Net asset value per share $10.12 $6.40
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
27
Statement of Operations
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------
INCOME:
- --------------------------------------------
Interest $13,246,656 $2,400,808
- --------------------------------------------
Securities lending 73,373 27,876
- --------------------------------------------------------------------------------
13,320,029 2,428,684
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------
Management fees 1,455,368 277,499
- --------------------------------------------
Distribution fees:
- --------------------------------------------
Advisor Class 6,975 504
- --------------------------------------------
B Class 2,947 4,384
- --------------------------------------------
C Class 5,412 12,407
- --------------------------------------------
Service fees:
- --------------------------------------------
Advisor Class 6,975 504
- --------------------------------------------
B Class 982 1,461
- --------------------------------------------
C Class 1,804 4,136
- --------------------------------------------
Service and distribution fees:
- --------------------------------------------
A Class 6,927 18,952
- --------------------------------------------
R Class 20 20
- --------------------------------------------
Trustees' fees and expenses 15,896 1,744
- --------------------------------------------
Other expenses 2,502 272
- --------------------------------------------------------------------------------
1,505,808 321,883
Amount waived -- (10,843)
- --------------------------------------------------------------------------------
1,505,808 311,040
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 11,814,221 2,117,644
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss)
on investment transactions 1,211,757 (89,368)
- --------------------------------------------
Change in net unrealized appreciation
(depreciation) on investments (695,801) (158,433)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 515,956 (247,801)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $12,330,177 $1,869,843
================================================================================
See Notes to Financial Statements.
- ------
28
Statement of Changes in Net Assets
SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MARCH 31, 2005
- --------------------------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- --------------------------------------------------------------------------------------------------
INCREASE (DECREASE)
IN NET ASSETS SEPT. 30, 2005 MARCH 31, 2005 SEPT. 30, 2005 MARCH 31, 2005
- --------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 11,814,221 $ 16,522,233 $ 2,117,644 $ 4,465,319
- ------------------------------
Net realized gain (loss) 1,211,757 (1,133,855) (89,368) 1,551,123
- ------------------------------
Change in net unrealized
appreciation (depreciation) (695,801) (12,137,535) (158,433) (2,987,138)
- --------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 12,330,177 3,250,843 1,869,843 3,029,304
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------
From net investment income:
- ------------------------------
Investor Class (3,726,115) (5,567,572) (1,336,400) (3,129,375)
- ------------------------------
Institutional Class (7,957,641) (10,897,263) (161,588) (54,722)
- ------------------------------
Advisor Class (99,985) (195,912) (12,838) (29,176)
- ------------------------------
A Class (99,746) (123,356) (481,199) (988,944)
- ------------------------------
B Class (11,111) (15,604) (32,755) (59,972)
- ------------------------------
C Class (20,377) (32,664) (92,590) (203,130)
- ------------------------------
R Class (150) -- (274) --
- ------------------------------
From net realized gains:
- ------------------------------
Investor Class -- (1,845,189) -- --
- ------------------------------
Institutional Class -- (3,579,242) -- --
- ------------------------------
Advisor Class -- (71,376) -- --
- ------------------------------
A Class -- (46,319) -- --
- ------------------------------
B Class -- (8,419) -- --
- ------------------------------
C Class -- (16,206) -- --
- --------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (11,915,125) (22,399,122) (2,117,644) (4,465,319)
- --------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from capital
share transactions 94,876,754 48,274,529 27,250 (5,649,240)
- --------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS 95,291,806 29,126,250 (220,551) (7,085,255)
NET ASSETS
- --------------------------------------------------------------------------------------------------
Beginning of period 529,188,936 500,062,686 64,124,210 71,209,465
- --------------------------------------------------------------------------------------------------
End of period $624,480,742 $529,188,936 $63,903,659 $64,124,210
==================================================================================================
See Notes to Financial Statements.
- ------
29
Notes to Financial Statements
SEPTEMBER 30, 2005 (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 Bond) and
High-Yield Fund (High-Yield) (the funds) are two funds in a series issued by the
trust. The funds are diversified under the 1940 Act. Diversified Bond's
investment objective is to seek 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-yield 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 yields. 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, the C Class,
and the R 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. The funds are closed to new self-directed
retail investors. Sale of the Institutional Class of High-Yield commenced on
August 2, 2004. Sale of the R Class commenced on July 29, 2005 for the funds.
SECURITY VALUATIONS -- Debt securities maturing in greater than 60 days are
valued at current market value as provided by a commercial pricing service or at
the mean of the most recent bid and asked prices. Debt securities maturing
within 60 days may be valued at cost, plus or minus any amortized discount or
premium. If the funds determine that the market price of a portfolio security is
not readily available, or that the valuation methods mentioned above do not
reflect the security's fair value, such security is valued at its fair value as
determined by, or in accordance with procedures adopted by, the Board of
Trustees or its designee if such fair value determination would materially
impact a fund's net asset value. Circumstances that may cause the funds to fair
value a security include: an event occurred after the close of the exchange on
which a portfolio security principally trades (but before the close of the New
York Stock Exchange) that was likely to have changed the value of the security;
a security has been declared in default; or trading in a security has been
halted during the trading day.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes 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)
- ------
30
Notes to Financial Statements
SEPTEMBER 30, 2005 (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.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) 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 or American Century Global
Investment Management, Inc. (ACGIM), 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.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the funds. In addition, in the normal course of
business, the funds enter into contracts that provide general indemnifications.
The funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the funds. The risk of material
loss from such claims is considered by management to be remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
- ------
31
Notes to Financial Statements
SEPTEMBER 30, 2005 (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 funds with investment advisory and management
services in exchange for a single, unified management fee (the fee) per class.
The Agreement provides that all expenses of the funds, except brokerage
commissions, taxes, interest, fees and expenses of those trustees who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee is computed and
accrued daily based on the daily net assets of each specific class of shares of
each fund and paid monthly in arrears. The fee consists of (1) an Investment
Category Fee based on the daily net assets of the funds and certain other
accounts managed by the investment advisor that are in the same broad investment
category as each fund and (2) a Complex Fee based on the assets of all the funds
in the American Century family of funds. The rates for the Investment Category
Fee range from 0.2925% 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, C, and R
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. Effective July 29, 2005, ACIM voluntarily agreed to waive 0.095% of its
management fee for High-Yield.
The effective annual management fees for the funds for the six months ended
September 30, 2005 were as follows:
- --------------------------------------------------------------------------------
INVESTOR,
A, B & C INSTITUTIONAL ADVISOR R CLASS
- --------------------------------------------------------------------------------
Diversified Bond 0.62% 0.42% 0.37% 0.62%
- --------------------------------------------------------------------------------
High-Yield (before waiver) 0.87% 0.67% 0.62% 0.87%
- --------------------------------------------------------------------------------
High-Yield (after waiver) 0.84% 0.63% 0.59% 0.78%
- --------------------------------------------------------------------------------
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, C Class and R 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 and R Class will pay ACIS an annual
distribution and service fee of 0.25% and 0.50%, respectively. 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, C and R
Class shares. Fees incurred under the plans during the six months ended
September 30, 2005, are detailed in the Statement of Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment advisor, ACIM, the
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services, LLC.
The funds have a bank line of credit 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.
(continued)
- ------
32
Notes to Financial Statements
SEPTEMBER 30, 2005 (UNAUDITED)
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended September 30, 2005, were as follows:
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
PURCHASES
- --------------------------------------------------------------------------------
U.S. Treasury & Government Agency Obligations $1,017,109,670 --
- --------------------------------------------------------------------------------
Investment securities other than
U.S. Treasury & Government
Agency Obligations $91,224,031 $17,328,556
- --------------------------------------------------------------------------------
PROCEEDS FROM SALES
- --------------------------------------------------------------------------------
U.S. Treasury & Government Agency Obligations $951,565,680 --
- --------------------------------------------------------------------------------
Investment securities other than U.S.
Treasury & Government Agency Obligations $35,836,322 $14,106,070
- --------------------------------------------------------------------------------
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, 2005
- -----------------------------
Sold 3,514,819 $ 35,838,985 913,091 $ 5,877,468
- -----------------------------
Issued in reinvestment
of distributions 261,813 2,675,310 144,424 929,647
- -----------------------------
Redeemed (1,626,138) (16,612,112) (1,200,792) (7,724,372)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 2,150,494 $ 21,902,183 (143,277) $ (917,257)
=============================================================================================
YEAR ENDED MARCH 31, 2005
- -----------------------------
Sold 4,276,189 $ 43,779,141 2,217,561 $ 14,511,413
- -----------------------------
Issued in reinvestment
of distributions 648,996 6,635,162 337,196 2,195,208
- -----------------------------
Redeemed (4,017,237) (41,058,188) (4,467,467) (29,031,029)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 907,948 $ 9,356,115 (1,912,710) $(12,324,408)
=============================================================================================
INSTITUTIONAL CLASS
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005
- -----------------------------
Sold 8,788,349 $ 89,389,807 451,490 $2,898,147
- -----------------------------
Issued in reinvestment
of distributions 328,275 3,354,256 142 919
- -----------------------------
Redeemed (2,163,753) (22,042,273) (18,061) (116,569)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 6,952,871 $ 70,701,790 433,571 $2,782,497
=============================================================================================
YEAR ENDED MARCH 31, 2005(1)
- -----------------------------
Sold 10,247,819 $105,039,653 471,927 $3,112,995
- -----------------------------
Issued in reinvestment
of distributions 752,745 7,696,248 183 1,198
- -----------------------------
Redeemed (7,223,585) (74,246,876) (1,854) (12,263)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 3,776,979 $ 38,489,025 470,256 $3,101,930
=============================================================================================
(1) August 2, 2004 (commencement of sale) through March 31, 2005 for High-Yield.
(continued)
- ------
33
Notes to Financial Statements
SEPTEMBER 30, 2005 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ---------------------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- ---------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
ADVISOR CLASS
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005
- -----------------------------
Sold 129,309 $ 1,317,074 9,931 $ 64,223
- -----------------------------
Issued in reinvestment
of distributions 9,422 96,267 674 4,341
- -----------------------------
Redeemed (108,414) (1,105,634) (5,817) (37,531)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 30,317 $ 307,707 4,788 $ 31,033
=============================================================================================
YEAR ENDED MARCH 31, 2005
- -----------------------------
Sold 217,034 $ 2,220,710 60,503 $ 389,029
- -----------------------------
Issued in reinvestment
of distributions 24,443 249,910 1,346 8,758
- -----------------------------
Redeemed (382,160) (3,907,965) (38,784) (250,708)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) (140,683) $(1,437,345) 23,065 $ 147,079
=============================================================================================
A CLASS
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005
- -----------------------------
Sold 250,110 $2,550,365 374,932 $ 2,411,974
- -----------------------------
Issued in reinvestment
of distributions 8,108 82,809 68,079 438,195
- -----------------------------
Redeemed (82,253) (839,429) (708,535) (4,569,182)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 175,965 $1,793,745 (265,524) $(1,719,013)
=============================================================================================
YEAR ENDED MARCH 31, 2005
- -----------------------------
Sold 273,403 $ 2,799,725 1,233,240 $ 8,018,943
- -----------------------------
Issued in reinvestment
of distributions 14,447 147,684 135,500 882,613
- -----------------------------
Redeemed (133,942) (1,367,672) (853,689) (5,573,755)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 153,908 $ 1,579,737 515,051 $ 3,327,801
=============================================================================================
B CLASS
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005
- -----------------------------
Sold 6,195 $ 63,185 18,293 $117,968
- -----------------------------
Issued in reinvestment
of distributions 858 8,771 3,235 20,823
- -----------------------------
Redeemed (6,715) (68,142) (7,547) (48,784)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 338 $ 3,814 13,981 $ 90,007
=============================================================================================
YEAR ENDED MARCH 31, 2005
- -----------------------------
Sold 34,527 $ 354,652 53,831 $ 350,840
- -----------------------------
Issued in reinvestment
of distributions 1,738 17,768 6,741 43,865
- -----------------------------
Redeemed (20,347) (208,523) (19,080) (124,571)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 15,918 $ 163,897 41,492 $ 270,134
=============================================================================================
(continued)
- ------
34
Notes to Financial Statements
SEPTEMBER 30, 2005 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ---------------------------------------------------------------------------------------------
DIVERSIFIED BOND HIGH-YIELD
- ---------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
C CLASS
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005
- -----------------------------
Sold 37,823 $ 385,834 48,127 $ 310,587
- -----------------------------
Issued in reinvestment
of distributions 1,403 14,338 4,102 26,400
- -----------------------------
Redeemed (25,250) (257,810) (93,780) (602,279)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 13,976 $ 142,362 (41,551) $(265,292)
=============================================================================================
YEAR ENDED MARCH 31, 2005
- -----------------------------
Sold 62,876 $ 643,095 152,831 $ 994,646
- -----------------------------
Issued in reinvestment
of distributions 2,675 27,340 10,620 69,115
- -----------------------------
Redeemed (53,576) (547,335) (189,997) (1,235,537)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 11,975 $ 123,100 (26,546) $ (171,776)
=============================================================================================
R CLASS
- ---------------------------------------------------------------------------------------------
PERIOD ENDED
SEPTEMBER 30, 2005(1)
- -----------------------------
Sold 2,458 $25,005 3,840 $25,003
- -----------------------------
Issued in reinvestment
of distributions 15 148 42 272
- ---------------------------------------------------------------------------------------------
Net increase (decrease) 2,473 $25,153 3,882 $25,275
=============================================================================================
(1) July 29, 2005 (commencement of sale) through September 30, 2005.
5. SECURITIES LENDING
As of September 30, 2005, securities in Diversified Bond and High-Yield valued
at $84,158,801 and $15,756,101, 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 $85,984,439 and
$16,333,913, 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 or ACGIM, have a
$575,000,000 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, 2005.
(continued)
- ------
35
Notes to Financial Statements
SEPTEMBER 30, 2005 (UNAUDITED)
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, 2005, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
DIVERSIFIED
BOND HIGH-YIELD
- --------------------------------------------------------------------------------
Federal tax cost of investments $790,325,670 $78,324,454
================================================================================
Gross tax appreciation of investments $ 3,862,145 $1,874,283
- --------------------------------------------
Gross tax depreciation of investments (5,746,243) (830,215)
- --------------------------------------------------------------------------------
Net tax appreciation (depreciation)
of investments $(1,884,098) $1,044,068
================================================================================
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, 2005, Diversified Bond had net capital loss carryovers of
$1,154,152 expiring in 2013 and High-Yield had net capital loss carryovers of
$2,609,243 and $10,290,669 expiring in 2009 and 2010, respectively, that may be
used to offset future realized capital gains for federal income tax purposes.
- ------
36
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -----------------------------------------------------------------------------------------
INVESTOR CLASS
- -----------------------------------------------------------------------------------------
2005(1) 2005 2004 2003 2002(2)
- -----------------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.10 $10.49 $10.47 $9.98 $10.25
- -----------------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------------
Net Investment Income 0.20(3) 0.33(3) 0.36(3) 0.48 0.17
- ---------------------------------
Net Realized and
Unrealized Gain (Loss) 0.02 (0.27) 0.14 0.49 (0.27)
- -----------------------------------------------------------------------------------------
Total From
Investment Operations 0.22 0.06 0.50 0.97 (0.10)
- -----------------------------------------------------------------------------------------
Distributions
- ---------------------------------
From Net Investment Income (0.20) (0.34) (0.37) (0.48) (0.17)
- ---------------------------------
From Net Realized Gains -- (0.11) (0.11) -- --
- -----------------------------------------------------------------------------------------
Total Distributions (0.20) (0.45) (0.48) (0.48) (0.17)
- -----------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.12 $10.10 $10.49 $10.47 $9.98
=========================================================================================
TOTAL RETURN(4) 2.14% 0.63% 4.92% 9.93% (0.99)%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.62%(5) 0.63% 0.64% 0.64% 0.63%(5)
- ---------------------------------
Ratio of Net Investment Income
to Average Net Assets 3.81%(5) 3.25% 3.38% 4.67% 5.19%(5)
- ---------------------------------
Portfolio Turnover Rate 173% 386% 324% 151% 136%(6)
- ---------------------------------
Net Assets, End of Period
(in thousands) $202,421 $180,346 $177,791 $198,835 $170,707
- -----------------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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.
