ANNUAL
REPORT
[american century logo]
American
Century(reg.sm)
SEPTEMBER 30, 1997
BENHAM
GROUP
Target Maturities Trust: 2000
Target Maturities Trust: 2005
Target Maturities Trust: 2010
Target Maturities Trust: 2015
Target Maturities Trust: 2020
Target Maturities Trust: 2025
TABLE OF CONTENTS
Our Message to You .............................................. 1
Report Highlights ............................................... 2
Market Perspective .............................................. 4
Target Maturities Trust: 2000
Performance & Portfolio Information .................. 5
Management Q & A ..................................... 6
Schedule of Investments .............................. 8
Financial Highlights ................................. 36
Target Maturities Trust: 2005
Performance & Portfolio Information .................. 9
Management Q & A ..................................... 10
Schedule of Investments .............................. 12
Financial Highlights ................................. 37
Target Maturities Trust: 2010
Performance & Portfolio Information .................. 13
Management Q & A ..................................... 14
Schedule of Investments .............................. 16
Financial Highlights ................................. 38
Target Maturities Trust: 2015
Performance & Portfolio Information .................. 17
Management Q & A ..................................... 18
Schedule of Investments .............................. 20
Financial Highlights ................................. 39
Target Maturities Trust: 2020
Performance & Portfolio Information .................. 21
Management Q & A ..................................... 22
Schedule of Investments .............................. 24
Financial Highlights ................................. 40
Target Maturities Trust: 2025
Performance & Portfolio Information .................. 25
Management Q & A ..................................... 26
Schedule of Investments .............................. 28
Financial Highlights ................................. 41
Statements of Assets and Liabilities ............................ 29
Statements of Operations ........................................ 30
Statements of Changes in Net Assets ............................. 31
Notes to Financial Statements ................................... 33
Independent Auditors' Report .................................... 42
Proxy Voting Results ............................................ 43
Retirement Account Information .................................. 47
Background Information .......................................... 48
Glossary ........................................................ 49
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. We'
ve organized our funds into three distinct groups to help you identify those
that best fit your needs. These groups, which appear below, are designed to help
simplify your fund decisions.
AMERICAN CENTURY INVESTMENTS--FAMILY OF FUNDS
- -------------------------------------------------------------------------------
Benham American Century Twentieth Century(reg. tm)
Group(reg. tm) Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
Target Maturities
Trust
We welcome your comments or questions about this report. See the back cover for
ways to contact us by mail, phone or e-mail.
Twentieth Century and American Century are registered marks of American Century
Services Corporation. Benham Group is a registered mark of Benham Management
Corporation.
AMERICAN CENTURY INVESTMENTS
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
Zero-coupon bonds posted impressive gains during the 12 months ended
September 30, 1997, with returns on longer-maturity zeros rivaling those of
stocks. The second half of the period--characterized by falling interest rates
as inflation concerns waned and demand for Treasury securities outpaced
supply--proved ideal for zeros and Treasury bonds in general. In the following
pages, our investment management team provides further details about the market
and how your fund was managed during the period.
During the summer, American Century held its largest proxy vote ever, asking
shareholders to approve measures to simplify fund management and eliminate
overlapping funds. Most notably, shareholders approved a unified fee for all
funds. In the past, many of our funds had both a management fee and separate
administrative and transfer agency fees. Under the new fee structure, fund
shareholders pay one annual management fee, based on a percentage of fund
assets.
We also made some important corporate changes. In June, Bill Lyons, American
Century's chief operating officer, became president, assuming full
responsibility for the company's day-to-day operations. With this change, Jim
Stowers, Jr. and Jim Stowers III will be able to spend more time developing and
refining new investment technologies and tools that build on and leverage the
proprietary system they pioneered 25 years ago. One of our goals is to ensure
that we continue to evolve and innovate--building the investment tools today
that will lead us and our investors to success in the next century.
In July, American Century agreed to enter into a business partnership with
J.P. Morgan & Co., Inc., one of the strongest and most respected firms in the
financial services industry. J.P. Morgan will become a significant minority
owner of American Century Companies, Inc. Through this proposed partnership, we
see many opportunities to expand the range of investment choices and services we
offer you. A global financial services firm, J.P. Morgan has been in business
for more than 150 years, serving institutions, governments and individuals with
complex financial needs.
Within the framework of this proposed relationship, American Century will
continue to operate as an independent company. No changes in your fund's
investment managers, policies or fees are anticipated as a result of this
transaction. American Century's corporate management team will remain the same,
and the Stowers family will retain voting control of the company.
In closing, we want to reassure you that American Century remains committed
to serving your investment needs first and foremost. Thank you for your trust
and confidence.
Sincerely,
/s/James E. Stowers III /s/James M. Benham
James E. Stowers III James M. Benham
Chief Executive Officer Vice Chairman
American Century Companies, Inc. American Century Companies, Inc.
ANNUAL REPORT OUR MESSAGE TO YOU 1
REPORT HIGHLIGHTS
MARKET PERSPECTIVE
* U.S. bonds overcame losses in the first quarter of 1997 to post strong
returns for the fiscal year ended September 30, 1997. Low inflation and
slower economic growth in the second half of the fiscal year helped bonds
rally.
* Treasury bonds benefited from strong demand and reduced supply. Equity and
foreign investors seeking a "safe haven" helped boost demand, while
shrinking federal budget deficits and reduced Treasury issuance helped
diminish supply.
* Treasury yields have been in a trading range for the past two years. The
30-year Treasury bond yield has stayed between 6.25% and 7.25%. We expect
yields to remain in the lower end of that range until the contradiction of
strong economic growth and low inflation is resolved.
* The Federal Reserve doesn't appear ready to raise interest rates in the
immediate future.
TARGET MATURITIES TRUST: 2000
* The fund posted a 7.64% total return, reflecting the favorable bond market
conditions that prevailed during the second half of the fiscal year.
* The fund's assets declined, so we sold lower-yielding, shorter-maturity
STRIPS to meet investors' redemption needs.
* We kept the fund's weighted average maturity date close to the benchmark's
November 15, 2000 maturity date to ensure that the fund closely tracked its
benchmark.
TARGET MATURITIES TRUST: 2005
* Reflecting the favorable bond market conditions that prevailed during the
second half of the fiscal year, the fund posted an 11.60% total return.
* The fund's net assets grew by 20% during the second half of the fiscal year.
We used the new money to buy STRIPS, which improved the fund's liquidity.
* We kept the fund's weighted average maturity date close to the benchmark's
November 15, 2005 maturity date to ensure that the fund closely tracked its
benchmark.
TARGET MATURITIES TRUST: 2010
* The fund posted a 15.75% total return, reflecting the favorable bond market
conditions that prevailed during the second half of the fiscal year.
* The fund's net assets grew by 25% during the second half of the fiscal year.
We used the new money to buy STRIPS, which improved the fund's liquidity.
* We extended the fund's weighted average maturity date to October 3, 2010,
bringing it significantly closer to the November 15, 2010 maturity date of
its STRIPS benchmark.
TARGET: 2000
TOTAL RETURNS: AS OF 9/30/97
6 Months 5.49%*
1 Year 7.64%
NET ASSETS: $248.4 million
(AS OF 9/30/97)
INCEPTION DATE: 3/25/85
TICKER SYMBOL: BTMTX
TARGET: 2005
TOTAL RETURNS: AS OF 9/30/97
6 Months 10.23%*
1 Year 11.60%
NET ASSETS: $281.7 million
(AS OF 9/30/97)
INCEPTION DATE: 3/25/85
TICKER SYMBOL: BTFIX
TARGET: 2010
TOTAL RETURNS: AS OF 9/30/97
6 Months 14.19%*
1 Year 15.75%
NET ASSETS: $124.8 million
(AS OF 9/30/97)
INCEPTION DATE: 3/25/85
TICKER SYMBOL: BTTNX
* Not annualized.
2 REPORT HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
REPORT HIGHLIGHTS
TARGET MATURITIES TRUST: 2015
* Reflecting the favorable bond market conditions that prevailed during the
second half of the fiscal year, the fund posted a 19.96% total return.
* We made virtually no changes to the fund's portfolio.
* We kept the fund's weighted average maturity date close to the benchmark' s
November 15, 2015 maturity date to ensure that the fund closely tracked its
benchmark.
TARGET MATURITIES TRUST: 2020
* The fund posted a 23.50% total return, reflecting the favorable bond market
conditions that prevailed during the second half of the fiscal year.
* The fund's assets dropped by one-third during the second half of the fiscal
year. Much of the decline occurred in July, when many market timers sold
fund shares in the midst of the summer bond rally to lock in gains.
* We sold STRIPS, the fund's most liquid holdings, to meet the increased
redemptions.
TARGET MATURITIES TRUST: 2025
* Reflecting the favorable bond market conditions that prevailed during the
second half of the fiscal year, the fund posted a 24.34% total return.
* The fund's net assets grew by more than 30% during the second half of the
fiscal year. We used the new money to buy more REFCORPs, which had higher
yields than available STRIPS in this maturity sector of the Treasury zero
market.
* We extended the fund's weighted average maturity date to July 10, 2025,
bringing it significantly closer to the August 15, 2025 maturity date of its
STRIPS benchmark.
TARGET: 2015
TOTAL RETURNS: AS OF 9/30/97
6 Months 18.81%*
1 Year 19.96%
NET ASSETS: $114.9 million
(AS OF 9/30/97)
INCEPTION DATE: 9/1/86
TICKER SYMBOL: BTFTX
TARGET: 2020
TOTAL RETURNS: AS OF 9/30/97
6 Months 22.89%*
1 Year 23.50%
NET ASSETS: $553.6 million
(AS OF 9/30/97)
INCEPTION DATE: 12/29/89
TICKER SYMBOL: BTTTX
TARGET: 2025
TOTAL RETURNS: AS OF 9/30/97
6 Months 26.32%*
1 Year 24.34%
NET ASSETS: $73.8 million
(AS OF 9/30/97)
INCEPTION DATE: 2/15/96
TICKER SYMBOL: BTTRX
* Not annualized.
Many of the investment terms in this report are defined in the Glossary on page
49.
ANNUAL REPORT REPORT HIGHLIGHTS 3
MARKET PERSPECTIVE
[line graph - data below]
Shifting Yield Curve for Treasury Zeros
Years to Maturity 9/30/96 9/30/97 3/31/97
1 5.78 5.67 6.07
2 6.07 5.84 6.42
3 6.23 5.91 6.57
4 6.31 5.99 6.65
5 6.36 6.01 6.70
6 6.44 6.09 6.77
7 6.52 6.18 6.83
8 6.62 6.21 6.93
9 6.67 6.29 6.95
10 6.73 6.33 7.00
11 6.77 6.37 7.03
12 6.81 6.41 7.06
13 6.84 6.45 7.09
14 6.88 6.49 7.12
15 6.92 6.53 7.15
16 6.94 6.55 7.16
17 6.95 6.57 7.17
18 6.97 6.58 7.19
19 6.98 6.60 7.20
20 7.00 6.62 7.21
21 7.00 6.60 7.21
22 7.00 6.58 7.21
23 7.01 6.56 7.21
24 7.01 6.54 7.21
25 7.01 6.52 7.21
26 6.99 6.50 7.20
27 6.97 6.48 7.18
28 6.94 6.46 7.17
29 6.92 6.44 7.15
30 6.90 6.42 7.14
STRONG PERFORMANCE
The U.S. bond market posted strong returns for the fiscal year ended
September 30, 1997, overcoming a spike in interest rates from December to April
that depressed prices. The rally especially benefited zero-coupon Treasury bonds
(zeros), the securities that constitute the Target Maturities Trust funds.
As shown in the accompanying chart, the zeros that serve as the funds'
benchmarks posted total returns for the period ranging from 8.15% for a
short-maturity zero (a coupon STRIPS maturing on November 15, 2000) to 23.89%
for a long-maturity zero (a coupon STRIPS maturing on November 15, 2020). These
returns were a far cry from the returns zeros posted just six months earlier.
Returns for zeros for the 12-month period ended March 31, 1997 ranged from 4.03%
for the November 15, 2000 STRIPS to -5.76% for the August 15, 2025 STRIPS.
Interest rates soared and bond prices fell most sharply in March, 1997, when the
Federal Reserve (the Fed) raised short-term interest rates for the first time in
two years. The Fed's action fueled speculation that this might be the first in a
series of interest rate hikes to slow down economic growth and keep inflation in
check.
LOW INFLATION AND FALLING YIELDS
Instead, economic growth slowed from its rapid pace in the first quarter of
1997, and inflation remained under control. For the nine months ended September
30, 1997, inflation (as measured by the consumer price index) rose at an annual
rate of just 1.6%, the slowest pace in 11 years. As a result, interest rates and
bond yields fell from April 1997 through the end of the fiscal year, dropping
below the levels that had prevailed at the start of the period. The accompanying
yield curve graph for Treasury zeros shows how yields rose in the first half of
the period, then declined sharply in the second half. The yield curve also
flattened, due to supply and demand factors.
STRONG DEMAND AND REDUCED SUPPLY
Treasury bonds also benefited from prevailing supply and demand conditions.
A declining federal budget deficit meant the U.S. government didn't need to
issue as much debt, leading to smaller auctions of Treasury securities and less
new supply. The Treasury also discontinued two regularly scheduled auctions of
10-year notes, dropping the number of auctions from six per year to four.
On the demand side, equity investors looked to the Treasury market for a "
safe haven" from increased stock market volatility late in the period. In
addition, foreign investors were attracted to Treasury securities by their
relatively high interest rates and the strong U.S. dollar. Interest rates fell
in Europe and parts of Asia, and remained low in Japan.
REPRESENTATIVE RETURNS FOR ZEROS (year ended 9/30/97)
11/15/00 coupon STRIPS ............. 8.15%
11/15/05 coupon STRIPS ............. 12.28%
11/15/10 coupon STRIPS ............. 16.27%
11/15/15 coupon STRIPS ............. 20.30%
11/15/20 coupon STRIPS ............. 23.89%
08/15/25 coupon STRIPS ............. 21.58%
Source: Bloomberg Financial Markets
4 MARKET PERSPECTIVE AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
TARGET MATURITIES TRUST: 2000
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Target Maturities Trust: 2000 ............. 5.49% 7.64% 8.74% 6.72% 11.43%
11/15/00 Maturity
STRIPS Issue .............................. 5.68% 8.15% 9.25% 7.10% 11.89%
Merrill Lynch Long-Term
Treasury Index ............................11.52% 13.17% 12.47% 8.88% 11.36%
See pages 48-49 for more information about returns, the comparative index and
the fund's benchmark.
