SEMIANNUAL REPORT
[american century logo]
American
Century(sm)
March 31, 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
[front cover]
TABLE OF CONTENTS
Our Message to You............................................ 1
Report Highlights............................................. 2
Period Overview............................................... 4
Target Maturities Trust: 2000
Performance & Portfolio Information........................ 5
Management Q & A........................................... 6
Schedule of Investments.................................... 8
Financial Highlights....................................... 37
Target Maturities Trust: 2005
Performance & Portfolio Information........................ 9
Management Q & A........................................... 10
Schedule of Investments.................................... 12
Financial Highlights....................................... 38
Target Maturities Trust: 2010
Performance & Portfolio Information........................ 13
Management Q & A........................................... 14
Schedule of Investments.................................... 16
Financial Highlights....................................... 39
Target Maturities Trust: 2015
Performance & Portfolio Information........................ 17
Management Q & A........................................... 18
Schedule of Investments.................................... 20
Financial Highlights....................................... 40
Target Maturities Trust: 2020
Performance & Portfolio Information........................ 21
Management Q & A........................................... 22
Schedule of Investments.................................... 24
Financial Highlights....................................... 41
Target Maturities Trust: 2025
Performance & Portfolio Information........................ 25
Management Q & A........................................... 26
Schedule of Investments.................................... 28
Financial Highlights....................................... 42
Statements of Assets and Liabilities.......................... 29
Statements of Operations...................................... 30
Statements of Changes in Net Assets........................... 31
Notes to Financial Statements................................. 33
IRA/403(b) Information........................................ 43
Background Information........................................ 44
Glossary...................................................... 45
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your needs, we have divided American Century funds
into three groups based on investment style and objectives. These groups, which
appear below, are designed to help simplify your fund decisions.
American Century Investments -- Family of Funds
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY GROUP
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS U.S. GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL 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 the Benham Group are registered marks of American Century
Services Corporation and Benham Management Corporation, respectively. American
Century is a service mark of American Century Services Corporation.
American Century Investments
OUR MESSAGE TO YOU
[photo of James E. Stower, III and James M. Benham]
March 31, 1997, marked the end of an eventful period for our company and the
zero-coupon bond market. Over the past six months, the zero-coupon market
experienced both a significant rally and a significant sell-off in response to
changing interest rate expectations. In the following pages, our investment
management team provides further details about the market and how your fund was
managed during the year.
In January, nearly two years of integration between Twentieth Century and The
Benham Group culminated when we began serving you as American Century
Investments. Under this new name, we have combined our offerings of nearly 70
funds.
The new name also introduces three new groupings for the funds--the Benham Group
(money market and bond funds), the American Century Group (asset allocation,
balanced, conservative equity and specialty funds) and the Twentieth Century
Group (growth and international equity funds). The Target Maturities portfolios
will remain in the Benham Group because their investment goals match key
attributes of that group.
In reviewing this report, you may notice some changes. Based on investors'
feedback, our shareholder reports have been redesigned with added features,
including a two-page report summary, a glossary, more charts and graphs, and
expanded management Q & A and background information sections. By June, all
American Century shareholder reports will have been converted to this format.
Another new resource is the American Century Web site. If you use a personal
computer and have Internet access, we've made it easier for you to download
information about American Century funds and access your fund accounts. With a
personal access code, you can view account balances, exchange money between
existing accounts and make additional investments. The Web site address is:
www.americancentury.com. We are one of the first fund companies to offer direct
on-line transactions via the Internet.
In June, you will receive a proxy statement and ballot that proposes several
changes to your fund. The proxy statement contains more details about the
proposed changes; we strongly encourage you to read it carefully and take part
in the proxy vote.
We appreciate your confidence in American Century and look forward to continuing
to serve you.
Sincerely,
/s/James E. Stowers III /s/James M. Benham
James E. Stowers III James M. Benham
President and Chief Executive Officer Vice Chairman
American Century Companies American Century Companies
Semiannual Report Our Message to You 1
REPORT HIGHLIGHTS
Period Overview
o The U.S. economy expanded at a healthy 3.8% annual rate during the fourth
quarter of 1996 and at an even more impressive 5.6% rate during the first
quarter of 1997--the largest quarterly increase in a decade.
o While the economy continued its impressive growth, inflation remained
relatively subdued. Overall consumer prices--as measured by the
government's consumer price index--rose at a mere 1.8% annual rate during
the first quarter of 1997.
o In the zero-coupon bond market, shifting expectations over the possibility
of an interest rate increase by the Federal Reserve kept investors guessing
about the possible direction of bond prices during the six-month period.
o Looking ahead to the next six months in the U.S. Treasury zero market, our
most important consideration may be increased demand from investors
purchasing zeros to add duration to their portfolios.