- ------
37
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------
2005(1) 2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------
PER-SHARE DATA
- -------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.10 $10.49 $10.47 $9.98 $10.12 $9.62
- -------------------------------------------------------------------------------------------
Income From
Investment Operations
- -----------------------
Net Investment
Income 0.21(2) 0.35(2) 0.38(2) 0.50 0.56 0.62
- -----------------------
Net Realized and
Unrealized
Gain (Loss) 0.02 (0.27) 0.14 0.49 (0.09) 0.50
- -------------------------------------------------------------------------------------------
Total From
Investment
Operations 0.23 0.08 0.52 0.99 0.47 1.12
- -------------------------------------------------------------------------------------------
Distributions
- -----------------------
From Net
Investment Income (0.21) (0.36) (0.39) (0.50) (0.56) (0.62)
- -----------------------
From Net
Realized Gains -- (0.11) (0.11) -- (0.05) --
- -------------------------------------------------------------------------------------------
Total Distributions (0.21) (0.47) (0.50) (0.50) (0.61) (0.62)
- -------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.12 $10.10 $10.49 $10.47 $9.98 $10.12
===========================================================================================
TOTAL RETURN(3) 2.24% 0.83% 5.13% 10.15% 4.76% 12.03%
- -------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.42%(4) 0.43% 0.44% 0.44% 0.44% 0.45%
- -----------------------
Ratio of Net
Investment Income
to Average Net Assets 4.01%(4) 3.45% 3.58% 4.87% 5.46% 6.31%
- -----------------------
Portfolio
Turnover Rate 173% 386% 324% 151% 136% 139%
- -----------------------
Net Assets,
End of Period
(in thousands) $407,144 $336,207 $309,579 $281,998 $202,476 $140,497
- -------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(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.
- ------
38
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- -----------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------
2005(1) 2005 2004 2003 2002(2)
- -----------------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.10 $10.49 $10.47 $9.98 $10.25
- -----------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------------
Net Investment Income 0.18(3) 0.31(3) 0.33(3) 0.46 0.16
- --------------------------------
Net Realized and
Unrealized Gain (Loss) 0.02 (0.28) 0.14 0.49 (0.27)
- -----------------------------------------------------------------------------------------
Total From
Investment Operations 0.20 0.03 0.47 0.95 (0.11)
- -----------------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Investment Income (0.18) (0.31) (0.34) (0.46) (0.16)
- --------------------------------
From Net Realized Gains -- (0.11) (0.11) -- --
- -----------------------------------------------------------------------------------------
Total Distributions (0.18) (0.42) (0.45) (0.46) (0.16)
- -----------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.12 $10.10 $10.49 $10.47 $9.98
=========================================================================================
TOTAL RETURN(4) 2.01% 0.38% 4.66% 9.66% (1.07)%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.87%(5) 0.88% 0.89% 0.89% 0.88%(5)
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets 3.56%(5) 3.00% 3.13% 4.42% 4.94%(5)
- --------------------------------
Portfolio Turnover Rate 173% 386% 324% 151% 136%(6)
- --------------------------------
Net Assets, End of Period
(in thousands) $5,738 $5,421 $7,107 $11,567 $10,291
- -----------------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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.
- ------
39
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.10 $10.49 $10.47 $10.40
- --------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------------
Net Investment Income 0.18(3) 0.31(3) 0.33(3) 0.06
- --------------------------------
Net Realized and
Unrealized Gain (Loss) 0.02 (0.28) 0.14 0.07
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.20 0.03 0.47 0.13
- --------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Investment Income (0.18) (0.31) (0.34) (0.06)
- --------------------------------
From Net Realized Gains -- (0.11) (0.11) --
- --------------------------------------------------------------------------------
Total Distributions (0.18) (0.42) (0.45) (0.06)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $10.12 $10.10 $10.49 $10.47
================================================================================
TOTAL RETURN(4) 2.01% 0.38% 4.65% 1.27%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.87%(5) 0.88% 0.89% 0.88%(5)
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets 3.56%(5) 3.00% 3.13% 3.69%(5)
- --------------------------------
Portfolio Turnover Rate 173% 386% 324% 151%(6)
- --------------------------------
Net Assets, End of Period
(in thousands) $6,834 $5,044 $3,625 $294
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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.
- ------
40
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.10 $10.49 $10.47 $10.40
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------------
Net Investment Income 0.14(3) 0.23(3) 0.26(3) 0.05
- ---------------------------------
Net Realized and
Unrealized Gain (Loss) 0.02 (0.27) 0.14 0.07
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.16 (0.04) 0.40 0.12
- --------------------------------------------------------------------------------
Distributions
- ---------------------------------
From Net Investment Income (0.14) (0.24) (0.27) (0.05)
- ---------------------------------
From Net Realized Gains -- (0.11) (0.11) --
- --------------------------------------------------------------------------------
Total Distributions (0.14) (0.35) (0.38) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $10.12 $10.10 $10.49 $10.47
================================================================================
TOTAL RETURN(4) 1.63% (0.37)% 3.87% 1.20%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.62%(5) 1.63% 1.64% 1.61%(5)
- ---------------------------------
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.62%(5) 1.63% 1.64% 1.63%(5)(6)
- ---------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.81%(5) 2.25% 2.38% 2.98%(5)
- ---------------------------------
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) 2.81%(5) 2.25% 2.38% 2.96%(5)(6)
- ---------------------------------
Portfolio Turnover Rate 173% 386% 324% 151%(7)
- ---------------------------------
Net Assets, End of Period
(in thousands) $757 $753 $615 $84
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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.
- ------
41
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.10 $10.49 $10.47 $10.40
- --------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------------
Net Investment Income 0.14(3) 0.23(3) 0.28(3) 0.05
- --------------------------------
Net Realized and
Unrealized Gain (Loss) 0.02 (0.27) 0.14 0.07
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.16 (0.04) 0.42 0.12
- --------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Investment Income (0.14) (0.24) (0.29) (0.05)
- --------------------------------
From Net Realized Gains -- (0.11) (0.11) --
- --------------------------------------------------------------------------------
Total Distributions (0.14) (0.35) (0.40) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $10.12 $10.10 $10.49 $10.47
================================================================================
TOTAL RETURN(4) 1.63% (0.37)% 4.07% 1.20%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.62%(5) 1.63% 1.47% 1.38%(5)
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.81%(5) 2.25% 2.55% 3.23%(5)
- --------------------------------
Portfolio Turnover Rate 173% 386% 324% 151%(6)
- --------------------------------
Net Assets, End of Period
(in thousands) $1,562 $1,418 $1,347 $342
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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.
- ------
42
Diversified Bond - Financial Highlights
For a Share Outstanding Throughout the Period Indicated
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.17
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------------
Net Investment Income(2) 0.06
- -------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.05)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.01
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------------------
From Net Investment Income (0.06)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $10.12
================================================================================
TOTAL RETURN(3) 0.08%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.12%(4)
- -------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 3.51%(4)
- -------------------------------------------------------------------
Portfolio Turnover Rate 173%(5)
- -------------------------------------------------------------------
Net Assets, End of Period (in thousands) $25
- --------------------------------------------------------------------------------
(1) July 29, 2005 (commencement of sale) through September 30, 2005
(unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the six months ended September 30, 2005.
See Notes to Financial Statements.
- ------
43
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- ---------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2) 2002 2001 2000
- ---------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning
of Period $6.42 $6.55 $6.13 $5.76 $6.18 $7.20 $8.54
- ---------------------------------------------------------------------------------------------------
Income From
Investment
Operations
- -----------------
Net Investment
Income 0.21 0.46 0.50 0.18 0.52 0.74 0.85
- -----------------
Net Realized
and Unrealized
Gain (Loss) (0.02) (0.13) 0.42 0.37 (0.42) (0.97) (1.39)
- ---------------------------------------------------------------------------------------------------
Total From
Investment
Operations 0.19 0.33 0.92 0.55 0.10 (0.23) (0.54)
- ---------------------------------------------------------------------------------------------------
Distributions
- -----------------
From Net
Investment
Income (0.21) (0.46) (0.50) (0.18) (0.52) (0.79) (0.80)
- ---------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.40 $6.42 $6.55 $6.13 $5.76 $6.18 $7.20
===================================================================================================
TOTAL RETURN(3) 3.04% 5.17% 15.53% 9.61% 1.43% (3.56)% (7.08)%
- ---------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
Ratio of
Operating
Expenses to
Average
Net Assets 0.84%(4)(5) 0.88% 0.89% 0.88%(5) 0.90% 0.90% 0.90%
- -----------------
Ratio of
Operating
Expenses to
Average
Net Assets
(Before
Expense Waiver) 0.87%(5) 0.88% 0.89% 0.88%(5) 0.90% 0.90% 0.90%
- -----------------
Ratio of Net
Investment
Income to
Average
Net Assets 6.61%(4)(5) 7.04% 7.82% 7.22%(5) 8.37% 10.88% 10.09%
- -----------------
Ratio of Net
Investment
Income to
Average
Net Assets
(Before
Expense Waiver) 6.58%(5) 7.04% 7.82% 7.22%(5) 8.37% 10.88% 10.09%
- -----------------
Portfolio
Turnover Rate 24% 64% 80% 9% 80% 131% 77%
- -----------------
Net Assets,
End of Period
(in thousands) $39,665 $40,746 $54,074 $78,223 $50,287 $34,150 $25,126
- ---------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(5) Annualized.
See Notes to Financial Statements.
- ------
44
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Periods Indicated
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2005(1) 2005(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.42 $6.43
- --------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------------------
Net Investment Income 0.22 0.30
- ---------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.02) (0.01)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.20 0.29
- --------------------------------------------------------------------------------
Distributions
- ---------------------------------------------------
From Net Investment Income (0.22) (0.30)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.40 $6.42
================================================================================
TOTAL RETURN(3) 3.14% 4.53%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.63%(4)(5) 0.68%(5)
- ---------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver) 0.67%(5) 0.68%(5)
- ---------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 6.82%(4)(5) 4.37%(5)
- ---------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets (Before Expense Waiver) 6.78%(5) 4.37%(5)
- ---------------------------------------------------
Portfolio Turnover Rate 24% 64%(6)
- ---------------------------------------------------
Net Assets, End of Period (in thousands) $5,783 $3,021
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (unaudited).
(2) August 2, 2004 (commencement of sale) through March 31, 2005.
(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) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2005.
See Notes to Financial Statements.
- ------
45
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- ------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2) 2002(3)
- ------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.42 $6.55 $6.13 $5.76 $6.22
- ------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------
Net Investment Income 0.21 0.44 0.49 0.18 0.30
- -------------------------
Net Realized and
Unrealized Gain (Loss) (0.02) (0.13) 0.42 0.37 (0.46)
- ------------------------------------------------------------------------------------
Total From
Investment Operations 0.19 0.31 0.91 0.55 (0.16)
- ------------------------------------------------------------------------------------
Distributions
- -------------------------
From Net
Investment Income (0.21) (0.44) (0.49) (0.18) (0.30)
- ------------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.40 $6.42 $6.55 $6.13 $5.76
====================================================================================
TOTAL RETURN(4) 2.91% 4.91% 15.35% 9.63% (2.72)%
- ------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------
Ratio of Operating
Expenses to
Average Net Assets 1.09%(5)(6) 1.13% 1.12%(7) 0.84%(6)(7) 1.15%(6)
- -------------------------
Ratio of Operating
Expenses to Average
Net Assets (Before
Expense Waiver) 1.12%(6) 1.13% 1.14% 1.13%(6) 1.15%(6)
- -------------------------
Ratio of Net
Investment Income
to Average
Net Assets 6.36%(5)(6) 6.79% 7.59%(7) 7.27%(6)(7) 7.63%(6)
- -------------------------
Ratio of Net
Investment Income
to Average Net
Assets (Before
Expense Waiver) 6.33%(6) 6.79% 7.57% 6.98%(6) 7.63%(6)
- -------------------------
Portfolio
Turnover Rate 24% 64% 80% 9% 80%(8)
- -------------------------
Net Assets,
End of Period
(in thousands) $414 $385 $242 $1 $4
- ------------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(6) Annualized.
(7) 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.
(8) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2002.
See Notes to Financial Statements.
- ------
46
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.42 $6.55 $6.13 $5.98
- --------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------------
Net Investment Income 0.21 0.44 0.49 0.07
- --------------------------------
Net Realized and
Unrealized Gain (Loss) (0.02) (0.13) 0.42 0.15
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.19 0.31 0.91 0.22
- --------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Investment Income (0.21) (0.44) (0.49) (0.07)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.40 $6.42 $6.55 $6.13
================================================================================
TOTAL RETURN(3) 2.91% 4.91% 15.24% 3.74%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.09%(4)(5) 1.13% 1.14% 1.13%(5)
- --------------------------------
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.12%(5) 1.13% 1.14% 1.13%(5)
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets 6.36%(4)(5) 6.79% 7.57% 8.01%(5)
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) 6.33%(5) 6.79% 7.57% 8.01%(5)
- --------------------------------
Portfolio Turnover Rate 24% 64% 80% 9%(6)
- --------------------------------
Net Assets, End of Period
(in thousands) $13,756 $15,517 $12,449 $763
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(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.
- ------
47
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.42 $6.55 $6.13 $5.98
- --------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------------
Net Investment Income 0.18 0.39 0.44 0.07
- --------------------------------
Net Realized and
Unrealized Gain (Loss) (0.02) (0.13) 0.42 0.15
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.16 0.26 0.86 0.22
- --------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Investment Income (0.18) (0.39) (0.44) (0.07)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.40 $6.42 $6.55 $6.13
================================================================================
TOTAL RETURN(3) 2.53% 4.13% 14.38% 3.64%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.84%(4)(5) 1.88% 1.89% 1.86%(5)(6)
- --------------------------------
Ratio of Operating Expenses
to Average Net Assets
(Before Expense Waiver) 1.87%(5) 1.88% 1.89% 1.88%(5)
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets 5.61%(4)(5) 6.04% 6.82% 7.27%(5)(6)
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets
(Before Expense Waiver) 5.58%(5) 6.04% 6.82% 7.25%(5)
- --------------------------------
Portfolio Turnover Rate 24% 64% 80% 9%(7)
- --------------------------------
Net Assets, End of Period
(in thousands) $1,190 $1,105 $855 $57
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(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.
- ------
48
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2005(1) 2005 2004 2003(2) 2002(3)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.42 $6.55 $6.13 $5.76 $6.32
- --------------------------------------------------------------------------------
Income From
Investment Operations
- ----------------------
Net Investment
Income 0.18 0.39 0.45 0.16 0.41
- ----------------------
Net Realized
and Unrealized
Gain (Loss) (0.02) (0.13) 0.42 0.37 (0.56)
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.16 0.26 0.87 0.53 (0.15)
- --------------------------------------------------------------------------------
Distributions
- ----------------------
From Net
Investment Income (0.18) (0.39) (0.45) (0.16) (0.41)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.40 $6.42 $6.55 $6.13 $5.76
================================================================================
TOTAL RETURN(4) 2.53% 4.13% 14.60% 9.28% (2.49)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.84%(5)(6) 1.88% 1.72% 1.63%(6) 1.65%(6)
- ----------------------
Ratio of Operating
Expenses to Average
Net Assets (Before
Expense Waiver) 1.87%(6) 1.88% 1.72% 1.63%(6) 1.65%(6)
- ----------------------
Ratio of Net
Investment Income
to Average Net Assets 5.61%(5)(6) 6.04% 6.99% 6.48%(6) 7.78%(6)
- ----------------------
Ratio of Net
Investment Income
to Average Net
Assets (Before
Expense Waiver) 5.58%(6) 6.04% 6.99% 6.48%(6) 7.78%(6)
- ----------------------
Portfolio
Turnover Rate 24% 64% 80% 9% 80%(7)
- ----------------------
Net Assets,
End of Period
(in thousands) $3,071 $3,351 $3,590 $283 $31
- --------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (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) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(6) Annualized.