</TABLE>
[mountain graph - data below]
Growth of $10,000 Over Ten Years
$10,000 investment made 9/30/87
Value on 9/30/97
11/15/00 Merrill Lynch
Target: 2000 STRIPS Issue Long-Term Index
Sep-87 $10,000 $10,000 $10,000
Oct-87 $10,995 $11,026 $10,735
Nov-87 $11,022 $10,963 $10,740
Dec-87 $11,434 $11,298 $10,954
Jan-88 $12,196 $12,248 $11,616
Feb-88 $12,456 $12,504 $11,759
Mar-88 $11,925 $11,914 $11,394
Apr-88 $11,681 $11,630 $11,211
May-88 $11,393 $11,490 $11,014
Jun-88 $12,051 $12,139 $11,478
Jul-88 $11,774 $11,775 $11,261
Aug-88 $11,811 $11,874 $11,304
Sep-88 $12,425 $12,460 $11,731
Oct-88 $12,899 $12,952 $12,076
Nov-88 $12,576 $12,634 $11,812
Dec-88 $12,748 $12,684 $11,962
Jan-89 $13,074 $13,194 $12,204
Feb-89 $12,631 $12,729 $11,959
Mar-89 $12,806 $12,871 $12,086
Apr-89 $13,228 $13,265 $12,370
May-89 $13,750 $13,849 $12,862
Jun-89 $14,683 $14,794 $13,591
Jul-89 $15,060 $15,123 $13,901
Aug-89 $14,617 $14,693 $13,531
Sep-89 $14,679 $14,742 $13,583
Oct-89 $15,245 $15,394 $14,128
Nov-89 $15,372 $15,527 $14,243
Dec-89 $15,273 $15,511 $14,223
Jan-90 $14,600 $14,835 $13,738
Feb-90 $14,590 $14,779 $13,679
Mar-90 $14,607 $14,762 $13,643
Apr-90 $14,137 $14,311 $13,293
May-90 $14,806 $15,040 $13,914
Jun-90 $15,166 $15,401 $14,231
Jul-90 $15,324 $15,592 $14,377
Aug-90 $14,635 $14,881 $13,755
Sep-90 $14,789 $15,012 $13,931
Oct-90 $15,204 $15,531 $14,242
Nov-90 $15,877 $16,188 $14,833
Dec-90 $16,237 $16,567 $15,142
Jan-91 $16,360 $16,744 $15,313
Feb-91 $16,422 $16,676 $15,373
Mar-91 $16,497 $16,800 $15,423
Apr-91 $16,734 $17,124 $15,627
May-91 $16,710 $17,023 $15,626
Jun-91 $16,597 $16,916 $15,503
Jul-91 $16,844 $17,196 $15,730
Aug-91 $17,520 $17,825 $16,279
Sep-91 $18,069 $18,457 $16,787
Oct-91 $18,226 $18,512 $16,841
Nov-91 $18,446 $18,867 $16,923
Dec-91 $19,592 $20,044 $17,933
Jan-92 $18,789 $19,209 $17,350
Feb-92 $18,909 $19,319 $17,473
Mar-92 $18,648 $19,014 $17,281
Apr-92 $18,642 $19,135 $17,287
May-92 $19,153 $19,552 $17,742
Jun-92 $19,657 $20,066 $17,996
Jul-92 $20,535 $20,965 $18,731
Aug-92 $20,786 $21,271 $18,890
Sep-92 $21,324 $21,831 $19,179
Oct-92 $20,796 $21,258 $18,798
Nov-92 $20,686 $21,153 $18,856
Dec-92 $21,252 $21,721 $19,357
Jan-93 $21,914 $22,421 $19,930
Feb-93 $22,707 $23,234 $20,591
Mar-93 $22,810 $23,377 $20,646
Apr-93 $23,036 $23,613 $20,797
May-93 $22,964 $23,532 $20,874
Jun-93 $23,849 $24,436 $21,751
Jul-93 $23,935 $24,531 $22,087
Aug-93 $24,652 $25,265 $22,972
Sep-93 $24,834 $25,480 $23,074
Oct-93 $24,847 $25,454 $23,217
Nov-93 $24,405 $25,015 $22,625
Dec-93 $24,539 $25,151 $22,692
Jan-94 $25,026 $25,666 $23,244
Feb-94 $24,158 $24,790 $22,273
Mar-94 $23,328 $23,927 $21,364
Apr-94 $23,022 $23,599 $21,036
May-94 $23,039 $23,637 $20,934
Jun-94 $22,906 $23,516 $20,747
Jul-94 $23,372 $24,011 $21,402
Aug-94 $23,448 $24,087 $21,269
Sep-94 $22,961 $23,588 $20,625
Oct-94 $22,827 $23,473 $20,533
Nov-94 $22,672 $23,322 $20,642
Dec-94 $22,847 $23,496 $21,005
Jan-95 $23,345 $24,054 $21,541
Feb-95 $24,082 $24,853 $22,147
Mar-95 $24,178 $24,946 $22,307
Apr-95 $24,580 $25,350 $22,701
May-95 $25,835 $26,664 $24,456
Jun-95 $26,065 $26,886 $24,751
Jul-95 $25,904 $26,758 $24,365
Aug-95 $26,158 $27,026 $24,890
Sep-95 $26,367 $27,182 $25,340
Oct-95 $26,775 $27,681 $26,085
Nov-95 $27,242 $28,176 $26,725
Dec-95 $27,585 $28,514 $27,447
Jan-96 $27,853 $28,845 $27,432
Feb-96 $27,338 $28,300 $26,094
Mar-96 $27,005 $27,977 $25,597
Apr-96 $26,755 $27,700 $25,170
May-96 $26,635 $27,597 $25,049
Jun-96 $26,967 $27,948 $25,557
Jul-96 $27,029 $28,027 $25,557
Aug-96 $27,002 $27,992 $25,246
Sep-96 $27,428 $28,443 $25,937
Oct-96 $27,985 $29,070 $26,948
Nov-96 $28,416 $29,489 $27,834
Dec-96 $28,135 $29,216 $27,175
Jan-97 $28,225 $29,322 $26,999
Feb-97 $28,228 $29,322 $26,962
Mar-97 $27,988 $29,106 $26,321
Apr-97 $28,321 $29,455 $26,961
May-97 $28,530 $29,689 $27,250
Jun-97 $28,773 $29,955 $27,764
Jul-97 $29,386 $30,579 $29,369
Aug-97 $29,207 $30,413 $28,550
Sep-97 $29,523 $30,760 $29,353
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
9/30/97 9/30/96
Number of Securities 31 33
Anticipated Growth Rate 5.24% 5.75%
Weighted Average Maturity Date 11/14/00 11/23/00
Anticipated Value at Maturity
(AVM--see graph on next page) $101.13 $101.10
Expense Ratio 0.56% 0.53%
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
ANNUAL REPORT TARGET MATURITIES TRUST: 2000 5
TARGET MATURITIES TRUST: 2000
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1997?
The fund rebounded from a slight loss in the first quarter of 1997 to post a
7.64% total return for the one-year period. The fund's returns reflect favorable
market conditions in the second half of the period as well as the fund's
position at the short end of the maturity spectrum, where interest rate
fluctuations have significantly less impact on performance than at the long end
of the market.
The fund's benchmark, a coupon STRIPS issue maturing on November 15, 2000,
returned 8.15% for the period. The fund typically underperforms its benchmark by
around 60 basis points because the benchmark is a security, not a mutual fund.
Though the fund's portfolio is managed to mimic the performance of the security,
the fund is subject to operating expenses (such as transaction costs and
management fees), while the benchmark is not. The roughly 60-basis-point
difference in performance is approximately equivalent to the fund's expense
ratio.
WHAT CHANGES HAVE OCCURRED IN THE FUND'S PORTFOLIO SINCE THE SEMIANNUAL REPORT?
In spite of the fund's positive investment returns, the fund's net assets
declined from $258.4 million on March 31 to $248.4 million on September 30,
reflecting shareholder withdrawals during the period. To meet these redemptions,
we sold some of the fund's lower-yielding, shorter-maturity STRIPS. That's why
the number of securities and the percentage of
[line graph - data below]
Target 2000: Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'85 26.77 100
'86 35.44 100
'87 33.33 98.69
'88 37.16 97.43
'89 44.52 96.21
'90 47.33 97.59
'91 57.11 98.91
'92 61.947 101.16
'93 71.526 100.708
'94 66.598 100.829
'95 80.408 100.992
'96 79.947 101.102
'97 86.06 101.13
'98
'99
'00
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 49), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
6 TARGET MATURITIES TRUST: 2000 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2000
STRIPS holdings declined during the period. (See the "Portfolio at a Glance"
chart on page 5 and the graphs below.)
A benefit of selling the lower-yielding, shorter- maturity STRIPS is also
shown in the "Portfolio at a Glance" chart on page 5 -- the fund's anticipated
value at maturity (AVM) increased during the period.
WHAT'S YOUR OUTLOOK FOR THE TREASURY MARKET?
It might not appear obvious because of the volatility we've seen, but the
Treasury market has been trading in a range since early 1996. During this time,
the 30-year Treasury bond yield has stayed between 6.25% and 7.25%. Bond yields
ended the fiscal year at the low end of this range. The strength of the U.S.
economy has kept interest rates from falling below 6%, but low U.S. inflation
and relatively passive monetary policy by the Federal Reserve (the Fed) have
kept rates from rising much higher than 7%.
As 1997 draws to a close, we remain in this contradictory environment of
strong economic growth and low inflation. These two conditions can't co-exist
forever--something has to give. But until this situation is resolved, bond
yields aren't likely to break significantly out of the range they've
established. They won't drop dramatically unless there are consistent signs of
economic weakness, and they aren't likely to rise unless the market anticipates
an interest rate hike by the Fed.
That expectation doesn't exist yet. As of early November, the federal funds
rate futures contract didn't have a Fed interest rate increase priced into it
until May of next year! Not only has the Fed not seen enough evidence yet of
inflation, it also has its hands tied by currency turmoil overseas. We believe
the Fed is unlikely to make any dramatic interest rate moves because higher U.S.
interest rates could cause further devaluations of already weak overseas
currencies.
Supply and demand factors should also lend support to the Treasury market. A
smaller federal budget deficit means we should see lower levels of Treasury debt
issuance going forward. That would likely bolster prices and help keep yields
down.
The bottom line is: We expect Treasury yields to remain in the lower half of
their recent range until a clearer direction for the U.S. economy emerges.
WHAT IS YOUR STRATEGY GOING FORWARD?
To help the fund reach its AVM, we will likely continue to keep its maturity
date close to the November 15, 2000 maturity date of its benchmark. Although
there can be no assurances that the fund will reach its AVM, we manage the fund
to reach or exceed this value at maturity.
We will also continue looking for opportunities to improve the fund's
liquidity by replacing receipt zeros (such as TRs and CATS) with STRIPS when we
can do so without sacrificing yield. We will likely continue to use STRIPS to
meet the fund's cash flow needs.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
STRIPS 62%
TRs 28%
Other 10%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
STRIPS 66%
TRs 26%
Other 8%
ANNUAL REPORT TARGET MATURITIES TRUST: 2000 7
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2000
SEPTEMBER 30, 1997
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 71,250 CUBES, 5.85%, 8/15/99 $ 63,965
75,000 ETR, 5.97%, 11/15/99 66,198
153,000 STRIPS -- COUPON, 5.83%,
11/15/99 135,433
2,836,700 TBR, 5.98%, 11/15/99 2,503,248
424,800 TR, 5.90%, 11/15/99 375,484
133,000 CATS, 5.92%, 2/15/00 115,810
88,125 CUBES, 5.94%, 2/15/00 76,700
13,069,000 STRIPS -- PRINCIPAL, 5.87%,
2/15/00 11,394,259
306,945 TBR, 6.01%, 2/15/00 266,719
30,036,209 TR, 5.93%, 2/15/00 26,147,994
149,000 CATS, 5.92%, 5/15/00 127,863
5,850,000 CUBES, 6.01%, 5/15/00 5,008,638
1,494,525 TBR, 6.01%, 5/15/00 1,279,579
36,467,000 STRIPS -- PRINCIPAL, 5.91%,
8/15/00 30,853,651
894,045 TBR, 6.05%, 8/15/00 753,477
3,932,000 COUGAR, 6.03%, 11/15/00 3,266,297
410,625 CUBES, 5.99%, 11/15/00 341,518
66,391,000 STRIPS -- PRINCIPAL, 5.92%,
11/15/00 55,343,367
3,754,000 TIGR, 5.97%, 11/15/00 3,124,110
2,252,886 TR, 5.98%, 11/15/00 1,874,302
75,000 CATS, 6.02%, 2/15/01 61,414
25,000,000 STRIPS -- COUPON, 5.96%,
2/15/01 20,511,548
27,184,000 STRIPS -- PRINCIPAL, 5.95%,
2/15/01 22,307,089
4,657,000 TIGR, 6.02%, 2/15/01 3,813,392
20,422,328 TR, 6.03%, 2/15/01 16,717,383
1,400,000 COUGAR, 6.10%, 5/15/01 1,126,360
1,496,250 CUBES, 6.125%, 5/15/01 1,202,529
44,000 TIGR, 6.04%, 5/15/01 35,475
24,350,000 TR, 6.05%, 5/15/01 19,625,089
18,450,000 STRIPS -- PRINCIPAL, 6.01%,
8/15/01 14,669,468
7,060,020 TR, 6.07%, 8/15/01 5,601,781
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $248,790,140
===================
(Cost $241,245,778)
NOTES TO SCHEDULE OF INVESTMENTS
CATS = Certificates of Accrual of Treasury Securities
COUGAR = Coupons on Underlying Government Securities
CUBES = Coupons Under Book Entry Safekeeping
ETR = Easy Growth Treasury Receipts
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TBR = Treasury Bond Receipts
TIGR = Treasury Investment Growth Receipts
TR = Treasury Receipts
(1) The effective yield to maturity at September 30, 1997 is indicated. These
securities are purchased at a substantial discount from their value at
maturity.
See Notes to Financial Statements
8 TARGET MATURITIES TRUST: 2000 AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
TARGET MATURITIES TRUST: 2005
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Target Maturities Trust: 2005 ............ 10.23% 11.60% 12.58% 9.40% 13.66%
11/15/05 Maturity
STRIPS Issue ............................. 10.51% 12.28% 13.24% 9.72% 13.97%
Merrill Lynch Long-Term
Treasury Index ........................... 11.52% 13.17% 12.47% 8.88% 11.36%
</TABLE>
See pages 48-49 for more information about returns, the comparative index and
the fund's benchmark.
[mountain graph - data below]
Growth of $10,000 Over Ten Years
$10,000 investment made 9/30/87
Value on 9/30/97
11/15/05 Merrill Lynch
Target: 2005 STRIPS Issue Long-Term Index
Sep-87 $10,000 $10,000 $10,000
Oct-87 $11,378 $11,411 $10,735
Nov-87 $11,372 $11,286 $10,740
Dec-87 $11,868 $11,792 $10,954
Jan-88 $13,006 $13,155 $11,616
Feb-88 $13,235 $13,274 $11,759
Mar-88 $12,298 $12,373 $11,394
Apr-88 $11,991 $11,890 $11,211
May-88 $11,584 $11,672 $11,014
Jun-88 $12,677 $12,717 $11,478
Jul-88 $12,091 $12,089 $11,261
Aug-88 $12,164 $12,191 $11,304
Sep-88 $12,917 $12,987 $11,731
Oct-88 $13,648 $13,720 $12,076
Nov-88 $13,179 $13,270 $11,812
Dec-88 $13,586 $13,607 $11,962
Jan-89 $13,993 $14,139 $12,204
Feb-89 $13,497 $13,675 $11,959
Mar-89 $13,709 $13,911 $12,086
Apr-89 $14,155 $14,320 $12,370
May-89 $14,863 $15,132 $12,862
Jun-89 $16,213 $16,380 $13,591
Jul-89 $16,453 $16,570 $13,901
Aug-89 $15,912 $15,946 $13,531
Sep-89 $15,956 $16,001 $13,583
Oct-89 $16,860 $17,010 $14,128
Nov-89 $17,044 $17,200 $14,243
Dec-89 $16,832 $17,046 $14,223
Jan-90 $15,711 $15,893 $13,738
Feb-90 $15,572 $15,782 $13,679
Mar-90 $15,544 $15,680 $13,643
Apr-90 $14,875 $14,906 $13,293
May-90 $15,901 $16,102 $13,914
Jun-90 $16,392 $16,648 $14,231
Jul-90 $16,447 $16,698 $14,377
Aug-90 $15,276 $15,389 $13,755
Sep-90 $15,471 $15,585 $13,931
Oct-90 $15,901 $16,101 $14,242
Nov-90 $17,016 $17,274 $14,833
Dec-90 $17,434 $17,723 $15,142
Jan-91 $17,552 $17,924 $15,313
Feb-91 $17,641 $17,785 $15,373
Mar-91 $17,669 $17,878 $15,423
Apr-91 $17,953 $18,136 $15,627
May-91 $17,830 $17,987 $15,626
Jun-91 $17,602 $17,807 $15,503
Jul-91 $17,914 $18,217 $15,730
Aug-91 $18,801 $18,979 $16,279
Sep-91 $19,593 $19,879 $16,787
Oct-91 $19,565 $19,771 $16,841
Nov-91 $19,671 $19,923 $16,923
Dec-91 $21,177 $21,534 $17,933
Jan-92 $20,262 $20,605 $17,350
Feb-92 $20,368 $20,702 $17,473
Mar-92 $20,006 $20,253 $17,281
Apr-92 $19,844 $20,071 $17,287
May-92 $20,586 $20,812 $17,742
Jun-92 $20,948 $21,147 $17,996
Jul-92 $22,181 $22,378 $18,731
Aug-92 $22,387 $22,607 $18,890
Sep-92 $22,967 $23,241 $19,179
Oct-92 $22,259 $22,488 $18,798
Nov-92 $22,331 $22,577 $18,856
Dec-92 $23,201 $23,497 $19,357
Jan-93 $23,960 $24,316 $19,930
Feb-93 $25,215 $25,554 $20,591
Mar-93 $25,165 $25,587 $20,646
Apr-93 $25,510 $25,919 $20,797
May-93 $25,533 $26,023 $20,874
Jun-93 $27,111 $27,633 $21,751
Jul-93 $27,479 $28,010 $22,087
Aug-93 $28,622 $29,183 $22,972
Sep-93 $28,912 $29,605 $23,074
Oct-93 $29,052 $29,692 $23,217
Nov-93 $27,981 $28,560 $22,625
Dec-93 $28,204 $28,796 $22,692
Jan-94 $29,180 $29,738 $23,244
Feb-94 $27,529 $28,100 $22,273
Mar-94 $26,146 $26,430 $21,364
Apr-94 $25,884 $26,024 $21,036
May-94 $25,739 $25,904 $20,934
Jun-94 $25,482 $25,652 $20,747
Jul-94 $26,280 $26,504 $21,402
Aug-94 $26,219 $26,479 $21,269
Sep-94 $25,226 $25,455 $20,625
Oct-94 $25,031 $25,314 $20,533
Nov-94 $25,220 $25,479 $20,642
Dec-94 $25,694 $25,983 $21,005
Jan-95 $26,341 $26,682 $21,541
Feb-95 $27,306 $27,668 $22,147
Mar-95 $27,535 $27,912 $22,307
Apr-95 $28,115 $28,515 $22,701
May-95 $30,574 $31,040 $24,456
Jun-95 $30,965 $31,440 $24,751
Jul-95 $30,385 $30,893 $24,365
Aug-95 $31,021 $31,545 $24,890
Sep-95 $31,573 $32,113 $25,340
Oct-95 $32,354 $32,942 $26,085
Nov-95 $33,279 $33,900 $26,725
Dec-95 $34,083 $34,735 $27,447
Jan-96 $34,127 $34,813 $27,432
Feb-96 $32,526 $33,172 $26,094
Mar-96 $31,924 $32,591 $25,597
Apr-96 $31,277 $31,888 $25,170
May-96 $31,043 $31,663 $25,049
Jun-96 $31,645 $32,325 $25,557
Jul-96 $31,690 $32,347 $25,557
Aug-96 $31,394 $32,039 $25,246
Sep-96 $32,254 $32,917 $25,937
Oct-96 $33,416 $34,225 $26,948
Nov-96 $34,498 $35,244 $27,834
Dec-96 $33,660 $34,381 $27,175
Jan-97 $33,542 $34,334 $26,999
Feb-97 $33,509 $34,273 $26,962
Mar-97 $32,654 $33,445 $26,321
Apr-97 $33,409 $34,224 $26,961
May-97 $33,799 $34,611 $27,250
Jun-97 $34,296 $35,204 $27,764
Jul-97 $35,990 $36,909 $29,369
Aug-97 $35,155 $36,079 $28,550
Sep-97 $35,996 $36,959 $29,353
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
9/30/97 9/30/96
Number of Securities 34 36
Anticipated Growth Rate 5.57% 6.17%
Weighted Average Maturity Date 11/16/05 11/18/05
Anticipated Value at Maturity
(AVM--see graph on next page) $100.85 $100.71
Expense Ratio 0.57% 0.58%
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
ANNUAL REPORT TARGET MATURITIES TRUST: 2005 9
TARGET MATURITIES TRUST: 2005
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1997?