Target Maturities Trust: 2000
o The fund posted a 2.04% total return for the six-month period.
o 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's performance.
o Looking forward, we will likely keep the fund's maturity date close to the
November 15, 2000 maturity of its benchmark to help the fund reach its
anticipated value at maturity.
Target Maturities Trust: 2005
o The fund posted a 1.25% total return for the six-month period, reflecting
the unfavorable U.S. bond market conditions that prevailed in early 1997.
o We kept the fund's weighted average maturity date close to its benchmark's
November 15, 2005 maturity date to ensure the fund's close tracking with
its benchmark.
o Looking forward, we will likely keep the fund's maturity date close to the
November 15, 2005 maturity of its benchmark to help the fund reach its
anticipated value at maturity.
Target Maturities Trust: 2010
o The fund posted a 1.37% total return for the six-month period, reflecting
the unfavorable U.S. bond market conditions that prevailed in early 1997.
o By selling some of the fund's STRIPS maturing in November 2009 and
purchasing STRIPS maturing in November 2010, we extended the fund's
weighted average maturity date to September 21, 2010.
o Looking forward, we will likely maintain the fund's current asset
allocation, keeping the majority of the fund's assets in STRIPS and
REFCORPs.
Target: 2000
Total Returns: AS OF 3/31/97
6 Months 2.04%*
1 Year 3.63%
Net Assets: $258.4 million
(AS of 3/31/97)
Inception Date: 3/25/85
Ticker Symbol: BTMTX
Target: 2005
Total Returns: AS OF 3/31/97
6 Months 1.25%*
1 Year 2.29%
Net Assets: $234.0 million
(AS of 3/31/97)
Inception Date: 3/25/85
Ticker Symbol: BTFIX
Target: 2010
Total Returns: AS OF 3/31/97
6 Months 1.37%*
1 Year 2.04%
Net Assets: $100.7 million
(AS of 3/31/97)
Inception Date: 3/25/85
Ticker Symbol: BTTNX
* Not annualized.
2 Report Highlights American Century Investments
REPORT HIGHLIGHTS
Target Maturities Trust: 2015
o Reflecting the unfavorable U.S. bond market conditions that prevailed in
early 1997, the fund posted a 0.97% total return for the six-month period.
o We kept the fund's weighted average maturity date close to the November 15,
2015 maturity date of its benchmark.
o Looking forward, we will likely keep the fund's current asset allocation
for the time being, with roughly 50% of its assets invested in REFCORPs and
the other 50% in STRIPS.
Target Maturities Trust: 2020
o The fund posted a 0.50% total return for the six-month period, reflecting
the unfavorable U.S. bond market conditions that prevailed in early 1997.
o We extended the fund's weighted average maturity (WAM) date from August 21,
2020, to September 12, 2020, bringing it closer to the November 15, 2020
maturity date of its benchmark.
o Looking forward, we will likely continue shifting the fund's WAM date
closer to the November 15, 2020 maturity date of its benchmark.
Target Maturities Trust: 2025
o As a result of rising yields on long-term zeros, the fund posted a -1.56%
total return for the six-month period.
o We used incoming assets to purchase REFCORPs because they offered more
yield and higher potential returns than STRIPS in this maturity sector.
o Looking forward, we will likely continue our efforts to extend the fund's
weighted average maturity date so that it can better track the performance
of its benchmark.
Target: 2015
Total Returns: AS OF 3/31/97
6 Months 0.97%*
1 Year 1.70%
Net Assets: $104.9 million
(AS of 3/31/97)
Inception Date: 9/1/86
Ticker Symbol: BTFTX
Target: 2020
Total Returns: AS OF 3/31/97
6 Months 0.50%*
1 Year 1.01%
Net Assets: $831.4 million
(AS of 3/31/97)
Inception Date: 12/29/89
Ticker Symbol: BTTTX
Target: 2025
Total Returns: AS OF 3/31/97
6 Months -1.56%*
1 Year -2.65%
Net Assets: $55.3 million
(AS of 3/31/97)
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 45.
Semiannual Report Report Highlights 3
PERIOD OVERVIEW
U.S. Economy
The U.S. economy grew vigorously during the six months ended March 31, 1997. A
low unemployment rate, job growth, strong consumer spending and a robust housing
market were responsible for much of the economy's surprising strength. As a
result, the economy expanded at a healthy 3.8% annual rate during the fourth
quarter of 1996 and at an even more impressive 5.6% rate during the first
quarter of 1997--the largest quarterly increase in a decade.
While the economy continued its impressive growth, inflation remained relatively
subdued. Overall consumer prices--as measured by the government's consumer price
index--rose at a mere 1.8% annual rate during the first quarter of 1997. This
unusual combination of high growth and low inflation sent mixed signals to U.S.
bond investors.