(7) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2002.
See Notes to Financial Statements.
- ------
49
High-Yield - Financial Highlights
For a Share Outstanding Throughout the Period Indicated
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.51
- --------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------------------------------
Net Investment Income(2) 0.07
- ---------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.11)
- --------------------------------------------------------------------------------
Total From Investment Operations (0.04)
- --------------------------------------------------------------------------------
Distributions
- ---------------------------------------------------------------
From Net Investment Income (0.07)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.40
================================================================================
TOTAL RETURN(3) (0.64)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.28%(4)(5)
- ---------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver) 1.37%(5)
- ---------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 6.46%(4)(5)
- ---------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets
(Before Expense Waiver) 6.55%(5)
- ---------------------------------------------------------------
Portfolio Turnover Rate 24%(6)
- ---------------------------------------------------------------
Net Assets, End of Period (in thousands) $25
- --------------------------------------------------------------------------------
(1) July 29, 2005 (commencement of sale) through September 30, 2005
(unaudited).
(2) Computed using average shares outstanding throughout the period.
(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) Effective July 29, 2005, the investment advisor voluntarily agreed to waive
a portion of the management fee.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the six months ended September 30, 2005.
See Notes to Financial Statements.
- ------
50
Approval of Management Agreements for Diversified Bond and High-Yield
Under Section 15(c) of the Investment Company Act, contracts for investment
advisory services are required to be reviewed, evaluated and approved by a
majority of a fund's independent directors or trustees (the "Directors") each
year. At American Century, this process -- referred to as the "15(c) Process" --
involves at least two board meetings spanning a 30 to 60 day period each year,
as well as meetings of the Corporate Governance Committee (comprised solely of
independent directors), which coordinates the board's 15(c) Process. In addition
to this annual review, the board and its committees oversee and evaluate at
quarterly meetings the nature and quality of significant services performed by
the advisor on behalf of the funds. At these meetings the board reviews fund
performance, provision of shareholder services, audit and compliance
information, and a variety of other reports from the advisor concerning fund
operations. The board, or committees of the board, also holds special meetings,
as needed.
ANNUAL CONTRACT REVIEW PROCESS
As part of the annual 15(c) Process undertaken during the most recent fiscal
half-year, the Directors requested and received extensive data and information
compiled by the advisor and certain independent providers of evaluative data
(the "15(c) Providers") concerning Diversified Bond and High-Yield (the "funds")
and the services provided to such funds under the management agreement. The
information included:
* the nature, extent and quality of investment management, shareholder
services and other services provided to the funds under the management
agreement;
* reports on the advisor's activities relating to the wide range of
programs and services the advisor provides to the funds and their
shareholders on a routine and non-routine basis;
* data comparing the cost of owning the funds to the cost of owning
similar funds;
* data comparing the funds' performance to appropriate benchmarks
and/or a peer group of other mutual funds with similar investment
objectives and strategies;
* financial data showing the profitability of the funds to the advisor
and the overall profitability of the advisor; and
* data comparing services provided and charges to clients of the
advisor other than the funds.
In addition, the board also reviewed information provided by an independent
consultant retained by the board in connection with the 15(c) Process.
In keeping with its practice, the funds' board held two regularly scheduled
meetings and one special meeting to review and discuss the information provided
by the advisor and to complete its negotiations with the advisor regarding the
renewal of the management agreement, including the setting of the applicable
advisory fee. In addition, the independent directors and the Corporate
Governance Committee met to review and discuss the information provided and
evaluate the advisor's performance as manager of the funds. Working through the
Corporate Governance Committee, the board also retained a consultant to assist
it in its evaluation of the profitability of the funds and the advisor,
(continued)
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51
Approval of Management Agreements for Diversified Bond and High-Yield
and in formulating the board's fee proposals. The board also had the benefit of
the advice of its independent counsel throughout the period.
FACTORS CONSIDERED
The Directors considered all of the information provided by the advisor, the
15(c) Providers, the board's consultant and its independent counsel, and
evaluated such information for each fund for which the board has responsibility.
The Directors did not identify any single factor as being all-important or
controlling, and each Director may have attributed different levels of
importance to different factors. In deciding to renew the agreement under the
terms ultimately determined by the board to be appropriate, the Directors'
decision was based on the following factors.
NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management
agreement, the advisor is responsible for providing or arranging for all
services necessary for the operation of the funds. The board noted that under
the management agreement, the advisor provides or arranges at its own expense a
wide variety of services including:
* fund construction and design
* portfolio security selection
* initial capitalization/funding
* securities trading
* custody of fund assets
* daily valuation of the funds' portfolio
* shareholder servicing and transfer agency, including shareholder
confirmations, recordkeeping and communications
* legal services
* regulatory and portfolio compliance
* financial reporting
* marketing and distribution
The Directors noted that many of these services have expanded over time both in
terms of quantity and complexity in response to shareholder demands, competition
in the industry and the changing regulatory environment. In performing their
evaluation, the Directors considered information received in connection with the
annual review, as well as information provided on an ongoing basis at their
regularly scheduled board and committee meetings.
INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services
provided is quite complex and allows fund shareholders access to professional
money management, instant diversification of their investments within an asset
class, the opportunity to easily diversify among asset classes, and liquidity.
In evaluating investment performance, the board expects the advisor to manage
the funds in accordance with their investment objectives and approved
strategies. In providing these services, the advisor utilizes teams of
investment professionals (portfolio managers, analysts, research assistants, and
securities traders) who require extensive information technology, research,
training, compliance and other systems to conduct their business. At each
quarterly meeting the board and the Portfolio Committee review investment
performance information for the funds, together with comparative information for
appropriate benchmarks and peer groups of funds managed similarly to
(continued)
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52
Approval of Management Agreements for Diversified Bond and High-Yield
the funds. Further, the Portfolio Committee reports its assessment to the board.
If performance concerns are identified, the Directors discuss with the advisor
and its portfolio managers the reasons for such results (e.g., market
conditions, security selection) and any efforts being undertaken to improve
performance. Diversified Bond's performance was below its benchmark for both the
one and three year periods during the past year. High-Yield's performance fell
below the median of its peer group for both the one and three year periods
during the past year. The board discussed the funds' performance with the
advisor and was satisfied with the efforts being undertaken by the advisor.
SHAREHOLDER AND OTHER SERVICES. The advisor provides the funds with a
comprehensive package of transfer agency, shareholder, and other services. The
Quality of Service Committee reviews reports and evaluations of such services at
its regular quarterly meetings, including the annual meeting concerning contract
review, and reports to the board. The Quality of Service Committee reviews
interim reports between regularly scheduled meetings. These reports include, but
are not limited to, information regarding the operational efficiency and
accuracy of the shareholder and transfer agency services provided, staffing
levels, shareholder satisfaction (as measured by external as well as internal
sources), technology support, new products and services offered to fund
shareholders, securities trading activities, portfolio valuation services,
auditing services, and legal and operational compliance activities. Certain
aspects of shareholder and transfer agency service level efficiency and the
quality of securities trading activities are measured by independent third party
providers and are presented in comparison to other fund groups not managed by
the advisor.
COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor
provides detailed information concerning its cost of providing various services
to the funds, its profitability in managing the funds, its overall
profitability, and its financial condition. The Directors have reviewed with the
advisor the methodology used to prepare this financial information. This
financial information regarding the advisor is considered in order to evaluate
the advisor's financial condition, its ability to continue to provide services
under the management agreement, and the reasonableness of the current management
fee. The board has retained a consultant to assist it in this review.
ETHICS OF THE ADVISOR. The Directors generally consider the advisor's commitment
to providing quality services to shareholders and to conducting its business
ethically. They noted that the advisor's practices generally meet or exceed
industry best practices and that the advisor was not implicated in the industry
scandals of 2003 and 2004.
ECONOMIES OF SCALE. The Directors review reports provided by the advisor on
economies of scale for the complex as a whole and the year-over-year changes in
revenue, costs, and profitability. The Directors concluded that economies of
scale are difficult to measure with precision, particularly on a fund-by-fund
basis. This analysis is also complicated by the additional services and content
provided by the
(continued)
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53
Approval of Management Agreements for Diversified Bond and High-Yield
advisor and its reinvestment in its ability to provide and expand those
services. Accordingly, the Directors also seek to evaluate economies of scale by
reviewing other information, such as year-over-year profitability of the advisor
generally, the profitability of its management of the funds specifically, the
expenses incurred by the advisor in providing various functions to the funds,
and the fee breakpoints of competitive funds not managed by the advisor. The
Directors believe the advisor is appropriately sharing economies of scale
through a competitive fee structure, through breakpoints that reduce fees as the
fund complex and the funds increase in size and through reinvestment in its
business to provide shareholders additional content and services. In particular,
separate breakpoint schedules based on the size of the entire fund complex and
on the size of a particular fund reflect the complexity of assessing economies
of scale.
COMPARISON TO OTHER FUNDS' FEES. Each fund pays the advisor a single,
all-inclusive (or unified) management fee for providing all services necessary
for the management and operation of the funds, other than brokerage expenses,
taxes, interest, extraordinary expenses, and the fees and expenses of the funds'
independent directors (including their independent legal counsel). Under the
unified fee structure, the advisor is responsible for providing all investment
advisory, custody, audit, administrative, compliance, recordkeeping, marketing
and shareholder services, or arranging and supervising third parties to provide
such services. By contrast, most other fund groups are charged a variety of
fees, including an investment advisory fee, a transfer agency fee, an
administrative fee, distribution charges and other expenses. Other than their
investment advisory fees and Rule 12b-1 distribution fees, all other components
of the total fees charged by these other fund groups may be increased without
shareholder approval. The board believes the unified fee structure is a benefit
to fund shareholders because it clearly discloses to shareholders the cost of
owning fund shares, and, since the unified fee cannot be increased without a
vote of fund shareholders, it shifts to the advisor the increased costs of
operating the funds and the risk of administrative inefficiencies. Part of the
Directors' analysis of fee levels involves comparing the fund's unified fee to
the total expense ratio of other funds in the funds' peer groups. The unified
fee charged to shareholders of Diversified Bond was in the lowest quartile of
the total expense ratios of its peer group. The unified fee charged to
shareholders of High-Yield was below the median of the total expense ratios of
its peer group.
COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The
Directors also requested and received information from the advisor concerning
the nature of the services, fees, and profitability of its advisory services to
advisory clients other than the funds. They observed that these varying types of
client accounts require different services and involve different regulatory and
entrepreneurial risks than the management of the funds. The Directors analyzed
this information and concluded that the fees charged and services provided to
the advisor's other clients did not suggest that the funds' fees were
unreasonable by comparison.
(continued)
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54
Approval of Management Agreements for Diversified Bond and High-Yield
COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information
from the advisor concerning collateral benefits it receives as a result of its
relationship with the funds. They concluded that the advisor's primary business
is managing mutual funds and it generally does not use the fund or shareholder
information to generate profits in other lines of business, and therefore does
not derive any significant collateral benefits from them. The Directors noted
that the advisor receives proprietary research from broker dealers that execute
fund portfolio transactions and concluded that this research is likely to
benefit fund shareholders. The Directors also determined that the advisor is
able to provide investment management services to clients other than the funds,
at least in part, due to its existing infrastructure built to serve the fund
complex. The Directors concluded, however, that the assets of those other
clients are not significant and that, in any event, the addition of such other
assets to the assets of the funds that use substantially the same investment
management team and strategy to determine whether breakpoints have been achieved
captures for the shareholders a portion of any benefit that exists.
CONCLUSIONS OF THE DIRECTORS
As a result of this process, the independent directors concluded that the
investment management agreement between Diversified Bond and the advisor is fair
and reasonable in light of the services provided and should be renewed.
In addition, the independent directors negotiated a one-year waiver by the
advisor of a portion of the management fee of High-Yield. These changes were
proposed by the Directors based on their review of High-Yield's percentile rank
in its peer group universe and the fact that the Directors seek as a general
rule to have total expense ratios of fixed income and money market funds in the
lowest 25th percentile of the fees of comparable funds. The advisor accepted the
principle of the fee waiver based on the fact that the lower fee will result in
increased competitiveness of High-Yield within its peer group universe. The fee
waiver, effective July 29, 2005, will result in a lowering of the management fee
by .095 percentage points below the current management fee. Following these
negotiations with the advisor, the independent directors concluded that the
investment management agreement between High-Yield and the advisor is fair and
reasonable in light of the services provided and should be renewed.
- ------
55
Share Class Information
Seven classes of shares are authorized for sale by the funds: Investor Class,
Institutional Class, Advisor Class, A Class, B Class, C Class, and R Class. The
total expense ratios of Advisor, A, B, C, and R 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. THE FUNDS ARE CLOSED TO NEW
SELF-DIRECTED RETAIL INVESTORS, BUT ARE AVAILABLE THROUGH FINANCIAL
INTERMEDIARIES. SELF-DIRECTED RETAIL INVESTORS WITH OPEN ACCOUNTS MAY MAKE
ADDITIONAL INVESTMENTS AND REINVEST DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AS
LONG AS SUCH ACCOUNTS REMAIN OPEN.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through certain
financial intermediaries (such as banks, broker-dealers, insurance companies and
investment advisors), which may require payment of a transaction fee to the
financial intermediary.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) in an American Century fund or at least $10
million in multiple funds. In recognition of the larger investments and account
balances and comparatively lower transaction costs, the unified management fee
of Institutional Class shares is 0.20% less than the unified management fee of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as investment
advisors, banks, broker-dealers, insurance companies, and financial advisors.
Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and
distribution fee. The total expense ratio of Advisor Class shares is 0.25%
higher than the total expense ratio of Investor Class shares.
A CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. A Class shares are sold at their offering price, which is
net asset value plus an initial sales charge that ranges from 4.50% to 0.00% for
fixed-income funds, depending on the amount invested. The initial sales charge
is deducted from the purchase amount before it is invested. A Class shares may
be subject to a contingent deferred sales charge (CDSC). There is no CDSC on
shares acquired through reinvestment of dividends or capital gains. The
prospectus contains information regarding reductions and waivers of sales
charges for A Class shares. The unified management fee for A Class shares is the
same as for Investor Class shares. A Class shares also are subject to a 0.25%
annual Rule 12b-1 service and distribution fee.
B CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. B Class shares redeemed within six years of purchase are
subject to a CDSC that declines from 5.00% during the first year after purchase
to 0.00%
(continued)
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56
Share Class Information
after the sixth year. There is no CDSC on shares acquired through reinvestment
of dividends or capital gains. The unified management fee for B Class shares is
the same as for Investor Class shares. B Class shares also are subject to a
1.00% annual Rule 12b-1 service and distribution fee. B Class shares
automatically convert to A Class shares (with lower expenses) eight years after
their purchase date.
C CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. C Class shares redeemed within 12 months of purchase are
subject to a CDSC of 1.00%. There is no CDSC on shares acquired through
reinvestment of dividends or capital gains. The unified management fee for C
Class shares is the same as for Investor Class shares. C Class shares also are
subject to a Rule 12b-1 service and distribution fee of 1.00%.
R CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. The unified management fee for R Class shares is the same
as for Investor Class shares. R Class shares are subject to a 0.50% annual Rule
12b-1 service and distribution fee.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- ------
57
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' investment advisor, is
responsible for exercising the voting rights associated with the securities
purchased and/or held by the funds. A description of the policies and procedures
the advisor uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century's Web site at americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
advisor voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The funds file their complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The funds' Forms N-Q are available on the SEC's Web site at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The funds also make their complete schedule
of portfolio holdings for the most recent quarter of their fiscal year available
on their Web site at americancentury.com and, upon request, by calling
1-800-345-2021.