The fund rebounded from a nearly 3% loss in the first quarter of 1997 to
post an 11.60% total return for the one-year period. The fund's returns reflect
favorable market conditions in the second half of the period as well as the
fund's intermediate-term maturity, which causes its portfolio to experience less
price fluctuation than bond portfolios with longer maturities.
The fund's benchmark, a coupon STRIPS issue maturing on November 15, 2005,
returned 12.28% for the period. The fund typically underperforms its benchmark
by around 60 basis points because the benchmark is a security, not a mutual
fund. Though the fund's portfolio is managed to mimic the performance of the
security, the fund is subject to operating expenses (such as transaction costs
and management fees), while the benchmark is not. The roughly 60-basis-point
difference in performance is approximately equivalent to the fund's expense
ratio.
WHAT CHANGES HAVE OCCURRED IN THE FUND'S PORTFOLIO SINCE THE SEMIANNUAL REPORT?
The fund's net assets grew from $234.0 million on March 31 to $281.7 million
on September 30, due to a favorable combination of cash inflows from investors
and positive fund performance. We used the new money primarily to buy STRIPS,
which is why the graphs on page 11 show that the fund held an increasing
percentage of STRIPS and a declining
[line graph - data below]
Target 2005: Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'85 16.69 98
'86 23.74 97
'87 21.28 94.59
'88 24.36 93.66
'89 30.18 93.14
'90 31.26 97.25
'91 37.97 99.29
'92 41.597 99.625
'93 50.575 100.087
'94 46.066 100.516
'95 61.108 100.34
'96 57.829 100.707
'97 64.54 100.85
'98
'99
'00
'01
'02
'03
'04
'05
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 49), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
10 TARGET MATURITIES TRUST: 2005 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2005
percentage of REFCORPs. REFCORPs typically offer higher yields than STRIPS, but
the yield difference in this maturity range was narrow during the period due to
strong demand. When the yield spread is small, we'd rather own STRIPS than
REFCORPs because STRIPS are typically easier to buy and sell.
WHAT'S YOUR OUTLOOK FOR THE TREASURY MARKET?
It might not appear obvious because of the volatility we've seen, but the
Treasury market has been trading in a range since early 1996. During this time,
the 30-year Treasury bond yield has stayed between 6.25% and 7.25%. Bond yields
ended the fiscal year at the low end of this range. The strength of the U.S.
economy has kept interest rates from falling below 6%, but low U.S. inflation
and relatively passive monetary policy by the Federal Reserve (the Fed) have
kept rates from rising much higher than 7%.
As 1997 draws to a close, we remain in this contradictory environment of
strong economic growth and low inflation. These two conditions can't co-exist
forever--something has to give. But until this situation is resolved, bond
yields aren't likely to break significantly out of the range they've
established. They won't drop dramatically unless there are consistent signs of
economic weakness, and they aren't likely to rise unless the market anticipates
an interest rate hike by the Fed.
That expectation doesn't exist yet. As of early November, the federal funds
rate futures contract didn't have a Fed interest rate increase priced into it
until May of next year! Not only has the Fed not seen enough evidence yet of
inflation, it also has its hands tied by currency turmoil overseas. We believe
the Fed is unlikely to make any dramatic interest rate moves because higher U.S.
interest rates could cause further devaluations of already weak overseas
currencies.
Supply and demand factors should also lend support to the Treasury market. A
smaller federal budget deficit means we should see lower levels of Treasury debt
issuance going forward. That would likely bolster prices and help keep yields
down.
The bottom line is: We expect Treasury yields to remain in the lower half of
their recent range until a clearer direction for the U.S. economy emerges.
WHAT IS YOUR STRATEGY GOING FORWARD?
To help the fund reach its anticipated value at maturity (AVM), we will
likely continue to keep its maturity date close to the November 15, 2005
maturity date of its benchmark. Although there can be no assurances that the
fund will reach its AVM, we manage the fund to reach or exceed this value at
maturity.
We will also continue looking for opportunities to improve the fund's
liquidity and yield by replacing receipt zeros (such as TRs and CATS) with
REFCORPs and STRIPS.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
STRIPS 41%
REFCORPs 40%
CATS 8%
TRs 6%
Other 5%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
REFCORPs 43%
STRIPS 36%
CATS 9%
TRs 6%
Other 6%
ANNUAL REPORT TARGET MATURITIES TRUST: 2005 11
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2005
SEPTEMBER 30, 1997
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 693,750 CUBES, 6.35%, 11/15/04 $ 444,468
87,000 ETR, 6.34%, 11/15/04 55,777
27,000 TIGR, 6.25%, 11/15/04 17,418
11,500,000 REFCORP STRIPS -- COUPON,
6.27%, 1/15/05 7,333,136
15,000,000 STRIPS -- COUPON, 6.19%,
2/15/05 9,569,926
3,200,000 U.S. Treasury Corpus, 6.42%,
2/15/10, Call Date 2/15/05 2,008,299
4,615,672 CUBES, 6.30%, 5/15/05 2,877,815
1,000,000 ETR, 6.37%, 5/15/05 620,271
17,144,000 STRIPS -- COUPON, 6.21%,
5/15/05 10,760,415
38,559,000 STRIPS -- PRINCIPAL, 6.23%,
5/15/05 24,165,764
428,750 TBR, 6.39%, 5/15/05 265,549
6,450,000 TR, 6.375%, 5/15/10, Call Date
5/15/05 3,997,796
12,500,000 REFCORP STRIPS -- COUPON,
6.30%, 7/15/05 7,711,024
59,500,000 STRIPS -- PRINCIPAL, 6.21%,
8/15/05 36,764,905
40,000,000 REFCORP STRIPS -- COUPON,
6.31%, 10/15/05 24,276,351
170,000 CATS, 6.28%, 11/15/05 102,880
491,519 CUBES, 6.30%, 11/15/05 296,988
5,000,000 STRIPS -- COUPON, 6.21%,
11/15/05 3,042,612
2,247,000 TBR, 6.39%, 11/15/05 1,348,106
10,900,000 U.S. Treasury Corpus, 6.44%,
11/15/10, Call Date 11/15/05 6,513,864
46,429,000 REFCORP STRIPS -- COUPON,
6.31%, 1/15/06 27,744,265
45,056,000 STRIPS -- COUPON, 6.25%,
2/15/06 26,924,968
19,415,340 TR, 6.33%, 2/15/06 11,527,294
56,800,000 REFCORP STRIPS -- COUPON,
6.32%, 4/15/06 33,390,430
107,000 CATS, 6.33%, 5/15/06 62,521
38,699,000 CATS, 6.43%, 5/15/11, Call Date
5/15/06 22,423,885
566,500 CUBES, 6.35%, 5/15/06 330,456
Principal Amount Value
- --------------------------------------------------------------------------------
$ 4,718,000 STRIPS -- COUPON, 6.26%,
5/15/06 $ 2,772,931
410,000 TBR, 6.44%, 5/15/06 237,374
146,346 TR, 6.34%, 5/15/06 85,439
1,000,000 TR, 6.43%, 5/15/11, Call Date
5/15/06 579,444
11,428,000 REFCORP STRIPS -- COUPON,
6.33%, 7/15/06 6,608,820
2,000,000 STRIPS -- COUPON, 6.28%,
8/15/06 1,156,001
1,299,780 TR, 6.36%, 8/15/06 746,122
----------------
TOTAL INVESTMENT SECURITIES--100.0% $276,763,314
================
(Cost $257,998,629)
NOTES TO SCHEDULE OF INVESTMENTS
CATS = Certificates of Accrual of Treasury Securities
CUBES = Coupons Under Book Entry Safekeeping
ETR = Easy Growth Treasury Receipts
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TBR = Treasury Bond Receipts
TIGR = Treasury Investment Growth Receipts
TR = Treasury Receipts
(1) The effective yield to maturity at September 30, 1997 is indicated. These
securities are purchased at a substantial discount from their value at
maturity.
See Notes to Financial Statements
12 TARGET MATURITIES TRUST: 2005 AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
TARGET MATURITIES TRUST: 2010
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10
YEARS
- ----------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Target Maturities Trust: 2010 ............. 14.19% 15.75% 15.79% 11.50% 15.10%
11/15/10 Maturity
STRIPS Issue .............................. 14.70% 16.27% 16.85% 12.21% 15.64%
Merrill Lynch Long-Term
Treasury Index ............................ 11.52% 13.17% 12.47% 8.88% 11.36%
</TABLE>
See pages 48-49 for more information about returns, the comparative index and
the fund's benchmark.
[mountain graph - data below]
Growth of $10,000 Over Ten Years
$10,000 investment made 9/30/87
Value on 9/30/97
11/15/10 Merrill Lynch
Target: 2010 STRIPS Issue Long-Term Index
Sep-87 $10,000 $10,000 $10,000
Oct-87 $11,784 $11,706 $10,735
Nov-87 $11,867 $11,721 $10,740
Dec-87 $12,415 $12,287 $10,954
Jan-88 $13,817 $14,014 $11,616
Feb-88 $14,216 $14,240 $11,759
Mar-88 $12,822 $13,011 $11,394
Apr-88 $12,382 $12,336 $11,211
May-88 $11,809 $11,914 $11,014
Jun-88 $13,029 $13,219 $11,478
Jul-88 $12,315 $12,357 $11,261
Aug-88 $12,349 $12,435 $11,304
Sep-88 $13,328 $13,435 $11,731
Oct-88 $14,166 $14,392 $12,076
Nov-88 $13,610 $13,840 $11,812
Dec-88 $14,365 $14,267 $11,962
Jan-89 $14,780 $15,053 $12,204
Feb-89 $13,975 $14,237 $11,959
Mar-89 $14,307 $14,554 $12,086
Apr-89 $14,805 $15,113 $12,370
May-89 $15,942 $16,268 $12,862
Jun-89 $17,685 $18,151 $13,591
Jul-89 $17,892 $18,273 $13,901
Aug-89 $17,062 $17,341 $13,531
Sep-89 $17,087 $17,489 $13,583
Oct-89 $18,266 $18,754 $14,128
Nov-89 $18,523 $18,952 $14,243
Dec-89 $18,390 $18,880 $14,223
Jan-90 $16,763 $17,107 $13,738
Feb-90 $16,523 $16,946 $13,679
Mar-90 $16,390 $16,830 $13,643
Apr-90 $15,544 $15,794 $13,293
May-90 $16,871 $17,551 $13,914
Jun-90 $17,535 $18,302 $14,231
Jul-90 $17,427 $18,292 $14,377
Aug-90 $15,685 $16,056 $13,755
Sep-90 $15,917 $16,417 $13,931
Oct-90 $16,448 $16,902 $14,242
Nov-90 $17,959 $18,448 $14,833
Dec-90 $18,440 $18,938 $15,142
Jan-91 $18,730 $19,071 $15,313
Feb-91 $18,714 $18,869 $15,373
Mar-91 $18,739 $18,995 $15,423
Apr-91 $18,988 $19,351 $15,627
May-91 $18,896 $19,128 $15,626
Jun-91 $18,465 $18,757 $15,503
Jul-91 $18,780 $19,149 $15,730
Aug-91 $19,909 $20,266 $16,279
Sep-91 $20,813 $21,289 $16,787
Oct-91 $20,647 $21,122 $16,841
Nov-91 $20,481 $20,875 $16,923
Dec-91 $22,324 $22,813 $17,933
Jan-92 $21,320 $21,791 $17,350
Feb-92 $21,469 $21,925 $17,473
Mar-92 $21,062 $21,495 $17,281
Apr-92 $20,739 $21,145 $17,287
May-92 $21,668 $22,092 $17,742
Jun-92 $21,784 $22,170 $17,996
Jul-92 $23,137 $23,532 $18,731
Aug-92 $23,237 $23,606 $18,890
Sep-92 $23,676 $24,050 $19,179
Oct-92 $23,104 $23,460 $18,798
Nov-92 $23,402 $23,823 $18,856
Dec-92 $24,506 $24,951 $19,357
Jan-93 $25,270 $25,712 $19,930
Feb-93 $26,705 $27,221 $20,591
Mar-93 $26,598 $27,167 $20,646
Apr-93 $26,855 $27,331 $20,797
May-93 $27,062 $27,577 $20,874
Jun-93 $29,087 $29,685 $21,751
Jul-93 $30,124 $30,765 $22,087
Aug-93 $31,627 $32,316 $22,972
Sep-93 $31,635 $32,380 $23,074
Oct-93 $32,041 $32,871 $23,217
Nov-93 $30,805 $31,572 $22,625
Dec-93 $30,946 $31,726 $22,692
Jan-94 $32,224 $33,041 $23,244
Feb-94 $29,983 $30,728 $22,273
Mar-94 $28,141 $28,827 $21,364
Apr-94 $27,668 $28,221 $21,036
May-94 $27,178 $27,763 $20,934
Jun-94 $26,763 $27,350 $20,747
Jul-94 $28,058 $28,711 $21,402
Aug-94 $27,627 $28,305 $21,269
Sep-94 $26,282 $26,813 $20,625
Oct-94 $26,066 $26,666 $20,533
Nov-94 $26,539 $27,176 $20,642
Dec-94 $27,369 $28,054 $21,005
Jan-95 $28,191 $28,965 $21,541
Feb-95 $29,112 $29,919 $22,147
Mar-95 $29,394 $30,248 $22,307
Apr-95 $30,083 $30,998 $22,701
May-95 $33,452 $34,565 $24,456
Jun-95 $34,058 $35,226 $24,751
Jul-95 $33,178 $34,318 $24,365
Aug-95 $34,124 $35,340 $24,890
Sep-95 $34,971 $36,265 $25,340
Oct-95 $36,315 $37,772 $26,085
Nov-95 $37,577 $39,059 $26,725
Dec-95 $38,888 $40,488 $27,447
Jan-96 $38,672 $40,213 $27,432
Feb-96 $35,925 $37,360 $26,094
Mar-96 $35,012 $36,430 $25,597
Apr-96 $33,975 $35,283 $25,170
May-96 $33,710 $35,101 $25,049
Jun-96 $34,697 $36,186 $25,557
Jul-96 $34,714 $36,163 $25,557
Aug-96 $34,033 $35,436 $25,246
Sep-96 $35,245 $36,789 $25,937
Oct-96 $37,063 $38,754 $26,948
Nov-96 $38,757 $40,461 $27,834
Dec-96 $37,513 $39,133 $27,175
Jan-97 $37,074 $38,678 $26,999
Feb-97 $37,033 $38,622 $26,962
Mar-97 $35,730 $37,293 $26,321
Apr-97 $36,766 $38,455 $26,961
May-97 $37,240 $38,927 $27,250
Jun-97 $38,052 $39,870 $27,764
Jul-97 $40,914 $42,874 $29,369
Aug-97 $39,388 $41,215 $28,550
Sep-97 $40,797 $42,776 $29,353
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
9/30/97 9/30/96
Number of Securities 16 16
Anticipated Growth Rate 5.80% 6.44%
Weighted Average Maturity Date 10/03/10 8/29/10
Anticipated Value at Maturity
(AVM--see graph on next page) $103.40 $102.53
Expense Ratio 0.62% 0.67%
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
ANNUAL REPORT TARGET MATURITIES TRUST: 2010 13
TARGET MATURITIES TRUST: 2010
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1997?
The fund rebounded from a nearly 5% loss in the first quarter of 1997 to
post a 15.75% total return for the one-year period. The fund's returns reflect
favorable market conditions in the second half of the period as well as the
fund's intermediate-term maturity, which causes its portfolio to experience less
price fluctuation than bond portfolios with longer maturities.
The fund's benchmark, a coupon STRIPS issue maturing on November 15, 2010,
returned 16.27% for the period. The fund typically underperforms its benchmark
by around 60 basis points because the benchmark is a security, not a mutual
fund. Though the fund's portfolio is managed to mimic the performance of the
security, the fund is subject to operating expenses (such as transaction costs
and management fees), while the benchmark is not. The roughly 60-basis-point
difference in performance is approximately equivalent to the fund's expense
ratio.
WHAT CHANGES HAVE OCCURRED IN THE FUND'S PORTFOLIO SINCE THE SEMIANNUAL REPORT?
The fund's net assets grew from $100.7 million on March 31 to $124.8 million
on September 30, due to a favorable combination of cash inflows from investors
and positive fund performance. We used the new money primarily to buy STRIPS,
which is why the graphs on page 15 show that the fund held an increasing
percentage of STRIPS and a declining
[line graph - data below]
Target 2010: Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'85 11.43 97
'86 17.65 97
'87 14.96 95.27
'88 17.31 97.13
'89 22.16 96.66
'90 22.22 97.52
'91 26.9 98.97
'92 29.534 100.179
'93 37.292 100.874
'94 32.981 101.78
'95 46.864 101.788
'96 42.474 102.529
'97 49.16 103.4
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 49), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
14 TARGET MATURITIES TRUST: 2010 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2010
percentage of REFCORPs. REFCORPs typically offer higher yields than STRIPS, but
the yield difference in this maturity range was narrow during the period due to
strong demand. When the yield spread is small, we'd rather own STRIPS than
REFCORPs because STRIPS are typically easier to buy and sell.
The "Portfolio at a Glance" chart on page 13 shows that the fund's weighted
average maturity date extended significantly. This reflects a conscious effort
on our part to move the fund's maturity date closer to the November 15, 2010
maturity date of its STRIPS benchmark. The fund's portfolio is managed to mimic
the performance of that zero-coupon bond as closely as possible.
WHAT'S YOUR OUTLOOK FOR THE TREASURY MARKET?
It might not appear obvious because of the volatility we've seen, but the
Treasury market has been trading in a range since early 1996. During this time,
the 30-year Treasury bond yield has stayed between 6.25% and 7.25%. Bond yields
ended the fiscal year at the low end of this range. The strength of the U.S.
economy has kept interest rates from falling below 6%, but low U.S. inflation
and relatively passive monetary policy by the Federal Reserve (the Fed) have
kept rates from rising much higher than 7%.
As 1997 draws to a close, we remain in this contradictory environment of
strong economic growth and low inflation. These two conditions can't co-exist
forever--something has to give. But until this situation is resolved, bond
yields aren't likely to break significantly out of the range they've
established. They won't drop dramatically unless there are consistent signs of
economic weakness, and they aren't likely to rise unless the market anticipates
an interest rate hike by the Fed.
That expectation doesn't exist yet. As of early November, the federal funds
rate futures contract didn't have a Fed interest rate increase priced into it
until May of next year! Not only has the Fed not seen enough evidence yet of
inflation, it also has its hands tied by currency turmoil overseas. We believe
the Fed is unlikely to make any dramatic interest rate moves because higher U.S.
interest rates could cause further devaluations of already weak overseas
currencies.
WHAT IS YOUR STRATEGY GOING FORWARD?
In general, we will continue to buy the highest- yielding zeros we can
locate. We will also continue to move the fund's maturity date closer to the
November 15, 2010 maturity date of its STRIPS benchmark. We may add REFCORPs to
the fund's portfolio if their prices become more attractive and the yield spread
between them and STRIPS increases. But we still plan to maintain at least 25% of
the fund's assets in STRIPS to meet liquidity needs.
We expect to continue holding the fund's principal ETRs, which were
purchased in 1993 when their yield was 30 basis points higher than coupon STRIPS
of comparable maturity. These securities still offer a yield that is more than
20 basis points higher than like-maturity STRIPS.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
STRIPS 48%
REFCORPs 41%
ETRs 11%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
STRIPS 44%
REFCORPs 44%
ETRs 12%
ANNUAL REPORT TARGET MATURITIES TRUST: 2010 15
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2010
SEPTEMBER 30, 1997
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$28,520,000 ETR, 6.62%, 5/15/14, Call Date
5/15/09 $ 13,386,307
2,000,000 REFCORP STRIPS -- COUPON,
6.54%, 10/15/09 921,681
11,500,000 STRIPS -- PRINCIPAL, 6.50%,
11/15/14, Call Date
11/15/09 5,299,005
5,772,000 REFCORP STRIPS -- COUPON,
6.53%, 1/15/10 2,620,671
30,728,000 REFCORP STRIPS -- COUPON,
6.55%, 4/15/10 13,695,678
587,000 STRIPS -- COUPON, 6.43%,
5/15/10 264,062
15,000,000 REFCORP STRIPS -- COUPON,
6.56%, 7/15/10 6,570,690
3,277,000 STRIPS -- COUPON, 6.45%,
8/15/10 1,448,309
25,000,000 REFCORP STRIPS -- COUPON,
6.58%, 10/15/10 10,748,536
42,700,000 STRIPS -- COUPON, 6.46%,
11/15/10 18,539,470
20,500,000 REFCORP STRIPS -- COUPON,
6.57%, 1/15/11 8,683,575
29,360,000 STRIPS -- COUPON, 6.47%,
2/15/11 12,538,375
18,850,000 REFCORP STRIPS -- COUPON,
6.57%, 4/15/11 7,856,545
10,000,000 STRIPS -- COUPON, 6.47%,
5/15/11 4,200,398
11,715,000 STRIPS -- COUPON, 6.48%,
8/15/11 4,839,800
30,000,000 STRIPS -- COUPON, 6.49%,
11/15/11 12,172,971
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $123,786,073
===================
(Cost $112,470,517)
NOTES TO SCHEDULE OF INVESTMENTS
ETR = Easy Growth Treasury Receipts
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) The effective yield to maturity at September 30, 1997 is indicated. These
securities are purchased at a substantial discount from their value at
maturity.
See Notes to Financial Statements
16 TARGET MATURITIES TRUST: 2010 AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
TARGET MATURITIES TRUST: 2015
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10
YEARS
- ----------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Target Maturities Trust: 2015 ............ 18.81% 19.96% 18.93% 13.46% 15.56%
11/15/15 Maturity
STRIPS Issue ............................. 19.29% 20.30% 19.70% 14.02% 15.64%
Merrill Lynch Long-Term
Treasury Index ........................... 11.52% 13.17% 12.47% 8.88% 11.36%
</TABLE>
See pages 48-49 for more information about returns, the comparative index and
the fund's benchmark.
[mountain graph - data below]
Growth of $10,000 Over Ten Years
$10,000 investment made 9/30/87
Value on 9/30/97
11/15/15 Merrill Lynch
Target: 2015 STRIPS Issue Long-Term Index
Sep-87 $10,000 $10,000 $10,000
Oct-87 $11,783 $11,217 $10,735
Nov-87 $11,949 $11,302 $10,740
Dec-87 $12,591 $12,045 $10,954
Jan-88 $14,452 $13,637 $11,616
Feb-88 $14,862 $14,330 $11,759
Mar-88 $13,189 $12,775 $11,394
Apr-88 $12,392 $12,137 $11,211
May-88 $11,783 $11,305 $11,014
Jun-88 $12,901 $12,549 $11,478
Jul-88 $11,993 $11,473 $11,261
Aug-88 $11,838 $11,448 $11,304
Sep-88 $12,979 $12,631 $11,731
Oct-88 $14,031 $13,682 $12,076
Nov-88 $13,112 $12,785 $11,812
Dec-88 $13,987 $13,385 $11,962
Jan-89 $14,452 $14,234 $12,204
Feb-89 $13,787 $13,439 $11,959
Mar-89 $14,175 $13,783 $12,086
Apr-89 $14,463 $14,160 $12,370
May-89 $15,781 $15,359 $12,862
Jun-89 $18,062 $17,687 $13,591
Jul-89 $18,339 $17,985 $13,901
Aug-89 $17,353 $16,956 $13,531
Sep-89 $17,298 $16,979 $13,583
Oct-89 $18,527 $18,478 $14,128
Nov-89 $18,959 $18,643 $14,243
Dec-89 $18,671 $18,342 $14,223
Jan-90 $16,844 $16,646 $13,738
Feb-90 $16,611 $16,222 $13,679
Mar-90 $16,235 $15,898 $13,643
Apr-90 $14,928 $14,627 $13,293
May-90 $16,689 $16,286 $13,914
Jun-90 $17,342 $17,046 $14,231
Jul-90 $17,353 $17,045 $14,377
Aug-90 $15,050 $14,707 $13,755
Sep-90 $15,227 $14,915 $13,931
Oct-90 $15,836 $15,660 $14,242
Nov-90 $17,497 $17,190 $14,833
Dec-90 $18,040 $17,646 $15,142
Jan-91 $18,405 $18,069 $15,313
Feb-91 $18,250 $18,011 $15,373
Mar-91 $18,272 $18,002 $15,423
Apr-91 $18,583 $18,434 $15,627
May-91 $18,317 $17,921 $15,626
Jun-91 $17,763 $17,455 $15,503
Jul-91 $18,162 $17,962 $15,730
Aug-91 $19,491 $19,079 $16,279
Sep-91 $20,421 $20,077 $16,787
Oct-91 $20,100 $19,752 $16,841
Nov-91 $19,679 $19,249 $16,923
Dec-91 $22,093 $21,645 $17,933
Jan-92 $20,842 $20,391 $17,350
Feb-92 $21,096 $20,657 $17,473
Mar-92 $20,698 $20,244 $17,281
Apr-92 $20,277 $19,879 $17,287
May-92 $21,274 $20,885 $17,742
Jun-92 $21,130 $20,705 $17,996
Jul-92 $22,857 $22,446 $18,731
Aug-92 $22,614 $22,196 $18,890
Sep-92 $22,580 $22,191 $19,179
Oct-92 $21,960 $21,559 $18,798
Nov-92 $22,857 $22,437 $18,856
Dec-92 $23,810 $23,397 $19,357
Jan-93 $24,629 $24,223 $19,930
Feb-93 $26,024 $25,623 $20,591
Mar-93 $25,792 $25,404 $20,646
Apr-93 $26,013 $25,617 $20,797
May-93 $26,567 $26,157 $20,874
Jun-93 $28,450 $28,033 $21,751
Jul-93 $29,911 $29,502 $22,087
Aug-93 $32,436 $32,067 $22,972
Sep-93 $32,159 $31,795 $23,074
Oct-93 $32,735 $32,375 $23,217
Nov-93 $31,274 $30,879 $22,625
Dec-93 $31,074 $30,764 $22,692
Jan-94 $32,337 $32,038 $23,244
Feb-94 $29,945 $29,674 $22,273
Mar-94 $28,029 $27,694 $21,364
Apr-94 $27,331 $27,032 $21,036
May-94 $26,523 $26,246 $20,934
Jun-94 $26,002 $25,717 $20,747
Jul-94 $27,807 $27,547 $21,402
Aug-94 $26,866 $26,600 $21,269
Sep-94 $25,238 $24,934 $20,625
Oct-94 $25,150 $24,854 $20,533
Nov-94 $25,803 $25,504 $20,642
Dec-94 $26,700 $26,431 $21,005
Jan-95 $27,719 $27,507 $21,541
Feb-95 $28,472 $28,200 $22,147
Mar-95 $28,970 $28,725 $22,307
Apr-95 $29,513 $29,354 $22,701
May-95 $33,810 $33,699 $24,456
Jun-95 $34,264 $34,125 $24,751
Jul-95 $33,090 $32,973 $24,365
Aug-95 $34,618 $34,525 $24,890
Sep-95 $35,659 $35,569 $25,340
Oct-95 $37,564 $37,556 $26,085
Nov-95 $38,981 $38,906 $26,725
Dec-95 $40,775 $40,717 $27,447
Jan-96 $40,299 $40,243 $27,432
Feb-96 $36,556 $36,588 $26,094
Mar-96 $35,138 $35,171 $25,597
Apr-96 $34,053 $34,054 $25,170
May-96 $33,976 $34,005 $25,049
Jun-96 $35,039 $35,166 $25,557
Jul-96 $35,050 $35,064 $25,557
Aug-96 $33,876 $33,923 $25,246
Sep-96 $35,394 $35,548 $25,937
Oct-96 $37,751 $38,001 $26,948
Nov-96 $40,042 $40,072 $27,834
Dec-96 $38,316 $38,433 $27,175
Jan-97 $37,496 $37,685 $26,999
Feb-97 $37,496 $37,613 $26,962
Mar-97 $35,734 $35,849 $26,321
Apr-97 $37,063 $37,177 $26,961
May-97 $37,560 $37,863 $27,250
Jun-97 $38,702 $39,048 $27,764
Jul-97 $42,766 $42,986 $29,369
Aug-97 $40,495 $40,778 $28,550
Sep-97 $42,458 $42,766 $29,353
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
9/30/97 9/30/96
Number of Securities 11 12
Anticipated Growth Rate 5.93% 6.58%
Weighted Average Maturity Date 11/17/15 11/12/15
Anticipated Value at Maturity
(AVM--see graph on next page) $110.52 $110.11
Expense Ratio 0.61% 0.65%
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
ANNUAL REPORT TARGET MATURITIES TRUST: 2015 17
TARGET MATURITIES TRUST: 2015
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1997?
The fund rebounded from a nearly 7% loss in the first quarter of 1997 to
post a 19.96% total return for the one-year period. The fund's returns reflect
favorable market conditions in the second half of the period as well as the
fund's longer-term maturity, which causes its portfolio to experience
considerable price and performance fluctuations.
The fund's benchmark, a coupon STRIPS issue maturing on November 15, 2015,
returned 20.30% for the period. The fund typically underperforms its benchmark
because the benchmark is a security, not a mutual fund. Though the fund's
portfolio is managed to mimic the performance of the security, the fund is
subject to operating expenses (such as transaction costs and management fees),
while the benchmark is not. Assuming the fund's maturity date remains close to
the benchmark's, the difference in performance is approximately equal to the
fund's expense ratio.
WHAT CHANGES HAVE OCCURRED IN THE FUND'S PORTFOLIO SINCE THE SEMIANNUAL REPORT?
There hasn't been much activity in this fund. The fund's net assets grew
from $104.9 million on March 31 to $114.9 million on September 30, primarily
because of positive fund performance. The fund's investments remained split
evenly between coupon STRIPS and coupon REFCORPs, the most available securities
in this maturity sector of the Treasury zero market.
[line graph - data below]
Target 2015: Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'86 14.24 101
'87 11.37 102.86
'88 12.63 102.75
'89 16.86 101.77
'90 16.29 102.24
'91 19.95 106.05
'92 21.502 107.792
'93 28.064 106.952
'94 24.11 108.832
'95 36.819 109.462
'96 31.962 110.109
'97 38.34 110.52
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 49), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
18 TARGET MATURITIES TRUST: 2015 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2015
WHAT'S YOUR OUTLOOK FOR THE TREASURY MARKET?
It might not appear obvious because of the volatility we've seen, but the
Treasury market has been trading in a range since early 1996. During this time,
the 30-year Treasury bond yield has stayed between 6.25% and 7.25%. Bond yields
ended the fiscal year at the low end of this range. The strength of the U.S.
economy has kept interest rates from falling below 6%, but low U.S. inflation
and relatively passive monetary policy by the Federal Reserve (the Fed) have
kept rates from rising much higher than 7%.
As 1997 draws to a close, we remain in this contradictory environment of
strong economic growth and low inflation. These two conditions can't co-exist
forever--something has to give. But until this situation is resolved, bond
yields aren't likely to break significantly out of the range they've
established. They won't drop dramatically unless there are consistent signs of
economic weakness, and they aren't likely to rise unless the market anticipates
an interest rate hike by the Fed.
That expectation doesn't exist yet. As of early November, the federal funds
rate futures contract didn't have a Fed interest rate increase priced into it
until May of next year! Not only has the Fed not seen enough evidence yet of
inflation, it also has its hands tied by currency turmoil overseas. We believe
the Fed is unlikely to make any dramatic interest rate moves because higher U.S.
interest rates could cause further devaluations of already weak overseas
currencies.