- ------
58
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.
- ------
59
Notes
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60
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL 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 ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
The American Century Investments logo, American Century
and American Century Investments are service marks
of American Century Proprietary Holdings, Inc.
American Century Investment Services, Inc., Distributor
(c)2005 American Century Proprietary Holdings, Inc. All rights reserved.
0511
SH-SAN-45976N
American Century Investments
SEMIANNUAL REPORT
[photo of woman and girl]
SEPTEMBER 30, 2005
Premium Money Market Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PREMIUM MONEY MARKET
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . 11
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . . 13
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 14
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
OTHER INFORMATION
Approval of Management Agreement for
Premium Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . 17
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Index Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III
WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the semiannual report for the Premium Money
Market Fund for the six months ended September 30, 2005.
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, 2006, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER
AMERICAN CENTURY COMPANIES, INC.
/s/James E. Stowers III
James E. Stowers III
CHAIRMAN OF THE BOARD
AMERICAN CENTURY COMPANIES, INC.
- ------
1
Premium Money Market - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2005
------------------------------
AVERAGE ANNUAL RETURNS
- ----------------------------------------------------------------------------------------------
SINCE INCEPTION
6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------
PREMIUM
MONEY MARKET 1.43%(2) 2.32% 2.16% 3.73% 3.81% 4/1/93
- ----------------------------------------------------------------------------------------------
90-DAY U.S. TREASURY
BILL INDEX 1.52% 2.63% 2.23% 3.67% 3.81% --
- ----------------------------------------------------------------------------------------------
LIPPER MONEY MARKET
INSTRUMENT FUNDS
AVERAGE RETURN(3) 1.18% 1.85% 1.72% 3.36% 3.53% --
- ----------------------------------------------------------------------------------------------
Fund's Lipper Ranking(3) 29 of 366 34 of 361 24 of 302 21 of 188 -- --
- ----------------------------------------------------------------------------------------------
Premium Money Market acquired all of the net assets of the American Century
Premium Capital Reserve Fund and the American Century Premium Government Reserve
Fund on December 3, 2001, pursuant to a plan of reorganization approved by the
acquired funds' shareholders on November 16, 2001. Performance information prior
to December 3, 2001 is that of the American Century Premium Capital Reserve
Fund.
(1) Total returns for periods less than one year are not annualized.
(2) If American Century had not voluntarily waived a portion of its management
fees, fund returns would have been lower during the period.
(3) © 2005 Reuters. All rights reserved. Any copying, republication or
redistribution of Lipper content, including by caching, framing or similar
means, is expressly prohibited without the prior written consent of
Lipper. Lipper shall not be liable for any errors or delays in the
content, or for any actions taken in reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
Lipper Rankings -- Rankings are based only on the universe shown. This
listing might not represent the complete universe of funds tracked by
Lipper Inc.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be
reliable. Although carefully verified, data on compilations is not
guaranteed by Lipper Inc. -- A Reuters Company and may be incomplete.
No offer or solicitations to buy or sell any of the securities herein is
being made by Lipper.
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)
- ------
2
Premium Money Market - Performance
PORTFOLIO COMPOSITION BY CREDIT RATING
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/05 3/31/05
- --------------------------------------------------------------------------------
A-1+ 61% 61%
- --------------------------------------------------------------------------------
A-1 39% 39%
- --------------------------------------------------------------------------------
Ratings provided by independent research companies. These ratings are listed in
Standard & Poor's format even if they were provided by other sources.
PORTFOLIO COMPOSITION BY MATURITY
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
9/30/05 3/31/05
- --------------------------------------------------------------------------------
1 - 30 days 53% 55%
- --------------------------------------------------------------------------------
31 - 90 days 39% 40%
- --------------------------------------------------------------------------------
91 - 180 days 8% 3%
- --------------------------------------------------------------------------------
More than 180 days -- 2%
- --------------------------------------------------------------------------------
YIELDS AND WEIGHTED AVERAGE MATURITY
- --------------------------------------------------------------------------------
9/30/05
- --------------------------------------------------------------------------------
7-Day Current Yield 3.33%
- --------------------------------------------------------------------------------
7-Day Effective Yield 3.38%
- --------------------------------------------------------------------------------
9/30/05 3/31/05
- --------------------------------------------------------------------------------
Weighted Average
Maturity 37 days 37 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.
- ------
3
Premium Money Market - Portfolio Commentary
PORTFOLIO MANAGER: LYNN PASCHEN
PERFORMANCE SUMMARY
For the six months ended September 30, 2005, Premium Money Market returned
1.43%*, ahead of the 1.18% average return of the 366 funds in Lipper Inc.'s
money market instrument funds category. The fund's six-month return ranked in
the top 8% of the Lipper category. Premium Money Market's relative performance
has been consistent over the long term -- the fund's one-, five-, and 10-year
returns all rank in the top 12% of the Lipper group. (See the previous page
for additional performance information.)
ECONOMIC AND MARKET REVIEW
After growing by 4.2% in 2004 -- its fastest calendar-year growth rate since
1999 -- the U.S. economy slowed modestly during the past six months. U.S.
economic growth came in at a 3.3% annual rate in the second quarter of 2005, and
the preliminary estimate for the third quarter of 2005 was an annual rate of
3.8%.
Meanwhile, inflation continued to pick up -- the consumer price index rose by
4.7% during the 12 months ended September 30, 2005, compared with 3.1% for the
12 months ended March 31, 2005. A 34.8% increase in energy prices and a 14.5%
rise in transportation costs were the main reasons behind the higher inflation
rate.
With the economy still growing at a solid pace and inflation on the rise, the
Federal Reserve extended its cycle of short-term interest rate increases. The
Fed raised rates by a quarter-point four times during the six-month period, for
a total of eleven quarter-point rate hikes since June 2004. The Fed's actions
boosted the federal funds rate target during the six month period to 3.75%, its
highest level in more than four years.
Money market rates generally rose along with the federal funds rate; the
three-month Treasury bill yield climbed from 2.79% to 3.55% during the six
months.
PORTFOLIO STRATEGY
Mirroring the general rise in money market yields, Premium Money Market's
seven-day current yield increased from 2.28% to 3.33% during the six-month
period. We maintained a relatively short average maturity of approximately 30-40
days for the portfolio so its yield would more quickly reflect rising money
market rates.
We continued to add to the portfolio's commercial paper (CP) holdings during the
first half of the period, increasing our position from 46% to 56% of the
portfolio as CP issuance continued to expand. However, we subsequently reduced
our CP exposure back to 42% of the portfolio by the end of the period. We
shifted most of those assets into certificates of deposit, which increased from
4% to 12% of the portfolio. Certificates of deposit offered the most attractive
yields in the latter part of the six-month period.
OUR COMMITMENT
We will continue to seek capital preservation and high current income consistent
with an investment in high-quality short-term debt securities.
* Total returns for periods less than one year are not annualized.
- ------
4
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, 2005 to September 30, 2005.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of
(continued)
- ------
5
Shareholder Fee Example (Unaudited)
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.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
- --------------------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD(1) ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 4/1/05 - EXPENSE
4/1/05 9/30/05 9/30/05 RATIO(1)
- --------------------------------------------------------------------------------------------
PREMIUM MONEY MARKET
SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------------------
Actual (after waiver)(2) $1,000 $1,014.30 $2.32 0.46%
- --------------------------------------------------------------------------------------------
Actual (before waiver) $1,000 $1,014.30(3) $2.37 0.47%
- --------------------------------------------------------------------------------------------
Hypothetical (after waiver)(2) $1,000 $1,022.76 $2.33 0.46%
- --------------------------------------------------------------------------------------------
Hypothetical (before waiver) $1,000 $1,022.71 $2.38 0.47%
- --------------------------------------------------------------------------------------------
(1) 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.
(2) During the six months ended September 30, 2005, the fund had received a
partial waiver of its management fees.
(3) Ending account value assumes the return earned after waiver. The return
would have been lower had fees not been waived and would have resulted in
a lower ending account value.
- ------
6
Premium Money Market - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
COMMERCIAL PAPER(1) -- 41.3%
$ 5,500,000 American Family Financial
Services, Inc., 3.35%, 11/3/05 $ 5,483,111
- --------------------------------------------------------------------------------
708,000 Amstel Funding Corp., 3.72%,
10/17/05 (Acquired 8/23/05,
Cost $703,976)(2) 706,829
- --------------------------------------------------------------------------------
9,040,000 Amstel Funding Corp.,
3.46%, 11/23/05
(Acquired 5/26/05-6/28/05,
Cost $8,898,992)(2) 8,993,999
- --------------------------------------------------------------------------------
4,000,000 Amstel Funding Corp., 3.67%,
12/1/05 (Acquired 7/29/05,
Cost $3,950,659)(2) 3,975,126
- --------------------------------------------------------------------------------
5,000,000 Amsterdam Funding Corp., 3.58%,
10/4/05 (Acquired 8/10/05,
Cost $4,972,653)(2) 4,998,508
- --------------------------------------------------------------------------------
8,200,000 Amsterdam Funding Corp., 3.64%,
10/12/05 (Acquired 9/6/05,
Cost $8,170,152)(2) 8,190,880
- --------------------------------------------------------------------------------
2,485,000 Amsterdam Funding Corp., 3.64%,
10/13/05 (Acquired 9/6/05,
Cost $2,475,703)(2) 2,481,985
- --------------------------------------------------------------------------------
1,000,000 ANZ Inc., 3.83%, 11/14/05 995,319
- --------------------------------------------------------------------------------
5,000,000 Barclays U.S. Funding LLC,
3.60%, 11/1/05 4,984,500
- --------------------------------------------------------------------------------
10,000,000 Canadian Imperial Holdings,
3.59%, 11/1/05 9,969,086
- --------------------------------------------------------------------------------
2,500,000 Cedar Springs Capital Co., 3.70%,
11/14/05 (Acquired 8/16/05,
Cost $2,476,875)(2) 2,488,694
- --------------------------------------------------------------------------------
5,000,000 Cedar Springs Capital Co., 3.72%,
11/28/05 (Acquired 9/2/05,
Cost $4,955,050)(2) 4,970,033
- --------------------------------------------------------------------------------
4,847,000 Cedar Springs Capital Co., 3.75%,
12/8/05 (Acquired 9/8/05,
Cost $4,801,054)(2) 4,812,667
- --------------------------------------------------------------------------------
8,200,000 Charta LLC, 3.76%, 11/18/05
(Acquired 8/25/05,
Cost $8,127,299)(2) 8,158,946
- --------------------------------------------------------------------------------
10,000,000 CitiBank Credit Card Issuance
Trust, 3.76%, 10/20/05
(Acquired 9/19/05,
Cost $9,967,622)(2) 9,980,155
- --------------------------------------------------------------------------------
6,000,000 CitiBank Credit Card Issuance
Trust, 3.74%, 12/7/05
(Acquired 9/8/05,
Cost $5,943,900)(2) 5,958,237
- --------------------------------------------------------------------------------
3,000,000 Crown Point Capital Co., 3.65%,
10/18/05 (Acquired 8/8/05,
Cost $2,978,404)(2) 2,994,829
- --------------------------------------------------------------------------------
5,000,000 Crown Point Capital Co., 3.69%,
12/2/05 (Acquired 9/6/05,
Cost $4,955,413)(2) 4,968,225
- --------------------------------------------------------------------------------
1,800,000 Danske Corporation,
3.52%, 10/11/05 1,798,240
- --------------------------------------------------------------------------------
1,200,000 Danske Corporation,
3.67%, 11/7/05 1,195,474
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 8,000,000 Emerald Notes of the MBNA,
3.62%, 10/6/05 (Acquired
8/5/05, Cost $7,952,538)(2) $ 7,995,978
- --------------------------------------------------------------------------------
8,000,000 Emerald Notes of the MBNA,
3.73%, 11/16/05 (Acquired
9/8/05, Cost $7,942,807)(2) 7,961,871
- --------------------------------------------------------------------------------
12,000,000 Falcon Asset Security Corp.,
3.65%, 10/6/05 (Acquired
9/8/05, Cost $11,965,933)(2) 11,993,916
- --------------------------------------------------------------------------------
2,075,000 General Electric Capital Corp.,
3.62%, 10/20/05 2,071,035
- --------------------------------------------------------------------------------
4,000,000 Govco Incorporated, 3.58%,
10/3/05 (Acquired 8/8/05,
Cost $3,977,724)(2) 3,999,205
- --------------------------------------------------------------------------------
1,400,000 HBOS Treasury Services plc,
3.55%, 10/19/05 1,397,515
- --------------------------------------------------------------------------------
4,300,000 HBOS Treasury Services plc,
3.82%, 12/1/05 4,272,167
- --------------------------------------------------------------------------------
1,100,000 ING (US) Funding LLC,
3.47%, 10/19/05 1,098,092
- --------------------------------------------------------------------------------
8,200,000 ING (US) Funding LLC,
3.82%, 12/6/05 8,142,573
- --------------------------------------------------------------------------------
2,000,000 Lexington Parker Capital, 3.90%,
10/3/05 (Acquired 9/30/05,
Cost $1,999,350)(2) 1,999,567
- --------------------------------------------------------------------------------
7,000,000 Lexington Parker Capital, 3.52%,
10/18/05 (Acquired 7/18/05,
Cost $6,937,031)(2) 6,988,364
- --------------------------------------------------------------------------------
5,000,000 Newcastle Certificates, 3.78%,
10/20/05 (Acquired 9/19/05,
Cost $4,983,725)(2) 4,990,025
- --------------------------------------------------------------------------------
5,800,000 Newcastle Certificates, 3.74%,
11/16/05 (Acquired 8/18/05,
Cost $5,745,770)(2) 5,772,283
- --------------------------------------------------------------------------------
5,000,000 Paradigm Funding LLC, 3.80%,
11/28/05 (Acquired 8/30/05,
Cost $4,952,500)(2) 4,969,389
- --------------------------------------------------------------------------------
2,128,000 Preferred Receivable Funding,
3.70%, 10/13/05
(Acquired 9/13/05,
Cost $2,121,439)(2) 2,125,375
- --------------------------------------------------------------------------------
10,000,000 Preferred Receivable Funding,
3.77%, 12/12/05
(Acquired 9/13/05,
Cost $9,905,750)(2) 9,924,600
- --------------------------------------------------------------------------------
3,000,000 Spintab AB, 3.63%, 10/20/05 2,994,253
- --------------------------------------------------------------------------------
10,000,000 Thunder Bay Funding Inc.,
3.74%, 11/21/05 (Acquired
8/23/05, Cost $9,906,500)(2) 9,947,017
- --------------------------------------------------------------------------------
5,000,000 Thunder Bay Funding Inc.,
3.90%, 12/23/05 (Acquired
9/26/05, Cost $4,952,333)(2) 4,955,042
- --------------------------------------------------------------------------------
4,600,000 Triple A One Funding Corp.,
3.87%, 12/23/05 (Acquired
9/23/05, Cost $4,555,001)(2) 4,558,957
- --------------------------------------------------------------------------------
10,000,000 WestLB AG, 3.46%, 10/5/05
(Acquired 7/5/05,
Cost $9,911,706)(2) 9,996,160
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
7
Premium Money Market - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 4,000,000 Windmill Funding Corp., 3.65%,
10/19/05 (Acquired 9/6/05,
Cost $3,982,561)(2) $ 3,992,700
- --------------------------------------------------------------------------------
10,000,000 Windmill Funding Corp., 3.60%,
11/2/05 (Acquired 7/29/05,
Cost $9,907,000)(2) 9,967,999
- --------------------------------------------------------------------------------
5,000,000 Yorktown Capital, LLC, 3.75%,
10/18/05 (Acquired 9/19/05,
Cost $4,984,896)(2) 4,991,146
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER 235,210,072
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 18.4%
3,500,000 American National Fish &
Wildlife Museum District Rev.,
Series 2004 B, VRDN, 3.97%,
10/6/05 (LOC: Commerce
Bank N.A.) 3,500,000
- --------------------------------------------------------------------------------
2,490,000 Arizona Health Facilities Auth.
Rev., Series 2003 C, (Terraces),
VRDN, 3.94%, 10/6/05
(LOC: Lloyds TSB Bank plc) 2,490,000
- --------------------------------------------------------------------------------
795,000 Board Trustees Morgan County
Memorial Hospital Rev.,
(Johnson County), VRDN, 4.01%,
10/6/05 (LOC: Fifth Third Bank) 795,000
- --------------------------------------------------------------------------------
1,745,000 Calexico Unified School District
COP, (Refinancing Project), VRDN,
3.87%, 10/6/05 (XLCA)
(SBBPA: Wachovia Bank N.A.) 1,745,000
- --------------------------------------------------------------------------------
1,460,000 California Infrastructure &
Economic Development Bank Rev.,
Series 2000 B, (Metrotile
Manufacturing), VRDN, 3.92%,
10/6/05 (LOC: Comerica Bank) 1,460,000
- --------------------------------------------------------------------------------
400,000 California Statewide Communities
Development Auth. Rev.,
(Industrial Improvements), VRDN,
3.95%, 10/6/05
(LOC: Bank of the West) 400,000
- --------------------------------------------------------------------------------
895,000 Colorado Housing & Finance
Auth. Rev., Series 2004 B,
(Corey Building), VRDN, 3.94%,
10/6/05 (LOC: Wells Fargo
Bank N.A.) 895,000
- --------------------------------------------------------------------------------
1,040,000 Colorado Housing & Finance
Auth. Rev., Series 2004 B,
(Taxable POPIEL Properties),
VRDN, 3.92%, 10/6/05
(LOC: Wells Fargo Bank N.A.) 1,040,000
- --------------------------------------------------------------------------------
2,110,000 Colorado Housing & Finance
Auth. Rev., Series 2005 B,
(Closet Factory), VRDN, 3.94%,
10/6/05 (LOC: Bank of New York) 2,110,000
- --------------------------------------------------------------------------------
1,000,000 Columbus Development Auth.
Rev., (CEDC/ICFORM Inc.),
VRDN, 3.96%, 10/6/05
(LOC: Columbus Bank & Trust) 1,000,000
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$ 2,300,000 Columbus Development Auth.
Rev., (Columbus Park East),
VRDN, 3.91%, 10/6/05
(LOC: Columbus Bank & Trust) $ 2,300,000
- --------------------------------------------------------------------------------
1,400,000 Columbus Development Auth.
Rev., Series 2005 B,
(Foundation Properties, Inc.,
Student Housing), VRDN,
3.92%, 10/5/05 (LOC: Columbus
Bank & Trust) 1,400,000
- --------------------------------------------------------------------------------
3,250,000 Columbus Development Auth.
Rev., VRDN, 3.91%, 10/6/05
(LOC: Columbus Bank & Trust) 3,250,000
- --------------------------------------------------------------------------------
5,000,000 Cook County GO, Series 2005 D,
(Public Improvements),
VRDN, 3.86%, 10/5/05
(SBBPA: Depfa Bank plc) 5,000,000
- --------------------------------------------------------------------------------
5,105,000 Cook County Industrial
Development Rev., Series 1999 B,
(Devorahco LLC), VRDN, 3.88%,
10/6/05 (LOC: LaSalle Bank N.A.)
(Acquired 3/23/01,
Cost $5,105,000)(2) 5,105,000
- --------------------------------------------------------------------------------
1,210,000 Crawford Education Facilities
Corp. Rev., Series 2004 B,
(Refunding Taxable University
Package), VRDN, 3.94%, 10/6/05
(LOC: BNP Paribas) 1,210,000
- --------------------------------------------------------------------------------
5,000,000 Fairfield Rev., Series 2005 A-2,
VRDN, 3.84%, 10/6/05 (LOC: Landesbank
Hessen-Thuringen Girozentrale) 5,000,000
- --------------------------------------------------------------------------------
800,000 Greenville South Carolina
Memorial Auditorium District COP,
Series 1996 C, (BI-LO Center),
VRDN, 3.95%, 10/5/05
(LOC: Bank of America N.A.) 800,000
- --------------------------------------------------------------------------------
7,270,000 Kansas City Missouri Tax
Increment Rev., Series 2003 B,
(Chouteau Development Company LLC),
VRDN, 3.86%, 10/6/05 (MBIA)
(SBBPA: JPMorgan Chase Bank) 7,270,000
- --------------------------------------------------------------------------------
3,300,000 Lower Colorado River Auth. Rev.,
3.65%, 10/3/05 (Acquired 8/4/05,
Cost $3,300,000)(2) 3,300,000
- --------------------------------------------------------------------------------
1,500,000 Maine GO, (Bond Anticipation
Notes), 5.00%, 6/22/06 1,510,437
- --------------------------------------------------------------------------------
7,500,000 Mississippi Business Finance
Corp. Rev., Series 2005, (Future
Pipe Industries, Inc.) VRDN, 3.88%,
10/6/05 (LOC: Mashreqbank and
Bank of New York) 7,500,000
- --------------------------------------------------------------------------------
7,875,000 Montebello COP, VRDN, 3.84%,
10/5/05 (LOC: Union Bank of
California N.A. and California
State Teacher's Retirement System) 7,875,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
Premium Money Market - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 320,000 Nebraska Investment Finance
Auth. Multifamily Rev., Series
2001 B, (Riverbend Apartments),
VRDN, 3.96%, 10/6/05
(LOC: LaSalle Bank N.A.)
(Acquired 9/5/01,
Cost $320,000)(2) $ 320,000
- --------------------------------------------------------------------------------
5,000,000 New Orleans Rev., VRDN, 4.10%,
10/6/05 (Ambac)
(SBBPA: Bank One Louisiana) 5,000,000
- --------------------------------------------------------------------------------
1,220,000 Ontario County Industrial
Development Agency Rev., Series
2005 B, (Friends of the Finger
Lakes Performing Arts Center, Inc.
Civic Facility), VRDN, 4.00%,
10/6/05 (LOC: Citizens Bank NA) 1,220,000
- --------------------------------------------------------------------------------
1,900,000 Oregon State Facilities Auth. Rev.,
(Hazelden Springbrook), VRDN,
3.95%, 10/6/05 (LOC: Allied
Irish Bank plc) 1,900,000
- --------------------------------------------------------------------------------
2,000,000 Osceola County Housing Finance
Auth. Rev., Series 2002 B,
(Regatta Bay Apartments), VRDN,
3.95%, 10/5/05 (LOC: FNMA) 2,000,000
- --------------------------------------------------------------------------------
100,000 Palm Beach County Florida
Housing Finance Auth. Rev.,
Series 2003 B, (Renaissance),
VRDN, 3.95%, 10/5/05 (FNMA)
(LOC: FNMA) 100,000
- --------------------------------------------------------------------------------
2,500,000 Southeast Industrial Development
Agency Rev., (Powers Fasteners),
VRDN, 3.94%, 10/6/05
(LOC: Bank of New York) 2,500,000
- --------------------------------------------------------------------------------
1,415,000 St. Charles County Industrial
Development Auth. Rev.,
Series 2004 B, (Taxable
Development Newco), VRDN, 4.03%,
10/6/05 (LOC: Marshall & Ilsley) 1,415,000
- --------------------------------------------------------------------------------
12,700,000 Texas Municipal Power Agency
Rev., Series 2005 A, 4.05%,
1/9/06 (Acquired 9/27/05,
Cost $12,700,000)(2) 12,700,000
- --------------------------------------------------------------------------------
2,690,000 West Covina Public Financing
Auth. Rev., Series 2002 A, VRDN,
3.84%, 10/5/05 (LOC: California
State Teacher's Retirement System) 2,690,000
- --------------------------------------------------------------------------------
2,500,000 West Covina Public Financing Auth.
Tax Allocation Rev., Series 1999,
(Redevelopment Agency &
Sub-Lien), VRDN, 3.92%, 10/6/05
(LOC: Allied Irish Bank plc) 2,500,000
- --------------------------------------------------------------------------------
2,000,000 Westmoreland County Industrial
Development Auth. Rev., Series
2005 D, (Excela Health System),
VRDN, 3.85%, 10/6/05
(LOC: Wachovia Bank N.A.) 2,000,000
- --------------------------------------------------------------------------------
3,660,000 Wisconsin Health & Educational
Facilities Auth. Rev., Series 2004 C,
(Southwest Health), VRDN,
3.85%, 10/5/05 (LOC: Fifth
Third Bank) 3,660,000
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES 104,960,437
- --------------------------------------------------------------------------------
CORPORATE BONDS - 18.2%
$ 10,000,000 Barclays Bank plc, VRN, 3.64%,
10/3/05, resets monthly off the
1-month LIBOR minus 0.06%
with no caps $ 9,998,686
- --------------------------------------------------------------------------------
4,445,000 Building 3 LLC, VRN, 3.90%,
10/6/05 (Acquired 4/21/04,
Cost $4,445,000)(2) 4,445,000
- --------------------------------------------------------------------------------
3,600,000 Christopher Place Inc., VRN,
3.94%, 10/6/05 3,600,000
- --------------------------------------------------------------------------------
3,800,000 CPR Investments LLC, VRN,
3.91%, 10/6/05 3,800,000
- --------------------------------------------------------------------------------
4,875,000 Green Island Country Club Inc.,
VRN, 3.91%, 10/6/05 4,875,000
- --------------------------------------------------------------------------------
4,500,000 HBOS Treasury Services plc, VRN,
3.59%, 10/12/05, resets quarterly
off the 3-month LIBOR plus
0.03% with no caps (Acquired 3/28/05,
Cost $4,501,674)(2) 4,500,595
- --------------------------------------------------------------------------------
6,300,000 Lee Group Inc./County
Materials Inc./Lees Aggregate
& Trucking Inc., VRN,
3.95%, 10/6/05 6,300,000
- --------------------------------------------------------------------------------
5,000,000 Lloyds TSB Bank plc, VRN, 3.78%,
12/1/05, resets quarterly off the
3-month LIBOR minus 0.09%
with no caps 4,999,556
- --------------------------------------------------------------------------------
13,000,000 OSS Realty Co., VRN, 3.90%,
10/6/05 13,000,000
- --------------------------------------------------------------------------------
10,000,000 Paradigm Funding LLC, VRN,
3.80%, 10/31/05 (Acquired
9/26/05, Cost $10,000,000)(2) 10,000,000
- --------------------------------------------------------------------------------
8,000,000 Pfizer Inc., VRN, 3.66%, 11/4/05,
resets quarterly off the 3-month
LIBOR minus 0.06% with no caps 8,000,000
- --------------------------------------------------------------------------------
2,000,000 Salvation Army, VRN, 3.84%,
10/6/05 2,000,000
- --------------------------------------------------------------------------------
4,000,000 Six Ten Properties LLC, VRN,
3.91%, 10/6/05 4,000,000
- --------------------------------------------------------------------------------
2,010,000 St. Mary's Congregation, VRN,
3.99%, 10/6/05 2,010,000
- --------------------------------------------------------------------------------
8,000,000 Toyota Motor Credit Corp.,
2.80%, 1/18/06 7,973,352
- --------------------------------------------------------------------------------
5,000,000 Transamerica Occidental Life
Insurance Co., VRN, 3.80%,
11/1/05, 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, 3.82%, 11/7/05, 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
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS 103,502,189
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Premium Money Market - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 12.0%
$ 10,000,000 Calyon New York, 3.87%,
12/21/05 (Acquired 9/19/05,
Cost $10,000,000)(2) $ 10,000,000
- --------------------------------------------------------------------------------
5,000,000 Canadian Imperial Bank of
Commerce, 3.75%, 11/21/05
(Acquired 8/22/05,
Cost $5,000,000)(2) 5,000,000
- --------------------------------------------------------------------------------
8,000,000 Dexia Credit Local, 3.54%,
10/14/05 (Acquired 7/13/05,
Cost $8,000,000)(2) 8,000,000
- --------------------------------------------------------------------------------
10,000,000 First Tennessee Bank N.A., 3.74%,
11/21/05 (Acquired 8/22/05,
Cost $10,000,000)(2) 10,000,000
- --------------------------------------------------------------------------------
10,000,000 Fortis Bank (New York), 3.83%,
1/20/06 (Acquired 7/21/05,
Cost $10,000,000)(2) 10,000,000
- --------------------------------------------------------------------------------
5,000,000 HBOS Treasury Services plc,
3.77%, 11/25/05 (Acquired
8/23/05, Cost $5,000,000)(2) 5,000,000
- --------------------------------------------------------------------------------
10,000,000 Marshall & Ilsley Bank, 3.54%,
10/17/05 (Acquired 7/15/05,
Cost $10,000,130)(2) 10,000,023
- --------------------------------------------------------------------------------
10,000,000 Toronto Dominion Bank
(New York), 3.69%, 10/6/05
(Acquired 9/23/05,
Cost $9,999,714)(2) 9,999,890
- --------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 67,999,913
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES -- 8.3%
$ 6,925,000 FHLB, 2.50%, 12/15/05 $ 6,908,641
- --------------------------------------------------------------------------------
10,000,000 FHLB, 3.00%, 1/18/06 10,000,000
- --------------------------------------------------------------------------------
2,500,000 FHLB, 2.25%, 3/28/06 2,478,503
- --------------------------------------------------------------------------------
5,000,000 FHLB, VRN, 3.59%, 10/3/05,
resets monthly off the 1-month
LIBOR minus 0.11% with no caps 4,997,829
- --------------------------------------------------------------------------------
10,000,000 FHLB, VRN, 3.41%, 10/5/05,
resets quarterly off the 3-month
LIBOR minus 0.12% with no caps 9,999,943
- --------------------------------------------------------------------------------
2,154,000 FNMA, 2.375%, 12/15/05 2,148,371
- --------------------------------------------------------------------------------
2,542,000 FNMA, 6.00%, 12/15/05 2,553,853
- --------------------------------------------------------------------------------
8,000,000 FNMA, VRN, 3.51%, 10/21/05,
resets quarterly off the 3-month
LIBOR minus 0.07% with no caps 7,999,715
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 47,086,855
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 98.2% 558,759,466
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- 1.8% 10,164,388
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $568,923,854
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
Ambac = Ambac Assurance Corporation
COP = Certificates of Participation
FHLB = Federal Home Loan Bank
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
VRDN = Variable Rate Demand Note. Interest reset date is indicated. Rate shown
is effective September 30, 2005.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective September 30, 2005.
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, 2005, was $313,179,215, which represented 55.0%
of total net assets. Restricted securities considered illiquid represent
2.5% of total net assets.
See Notes to Financial Statements. (continued)
- ------
10
Statement of Assets and Liabilities
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (amortized cost
and cost for federal income tax purposes) $558,759,466
- -------------------------------------------------
Cash 691,331
- -------------------------------------------------
Receivable for investments sold 8,400,000
- -------------------------------------------------
Interest receivable 1,398,774
- -------------------------------------------------
Prepaid portfolio insurance 28,299
- --------------------------------------------------------------------------------
569,277,870
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Accrued management fees 195,978
- -------------------------------------------------
Dividends payable 158,038
- --------------------------------------------------------------------------------
354,016
- --------------------------------------------------------------------------------
NET ASSETS $568,923,854
================================================================================
CAPITAL SHARES
- --------------------------------------------------------------------------------
Outstanding (unlimited number of
shares authorized) 568,931,234
================================================================================
NET ASSET VALUE PER SHARE $1.00
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital paid in $568,925,050
- -------------------------------------------------
Accumulated net realized loss
on investment transactions (1,196)
- --------------------------------------------------------------------------------
$568,923,854
================================================================================
See Notes to Financial Statements.