Supply and demand factors should also lend support to the Treasury market. A
smaller federal budget deficit means we should see lower levels of Treasury debt
issuance going forward. That would likely bolster prices and help keep yields
down.
The bottom line is: We expect Treasury yields to remain in the lower half of
their recent range until a clearer direction for the U.S. economy emerges.
WHAT IS YOUR STRATEGY GOING FORWARD?
To help the fund reach its anticipated value at maturity (AVM), we will
likely continue to keep its maturity date close to the November 15, 2015
maturity date of its benchmark. Although there can be no assurances that the
fund will reach its AVM, we manage the fund to reach or exceed this value at
maturity.
In general, we will also continue to buy the highest- yielding zeros we can
find. As always, we will continue to monitor the relative values of coupon
STRIPS and principal STRIPS, shifting the fund's assets toward the more
attractively priced sector. We will also likely maintain the fund's current
asset allocation: approximately 50% STRIPS, 50% REFCORPs.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
STRIPS 50%
REFCORPs 50%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
STRIPS 50%
REFCORPs 50%
ANNUAL REPORT TARGET MATURITIES TRUST: 2015 19
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2015
SEPTEMBER 30, 1997
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 4,350,000 STRIPS -- COUPON, 6.58%,
2/15/15 $ 1,412,669
35,440,000 REFCORP STRIPS -- COUPON,
6.71%, 4/15/15 11,147,144
39,408,000 STRIPS -- COUPON, 6.58%,
5/15/15 12,592,342
29,644,000 REFCORP STRIPS -- COUPON,
6.72%, 7/15/15 9,155,977
35,050,000 STRIPS -- COUPON, 6.59%,
8/15/15 11,010,456
48,421,000 REFCORP STRIPS -- COUPON,
6.72%, 10/15/15 14,710,407
53,308,000 STRIPS -- COUPON, 6.59%,
11/15/15 16,476,891
36,300,000 STRIPS -- COUPON, 6.59%,
2/15/16 11,029,831
17,700,000 STRIPS -- COUPON, 6.59%,
5/15/16 5,291,708
50,500,000 REFCORP STRIPS -- COUPON,
6.72%, 7/15/16 14,600,754
25,500,000 REFCORP STRIPS -- COUPON,
6.72%, 10/15/16 7,251,822
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $114,680,001
===================
(Cost $84,422,308)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) The effective yield to maturity at September 30, 1997 is indicated. These
securities are purchased at a substantial discount from their value at
maturity.
See Notes to Financial Statements
20 TARGET MATURITIES TRUST: 2015 AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
TARGET MATURITIES TRUST: 2020
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS LIFE OF
FUND(1)
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Target Maturities Trust: 2020 ............. 22.89% 23.50% 21.15% 14.79% 11.12%
Fund Benchmark(2) ......................... 23.45% 23.89% 22.02% 15.27% 10.54%(3)
Merrill Lynch Long-Term
Treasury Index ............................ 11.52% 13.17% 12.47% 8.88% 9.80%(3)
</TABLE>
- ----------
(1) Inception date was December 29, 1989.
(2) From December 1989 through April 1990, the fund's benchmark was an 8/15/19
STRIPS issue; from May 1990 through October 1991, it was an 11/15/19 STRIPS
issue; and from November 1991 to the present, it has been an 11/15/20
STRIPS issue.
(3) Returns since December 31, 1989, the date nearest the fund's inception for
which data are available.
See pages 48-49 for more information about returns, the comparative index and
the fund's benchmark.
[mountain graph - data below]
Growth of 10,000 Over Life of Fund
$10,000 investment made 12/31/89
Value on 9/30/97
Fund Merrill Lynch
Target: 2020 Benchmark Long-Term Index
Dec-89 $10,000 $10,000 $10,000
Jan-90 $9,083 $9,063 $9,659
Feb-90 $8,767 $8,518 $9,617
Mar-90 $8,658 $8,407 $9,593
Apr-90 $7,967 $7,781 $9,346
May-90 $8,917 $8,351 $9,783
Jun-90 $9,258 $8,818 $10,006
Jul-90 $9,308 $9,237 $10,108
Aug-90 $7,950 $7,837 $9,671
Sep-90 $8,025 $7,976 $9,795
Oct-90 $8,458 $8,356 $10,013
Nov-90 $9,275 $8,845 $10,429
Dec-90 $9,550 $9,080 $10,646
Jan-91 $9,800 $9,373 $10,766
Feb-91 $9,850 $9,275 $10,809
Mar-91 $9,717 $9,257 $10,844
Apr-91 $9,808 $9,399 $10,987
May-91 $9,633 $9,133 $10,986
Jun-91 $9,208 $8,774 $10,900
Jul-91 $9,458 $9,058 $11,059
Aug-91 $10,117 $9,601 $11,446
Sep-91 $10,450 $10,012 $11,803
Oct-91 $10,117 $9,551 $11,841
Nov-91 $9,792 $9,257 $11,898
Dec-91 $11,208 $10,623 $12,608
Jan-92 $10,558 $10,005 $12,199
Feb-92 $10,742 $10,094 $12,285
Mar-92 $10,592 $9,970 $12,150
Apr-92 $10,408 $9,818 $12,154
May-92 $10,942 $10,295 $12,474
Jun-92 $10,842 $10,226 $12,653
Jul-92 $11,708 $11,110 $13,170
Aug-92 $11,533 $10,884 $13,281
Sep-92 $11,358 $10,690 $13,485
Oct-92 $10,925 $10,305 $13,217
Nov-92 $11,508 $10,861 $13,257
Dec-92 $12,142 $11,474 $13,609
Jan-93 $12,675 $11,985 $14,013
Feb-93 $13,383 $12,716 $14,477
Mar-93 $13,358 $12,631 $14,516
Apr-93 $13,300 $12,608 $14,622
May-93 $13,708 $12,951 $14,676
Jun-93 $14,692 $13,854 $15,293
Jul-93 $15,775 $14,963 $15,529
Aug-93 $17,542 $16,680 $16,152
Sep-93 $17,267 $16,421 $16,223
Oct-93 $17,583 $16,769 $16,324
Nov-93 $16,625 $15,862 $15,907
Dec-93 $16,467 $15,625 $15,955
Jan-94 $17,100 $16,254 $16,342
Feb-94 $15,800 $14,984 $15,660
Mar-94 $14,508 $13,672 $15,021
Apr-94 $14,142 $13,354 $14,790
May-94 $13,750 $12,955 $14,719
Jun-94 $13,375 $12,613 $14,587
Jul-94 $14,417 $13,623 $15,048
Aug-94 $13,767 $12,992 $14,954
Sep-94 $12,733 $11,974 $14,501
Oct-94 $12,608 $11,832 $14,437
Nov-94 $12,992 $12,212 $14,513
Dec-94 $13,558 $12,775 $14,768
Jan-95 $14,175 $13,401 $15,146
Feb-95 $14,533 $13,750 $15,571
Mar-95 $14,767 $13,925 $15,684
Apr-95 $15,075 $14,250 $15,961
May-95 $17,642 $16,707 $17,195
Jun-95 $17,933 $17,009 $17,402
Jul-95 $17,117 $16,274 $17,131
Aug-95 $18,008 $17,105 $17,500
Sep-95 $18,725 $17,816 $17,816
Oct-95 $19,917 $18,972 $18,340
Nov-95 $20,667 $19,659 $18,790
Dec-95 $21,875 $20,861 $19,298
Jan-96 $21,492 $20,480 $19,288
Feb-96 $19,067 $18,155 $18,347
Mar-96 $18,242 $17,378 $17,997
Apr-96 $17,583 $16,761 $17,697
May-96 $17,608 $16,824 $17,612
Jun-96 $18,133 $17,361 $17,969
Jul-96 $18,150 $17,391 $17,969
Aug-96 $17,450 $16,655 $17,750
Sep-96 $18,333 $17,558 $18,236
Oct-96 $19,741 $19,071 $18,947
Nov-96 $21,107 $20,130 $19,570
Dec-96 $20,033 $19,111 $19,107
Jan-97 $19,408 $18,529 $18,983
Feb-97 $19,415 $18,543 $18,957
Mar-97 $18,423 $17,620 $18,506
Apr-97 $19,265 $18,424 $18,956
May-97 $19,573 $18,742 $19,159
Jun-97 $20,264 $19,504 $19,520
Jul-97 $22,964 $21,958 $20,649
Aug-97 $21,464 $20,593 $20,073
Sep-97 $22,642 $21,752 $20,648
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The chart begins on 12/31/89, the date nearest the fund's 12/29/89 inception
date for which data are available. The line representing the fund's total return
includes operating expenses (such as transaction costs and management fees) that
reduce returns, while the index's total return line does not.
PORTFOLIO AT A GLANCE
9/30/97 9/30/96
Number of Securities 15 19
Anticipated Growth Rate 5.98% 6.59%
Weighted Average Maturity Date 9/01/20 8/21/20
Anticipated Value at Maturity
(AVM--see graph on next page) $104.84 $103.60
Expense Ratio 0.53% 0.61%
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
ANNUAL REPORT TARGET MATURITIES TRUST: 2020 21
TARGET MATURITIES TRUST: 2020
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1997?
The fund rebounded from an 8% loss in the first quarter of 1997 to post a
23.50% total return for the one-year period. The fund's returns reflect
favorable market conditions in the second half of the period as well as the
fund's position at the long end of the maturity spectrum, where interest rate
fluctuations typically have a considerable impact on performance.
The fund's benchmark, a coupon STRIPS issue maturing on November 15, 2020,
returned 23.89% for the period. The fund typically underperforms its benchmark
because the benchmark is a security, not a mutual fund. Though the fund's
portfolio is managed to mimic the performance of the security, the fund is
subject to operating expenses (such as transaction costs and management fees),
while the benchmark is not. Assuming the fund's maturity date remains close to
the benchmark's, the difference in performance is approximately equal to the
fund's expense ratio.
WHAT CHANGES HAVE OCCURRED IN THE FUND'S PORTFOLIO SINCE THE SEMIANNUAL REPORT?
In spite of the fund's strong performance for the period, the biggest story
was withdrawals and security sales due to investors making market-timing
decisions. The fund's net assets fell from $831.4 million on March 31 to $553.6
million on September 30 because of shareholder withdrawals. The biggest outflow
occurred in July, when an investment newsletter writer who typically recommends
the fund to his readers when he sees signs of an
[line graph - data below]
Target 2020: Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'90 11.46 92.6
'91 13.45 97.77
'92 14.575 102.184
'93 19.765 101.274
'94 16.273 102.175
'95 26.245 102.54
'96 22 103.598
'97 27.17 104.84
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 49), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
22 TARGET MATURITIES TRUST: 2020 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2020
economic slowdown on the horizon, suggested liquidating at least some fund
shares when the 30-year Treasury bond yield dropped below 6.50%.
To meet the needs of investors who sold fund shares during the period, we
sold STRIPS, the fund's lowest-yielding, most-liquid holdings. As a result, the
fund's percentage of STRIPS holdings declined and its percentage of REFCORP
holdings increased, as shown by the graphs below. Retaining the higher-yielding
REFCORPs was beneficial to the fund's anticipated value at maturity (AVM).
WHAT'S YOUR OUTLOOK FOR THE TREASURY MARKET?
It might not appear obvious because of the volatility we've seen, but the
Treasury market has been trading in a range since early 1996. During this time,
the 30-year Treasury bond yield has stayed between 6.25% and 7.25%. Bond yields
ended the fiscal year at the low end of this range. The strength of the U.S.
economy has kept interest rates from falling below 6%, but low U.S. inflation
and relatively passive monetary policy by the Federal Reserve (the Fed) have
kept rates from rising much higher than 7%.
As 1997 draws to a close, we remain in this contradictory environment of
strong economic growth and low inflation. These two conditions can't co-exist
forever--something has to give. But until this situation is resolved, bond
yields aren't likely to break significantly out of the range they've
established. They won't drop dramatically unless there are consistent signs of
economic weakness, and they aren't likely to rise unless the market anticipates
an interest rate hike by the Fed.
That expectation doesn't exist yet. As of early November, the federal funds
rate futures contract didn't have a Fed interest rate increase priced into it
until May of next year! Not only has the Fed not seen enough evidence yet of
inflation, it also has its hands tied by currency turmoil overseas. We believe
the Fed is unlikely to make any dramatic interest rate moves because higher U.S.
interest rates could cause further devaluations of already weak overseas
currencies.
WHAT IS YOUR STRATEGY GOING FORWARD?
To help the fund reach its AVM, we will continue to move its maturity date
closer to the November 15, 2020 maturity date of its benchmark. Although there
can be no assurances that the fund will reach its AVM, we manage the fund to
reach or exceed this value at maturity.
In general, we will also continue to buy the highest- yielding zeros we can
find. We will likely continue to use STRIPS to meet the fund's cash flow needs.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
REFCORPs 63%
STRIPS 37%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
REFCORPs 51%
STRIPS 49%
ANNUAL REPORT TARGET MATURITIES TRUST: 2020 23
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2020
SEPTEMBER 30, 1997
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 82,823,000 REFCORP STRIPS -- COUPON,
6.76%, 1/15/20 $ 18,840,621
240,000,000 STRIPS -- COUPON, 6.62%,
2/15/20(2) 55,900,723
38,344,000 REFCORP STRIPS -- COUPON,
6.76%, 4/15/20 8,578,723
70,500,000 STRIPS -- COUPON, 6.62%,
5/15/20 16,155,638
74,400,000 REFCORP STRIPS -- COUPON,
6.75%, 7/15/20 16,407,731
486,000,000 REFCORP STRIPS -- PRINCIPAL,
6.76%, 7/15/20 106,825,719
217,135,000 STRIPS -- COUPON, 6.61%,
8/15/20 49,063,122
16,165,000 REFCORP STRIPS -- COUPON,
6.75%, 10/15/20 3,502,344
600,000,000 REFCORP STRIPS -- PRINCIPAL,
6.76%, 10/15/20 129,707,932
249,407,000 STRIPS -- COUPON, 6.61%,
11/15/20 55,446,395
20,482,000 REFCORP STRIPS -- COUPON,
6.76%, 1/15/21 4,359,780
294,945,000 REFCORP STRIPS -- PRINCIPAL,
6.75%, 1/15/21 62,852,478
88,250,000 STRIPS -- COUPON, 6.61%,
2/15/21 19,324,578
27,500,000 STRIPS -- COUPON, 6.61%,
5/15/21 5,924,785
14,500,000 STRIPS -- COUPON, 6.60%,
11/15/21 3,031,176
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $555,921,745
===================
(Cost $456,481,868)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) The effective yield to maturity at September 30, 1997 is indicated. These
securities are purchased at a substantial discount from their value at
maturity.
(2) Security position, or a portion thereof, has been loaned. (See Note 4 in
the Notes to Financial Statements.)
See Notes to Financial Statements
24 TARGET MATURITIES TRUST: 2020 AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
TARGET MATURITIES TRUST: 2025
6 MONTHS 1 YEAR LIFE OF
FUND(1)
- ----------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1997
<S> <C> <C> <C> <C>
Target Maturities Trust: 2025 .............. 26.32% 24.34% 7.35%
8/15/25 Maturity
STRIPS Issue ............................... 25.13% 21.58% 3.48%
Merrill Lynch Long-Term
Treasury Index ............................. 11.52% 13.17% 5.18%
</TABLE>
- ----------
(1) Average annual returns. Inception date was February 15, 1996.
See pages 48-49 for more information about returns, the comparative index and
the fund's benchmark.
[mountain graph - data below]
Growth of 10,000 Over Life of Fund
$10,000 investment made 2/15/96
Value on 9/30/97
8/15/25 Merrill Lynch
Target: 2025 STRIPS Issue Long-Term Index
15-Feb $10,000 $10,000 $10,000
Feb-96 $9,308 $9,650 $9,542
Mar-96 $8,965 $9,466 $9,124
Apr-96 $8,354 $9,308 $8,756
May-96 $8,403 $9,263 $8,746
Jun-96 $8,713 $9,451 $8,983
Jul-96 $8,645 $9,451 $8,968
Aug-96 $8,198 $9,336 $8,529
Sep-96 $8,696 $9,591 $9,023
Oct-96 $9,456 $9,965 $9,799
Nov-96 $10,105 $10,293 $10,540
Dec-96 $9,455 $10,049 $9,890
Jan-97 $9,048 $9,984 $9,492
Feb-97 $8,946 $9,970 $9,427
Mar-97 $8,449 $9,733 $8,883
Apr-97 $8,854 $9,970 $9,392
May-97 $9,002 $10,077 $9,558
Jun-97 $9,432 $10,267 $9,966
Jul-97 $10,865 $10,861 $11,463
Aug-97 $9,989 $10,558 $10,561
Sep-97 $10,572 $10,855 $11,219
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
9/30/97 9/30/96
Number of Securities 14 12
Anticipated Growth Rate 5.86% 6.43%
Weighted Average Maturity Date 7/10/25 4/9/25
Anticipated Value at Maturity
(AVM--see graph on next page) $110.88 $109.24
Expense Ratio 0.62% 0.67%
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
ANNUAL REPORT TARGET MATURITIES TRUST: 2025 25
TARGET MATURITIES TRUST: 2025
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1997?