- ------
11
Statement of Operations
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- ------------------------------------------------------
Interest $8,579,021
- --------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------
Management fees 1,173,436
- ------------------------------------------------------
Trustees' fees and expenses 13,641
- ------------------------------------------------------
Portfolio insurance 42,284
- --------------------------------------------------------------------------------
1,229,361
- ------------------------------------------------------
Amount waived (29,162)
- --------------------------------------------------------------------------------
1,200,199
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,378,822
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
ON INVESTMENT TRANSACTIONS (451)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $7,378,371
================================================================================
See Notes to Financial Statements.
- ------
12
Statement of Changes in Net Assets
SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MARCH 31, 2005
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2005 MARCH 31, 2005
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 7,378,822 $ 6,360,336
- ----------------------------------------
Net realized gain (loss) (451) (745)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 7,378,371 6,359,591
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Decrease in net assets
from distributions (7,378,822) (6,360,336)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Proceeds from shares sold 229,667,023 270,333,905
- ----------------------------------------
Proceeds from reinvestment
of distributions 6,156,067 5,447,422
- ----------------------------------------
Payments for shares redeemed (139,852,860) (282,167,013)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions 95,970,230 (6,385,686)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 95,969,779 (6,386,431)
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 472,954,075 479,340,506
- --------------------------------------------------------------------------------
End of period $568,923,854 $472,954,075
================================================================================
TRANSACTIONS IN SHARES OF THE FUND
- --------------------------------------------------------------------------------
Sold 229,667,023 270,333,905
- ----------------------------------------
Issued in reinvestment of distributions 6,156,067 5,447,422
- ----------------------------------------
Redeemed (139,852,860) (282,167,013)
- --------------------------------------------------------------------------------
Net increase (decrease) in
shares of the fund 95,970,230 (6,385,686)
================================================================================
See Notes to Financial Statements.
- ------
13
Notes to Financial Statements
SEPTEMBER 30, 2005 (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 generally valued at amortized cost, which
approximates current market value. When such valuations do not reflect market
value, securities may be valued as determined in accordance with procedures
adopted by the Board of Trustees.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) 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 or American Century Global
Investment Management, Inc. (ACGIM), 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.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the fund. In addition, in the normal course of
business, the fund enters into contracts that provide general indemnifications.
The fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the fund. The risk of material
loss from such claims is considered by management to be remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
- ------
14
Notes to Financial Statements
SEPTEMBER 30, 2005 (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 fund 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%. Effective July 29, 2005, the investment advisor voluntarily agreed to
waive 0.030% of its management fee. The effective annual management fee for the
fund before waiver is 0.45%. The effective annual management fee for the fund
after waiver is 0.44%.
MONEY MARKET INSURANCE -- The fund, along with other money market funds managed
by ACIM, has entered into an insurance agreement with Ambac Assurance
Corporation (Ambac). Ambac provides limited coverage for certain loss events
including issuer defaults as to payment of principal or interest and insolvency
of a credit enhancement provider. The fund pays annual premiums to Ambac, which
are amortized daily over one year. For the six months ended September 30, 2005,
the annualized ratio of money market insurance expense to average net assets was
0.02%.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment advisor, ACIM, the
distributor of the trust, American Century Investment Services, Inc., and the
trust's transfer agent, American Century Services, LLC. JPMorgan Chase Bank is a
custodian of the fund and 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.
As of March 31, 2005, accumulated net realized capital loss carryovers for
federal income tax purposes of $446 (expiring 2013) may be used to offset future
taxable realized gains.
Capital loss deferrals of $299 represent net capital losses incurred in the
five-month period ended March 31, 2005. The fund has elected to treat such
losses as having been incurred in the following fiscal year for federal income
tax purposes.
- ------
15
Premium Money Market - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
- ---------------------------------------------------------------------------------------------------
2005(1) 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------
Net Investment Income 0.01 0.01 0.01 0.01 0.03 0.06
- ---------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------
From Net Investment Income (0.01) (0.01) (0.01) (0.01) (0.03) (0.06)
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===================================================================================================
TOTAL RETURN(2) 1.43% 1.33% 0.74% 1.32% 3.03% 6.18%
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.46%(3)(4) 0.48% 0.47% 0.47% 0.46% 0.45%
- -----------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.85%(3)(4) 1.31% 0.73% 1.32% 2.91% 5.99%
- -----------------------------------
Net Assets, End of Period
(in thousands) $568,924 $472,954 $479,341 $560,991 $575,389 $526,794
- ---------------------------------------------------------------------------------------------------
(1) Six months ended September 30, 2005 (unaudited).
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized.
(3) During the six months ended September 30, 2005, the fund received a partial
waiver of its management fees. Had fees not been waived, the annualized
ratio of operating expenses to average net assets and annualized ratio of
net investment income to average net assets would have been 0.47% and
2.84%, respectively.
(4) Annualized.
See Notes to Financial Statements.
- ------
16
Approval of Management Agreement for Premium Money Market Fund
Under Section 15(c) of the Investment Company Act, contracts for investment
advisory services are required to be reviewed, evaluated and approved by a
majority of a fund's independent directors or trustees (the "Directors") each
year. At American Century, this process -- referred to as the "15(c) Process" --
involves at least two board meetings spanning a 30 to 60 day period each year,
as well as meetings of the Corporate Governance Committee (comprised solely of
independent directors), which coordinates the board's 15(c) Process. In addition
to this annual review, the board and its committees oversee and evaluate at
quarterly meetings the nature and quality of significant services performed by
the advisor on behalf of the funds. At these meetings the board reviews fund
performance, provision of shareholder services, audit and compliance
information, and a variety of other reports from the advisor concerning fund
operations. The board, or committees of the board, also holds special meetings,
as needed.
ANNUAL CONTRACT REVIEW PROCESS
As part of the annual 15(c) Process undertaken during the most recent fiscal
half-year, the Directors requested and received extensive data and information
compiled by the advisor and certain independent providers of evaluative data
(the "15(c) Providers") concerning Premium Money Market (the "fund") and the
services provided to the fund under the management agreement. The information
included:
* the nature, extent and quality of investment management, shareholder
services and other services provided to the fund under the management
agreement;
* reports on the advisor's activities relating to the wide range of
programs and services the advisor provides to the fund and its shareholders
on a routine and non-routine basis;
* data comparing the cost of owning the fund to the cost of owning a
similar fund;
* data comparing the fund's performance to appropriate benchmarks
and/or a peer group of other mutual funds with similar investment
objectives and strategies;
* financial data showing the profitability of the fund to the advisor
and the overall profitability of the advisor; and
* data comparing services provided and charges to clients of the
advisor other than the fund.
In addition, the board also reviewed information provided by an independent
consultant retained by the board in connection with the 15(c) Process.
In keeping with its practice, the fund's board held two regularly scheduled
meetings and one special meeting to review and discuss the information provided
by the advisor and to complete its negotiations with the advisor regarding the
renewal of the management agreement, including the setting of the applicable
advisory fee. In addition, the independent directors and the Corporate
Governance Committee met to review and discuss the information provided and
evaluate the advisor's performance as manager of the fund. Working through the
Corporate Governance Committee, the board also retained a consultant to assist
it in its evaluation of the profitability of the fund and the advisor, and in
(continued)
- ------
17
Approval of Management Agreement for Premium Money Market Fund
formulating the board's fee proposals. The board also had the benefit of the
advice of its independent counsel throughout the period.
FACTORS CONSIDERED
The Directors considered all of the information provided by the advisor, the
15(c) Providers, the board's consultant and its independent counsel, and
evaluated such information for each fund for which the board has responsibility.
The Directors did not identify any single factor as being all-important or
controlling, and each Director may have attributed different levels of
importance to different factors. In deciding to renew the agreement under the
terms ultimately determined by the board to be appropriate, the Directors'
decision was based on the following factors.
NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management
agreement, the advisor is responsible for providing or arranging for all
services necessary for the operation of the fund. The board noted that under the
management agreement, the advisor provides or arranges at its own expense a wide
variety of services including:
* fund construction and design
* portfolio security selection
* initial capitalization/funding
* securities trading
* custody of fund assets
* daily valuation of the fund's portfolio
* shareholder servicing and transfer agency, including shareholder
confirmations, recordkeeping and communications
* legal services
* regulatory and portfolio compliance
* financial reporting
* marketing and distribution
The Directors noted that many of these services have expanded over time both in
terms of quantity and complexity in response to shareholder demands, competition
in the industry and the changing regulatory environment. In performing their
evaluation, the Directors considered information received in connection with the
annual review, as well as information provided on an ongoing basis at their
regularly scheduled board and committee meetings.
INVESTMENT MANAGEMENT SERVICES.The nature of the investment management services
provided is quite complex and allows fund shareholders access to professional
money management, instant diversification of their investments within an asset
class, the opportunity to easily diversify among asset classes, and liquidity.
In evaluating investment performance, the board expects the advisor to manage
the fund in accordance with its investment objectives and approved strategies.
In providing these services, the advisor utilizes teams of investment
professionals (portfolio managers, analysts, research assistants, and securities
traders) who require extensive information technology, research, training,
compliance and other systems to conduct their business. At each quarterly
meeting the board and the Portfolio Committee review investment performance
information for the fund, together with comparative information for appropriate
benchmarks and peer groups of funds managed similarly
(continued)
- ------
18
Approval of Management Agreement for Premium Money Market Fund
to the fund. Further, the Portfolio Committee reports its assessment to the
board. If performance concerns are identified, the Directors discuss with the
advisor and its portfolio managers the reasons for such results (e.g., market
conditions, security selection) and any efforts being undertaken to improve
performance. The fund's performance was above the median of its peer group for
both one and three year periods.
SHAREHOLDER AND OTHER SERVICES. The advisor provides the fund with a
comprehensive package of transfer agency, shareholder, and other services. The
Quality of Service Committee reviews reports and evaluations of such services at
its regular quarterly meetings, including the annual meeting concerning contract
review, and reports to the board. The Quality of Service Committee reviews
interim reports between regularly scheduled meetings. These reports include, but
are not limited to, information regarding the operational efficiency and
accuracy of the shareholder and transfer agency services provided, staffing
levels, shareholder satisfaction (as measured by external as well as internal
sources), technology support, new products and services offered to fund
shareholders, securities trading activities, portfolio valuation services,
auditing services, and legal and operational compliance activities. Certain
aspects of shareholder and transfer agency service level efficiency and the
quality of securities trading activities are measured by independent third party
providers and are presented in comparison to other fund groups not managed by
the advisor.
COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor
provides detailed information concerning its cost of providing various services
to the fund, its profitability in managing the fund, its overall profitability,
and its financial condition. The Directors have reviewed with the advisor the
methodology used to prepare this financial information. This financial
information regarding the advisor is considered in order to evaluate the
advisor's financial condition, its ability to continue to provide services under
the management agreement, and the reasonableness of the current management fee.
The board has retained a consultant to assist it in this review.
ETHICS OF THE ADVISOR. The Directors generally consider the advisor's commitment
to providing quality services to shareholders and to conducting its business
ethically. They noted that the advisor's practices generally meet or exceed
industry best practices and that the advisor was not implicated in the industry
scandals of 2003 and 2004.
ECONOMIES OF SCALE. The Directors review reports provided by the advisor on
economies of scale for the complex as a whole and the year-over-year changes in
revenue, costs, and profitability. The Directors concluded that economies of
scale are difficult to measure with precision, particularly on a fund-by-fund
basis. This analysis is also complicated by the additional services and content
provided by the advisor and its reinvestment in its ability to provide and
expand those services. Accordingly, the Directors also seek to evaluate
economies of scale by reviewing other information, such as
(continued)
- ------
19
Approval of Management Agreement for Premium Money Market Fund
year-over-year profitability of the advisor generally, the profitability of its
management of the fund specifically, the expenses incurred by the advisor in
providing various functions to the fund, and the fee breakpoints of competitive
funds not managed by the advisor. The Directors believe the advisor is
appropriately sharing economies of scale through a competitive fee structure,
through breakpoints that reduce fees as the fund complex and the fund increases
in size and through reinvestment in its business to provide shareholders
additional content and services. In particular, separate breakpoint schedules
based on the size of the entire fund complex and on the size of the fund reflect
the complexity of assessing economies of scale.
COMPARISON TO OTHER FUNDS' FEES. The fund pays the advisor a single,
all-inclusive (or unified) management fee for providing all services necessary
for the management and operation of the fund, other than brokerage expenses,
taxes, interest, extraordinary expenses, and the fees and expenses of the fund's
independent directors (including their independent legal counsel). Under the
unified fee structure, the advisor is responsible for providing all investment
advisory, custody, audit, administrative, compliance, recordkeeping, marketing
and shareholder services, or arranging and supervising third parties to provide
such services. By contrast, most other funds are charged a variety of fees,
including an investment advisory fee, a transfer agency fee, an administrative
fee, distribution charges and other expenses. Other than their investment
advisory fees and Rule 12b-1 distribution fees, all other components of the
total fees charged by these other funds may be increased without shareholder
approval. The board believes the unified fee structure is a benefit to fund
shareholders because it clearly discloses to shareholders the cost of owning
fund shares, and, since the unified fee cannot be increased without a vote of
fund shareholders, it shifts to the advisor the increased costs of operating the
fund and the risk of administrative inefficiencies. Part of the Directors'
analysis of fee levels involves comparing the fund's unified fee to the total
expense ratio of other funds in the fund's peer group. The unified fee charged
to shareholders of the fund was at the median of the total expense ratios of its
peer group.
COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The
Directors also requested and received information from the advisor concerning
the nature of the services, fees, and profitability of its advisory services to
advisory clients other than the fund. They observed that these varying types of
client accounts require different services and involve different regulatory and
entrepreneurial risks than the management of the fund. The Directors analyzed
this information and concluded that the fees charged and services provided to
the advisor's other clients did not suggest that the fund's fees were
unreasonable by comparison.
COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information
from the advisor concerning collateral benefits it receives as a result of its
relationship with the fund. They concluded that the advisor's primary
(continued)
- ------
20
Approval of Management Agreement for Premium Money Market Fund
business is managing mutual funds and it generally does not use the fund or
shareholder information to generate profits in other lines of business, and
therefore does not derive any significant collateral benefits from them. The
Directors noted that the advisor receives proprietary research from broker
dealers that execute fund portfolio transactions and concluded that this
research is likely to benefit fund shareholders. The Directors also determined
that the advisor is able to provide investment management services to clients
other than the fund, at least in part, due to its existing infrastructure built
to serve the fund complex. The Directors concluded, however, that the assets of
those other clients are not significant and that, in any event, the addition of
such other assets to the assets of the funds that use substantially the same
investment management team and strategy to determine whether breakpoints have
been achieved captures for the shareholders a portion of any benefit that
exists.
CONCLUSIONS OF THE DIRECTORS
As a result of this process, the independent directors negotiated a one-year
waiver by the advisor of a portion of the management fee. These changes were
proposed by the Directors based on their review of the fund's percentile rank in
its peer group universe and the fact that the Directors seek as a general rule
to have total expense ratios of fixed income and money market funds in the
lowest 25th percentile of the fees of comparable funds. The advisor accepted the
principle of the fee waiver based on the fact that the lower fee will result in
increased competitiveness of the fund within its peer group universe. The fee
waiver, effective July 29, 2005, will result in a lowering of the management fee
of the fund by .03 percentage points below the current management fee. Following
these negotiations with the advisor, the independent directors concluded that
the investment management agreement between the fund and the advisor is fair and
reasonable in light of the services provided and should be renewed.
- ------
21
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 advisor, 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 advisor uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century's Web site at americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
advisor voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The 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. 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.
- ------
22
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.
- ------
23
Notes
- ------
24
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL 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 ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
The American Century Investments logo,
American Century and American Century
Investments are service marks of American American Century Investment
Century Proprietary Holdings, Inc. Services, Inc., Distributor
0510 (c)2005 American Century Proprietary
SH-SAN-45977N Holdings, Inc. All rights reserved.
[front cover]
American Century Investments
SEMIANNUAL REPORT
[photo of boy and airplane]
SEPTEMBER 30, 2005
Inflation Protection Bond Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INFLATION PROTECTION BOND
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio at a Glance. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Composition by Maturity. . . . . . . . . . . . . . . . . . . . 4
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . 8
Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . . 11
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 12
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
OTHER INFORMATION
Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Index Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III
WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the semiannual report for the American
Century Inflation Protection Bond Fund for the period ended September 30, 2005.
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, 2006, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER
AMERICAN CENTURY COMPANIES, INC.
/s/James E. Stowers III
James E. Stowers III
CHAIRMAN OF THE BOARD
AMERICAN CENTURY COMPANIES, INC.
- ------
1
Inflation Protection Bond - Performance
TOTAL RETURNS AS OF SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION(1) DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 0.08% 5/31/05
- --------------------------------------------------------------------------------
CITIGROUP U.S. INFLATION-LINKED
SECURITIES INDEX(2) 0.39% --
- --------------------------------------------------------------------------------
Institutional Class 0.15% 5/31/05
- --------------------------------------------------------------------------------
A Class 5/31/05
No sales charge* 0.00%
With sales charge* -4.49%
- --------------------------------------------------------------------------------
B Class 5/31/05
No sales charge* -0.24%
With sales charge* -5.24%
- --------------------------------------------------------------------------------
C Class 5/31/05
No sales charge* -0.23%
With sales charge* -1.21%
- --------------------------------------------------------------------------------
R Class -0.08% 5/31/05
- --------------------------------------------------------------------------------
*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) Total returns for periods less than one year are not annualized.
(2) The Citigroup U.S. Inflation-Linked Securities Index is not subject to the
tax code diversification and other regulatory requirements limiting the type
and amount of securities that the fund may own.
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.
- ------
2
Inflation Protection Bond - Portfolio Commentary
PORTFOLIO MANAGER: JEREMY FLETCHER
RETURN SUMMARY
Inflation Protection Bond returned 0.08%* from its May 31, 2005, inception to
September 30, 2005, amid moderate U.S. economic growth, rising interest rates,
and accelerating overall inflation. By comparison, the fund's benchmark--the
Citigroup U.S. Inflation-Linked Securities Index--returned 0.39%. (Please see
page 2.) It's important to remember, however, that the benchmark's returns are
not reduced by expenses. We talk about the efforts that helped to produce the
fund's performance in the Portfolio Strategy section on the next page.
ECONOMIC REVIEW
The U.S. economy grew at a moderate pace during the reporting period, in spite
of the devastation and disruption caused by Hurricanes Katrina and Rita. The
annualized real rate of GDP growth was 3.3% in the second quarter and an
initially estimated 3.8% in the third quarter.
Warning of near-term inflationary pressures, the Federal Reserve continued its
current campaign of raising interest rates. The Fed raised the fed funds
rate--its short-term interest rate benchmark--three times, from 3.00% by the end
of May to 3.75% (the highest level since August 2001) by the end of September.
Meanwhile, crude oil climbed, reaching nearly $70 a barrel at the end of August
and marking the steepest closing price in more than two decades.
Despite soaring energy costs, the Fed continued to say that "core" inflation
(excluding food and energy prices) remained under control--the year-to-date
annualized gain for core CPI as of September 30, 2005, was 2.0%, compared with
the 2.2% rate for 2004.
BOND MARKET REVIEW
On the overall inflation front, however, prices (as measured by the seasonally
adjusted CPI) rose a sharp 4.7% for the 12 months ended September 30. This
year's devastating hurricane season helped to fuel that increase, as energy
prices rocketed 122% higher during the third-quarter (on a seasonally adjusted
annualized basis, as gauged by the CPI's energy index) and boosted the CPI to an
annualized three-month increase of 9.4%.
Longer-term U.S. interest rates and bond yields bounced around some to finish
modestly higher for the reporting period, while shorter-term interest rates and
bond yields rose more sharply due to the Fed's rate hikes. This caused the
Treasury yield curve to "flatten"--the difference between two- and 10-year
Treasury yields narrowed.
PORTFOLIO AT A GLANCE
- --------------------------------------------------------------------------------
AS OF 9/30/05
- --------------------------------------------------------------------------------
Weighted Average Maturity 10.4 years
- --------------------------------------------------------------------------------
Average Duration (effective) 6.1 years
- --------------------------------------------------------------------------------
YIELDS AS OF SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
30-DAY SEC YIELD
- --------------------------------------------------------------------------------
Investor 5.88%
- --------------------------------------------------------------------------------
Institutional 6.08%
- --------------------------------------------------------------------------------
A Class 5.38%
- --------------------------------------------------------------------------------
B Class 4.86%
- --------------------------------------------------------------------------------
C Class 4.83%
- --------------------------------------------------------------------------------
R Class 5.37%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary
are for Investor Class shares. Total returns for
periods less than one year are not annualized. (continued)
- ------
3
Inflation Protection Bond - Portfolio Commentary
PORTFOLIO STRATEGY
On the portfolio front, we primarily invested Inflation Protection Bond's
incoming cash into TIPS in a fairly wide range of maturities, attempting to
provide investors with a market-like performance.
Scouring the inflation-indexed bond market for what we believed to be
value-adding securities outside of TIPS was another strategy that we employed.
Those efforts led us to purchase inflation-indexed notes issued by the Tennessee
Valley Authority--a U.S. government agency--that mature in January 2007.
We also searched for attractive opportunities in well-established overseas
inflation-linked markets such as those of the U.K. and the euro zone. However,
with both economic growth and inflation running at higher rates in the U.S., we
felt that domestic inflation-indexed bonds offered better values.
The results of those collective efforts on Inflation Protection Bond's maturity
structure show up in the table on this page, while the portfolio's period-end
weighted average maturity and duration (a key gauge of an investment's
sensitivity to interest rate changes) appear in the Portfolio at a Glance table
at the bottom of the previous page.
OUR COMMITMENT
Inflation Protection Bond seeks to provide total return and inflation protection
consistent with investment in inflation-indexed securities. We remain committed
to that objective and will endeavor to do so by continuing to primarily invest
in inflation-indexed debt securities.
PORTFOLIO COMPOSITION BY MATURITY
- --------------------------------------------------------------------------------
% OF FUND
INVESTMENTS
AS OF
9/30/05
- --------------------------------------------------------------------------------
0 - 5-Year Notes(1) 32.1%
- --------------------------------------------------------------------------------
5 - 10-Year Notes 40.5%
- --------------------------------------------------------------------------------
10 - 30-Year Bonds 27.4%
- --------------------------------------------------------------------------------
(1) Includes temporary cash investments.
- ------
4
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 May 31, 2005 (inception) to September
30, 2005.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
(continued)
- ------
5
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(1) ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 4/1/05 - EXPENSE
4/1/05 9/30/05 9/30/05 RATIO(1)
- ------------------------------------------------------------------------------------
INFLATION PROTECTION BOND SHAREHOLDER FEE EXAMPLE
- ------------------------------------------------------------------------------------
ACTUAL
- ------------------------------------------------------------------------------------
Investor Class $1,000 $1,000.80(2) $2.01(3) 0.60%
- ------------------------------------------------------------------------------------
Institutional Class $1,000 $1,001.50(2) $1.34(3) 0.40%
- ------------------------------------------------------------------------------------
A Class $1,000 $1,000.00(2) $2.84(3) 0.85%
- ------------------------------------------------------------------------------------
B Class $1,000 $997.60(2) $5.34(3) 1.60%
- ------------------------------------------------------------------------------------
C Class $1,000 $997.70(2) $5.34(3) 1.60%
- ------------------------------------------------------------------------------------
R Class $1,000 $999.20(2) $3.68(3) 1.10%
- ------------------------------------------------------------------------------------
HYPOTHETICAL
- ------------------------------------------------------------------------------------
Investor Class $1,000 $1,022.06(4) $3.04(4) 0.60%
- ------------------------------------------------------------------------------------
Institutional Class $1,000 $1,023.06(4) $2.03(4) 0.40%
- ------------------------------------------------------------------------------------
A Class $1,000 $1,020.81(4) $4.31(4) 0.85%
- ------------------------------------------------------------------------------------
B Class $1,000 $1,017.05(4) $8.09(4) 1.60%
- ------------------------------------------------------------------------------------
C Class $1,000 $1,017.05(4) $8.09(4) 1.60%
- ------------------------------------------------------------------------------------
R Class $1,000 $1,019.55(4) $5.57(4) 1.10%
- ------------------------------------------------------------------------------------
(1) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 365, to reflect the one-half year period.
(2) Ending account value based on actual return from May 31, 2005 (inception)
through September 30, 2005.
(3) Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 122, the number of days in the period from May 31, 2005
(inception) through September 30, 2005, divided by 365, to reflect the
period ended. Had the classes been available for the full period, the
expenses paid during the period would have been higher.
(4) Ending account value and expenses paid during period assumes the classes
had been available throughout the entire period and are calculated using
each class's annualized expense ratio listed in the table above.
- ------
6
Inflation Protection Bond - Schedule of Investments
SEPTEMBER 30, 2005 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 92.2%
- --------------------------------------------------------------------------------
$917,559 U.S. Treasury Inflation
Indexed Bonds, 2.38%, 1/15/25 $ 981,933
- --------------------------------------------------------------------------------
501,449 U.S. Treasury Inflation
Indexed Bonds, 3.63%, 4/15/28 656,250
- --------------------------------------------------------------------------------
130,769 U.S. Treasury Inflation
Indexed Bonds, 3.88%, 4/15/29 179,052
- --------------------------------------------------------------------------------
423,907 U.S. Treasury Inflation
Indexed Bonds, 3.38%, 4/15/32 560,584
- --------------------------------------------------------------------------------
339,215 U.S. Treasury Inflation
Indexed Notes, 3.38%, 1/15/07 350,916
- --------------------------------------------------------------------------------
120,970 U.S. Treasury Inflation
Indexed Notes, 3.63%, 1/15/08 128,087
- --------------------------------------------------------------------------------
595,845 U.S. Treasury Inflation
Indexed Notes, 3.88%, 1/15/09 646,585
- --------------------------------------------------------------------------------
209,097 U.S. Treasury Inflation
Indexed Notes, 4.25%, 1/15/10 233,952
- --------------------------------------------------------------------------------
722,120 U.S. Treasury Inflation
Indexed Notes, 0.88%, 4/15/10 703,898
- --------------------------------------------------------------------------------
561,440 U.S. Treasury Inflation
Indexed Notes, 3.50%, 1/15/11 618,527
- --------------------------------------------------------------------------------
198,113 U.S. Treasury Inflation
Indexed Notes, 3.38%, 1/15/12 219,457
- --------------------------------------------------------------------------------
407,603 U.S. Treasury Inflation
Indexed Notes, 3.00%, 7/15/12 443,682
- --------------------------------------------------------------------------------
372,425 U.S. Treasury Inflation
Indexed Notes, 1.88%, 7/15/13 377,546
- --------------------------------------------------------------------------------
634,608 U.S. Treasury Inflation
Indexed Notes, 2.00%, 1/15/14 648,019
- --------------------------------------------------------------------------------
233,278 U.S. Treasury Inflation
Indexed Notes, 2.00%, 7/15/14 238,372
- --------------------------------------------------------------------------------
486,163 U.S. Treasury Inflation
Indexed Notes, 1.63%, 1/15/15 480,541
- --------------------------------------------------------------------------------
477,252 U.S. Treasury Inflation
Indexed Notes, 1.88%, 7/15/15 481,614
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES
(Cost $7,989,430) 7,949,015
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 5.3%
- --------------------------------------------------------------------------------
$444,064 TVA Inflation
Indexed Notes, 3.38%, 1/15/07
(Cost $456,554) $ 459,517
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 3.0%
- --------------------------------------------------------------------------------
262,000 Lexington Parker Capital,
3.90%, 10/3/05(1)
(Cost $262,000) 262,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.5%
(Cost $8,707,984) 8,670,532
- --------------------------------------------------------------------------------
OTHER ASSETS
AND LIABILITIES -- (0.5)% (39,347)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $ 8,631,185
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
TVA = Tennessee Valley Authority
(1) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
- ------
7
Statement of Assets and Liabilities
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (cost of $8,707,984) $8,670,532
- --------------------------------------------------------------------
Cash 255,842
- --------------------------------------------------------------------
Receivable for capital shares sold 52,638
- --------------------------------------------------------------------
Interest receivable 55,808
- --------------------------------------------------------------------------------
9,034,820
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for investments purchased 259,124
- --------------------------------------------------------------------
Payable for capital shares redeemed 100,000
- --------------------------------------------------------------------
Accrued management fees 3,936
- --------------------------------------------------------------------
Distribution fees payable 1,164
- --------------------------------------------------------------------
Service fees (and distribution fees -- A Class and R Class) payable 2,349
- --------------------------------------------------------------------
Dividends payable 37,062
- --------------------------------------------------------------------------------
403,635
- --------------------------------------------------------------------------------
Net Assets $8,631,185
================================================================================
See Notes to Financial Statements. (continued)
- ------
8
Statement of Assets and Liabilities
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital paid in $8,683,506
- --------------------------------------------------------------------
Accumulated net realized loss on investment transactions (14,869)
- --------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments (37,452)
- --------------------------------------------------------------------------------
$8,631,185
================================================================================
INVESTOR CLASS
- --------------------------------------------------------------------------------
Net assets $1,028,327
- --------------------------------------------------------------------
Shares outstanding 104,071
- --------------------------------------------------------------------
Net asset value per share $9.88
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
Net assets $830,489
- --------------------------------------------------------------------
Shares outstanding 84,049
- --------------------------------------------------------------------
Net asset value per share $9.88
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
Net assets $2,581,197
- --------------------------------------------------------------------
Shares outstanding 261,283
- --------------------------------------------------------------------
Net asset value per share $9.88
- --------------------------------------------------------------------
Maximum offering price (net asset value divided by 0.955) $10.35
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
Net assets $1,071,461
- --------------------------------------------------------------------
Shares outstanding 108,448
- --------------------------------------------------------------------
Net asset value per share $9.88
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
Net assets $2,290,667
- --------------------------------------------------------------------
Shares outstanding 231,904
- --------------------------------------------------------------------
Net asset value per share $9.88
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
Net assets $829,044
- --------------------------------------------------------------------
Shares outstanding 83,902
- --------------------------------------------------------------------
Net asset value per share $9.88
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
9
Statement of Operations
PERIOD ENDED SEPTEMBER 30, 2005 (UNAUDITED)(1)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- --------------------------------------------------------------------
Interest $ 96,783
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Management fees 12,361
- --------------------------------------------------------------------
Distribution fees:
- --------------------------------------------------------------------
B Class 2,407
- --------------------------------------------------------------------
C Class 3,226
- --------------------------------------------------------------------
Service fees:
- --------------------------------------------------------------------
B Class 802
- --------------------------------------------------------------------
C Class 1,075
- --------------------------------------------------------------------
Service and distribution fees -- A Class 1,485
- --------------------------------------------------------------------
Service and distribution fees -- R Class 1,404
- --------------------------------------------------------------------
Trustees' fees and expenses 73
- --------------------------------------------------------------------------------
22,833
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 73,950
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (14,869)
- --------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) on investments (37,452)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) (52,321)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 21,629
================================================================================
(1) May 31, 2005 (inception) through September 30, 2005 (unaudited).
See Notes to Financial Statements.
- ------
10
Statement of Changes in Net Assets
PERIOD ENDED SEPTEMBER 30, 2005 (UNAUDITED)(1)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2005
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 73,950
- -----------------------------------------------------------------
Net realized gain (loss) (14,869)
- -----------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (37,452)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 21,629
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income:
- -----------------------------------------------------------------
Investor Class (11,780)
- -----------------------------------------------------------------
Institutional Class (11,633)
- -----------------------------------------------------------------
A Class (18,619)
- -----------------------------------------------------------------
B Class (9,228)
- -----------------------------------------------------------------
C Class (13,032)
- -----------------------------------------------------------------
R Class (9,658)
- --------------------------------------------------------------------------------
Decrease in net assets from distributions (73,950)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions 8,683,506
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 8,631,185
NET ASSETS
- --------------------------------------------------------------------------------
End of period $ 8,631,185
================================================================================
(1) May 31, 2005 (inception) through September 30, 2005 (unaudited).