The fund rebounded from a 10% loss in the first quarter of 1997 to post a
24.34% total return for the one-year period. The fund's returns reflect
favorable market conditions in the second half of the period as well as the
fund's position at the long end of the maturity spectrum, where interest rate
fluctuations typically have a considerable impact on performance.
The fund's benchmark, a coupon STRIPS issue maturing on August 15, 2025,
returned 21.58% for the period. The fund's performance beat the benchmark's
because the fund's REFCORP holdings produced higher returns than STRIPS.
WHAT CHANGES HAVE OCCURRED IN THE FUND'S PORTFOLIO SINCE THE SEMIANNUAL REPORT?
Due to a favorable combination of cash inflows from investors and positive
fund performance, the fund's net assets grew from $55.3 million on March 31 to
$73.8 million on September 30. We used the new money primarily to buy REFCORPs,
which is why the graphs on page 27 show an increasing percentage of REFCORPs and
a declining percentage of STRIPS. REFCORPs typically offer higher yields than
STRIPS, and they have been nearly as easy to buy and sell as STRIPS in this
maturity sector of the zero market. We also bolstered our REFCORP position
because REFCORP issuance is about to decline. As supply falls, we expect to earn
some additional return from the REFCORP holdings as their yield differential
over STRIPS drops.
[line graph - data below]
Target 2025: Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'96 17.91 109.24
'97 22.27 110.88
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
'23
'24
'25
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 49), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
26 TARGET MATURITIES TRUST: 2025 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2025
The "Portfolio at a Glance" chart on page 25 shows another big change. The
fund's weighted average maturity date extended significantly during the period,
from April 9, 2025 to July 10, 2025. This reflects a conscious effort on our
part to move the fund's maturity date closer to the August 15, 2025 maturity
date of its STRIPS benchmark. The fund's portfolio is managed to mimic the
performance of that zero-coupon bond as closely as possible.
WHAT'S YOUR OUTLOOK FOR THE TREASURY MARKET?
It might not appear obvious because of the volatility we've seen, but the
Treasury market has been trading in a range since early 1996. During this time,
the 30-year Treasury bond yield has stayed between 6.25% and 7.25%. Bond yields
ended the fiscal year at the low end of this range. The strength of the U.S.
economy has kept interest rates from falling below 6%, but low U.S. inflation
and relatively passive monetary policy by the Federal Reserve (the Fed) have
kept rates from rising much higher than 7%.
As 1997 draws to a close, we remain in this contradictory environment of
strong economic growth and low inflation. These two conditions can't co-exist
forever--something has to give. But until this situation is resolved, bond
yields aren't likely to break significantly out of the range they've
established. They won't drop dramatically unless there are consistent signs of
economic weakness, and they aren't likely to rise unless the market anticipates
an interest rate hike by the Fed. That expectation doesn't exist yet. As of
early November, the federal funds rate futures contract didn't have a Fed
interest rate increase priced into it until May of next year! Not only has the
Fed not seen enough evidence yet of inflation, it also has its hands tied by
currency turmoil overseas. We believe the Fed is unlikely to make any dramatic
interest rate moves because higher U.S. interest rates could cause further
devaluations of already weak overseas currencies.
WHAT IS YOUR STRATEGY GOING FORWARD?
To help the fund reach its anticipated value at maturity (AVM), we will
continue to move its maturity date closer to the August 15, 2025 maturity of its
benchmark. Although there can be no assurances that the fund will reach its AVM,
we manage the fund to reach or exceed this value at maturity.
In general, we will also continue to buy the highest- yielding zeros we can
find. We expect to continue to keep the bulk of the fund's assets in REFCORPs,
with the remainder in STRIPS.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
REFCORPs 63%
STRIPS 37%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
REFCORPs 58%
STRIPS 42%
ANNUAL REPORT TARGET MATURITIES TRUST: 2025 27
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2025
SEPTEMBER 30, 1997
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 3,926,000 REFCORP STRIPS -- COUPON,
6.64%, 7/15/24 $ 682,348
48,083,000 REFCORP STRIPS -- COUPON,
6.65%, 10/15/24 8,199,974
13,000,000 STRIPS -- COUPON, 6.53%,
11/15/24 2,278,406
17,500,000 STRIPS -- PRINCIPAL, 6.57%,
11/15/24 3,035,034
26,500,000 REFCORP STRIPS -- COUPON,
6.66%, 1/15/25 4,434,279
65,900,000 STRIPS -- COUPON, 6.52%,
2/15/25 11,396,019
62,300,000 STRIPS -- PRINCIPAL, 6.56%,
2/15/25 10,645,736
19,759,000 REFCORP STRIPS -- COUPON,
6.65%, 4/15/25 3,261,223
8,500,000 REFCORP STRIPS -- COUPON,
6.64%, 7/15/25 1,383,903
54,425,000 REFCORP STRIPS -- COUPON,
6.61%, 10/15/25 8,788,666
22,000,000 REFCORP STRIPS -- COUPON,
6.57%, 1/15/26 3,533,864
16,000,000 REFCORP STRIPS -- COUPON,
6.57%, 4/15/26 2,528,847
36,000,000 REFCORP STRIPS -- COUPON,
6.58%, 7/15/26 5,583,183
52,000,000 REFCORP STRIPS -- COUPON,
6.59%, 10/15/26 7,912,739
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $73,664,221
===================
(Cost $64,514,424)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) The effective yield to maturity at September 30, 1997 is indicated. These
securities are purchased at a substantial discount from their value at
maturity.
See Notes to Financial Statements
28 TARGET MATURITIES TRUST: 2025 AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 2000 2005 2010 2015 2020 2025
---- ---- ---- ---- ---- ----
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Investment securities,
at value (identified
cost of $241,245,778,
$257,998,629,
$112,470,517, $84,422,308,
$456,481,868 and
$64,514,424) (Note 3) ...... $ 248,790,140 $276,763,314 $123,786,073 $114,680,001 $555,921,745 $ 73,664,221
Cash ......................... 73,630 686,977 1,201,213 401,633 177,713 331,422
Receivable for
investments sold ........... -- 4,609,305 -- -- -- --
Collateral for securities
loaned (Note 4) ............ -- -- -- -- 39,425,000 --
Securities lending
fee receivable ............. -- -- -- -- 13,003 --
------------- ------------ ------------ ------------ ------------ ------------
248,863,770 282,059,596 124,987,286 115,081,634 595,537,461 73,995,643
------------- ------------ ------------ ------------ ------------ ------------
LIABILITIES
Disbursements in excess
of demand deposit cash ..... 247,842 99,847 46,180 68,848 830,809 22,145
Payable for capital
shares redeemed ............ 107,564 138,959 65,515 55,315 1,439,658 115,200
Payable for collateral
received on securities
loaned (Note 4) ............ -- -- -- -- 39,425,000 --
Accrued management fee
(Note 2) ................... 128,598 140,237 61,113 55,858 280,032 34,084
Accrued expenses and
other liabilities .......... 2,632 3,412 2,649 2,044 10,935 2,899
------------- ------------ ------------ ------------ ------------ ------------
486,636 382,455 175,457 182,065 41,986,434 174,328
------------- ------------ ------------ ------------ ------------ ------------
Net Assets Applicable to
Outstanding Shares ......... $ 248,377,134 $281,677,141 $124,811,829 $114,899,569 $553,551,027 $ 73,821,315
============= ============ ============ ============ ============ ============
CAPITAL SHARES
Outstanding (Unlimited number
of shares authorized) ...... 2,886,261 4,364,423 2,539,122 2,996,659 20,376,558 3,314,198
============= ============ ============ ============ ============ ============
Net Asset Value Per Share .... $ 86.05 $ 64.54 $ 49.16 $ 38.34 $ 27.17 $ 22.27
============= ============ ============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital paid in .............. $ 232,179,189 $250,304,663 $107,632,668 $ 75,473,773 $378,071,400 $61,998,042
Undistributed net
investment income .......... 12,055,714 11,708,093 5,099,718 4,945,063 37,235,493 2,872,123
Accumulated net realized
gain (loss) on investment
transactions ............... (3,402,131) 899,700 763,887 4,223,040 38,804,257 (198,647)
Net unrealized
appreciation on
investments (Note 3) ....... 7,544,362 18,764,685 11,315,556 30,257,693 99,439,877 9,149,797
------------- ------------ ------------ ------------ ------------ ------------
$ 248,377,134 $281,677,141 $124,811,829 $114,899,569 $553,551,027 $ 73,821,315
============= ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
ANNUAL REPORT STATEMENTS OF ASSETS AND LIABILITIES 29
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
YEAR ENDED
SEPTEMBER 30, 1997 2000 2005 2010 2015 2020 2025
- ------------------ ---- ---- ---- ---- ---- ----
INVESTMENT INCOME
Income:
<S> <C> <C> <C> <C> <C> <C>
Interest ...................... $17,633,883 $16,881,275 $ 7,530,792 $ 7,293,811 $ 55,723,567 $ 3,792,500
Income from
securities lending ............ -- -- -- -- 442,641 34,749
----------- ----------- ------------ ------------ ------------ ------------
17,633,883 16,881,275 7,530,792 7,293,811 56,166,208 3,827,249
----------- ----------- ------------ ------------ ------------ ------------
Expenses (Note 2):
Investment advisory fees ...... 902,194 875,825 386,859 389,958 2,691,970 199,410
Administrative fees ........... 207,663 193,216 85,820 89,672 685,160 42,716
Transfer agency fees .......... 196,492 213,613 131,294 132,040 618,798 57,380
Printing and postage .......... 81,207 78,718 38,411 39,250 238,103 16,812
Auditing and legal fees ....... 16,879 15,660 8,780 9,028 49,098 6,041
Custodian fees ................ 17,424 11,769 11,907 11,817 42,000 12,308
Telephone expenses ............ 6,228 4,990 2,273 3,570 20,937 3,612
Trustees' fees and expenses ... 10,181 10,020 7,933 7,962 18,465 7,076
Registration and filing fees .. 17,575 18,950 15,012 15,642 16,159 16,285
Other operating expenses ...... 8,495 7,491 3,590 3,403 16,877 5,370
............................... ----------- ----------- ------------ ------------ ------------ ------------
Total expenses ................ 1,464,338 1,430,252 691,879 702,342 4,397,567 367,010
Amount waived ................. -- -- (6,793) (3,320) -- (17,780)
----------- ----------- ------------ ------------ ------------ ------------
Net expenses .................. 1,464,338 1,430,252 685,086 699,022 4,397,567 349,230
----------- ----------- ------------ ------------ ------------ ------------
Net investment income ......... 16,169,545 15,451,023 6,845,706 6,594,789 51,768,641 3,478,019
----------- ----------- ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 3)
Net realized gain
on investments .............. 1,190,560 1,348,958 1,066,854 4,715,347 45,078,260 302,702
Change in net unrealized
appreciation
on investments .............. 2,108,565 11,653,361 9,112,041 10,243,018 85,510,156 9,831,539
----------- ----------- ------------ ------------ ------------ ------------
Net realized and
unrealized gain
on investments ................ 3,299,125 13,002,319 10,178,895 14,958,365 130,588,416 10,134,241
----------- ----------- ------------ ------------ ------------ ------------
Net Increase in Net Assets
Resulting from Operations ..... $19,468,670 $28,453,342 $ 17,024,601 $ 21,553,154 $182,357,057 $ 13,612,260
=========== =========== ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
30 STATEMENTS OF OPERATIONS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1997
AND SEPTEMBER 30, 1996
2000 2005 2010
---- ---- ----
Increase (Decrease)
in Net Assets 1997 1996 1997 1996 1997 1996
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income ....... $ 16,169,545 $ 17,234,905 $ 15,451,023 $ 13,769,131 $ 6,845,706 $ 6,720,988
Net realized gain (loss)
on investments ............ 1,190,560 1,066,551 1,348,958 1,459,753 1,066,854 3,276,781
Change in net unrealized
appreciation (depreciation)
on investments ............ 2,108,565 (6,811,361) 11,653,361 (12,781,340) 9,112,041 (10,369,618)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets resulting
from operations ........... 19,468,670 11,490,095 28,453,342 2,447,544 17,024,601 (371,849)
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .. (17,081,069) (14,295,441) (14,549,884) (8,101,012) (6,941,406) (4,075,907)
From net realized gains on
investment transactions ... -- -- (1,764,760) (2,276,770) (2,886,953) --
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets
from distributions
to shareholders ........... (17,081,069) (14,295,441) (16,314,644) (10,377,782) (9,828,359) (4,075,907)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ... 68,953,917 119,660,626 121,523,893 148,911,501 63,762,772 70,823,974
Proceeds from reinvestment
of distributions .......... 16,712,103 13,909,269 15,992,574 10,138,688 9,617,856 3,967,590
Payments for shares redeemed (107,433,075) (157,743,941) (106,841,952) (95,708,098) (66,882,232) (54,283,235)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in
net assets from capital
share transactions ........ (21,767,055) (24,174,046) 30,674,515 63,342,091 6,498,396 20,508,329
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets ............. (19,379,454) (26,979,392) 42,813,213 55,411,853 13,694,638 16,060,573
NET ASSETS
Beginning of year ........... 267,756,588 294,735,980 238,863,928 183,452,075 111,117,191 95,056,618
------------- ------------- ------------- ------------- ------------- -------------
End of year ................. $ 248,377,134 $ 267,756,588 $ 281,677,141 $ 238,863,928 $ 124,811,829 $ 111,117,191
============= ============= ============= ============= ============= =============
Undistributed net
investment income ........... $ 12,055,714 $ 12,967,238 $ 11,708,093 $ 10,806,954 $ 5,099,718 $ 5,195,418
============= ============= ============= ============= ============= =============
TRANSACTIONS IN
SHARES OF THE FUNDS
Sold ........................ 833,120 1,519,287 1,988,109 2,554,065 1,383,983 1,630,076
Issued in reinvestment
of distributions ............ 217,238 183,642 282,750 177,478 233,038 89,942
Redeemed .................... (1,291,432) (1,999,924) (1,748,806) (1,660,147) (1,456,337) (1,267,142)
Reverse share split ......... (221,717) (188,515) (288,036) (181,450) (237,690) (92,308)
Net increase (decrease) ..... (462,791) (485,510) 234,017 889,946 (77,006) 360,568
============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements
ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS 31
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1997
AND SEPTEMBER 30, 1996
2000 2005 2010
---- ---- ----
Increase (Decrease)
in Net Assets 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ......... $ 6,594,789 $ 6,946,156 $ 51,768,641 $ 49,119,311 $ 3,478,019 $ 997,384
Net realized gain (loss)
on investments .............. 4,715,347 718,224 45,078,260 (5,541,503) 302,702 (501,349)
Change in net unrealized
appreciation (depreciation)
on investments .............. 10,243,018 (9,126,013) 85,510,156 (53,272,683) 9,831,539 (681,742)
------------- ------------- --------------- --------------- ------------- ------------
Net increase (decrease)
in net assets resulting
from operations ............. 21,553,154 (1,461,633) 182,357,057 (9,694,875) 13,612,260 (185,707)
------------- ------------- --------------- --------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .... (6,897,189) (4,803,254) (54,220,221) (13,777,349) (1,603,280) --
From net realized gains on
investment transactions ..... (1,134,946) (6,017,851) (831) (1,324,633) -- --
------------- ------------- --------------- --------------- ------------- ------------
Decrease in net assets from
distributions to shareholders (8,032,135) (10,821,105) (54,221,052) (15,101,982) (1,603,280) --
------------- ------------- --------------- --------------- ------------- ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ..... 62,777,456 77,986,100 528,512,319 1,028,945,392 147,285,096 67,610,593
Proceeds from reinvestment
of distributions ............ 7,799,177 10,455,098 51,887,629 14,532,555 1,500,130 --
Payments for shares redeemed .. (84,851,908) (75,152,046) (1,081,304,136) (667,063,399) (122,633,493)
------------- ------------- --------------- --------------- ------------- ------------
Net increase (decrease)
in net assets from capital
share transactions .......... (14,275,275) 13,289,152 (500,904,188) 376,414,548 26,151,733 35,846,309
------------- ------------- --------------- --------------- ------------- ------------
Net increase (decrease)
in net assets ............... (754,256) 1,006,414 (372,768,183) 351,617,691 38,160,713 35,660,602
NET ASSETS
Beginning of year ............. 115,653,825 114,647,411 926,319,210 574,701,519 35,660,602 --
------------- ------------- --------------- --------------- ------------- ------------
End of year ................... $ 114,899,569 $ 115,653,825 $ 553,551,027 $ 926,319,210 $ 73,821,315 $ 35,660,602
============= ============= =============== =============== ============= ============
Undistributed net
investment income ............. $ 4,945,063 $ 5,247,463 $ 37,235,493 $ 39,687,073 $ 2,872,123 $ 997,384
============= ============= =============== =============== ============= ============
TRANSACTIONS IN
SHARES OF THE FUNDS
Sold .......................... 1,812,323 2,345,915 21,885,096 45,297,616 7,508,353 3,762,927
Issued in reinvestment
of distributions .............. 241,373 318,306 2,286,212 585,620 79,036 --
Redeemed ...................... (2,427,375) (2,277,097) (43,514,345) (28,747,471) (6,180,587) (1,771,271)
Reverse share split ........... (248,086) (328,626) (2,383,074) (608,060) (84,260) --
------------- ------------- --------------- --------------- ------------- ------------
Net increase (decrease) ....... (621,765) 58,498 (21,726,111) 16,527,705 1,322,542 1,991,656
============= ============= =============== =============== ============= ============
</TABLE>
- ----------------
(1) February 15, 1996 (inception) through September 30, 1996.
See Notes to Financial Statements
32 STATEMENTS OF CHANGES IN NET ASSETS AMERICAN CENTURY INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--American Century Target Maturities Trust (the Trust) is
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. The Trust is composed of the following series:
American Century - Benham Target Maturities Trust: 2000 (2000), American Century
- - Benham Target Maturities Trust: 2005 (2005), American Century - Benham Target
Maturities Trust: 2010 (2010), American Century - Benham Target Maturities
Trust: 2015 (2015), American Century - Benham Target Maturities Trust: 2020
(2020), and American Century - Benham Target Maturities Trust: 2025 (2025) (the
"Funds"). Each Fund seeks to provide the highest attainable investment return
consistent with the creditworthiness of U.S. Treasury securities and the
professional management of reinvestment and market risks. Each Fund invests
primarily in zero-coupon U.S. Treasury securities and will be liquidated shortly
after the conclusion of its target maturity year. The following significant
accounting policies, related to the Funds, are in accordance with accounting
policies generally accepted in the investment company industry.
SECURITY VALUATIONS--Securities are valued through valuations obtained
through a commercial pricing service or at the mean of the most recent bid and
asked prices. When valuations are not readily available, securities are valued
at fair value as determined in accordance with procedures adopted by the Board
of Trustees.
SECURITY TRANSACTIONS--Security transactions are accounted for on the date
purchased or sold. 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 amortization of discounts and premiums. Discounts and premiums are
amortized using the effective interest rate method.
INCOME TAX STATUS--It is the Funds' policy to distribute all net investment
income and net realized capital gains to shareholders and to otherwise qualify
as a regulated investment company under the provisions of the Internal Revenue
Code. Accordingly, no provision has been made for federal or state taxes.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions from net investment income and
net realized gains are declared and paid annually in December. At September 30,
1997 accumulated capital loss carryovers of $3,399,216 for 2000 (expiring 2003)
may be used to offset future taxable gains.
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 are due to differences in the
recognition of income and expense items for financial statement and tax
purposes.
REVERSE SHARE SPLITS--The trustees may authorize reverse share splits
immediately after and of a size that exactly offsets the per share amount of the
annual dividend and capital gain distribution (if any). After taking into
account the reverse share split, a shareholder reinvesting dividends and capital
gain distributions will hold exactly the same number of shares owned prior to
the distributions and reverse share split. A shareholder electing to receive
dividends in cash will own fewer shares.
SUPPLEMENTARY INFORMATION--Certain officers and trustees of the Trust are
also officers and/or directors, and, as a group, controlling stockholders of
American Century Companies, Inc., the parent of the Trust's investment manager,
American Century Investment Management, Inc. (ACIM), the Trust's distributor,
American Century Investment Services, Inc., and the Trust's transfer agent,
American Century Services Corporation (ACSC).
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the period. Actual results could differ from these
estimates.
ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The shareholders of the Funds approved a new management agreement with ACIM
on July 30, 1997, effective August 1, 1997, which replaced the previously
existing contracts between the Funds and Benham Management Corporation and ACSC
for advisory, administrative and transfer agency services. Under the agreement,
ACIM provides all services required by the Funds in exchange for one "unified"
management fee. Expenses excluded from this agreement are brokerage, taxes,
portfolio insurance, interest, fees and expenses of the Trustees who are not
considered "interested persons" as defined in the Investment Company Act of 1940
(including counsel fees) and extraordinary expenses. The annual rate at which
this fee is assessed is determined monthly in a two-step process: First, a fee
rate schedule is applied to the assets of all of the funds in the Fund's
investment category which are managed by ACIM (the "Investment Category Fee").
The overall investment objective of each Fund determines its Investment
Category. The three investment categories are: the Money Market Fund Category,
the Bond Fund Category, and the Equity Fund Category. The Funds are included in
the Bond Fund Category. Second, a separate fee rate schedule is applied to the
assets of all of the funds managed by ACIM (the "Complex Fee"). The Investment
Category Fee and the Complex Fee are then added to determine the unified
management fee rate. The management fee is paid monthly by each Fund based on
each Fund's aggregate average daily net assets during the previous month
multiplied by the monthly management fee rate.
The annualized Investment Category Fee schedule for each Fund is as follows:
0.3600% of the first $1 billion
0.3080% of the next $1 billion
0.2780% of the next $3 billion
0.2580% of the next $5 billion
0.2450% of the next $15 billion
0.2430% of the next $25 billion
0.2425% of the average daily net assets over $50 billion
The annualized Complex Fee schedule (for all Funds) is as follows:
0.3100% of the first $2.5 billion
0.3000% of the next $7.5 billion
0.2985% of the next $15 billion
0.2970% of the next $25 billion
0.2960% of the next $50 billion
0.2950% of the next $100 billion
0.2940% of the next $100 billion
0.2930% of the next $200 billion
0.2920% of the next $250 billion
0.2910% of the next $500 billion
0.2900% of the average daily net assets over $1,250 billion
The following expenses, incurred under the new management agreement, are
included in Investment Advisory Fees in the Statements of Operations:
<TABLE>
2000 2005 2010 2015 2020 2025
<S> <C> <C> <C> <C> <C> <C>
Total expenses ............. $254,905 $274,952 $120,551 $114,405 $ 554,712 $ 68,322
Total expenses and the annualized ratio of operating expenses to average net
assets, under the previous agreement, for the ten months ended July 31, 1997
were as follows:
2000 2005 2010 2015 2020 2025
Total expenses ............. $1,209,433 $1,155,300 $564,535 $584,617 $3,842,855 $280,908
Ratio of operating
expenses to
average net assets ....... 0.55% 0.56% 0.62% 0.61% 0.52% 0.62%
</TABLE>
34 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions in U.S. Treasury securities (excluding short-term
investments) for the year ended September 30, 1997, were as follows:
<TABLE>
2000 2005 2010 2015 2020 2025
<S> <C> <C> <C> <C> <C> <C>
Purchases .................. $ 26,997,585 $ 46,771,639 $ 29,122,047 $23,813,090 $111,183,570 $58,512,004
Proceeds From Sales ........ $ 67,004,617 $ 38,410,738 $ 34,054,760 $46,659,160 $665,983,486 $32,512,855
On September 30, 1997, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal income tax purposes was as follows:
2000 2005 2010 2015 2020 2025
Appreciation ............... $ 7,887,451 $18,750,523 $11,571,995 $30,257,693 $98,849,256 $8,759,630
Depreciation ............... (346,008) (302,446) (340,726) -- -- --
------------ ----------- ------------ ---------- ---------- ----------
Net ........................ $ 7,541,443 $18,448,077 $11,231,269 $30,257,693 $98,849,256 $8,759,630
============ ============ ============ =========== ============ ===========
Federal Tax Cost ........... $241,248,697 $258,315,237 $112,554,804 $84,422,308 $457,072,489 $64,904,591
============ ============ ============ =========== ============ ===========
</TABLE>
4. SECURITIES LENDING
At September 30, 1997, securities valued at $34,938,000 for 2020 were on
loan to brokers. Securities received as collateral, at this date, were valued at
$39,425,000. The Fund's risks in securities lending are that the borrower may
not provide additional collateral when required or return the securities when
due.
ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 35
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2000
For a Share Outstanding Throughout the Years Ended September 30
1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Year .................... $79.95 $76.86 $66.93 $72.40 $62.16
--------- --------- --------- --------- ---------
Income From Investment
Operations
Net Investment Income(1) ........... 5.10 4.75 4.37 3.99 3.94
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ....................... 1.00 (1.66) 5.56 (9.46) 6.30
--------- --------- --------- --------- ---------
Total From
Investment Operations .............. 6.10 3.09 9.93 (5.47) 10.24
--------- --------- --------- --------- ---------
Distributions(2)
From Net Investment Income ......... (5.20) (3.94) (3.42) (3.25) (2.34)
From Net Realized Capital Gains .... -- -- -- (2.95) (1.83)
In Excess of Net Realized Gains .... -- -- -- (1.20) --
--------- --------- --------- --------- ---------
Total Distributions ................ (5.20) (3.94) (3.42) (7.40) (4.17)
--------- --------- --------- --------- ---------
Reverse Share Split .................. 5.20 3.94 3.42 7.40 4.17
--------- --------- --------- --------- ---------
Net Asset Value, End of Year ......... $86.05 $79.95 $76.86 $66.93 $72.40
========= ========= ========= ========= =========
Total Return(3) .................... 7.64% 4.01% 14.84% (7.54)% 16.46%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.56% 0.53% 0.63% 0.59% 0.60%
Ratio of Net Investment Income
to Average Net Assets ................ 6.14% 5.99% 6.13% 5.74% 5.94%
Portfolio Turnover Rate .............. 10% 29% 53% 89% 77%
Net Assets, End
of Year (in thousands) ............... $248,377 $267,757 $294,736 $243,895 $291,418
</TABLE>
- ----------
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
See Notes to Financial Statements
36 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2005
For a Share Outstanding Throughout the Years Ended September 30
1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Year .................... $57.83 $56.61 $45.22 $51.84 $41.18
--------- --------- --------- --------- ---------
Income From Investment Operations
Net Investment Income(1) ........... 3.74 3.50 3.33 3.11 2.90
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ....................... 2.97 (2.28) 8.06 (9.73) 7.76
--------- --------- --------- --------- ---------
Total From
Investment Operations .............. 6.71 1.22 11.39 (6.62) 10.66
--------- --------- --------- --------- ---------
Distributions(2)
From Net Investment Income ......... (3.61) (2.06) (2.41) (2.70) (2.51)
From Net Realized Capital Gains .... (0.44) (0.58) (0.67) (8.47) (1.01)
--------- --------- --------- --------- ---------
Total Distributions ................ (4.05) (2.64) (3.08) (11.17) (3.52)
--------- --------- --------- --------- ---------
Reverse Share Split .................. 4.05 2.64 3.08 11.17 3.52
--------- --------- --------- --------- ---------
Net Asset Value, End of Year ......... $64.54 $57.83 $56.61 $45.22 $51.84
========= ========= ========= ========= =========
Total Return(3) .................... 11.60% 2.15% 25.16% (12.75)% 25.89%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.57% 0.58% 0.71% 0.64% 0.62%
Ratio of Net Investment Income
to Average Net Assets ................ 6.15% 6.05% 6.58% 6.37% 6.44%
Portfolio Turnover Rate .............. 15% 31% 34% 68% 50%
Net Assets, End
of Year (in thousands) ...............$281,677 $238,864 $183,452 $96,207 $149,890
</TABLE>
- ----------
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
See Notes to Financial Statements
ANNUAL REPORT FINANCIAL HIGHLIGHTS 37
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2010
For a Share Outstanding Throughout the Years Ended September 30
1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Year ........................... $ 42.47 $ 42.14 $ 31.67 $ 38.13 $ 28.53
----------- ----------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income(1) .................. 2.79 2.58 2.41 2.24 2.05
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions .............................. 3.90 (2.25) 8.06 (8.70) 7.55
----------- ----------- ---------- ---------- ----------
Total From
Investment Operations ..................... 6.69 0.33 10.47 (6.46) 9.60
----------- ----------- ---------- ---------- ----------
Distributions(2)
From Net Investment Income ................ (2.82) (1.57) (1.48) (1.46) (1.58)
From Net Realized Capital Gains ........... (1.17) -- (0.48) (4.31) (1.14)
----------- ----------- ---------- ---------- ----------
Total Distributions ....................... (3.99) (1.57) (1.96) (5.77) (2.72)
----------- ----------- ---------- ---------- ----------
Reverse Share Split ......................... 3.99 1.57 1.96 5.77 2.72
----------- ----------- ---------- ---------- ----------
Net Asset Value, End of Year ................ $ 49.16 $ 42.47 $ 42.14 $ 31.67 $ 38.13
=========== =========== ========== ========== ==========
Total Return(3) ........................... 15.75% 0.78% 33.06% (16.92)% 33.61%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ....................... 0.62% 0.67% 0.71% 0.68% 0.66%
Ratio of Net Investment Income
to Average Net Assets ....................... 6.15% 5.98% 6.56% 6.35% 6.32%
Portfolio Turnover Rate ..................... 26% 24% 26% 35% 132%
Net Assets, End
of Year (in thousands) ...................... $ 124,812 $ 111,117 $ 95,057 $ 46,312 $ 70,551
</TABLE>
- ----------
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
See Notes to Financial Statements
38 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2015
For a Share Outstanding Throughout the Years Ended September 30
1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Year .......................... $ 31.96 $ 32.20 $ 22.79 $ 29.04 $ 20.39
----------- ----------- ----------- ---------- ----------
Income From Investment Operations
Net Investment Income(1) ................. 2.00 1.85 1.71 1.57 1.46
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ............................. 4.38 (2.09) 7.70 (7.82) 7.19
----------- ----------- ----------- ---------- ----------
Total From
Investment Operations .................... 6.38 (0.24) 9.41 (6.25) 8.65
----------- ----------- ----------- ---------- ----------
Distributions(2)
From Net Investment Income ............... (2.05) (1.28) (0.87) (1.19) (1.45)
From Net Realized Capital Gains .......... (0.34) (1.61) -- (7.08) (0.34)
In Excess of Net Realized Gains .......... -- -- -- (0.37) --
----------- ----------- ----------- ---------- ----------
Total Distributions ...................... (2.39) (2.89) (0.87) (8.64) (1.79)
----------- ----------- ----------- ---------- ----------
Reverse Share Split ........................ 2.39 2.89 0.87 8.64 1.79
----------- ----------- ----------- ---------- ----------
Net Asset Value, End of Year ............... $ 38.34 $ 31.96 $ 32.20 $ 22.79 $ 29.04
=========== =========== =========== ========== ==========
Total Return(3) .......................... 19.96% (0.74)% 41.29% (21.52)% 42.42%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................... 0.61% 0.65% 0.71% 0.68% 0.63%
Ratio of Net Investment Income
to Average Net Assets ...................... 5.79% 5.63% 6.40% 5.97% 6.28%
Portfolio Turnover Rate .................... 21% 17% 70% 65% 138%
Net Assets, End
of Year (in thousands) ..................... $ 114,900 $ 115,654 $ 114,647 $ 66,073 $ 89,023
</TABLE>
- ----------
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
See Notes to Financial Statements
ANNUAL REPORT FINANCIAL HIGHLIGHTS 39
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2020
For a Share Outstanding Throughout the Years Ended September 30
1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Year .......................... $ 22.00 $ 22.47 $ 15.28 $ 20.72 $ 13.63
----------- ----------- ----------- ---------- ----------
Income From Investment Operations
Net Investment Income(1) ................. 1.51 1.41 1.19 1.13 1.00
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ............................. 3.66 (1.88) 6.00 (6.57) 6.09
----------- ----------- ----------- ---------- ----------
Total From
Investment Operations .................... 5.17 (0.47) 7.19 (5.44) 7.09
----------- ----------- ----------- ---------- ----------
Distributions(2)
From Net Investment Income ............... (1.45) (0.40) (0.21) (0.28) (0.53)
From Net Realized Capital Gains .......... -- (0.04) -- (1.31) (0.72)
In Excess of Net Realized Gains .......... -- -- -- (1.18) --
Total Distributions ...................... (1.45) (0.44) (0.21) (2.77) (1.25)
----------- ----------- ----------- ---------- ----------
Reverse Share Split ........................ 1.45 0.44 0.21 2.77 1.25
----------- ----------- ----------- ---------- ----------
Net Asset Value, End of Year ............... $ 27.17 $ 22.00 $ 22.47 $ 15.28 $ 20.72
=========== =========== =========== ========== ==========
Total Return(3) .......................... 23.50% (2.09)% 47.05% (26.25)% 52.02%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................... 0.53% 0.61% 0.72% 0.70% 0.70%
Ratio of Net Investment Income
to Average Net Assets ...................... 6.29% 6.25% 6.24% 6.28% 6.10%
Portfolio Turnover Rate .................... 14% 47% 78% 116% 179%
Net Assets, End
of Year (in thousands) ..................... $ 553,551 $ 926,319 $ 574,702 $ 58,535 $ 56,125
</TABLE>
- ----------
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
See Notes to Financial Statements
40 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2025
For a Share Outstanding Throughout the Year Ended September 30 (except as noted)
1997 1996(1)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C>
Beginning of Period ......................... $17.91 $19.85
---------- ---------
Income From Investment Operations
Net Investment Income(2) .................. 1.21 0.72
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ......... 3.15 (2.66)
---------- ---------
Total From Investment Operations .......... 4.36 (1.94)
---------- ---------
Distributions
From Net Investment Income ................ (0.72) --
---------- ---------
Reverse Share Split ......................... 0.72 --
---------- ---------
Net Asset Value, End of Period .............. $22.27 $17.91
========== =========
Total Return(3) ........................... 24.34% (9.77)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets .......................... 0.62% 0.67%(4)
Ratio of Net Investment Income to
Average Net Assets .......................... 6.14% 6.57%(4)
Portfolio Turnover Rate ..................... 58% 61%
Net Assets, End of
Period (in thousands) ....................... $73,821 $35,661
</TABLE>
- ----------
(1) February 15, 1996 (inception) through September 30, 1996.