See Notes to Financial Statements.
- ------
11
Notes to Financial Statements
SEPTEMBER 30, 2005 (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. Inflation Protection Bond Fund (the fund) is one
fund in a series issued by the trust. The fund is nondiversified under the 1940
Act. The fund seeks to provide total return and protection against U.S.
inflation. The fund invests primarily in inflation-linked debt securities. These
securities include inflation-linked securities issued by the U.S. Treasury, by
U.S. government agencies and instrumentalities, and by entities other than the
U.S. Treasury or U.S. government agencies and instrumentalities. The following
is a summary of the fund's significant accounting policies.
MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the
Institutional Class, the A Class, the B Class, the C Class, and the R Class. The
A Class may incur an initial sales charge. The A Class, B Class, and C Class may
be subject to a contingent deferred sales charge. The share classes differ
principally in their respective sales charges and shareholder servicing and
distribution expenses and arrangements. All shares of the funds represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes. Income, non-class specific
expenses, and realized and unrealized capital gains and losses of the funds are
allocated to each class of shares based on their relative net assets. All
classes of the fund commenced sale on May 31, 2005, the fund's inception date.
SECURITY VALUATIONS -- Debt securities maturing in greater than 60 days are
valued at current market value as provided by a commercial pricing service or at
the mean of the most recent bid and asked prices. Debt securities maturing
within 60 days may be valued at cost, plus or minus any amortized discount or
premium. If the fund determines that the market price of a portfolio security is
not readily available, or that the valuation methods mentioned above do not
reflect the security's fair value, such security is valued at its fair value as
determined by, or in accordance with procedures adopted by, the Board of
Trustees or its designee if such fair value determination would materially
impact a fund's net asset value. Circumstances that may cause the fund to fair
value a security include: an event occurred after the close of the exchange on
which a portfolio security principally trades (but before the close of the New
York Stock Exchange) that was likely to have changed the value of the security;
a security has been declared in default; or trading in a security has been
halted during the trading day.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes paydown gain (loss) and accretion of discounts and amortization of
premiums.
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 to shareholders are recorded on
the ex-dividend date. Distributions from net investment income are declared
daily and paid monthly. Distributions from net realized gains, if any, are
generally declared and paid annually.
INDEMNIFICATIONS -- Under the trust's organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the fund. In addition, in the normal course of
business, the fund enters into contracts that provide general indemnifications.
The fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the fund. The risk of material
loss from such claims is considered by management to be remote.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
- ------
12
Notes to Financial Statements
SEPTEMBER 30, 2005 (UNAUDITED)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The trust has entered into a Management Agreement with
American Century Investment Management, Inc. (ACIM), under which ACIM provides
the 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, 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 fund and certain other accounts managed by the investment
advisor 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 0.3800% to
0.2625% and the rates for the Complex Fee (for all classes except Institutional
Class) range from 0.3100% to 0.2500%. The Institutional Class is 0.2000% less at
each point within the Complex Fee range. The effective annual management fee for
the period May 31, 2005 (inception) through September 30, 2005, was 0.60% for
all classes except Institutional Class which was 0.40%.
DISTRIBUTION AND SERVICE FEES -- The Board of Trustees has adopted a separate
Master Distribution and Individual Shareholder Services Plan for each of the A
Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule
12b-1 of the 1940 Act. The plans provide that the B Class and C Class will pay
American Century Investment Services, Inc. (ACIS) an annual distribution fee and
service fee of 0.75% and 0.25%, respectively. The plans provide that the A Class
and the R Class will pay ACIS an annual distribution and service fee of 0.25%
and 0.50%, respectively. 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
individual shareholder services rendered by broker/dealers or other independent
financial intermediaries. Fees incurred under the plans during the period May
31, 2005 (inception) through September 30, 2005, are detailed in the Statement
of Operations.
RELATED PARTIES -- Certain officers and trustees of the trust are also officers
and/or directors, and, as a group, controlling stockholders of American Century
Companies, Inc. (ACC), the parent of the trust's investment advisor, ACIM, the
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services, LLC (formerly American Century Services Corporation).
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the period May
31, 2005 (inception) through September 30, 2005, were as follows:
- --------------------------------------------------------------------------------
Purchases $9,355,288
- --------------------------------------------------------------------------------
Proceeds from sales $ 937,797
- --------------------------------------------------------------------------------
(continued)
- ------
13
Notes to Financial Statements
SEPTEMBER 30, 2005 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows (unlimited number of shares
authorized):
- --------------------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
PERIOD ENDED SEPTEMBER 30, 2005(1)
- ---------------------------------------------------
Sold 103,490 $1,032,060
- ---------------------------------------------------
Issued in reinvestment of distributions 581 5,780
- --------------------------------------------------------------------------------
Net increase (decrease) 104,071 $1,037,840
================================================================================
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
PERIOD ENDED SEPTEMBER 30, 2005(1)
- ---------------------------------------------------
Sold 83,449 $834,484
- ---------------------------------------------------
Issued in reinvestment of distributions 600 5,972
- --------------------------------------------------------------------------------
Net increase (decrease) 84,049 $840,456
================================================================================
A CLASS
- --------------------------------------------------------------------------------
PERIOD ENDED SEPTEMBER 30, 2005(1)
- ---------------------------------------------------
Sold 301,369 $2,987,422
- ---------------------------------------------------
Issued in reinvestment of distributions 561 5,587
- ---------------------------------------------------
Redeemed (40,647) (400,000)
- --------------------------------------------------------------------------------
Net increase (decrease) 261,283 $2,593,009
================================================================================
B CLASS
- --------------------------------------------------------------------------------
PERIOD ENDED SEPTEMBER 30, 2005(1)
- ---------------------------------------------------
Sold 107,945 $1,074,509
- ---------------------------------------------------
Issued in reinvestment of distributions 503 5,006
- --------------------------------------------------------------------------------
Net increase (decrease) 108,448 $1,079,515
================================================================================
C CLASS
- --------------------------------------------------------------------------------
PERIOD ENDED SEPTEMBER 30, 2005(1)
- ---------------------------------------------------
Sold 232,597 $2,300,545
- ---------------------------------------------------
Issued in reinvestment of distributions 517 5,142
- ---------------------------------------------------
Redeemed (1,210) (12,000)
- --------------------------------------------------------------------------------
Net increase (decrease) 231,904 $2,293,687
================================================================================
R CLASS
- --------------------------------------------------------------------------------
PERIOD ENDED SEPTEMBER 30, 2005(1)
- ---------------------------------------------------
Sold 83,361 $833,606
- ---------------------------------------------------
Issued in reinvestment of distributions 541 5,393
- --------------------------------------------------------------------------------
Net increase (decrease) 83,902 $838,999
================================================================================
(1) May 31, 2005 (inception) through September 30, 2005 (unaudited).
(continued)
- ------
14
Notes to Financial Statements
SEPTEMBER 30, 2005 (UNAUDITED)
5. 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.
As of September 30, 2005, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST
- --------------------------------------------------------------------------------
Federal tax cost of investments $8,707,984
================================================================================
Gross tax appreciation of investments $ 17,031
- --------------------------------------------------------------------
Gross tax depreciation of investments (54,483)
- --------------------------------------------------------------------------------
Net tax appreciation (depreciation) of investments $ (37,452)
================================================================================
As of September 30, 2005, the book-basis and tax-basis cost and unrealized
appreciation (depreciation) was the same.
- ------
15
Inflation Protection Bond - Financial Highlights
For a Share Outstanding Throughout the Period Indicated
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------------
Net Investment Income 0.13
- -------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.12)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.01
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------------------
From Net Investment Income (0.13)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.88
================================================================================
TOTAL RETURN(2) 0.08%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.60%(3)
- -------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 3.88%(3)
- -------------------------------------------------------------------
Portfolio Turnover Rate 14%
- -------------------------------------------------------------------
Net Assets, End of Period (in thousands) $1,028
- --------------------------------------------------------------------------------
(1) May 31, 2005 (inception) through September 30, 2005 (unaudited).
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(3) Annualized.
See Notes to Financial Statements.
- ------
16
Inflation Protection Bond - Financial Highlights
For a Share Outstanding Throughout the Period Indicated
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------
Net Investment Income 0.14
- -------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.12)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.02
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------------
From Net Investment Income (0.14)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.88
================================================================================
TOTAL RETURN(2) 0.15%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.40%(3)
- -------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 4.08%(3)
- -------------------------------------------------------------
Portfolio Turnover Rate 14%
- -------------------------------------------------------------
Net Assets, End of Period (in thousands) $830
- --------------------------------------------------------------------------------
(1) May 31, 2005 (inception) through September 30, 2005 (unaudited).
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(3) Annualized.
See Notes to Financial Statements.
- ------
17
Inflation Protection Bond - Financial Highlights
For a Share Outstanding Throughout the Period Indicated
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------
Net Investment Income 0.12
- -------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.12)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.00
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------------
From Net Investment Income (0.12)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.88
================================================================================
TOTAL RETURN(2) 0.00%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.85%(3)
- -------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 3.63%(3)
- -------------------------------------------------------------
Portfolio Turnover Rate 14%
- -------------------------------------------------------------
Net Assets, End of Period (in thousands) $2,581
- --------------------------------------------------------------------------------
(1) May 31, 2005 (inception) through September 30, 2005 (unaudited).
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
See Notes to Financial Statements.
- ------
18
Inflation Protection Bond - Financial Highlights
For a Share Outstanding Throughout the Period Indicated
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------
Net Investment Income 0.10
- -------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.12)
- --------------------------------------------------------------------------------
Total From Investment Operations (0.02)
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------------
From Net Investment Income (0.10)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.88
================================================================================
TOTAL RETURN(2) (0.24)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.60%(3)
- -------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.88%(3)
- -------------------------------------------------------------
Portfolio Turnover Rate 14%
- -------------------------------------------------------------
Net Assets, End of Period (in thousands) $1,071
- --------------------------------------------------------------------------------
(1) May 31, 2005 (inception) through September 30, 2005 (unaudited).
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
See Notes to Financial Statements.
- ------
19
Inflation Protection Bond - Financial Highlights
For a Share Outstanding Throughout the Period Indicated
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------
Net Investment Income 0.10
- -------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.12)
- --------------------------------------------------------------------------------
Total From Investment Operations (0.02)
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------------
From Net Investment Income (0.10)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.88
================================================================================
TOTAL RETURN(2) (0.23)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.60%(3)
- -------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.88%(3)
- -------------------------------------------------------------
Portfolio Turnover Rate 14%
- -------------------------------------------------------------
Net Assets, End of Period (in thousands) $2,291
- --------------------------------------------------------------------------------
(1) May 31, 2005 (inception) through September 30, 2005 (unaudited).
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include any applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(3) Annualized.
See Notes to Financial Statements.
- ------
20
Inflation Protection Bond - Financial Highlights
For a Share Outstanding Throughout the Period Indicated
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------
Net Investment Income 0.12
- -------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) (0.12)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.00
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------------
From Net Investment Income (0.12)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.88
================================================================================
TOTAL RETURN(2) (0.08)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.10%(3)
- -------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 3.38%(3)
- -------------------------------------------------------------
Portfolio Turnover Rate 14%
- -------------------------------------------------------------
Net Assets, End of Period (in thousands) $829
- --------------------------------------------------------------------------------
(1) May 31, 2005 (inception) through September 30, 2005 (unaudited).
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(3) Annualized.
See Notes to Financial Statements.
- ------
21
Share Class Information
Six classes of shares are authorized for sale by the fund: Investor Class,
Institutional Class, A Class, B Class, C Class, and R Class. The total expense
ratio of Institutional Class shares is lower than that of Investor Class shares.
The total expense ratios of A, B, C, and R Class shares are higher than that of
Investor Class shares. THE FUND IS CLOSED TO NEW SELF-DIRECTED RETAIL INVESTORS
BUT IS AVAILABLE THROUGH FINANCIAL INTERMEDIARIES.
INVESTOR CLASS shares are available for purchase through certain financial
intermediaries (such as banks, broker-dealers, insurance companies and
investment advisors), which may require payment of a transaction fee to the
financial intermediary.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) in an American Century fund or at least $10
million in multiple funds. In recognition of the larger investments and account
balances and comparatively lower transaction costs, the unified management fee
of Institutional Class shares is 0.20% less than the unified management fee of
Investor Class shares.
A CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. A Class shares are sold at their offering price, which is
net asset value plus an initial sales charge that ranges from 4.50% to 0.00% for
fixed-income funds, depending on the amount invested. The initial sales charge
is deducted from the purchase amount before it is invested. A Class shares may
be subject to a contingent deferred sales charge (CDSC). There is no CDSC on
shares acquired through reinvestment of dividends or capital gains. The
prospectus contains information regarding reductions and waivers of sales
charges for A Class shares. The unified management fee for A Class shares is the
same as for Investor Class shares. A Class shares also are subject to a 0.25%
annual Rule 12b-1 service and distribution fee.
B CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. B Class shares redeemed within six years of purchase are
subject to a CDSC that declines from 5.00% during the first year after purchase
to 0.00% after the sixth year. There is no CDSC on shares acquired through
reinvestment of dividends or capital gains. The unified management fee for B
Class shares is the same as for Investor Class shares. B Class shares also are
subject to a 1.00% annual Rule 12b-1 service and distribution fee. B Class
shares automatically convert to A Class shares (with lower expenses) eight years
after their purchase date.
(continued)
- ------
22
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. The unified management fee for C
Class shares is the same as for Investor Class shares. C Class shares also are
subject to a Rule 12b-1 service and distribution fee of 1.00%.
R CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. The unified management fee for R Class shares is the same
as for Investor Class shares. R Class shares are subject to a 0.50% annual Rule
12b-1 service and distribution fee.
All classes of shares represent a pro rata interest in the fund and generally
have the same rights and preferences.
- ------
23
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 advisor, 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 advisor uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century's Web site at americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
advisor voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The 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. 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.
- ------
24
Index Definition
The following index is used to illustrate investment market, sector, or style
performance or to serve as a fund performance comparison. It is not an
investment product available for purchase.
The CITIGROUP U.S. INFLATION-LINKED SECURITIES INDEX (ILSI) measures the return
of bonds with fixed-rate coupon payments that adjust for inflation as measured
by the Consumer Price Index (CPI).
- ------
25
Notes
- ------
26
Notes
- ------
27
Notes
- ------
28
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL 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 ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
The American Century Investments logo, American Century
and American Century Investments are service marks
of American Century Proprietary Holdings, Inc.
0511
SH-SAN-46174N
American Century Investment Services, Inc., Distributor
(c)2005 American Century Proprietary Holdings, Inc. All rights reserved.
ITEM 2. CODE OF ETHICS.
Not applicable for semiannual report filings.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semiannual report filings.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semiannual report filings.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedule of investments is included as part of the report to stockholders
filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by
which shareholders may recommend nominees to the registrant's board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) are effective based on their evaluation of these controls
and procedures as of a date within 90 days of the filing date of this
report.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) that occurred during the registrant's second
fiscal quarter of the period covered by this report that have
materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable for semiannual report filings.
(a)(2) Separate certifications by the registrant's principal executive
officer and principal financial officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are filed and attached hereto as Exhibit
99.302CERT.
(a)(3) Not applicable.
(b) A certification by the registrant's chief executive officer and chief
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AMERICAN CENTURY INVESTMENT TRUST
By: /s/ William M. Lyons
---------------------------------------
Name: William M. Lyons
Title: President
Date: November 29, 2005
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: November 29, 2005
By: /s/ Maryanne L. Roepke
---------------------------------------
Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer, and
Chief Accounting Officer
(principal financial officer)
Date: November 29, 2005