(2) Computed using average shares outstanding throughout the year.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements
ANNUAL REPORT FINANCIAL HIGHLIGHTS 41
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
American Century - Benham Target Maturities Trust:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investment securities of American Century - Benham
Target Maturities Trust: 2000 (2000), American Century - Benham Target
Maturities Trust: 2005 (2005), American Century - Benham Target Maturities
Trust: 2010 (2010), American Century - Benham Target Maturities Trust: 2015
(2015), American Century - Benham Target Maturities Trust: 2020 (2020), and
American Century - Benham Target Maturities Trust: 2025 (2025)(the "Funds") as
of September 30, 1997, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years
then ended and for the year ended September 30, 1997 and the period from
February 15, 1996 (inception) to September 30, 1996 for 2025, and the financial
highlights for each of the periods presented herein. These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Funds as of September 30, 1997, the results of their operations,
the changes in their net assets and the financial highlights for the periods
indicated above, in conformity with generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Kansas City, Missouri
November 3, 1997
42 INDEPENDENT AUDITORS' REPORT AMERICAN CENTURY INVESTMENTS
PROXY VOTING RESULTS
An annual meeting of shareholders was held on July 30, 1997, to vote on the
following proposals. All of the proposals received the required majority of
votes and were adopted.
A summary of voting results is listed below each proposal.
PROPOSAL 1:
To vote on the selection by the Board of Trustees of Coopers & Lybrand LLP
as independent auditors for the Trust.
2000 2005 2010
For: 2,338,249 3,221,511 2,005,894
Withheld: 32,050 39,182 20,298
Abstain: 16,056 23,829 16,652
2015 2020 2025
For: 2,839,173 34,662,889 2,245,523
Withheld: 48,007 260,561 50,063
Abstain: 23,203 365,292 17,204
PROPOSAL 2:
To vote on the approval of a Management Agreement with American Century
Investment Management, Inc.
2000 2005 2010
For: 2,155,666 3,164,507 1,970,766
Against: 83,430 87,477 42,085
Abstain: 23,369 32,538 29,993
Broker
Non-Vote: 123,890 -- --
2015 2020 2025
For: 2,773,277 29,480,181 2,230,855
Against: 102,709 853,758 53,379
Abstain: 34,397 474,044 28,556
Broker
Non-Vote: -- 4,480,759 --
PROPOSAL 3:
To vote on the adoption of standardized investment limitations.
* Eliminate the fundamental investment limitation concerning diversification
of investments.
2000 2005 2010
For: 2,118,749 2,829,627 1,744,756
Against: 107,870 157,025 73,427
Abstain: 35,846 40,658 39,018
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,434,182 28,685,039 1,604,110
Against: 138,293 1,429,790 151,226
Abstain: 53,799 693,154 34,735
Broker
Non-Vote: 284,109 4,480,759 522,719
* Amend the fundamental investment limitation concerning the issuance of senior
securities.
2000 2005 2010
For: 2,124,679 2,837,954 1,744,205
Against: 101,233 146,147 70,886
Abstain: 36,553 43,209 42,110
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,441,389 28,698,062 1,614,177
Against: 128,717 1,335,195 137,541
Abstain: 56,168 774,726 38,353
Broker
Non-Vote: 284,109 4,480,759 522,719
SEMIANNUAL REPORT PROXY VOTING RESULTS 43
PROXY VOTING RESULTS
* Amend the fundamental investment limitation concerning borrowing.
2000 2005 2010
For: 2,120,872 2,826,055 1,736,075
Against: 104,950 157,154 79,557
Abstain: 36,643 44,101 41,569
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,436,282 28,601,674 1,599,689
Against: 134,503 1,480,325 150,404
Abstain: 55,489 725,984 39,978
Broker
Non-Vote: 284,109 4,480,759 522,719
* Amend the fundamental investment limitation concerning lending.
2000 2005 2010
For: 2,120,457 2,823,601 1,733,191
Against: 105,658 159,749 80,761
Abstain: 36,350 43,960 43,249
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,426,825 28,604,041 1,597,752
Against: 139,620 1,463,444 149,576
Abstain: 59,829 740,498 42,743
Broker
Non-Vote: 284,109 4,480,759 522,719
* Amend the fundamental investment limitation concerning concentration of
investments in a particular industry.
2000 2005 2010
For: 2,123,374 2,834,661 1,742,557
Against: 105,094 151,362 76,049
Abstain: 33,997 41,287 38,595
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,434,998 28,694,588 1,597,858
Against: 147,153 1,425,847 154,523
Abstain: 44,123 687,548 37,690
Broker
Non-Vote: 284,109 4,480,759 522,719
* Eliminate the fundamental investment limitation regarding investments in
illiquid securities.
2000 2005 2010
For: 2,121,579 2,821,153 1,732,016
Against: 106,293 164,329 88,085
Abstain: 34,593 41,828 37,100
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,422,378 28,467,740 1,588,898
Against: 159,085 1,653,721 151,953
Abstain: 44,811 686,522 49,220
Broker
Non-Vote: 284,109 4,480,759 522,719
* Eliminate the fundamental limitation concerning investment in other investment
companies.
2000 2005 2010
For: 2,122,595 2,830,802 1,741,446
Against: 101,020 155,656 80,239
Abstain: 38,850 40,852 35,516
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,435,093 28,674,522 1,602,310
Against: 148,025 1,453,712 150,693
Abstain: 43,156 679,749 37,068
Broker
Non-Vote: 284,109 4,480,759 522,719
44 PROXY VOTING RESULTS AMERICAN CENTURY INVESTMENTS
PROXY VOTING RESULTS
* Amend the fundamental investment limitation concerning investments in real
estate.
2000 2005 2010
For: 2,125,415 2,831,897 1,740,965
Against: 101,322 153,340 79,072
Abstain: 35,728 42,073 37,164
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,449,566 28,756,043 1,611,710
Against: 135,542 1,395,445 141,802
Abstain: 41,166 656,495 36,559
Broker
Non-Vote: 284,109 4,480,759 522,719
* Amend the fundamental investment limitation concerning underwriting.
2000 2005 2010
For: 2,123,933 2,831,073 1,739,040
Against: 100,116 153,915 77,415
Abstain: 38,416 42,322 40,746
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,431,963 28,654,859 1,612,266
Against: 148,624 1,414,034 135,036
Abstain 45,687 739,090 42,769
Broker
Non-Vote: 284,109 4,480,759 522,719
* Amend the fundamental investment limitation concerning commodities.
2000 2005 2010
For: 2,118,769 2,821,811 1,728,371
Against: 107,049 162,920 92,499
Abstain: 36,647 42,579 36,331
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,427,302 28,366,230 1,572,093
Against: 154,307 1,727,107 175,946
Abstain: 44,665 714,646 42,032
Broker
Non-Vote 284,109 4,480,759 522,719
* Eliminate the fundamental limitation concerning investments in issuers with
less than three years of continuous operations.
2000 2005 2010
For: 2,120,488 2,828,156 1,735,215
Against: 105,671 157,611 86,332
Abstain: 36,306 41,543 35,654
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,429,564 28,511,369 1,603,757
Against: 152,805 1,587,778 147,935
Abstain: 43,905 708,836 38,379
Broker
Non-Vote: 284,109 4,480,759 522,719
* Eliminate the fundamental limitation concerning short sales.
2000 2005 2010
For: 2,120,629 2,826,855 1,734,039
Against: 106,199 157,922 88,096
Abstain: 35,637 42,533 35,066
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,427,370 28,518,493 1,589,639
Against: 156,192 1,580,927 158,700
Abstain: 42,712 708,563 41,732
Broker
Non-Vote: 284,109 4,480,759 522,719
ANNUAL REPORT PROXY VOTING RESULTS 45
PROXY VOTING RESULTS
* Eliminate the fundamental investment limitation concerning margin purchases of
securities.
2000 2005 2010
For: 2,119,356 2,821,798 1,729,755
Against: 107,218 162,295 90,705
Abstain: 35,891 43,217 36,741
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,420,465 28,447,323 1,580,980
Against: 160,714 1,645,583 164,609
Abstain: 45,095 715,077 44,482
Broker
Non-Vote: 284,109 4,480,759 522,719
* Eliminate the fundamental investment limitation concerning warrants.
2000 2005 2010
For: 2,120,867 2,828,708 1,736,245
Against: 104,743 154,886 83,688
Abstain: 36,855 43,716 37,268
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,433,434 28,623,390 1,588,398
Against: 148,382 1,422,589 152,408
Abstain: 44,458 762,004 49,265
Broker
Non-Vote: 284,109 4,480,759 522,719
* Eliminate the fundamental investment limitation concerning investments in oil,
gas and mineral exploration development programs.
2000 2005 2010
For: 2,123,640 2,826,213 1,735,220
Against: 104,658 158,151 84,935
Abstain: 34,167 42,946 37,046
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,428,503 28,591,455 1,576,729
Against: 153,266 1,526,409 179,485
Abstain: 44,505 690,119 33,857
Broker
Non-Vote: 284,109 4,480,759 522,719
* Eliminate the fundamental investment limitations concerning investments in
securities owned by officers and directors.
2000 2005 2010
For: 2,114,762 2,820,102 1,730,426
Against: 112,659 165,580 88,664
Abstain: 35,044 41,628 38,111
Broker
Non-Vote: 123,890 257,212 185,643
2015 2020 2025
For: 2,419,375 28,320,600 1,577,180
Against: 161,919 1,745,786 169,033
Abstain: 44,980 741,597 43,858
Broker
Non-Vote: 284,109 4,480,759 522,719
46 PROXY VOTING RESULTS AMERICAN CENTURY INVESTMENTS
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)]
are subject to federal income tax withholding at the rate of 10% of the total
amount withdrawn, unless you elect not to have withholding apply. If you don't
want us to withhold on this amount, you may send us a written notice not to have
the federal income tax withheld. Your written notice is valid for six months
from the date of receipt at American Century. 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 a written notice not to
withhold federal income tax within six months prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/ Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid for only six months from the date of
receipt at American Century. You may revoke your election at any time by sending
a written notice to us.
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.
ANNUAL REPORT RETIREMENT ACCOUNT INFORMATION 47
BACKGROUND INFORMATION
INVESTMENT PHILOSOPHY & POLICIES
The Benham Group offers 38 fixed-income funds, ranging from money market
funds to long-term bond funds and including both taxable and tax-exempt funds.
Each fund is managed to provide a "pure play" on a specific sector of the
fixed-income market. To ensure adherence to this principle, the basic structure
of each fund's portfolio is tied to a specific market index. Fund managers
attempt to add value by making modest portfolio adjustments based on their
analysis of prevailing market conditions. Investment decisions are made by
management teams, which meet regularly to discuss market analysis and investment
strategies.
In addition to these principles, each fund has its own investment policies:
The six TARGET MATURITIES TRUST funds, including TARGET: 2000, TARGET: 2005,
TARGET: 2010, TARGET: 2015, TARGET: 2020 and TARGET: 2025, are variable-priced
bond funds that invest primarily in zero-coupon U.S. Treasury securities and
will be liquidated shortly after the conclusion of their target maturity year.
COMPARATIVE INDICES
The following index is used in the report for fund performance comparisons.
The index is not an investment product available for purchase.
The MERRILL LYNCH LONG-TERM TREASURY INDEX is an index of U.S. Treasury
securities with maturities greater than 10 years.
FUND BENCHMARKS
The benchmarks for the Target Maturities Trust funds are coupon STRIPS
issues maturing in the target year of each portfolio.
The benchmark for the Target: 2000 fund is the 11/15/00 STRIPS ISSUE--a
zero-coupon Treasury bond that matures November 15, 2000.
The benchmark for the Target: 2005 fund is the 11/15/05 STRIPS ISSUE--a
zero-coupon Treasury bond that matures November 15, 2005.
The benchmark for the Target: 2010 fund is the 11/15/10 STRIPS ISSUE--a
zero-coupon Treasury bond that matures November 15, 2010.
The benchmark for the Target: 2015 fund is the 11/15/15 STRIPS ISSUE--a
zero-coupon Treasury bond that matures November 15, 2015.
The benchmark for the Target: 2020 fund is currently the 11/15/20 STRIPS
ISSUE--a zero-coupon Treasury bond that matures November 15, 2020.
The benchmark for the Target: 2025 fund is the 8/15/25 STRIPS ISSUE--a
zero-coupon Treasury bond that matures August 15, 2025.
- --------------------------------------------------------------------------------
INVESTMENT TEAM LEADERS
- -----------------------
Portfolio Manager Dave Schroeder
- --------------------------------------------------------------------------------
48 BACKGROUND INFORMATION AMERICAN CENTURY INVESTMENTS
GLOSSARY
INVESTMENT TERMS
BASIS POINT--one one-hundredth of a percentage point (or 0.01%). 100 basis
points equal one percentage point (or 1%).
COUPON--the stated interest rate of a security.
YIELD CURVE--a graphic representation of the relationship between maturity
and yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical axis.
RETURNS
TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on pages 36-41.
STATISTICAL TERMINOLOGY
NUMBER OF SECURITIES--the number of different securities held by a fund on a
given date.
ANTICIPATED GROWTH RATE (AGR)--the annualized rate of return that an investor
"locks in" after investing in a Targets fund on a specific day. It assumes that
the anticipated value at maturity is reached on the weighted average maturity
date.
WEIGHTED AVERAGE MATURITY (WAM)--a measurement of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount.
WAM DATE (WEIGHTED AVERAGE MATURITY DATE)--an average of the maturity dates
of a portfolio's securities, weighted by dollar amount. The WAM date is
calculated based on the WAM of the portfolio's investments on a given day.
ANTICIPATED VALUE AT MATURITY (AVM)--the calculated redemption value of a
portfolio share on the portfolio's WAM date.
EXPENSE RATIO--the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF SECURITIES
ZERO-COUPON BONDS (ZEROS)--bonds that make no periodic interest payments.
Instead, they are sold at a deep discount and then redeemed for their full face
value at maturity. When held to maturity, a zero's entire return comes from the
difference between its purchase price and its value at maturity.
TYPES OF ZEROS
STRIPS (SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES)
- --the U.S. Treasury Department program that allows broker-dealers to "strip"
Treasury securities into their component parts. The securities created by this "
stripping" activity are also known as STRIPS. STRIPS are direct obligations of
the U.S. government and are the most liquid (easily bought and sold) Treasury
zeros.
REFCORPS (RESOLUTION FUNDING CORPORATION ZEROS)--zeros created from bonds
issued by the Resolution Funding Corporation, a U.S. government agency. The
principal portions of these bonds are secured by Treasury zeros, and the
interest portions are guaranteed by the U.S. Treasury. REFCORPs are also
relatively liquid.
RECEIPT ZEROS--zeros created and issued by broker-dealers before the STRIPS
program was implemented in 1985. The effective maturities of existing receipt
zeros do not extend beyond 2009. Broker-dealers created receipt zeros by
purchasing Treasury bonds, depositing them in a custodian bank, and then selling
receipts representing ownership interest in the coupons or principal portions of
the bonds. The custodial accounts that hold the underlying Treasury bonds are
kept separate from the bank's assets. The types of receipt zeros include:
CATS (CERTIFICATES OF ACCRUAL OF TREASURY SECURITIES)--issued by Salomon
Brothers, Inc.
TRS (TREASURY RECEIPTS)--general receipt zeros.
ETRS (EASY-GROWTH TREASURY RECEIPTS)--issued by Dean Witter Reynolds, Inc.
ANNUAL REPORT GLOSSARY 49
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American
Century(reg.sm)
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES:
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE:
1-800-345-8765
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 OR 816-444-3485
FAX: 816-340-7962
INTERNET: www.americancentury.com
AMERICAN CENTURY TARGET MATURITIES TRUST
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
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