Zero-Coupon Bond Market
In the zero-coupon bond market, shifting expectations over the possibility of an
interest rate increase by the Federal Reserve (the Fed) kept investors guessing
about the direction of bond prices.
The effects of these shifting expectations are demonstrated by the accompanying
graph, depicting the Treasury zero yield curve. Derived from the Treasury curve,
the zero yield curve exaggerates fluctuations in Treasury yields. When Treasury
rates fall, zero rates typically fall faster; similarly, when Treasury rates
rise, zero rates tend to increase faster than Treasury rates.
At the beginning of the six-month period, zero yields reflected strong
expectations that the Fed would raise short-term interest rates to keep
inflation at bay. However, those expectations changed in October as signs of a
moderating U.S. economy convinced many that a rate hike was unlikely. As a
result, zero-coupon bonds rallied throughout the fourth quarter of 1996. By late
December, long-term zero-coupon bond yields bottomed at 6.70%, half a percentage
point lower than the 7.20% level seen in early October.
However, strong consumer spending activity fueled increased hiring and rising
wages in the first quarter of 1997 and the slowdown in economic activity never
materialized. With renewed expectations of a Fed interest rate increase,
investors pushed bond yields higher. Helping to fuel these concerns was a
semiannual report on the state of the U.S. economy delivered in February by
Federal Reserve Chairman Alan Greenspan. Within his testimony, Mr. Greenspan
expressed the Fed's concerns about the growing strains of robust economic growth
and put forward the notion of a pre-emptive strike against inflation.
Matching words to actions, the Fed raised short-term interest rates in March for
the first time since February 1995. In response, concerned investors pushed
long-term Treasury zero bond yields to 7.40% amid speculation that the Fed's
latest action was only the first in an upward trend.
Going forward, the most important consideration may be increased demand from
investors purchasing zeros to add duration to their portfolios. Recently, net
stripping activity has surged, with about $1.8 billion in bonds with maturities
longer than ten years net stripped in March. This activity indicates an increase
in demand for longer-maturity zeros. As zero coupon bond yields approach 7.50%,
longer-maturity zeros become an increasingly attractive vehicle for extending
duration and a viable investment alternative to stocks.
[line graph - data below]
Shifting Yield Curve for Zeros
Years to Maturity 10/1/96 12/2/96 3/31/97
1 5.78 5.41 6.07
2 6.07 5.60 6.42
3 6.23 5.70 6.57
4 6.31 5.77 6.65
5 6.36 5.82 6.70
6 6.44 5.89 6.77
7 6.52 5.96 6.83
8 6.62 6.06 6.93
9 6.67 6.10 6.95
10 6.73 6.17 7.00
11 6.77 6.21 7.03
12 6.81 6.25 7.06
13 6.84 6.29 7.09
14 6.88 6.33 7.12
15 6.92 6.37 7.15
16 6.94 6.39 7.16
17 6.95 6.41 7.17
18 6.97 6.42 7.19
19 6.98 6.44 7.20
20 7.00 6.46 7.21
21 7.00 6.47 7.21
22 7.00 6.48 7.21
23 7.01 6.48 7.21
24 7.01 6.49 7.21
25 7.01 6.50 7.21
26 6.99 6.48 7.20
27 6.97 6.46 7.18
28 6.94 6.45 7.17
29 6.92 6.43 7.15
30 6.90 6.41 7.14
Source: Bloomberg Financial Markets
4 Period Overview 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 MARCH 31, 1997
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2000 .............. 2.04% 3.63% 6.26% 8.46% 8.53%
11/15/00 Maturity
STRIPS Issue ............................... 2.33% 4.03% 6.75% 8.89% 9.01%
Merrill Lynch Long-Term
Treasury Index ............................. 1.48% 2.83% 7.20% 8.78% 8.83%
See pages 44-45 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
Value on 3/31/97
$10,000 investment made 3/31/87
Target: 2000 11/15/00 STRIPS Issue Merrill Lynch Long-Term Index
Mar-87 $10,000 $10,000 $10,000
Apr-87 $9,288 $9,312 $9,581
May-87 $9,169 $9,067 $9,496
Jun-87 $9,205 $9,185 $9,606
Jul-87 $8,883 $8,885 $9,424
Aug-87 $8,580 $8,600 $9,270
Sep-87 $8,102 $8,142 $8,857
Oct-87 $8,908 $8,978 $9,508
Nov-87 $8,930 $8,926 $9,512
Dec-87 $9,263 $9,199 $9,702
Jan-88 $9,880 $9,973 $10,288
Feb-88 $10,092 $10,181 $10,415
Mar-88 $9,661 $9,700 $10,092
Apr-88 $9,464 $9,470 $9,929
May-88 $9,230 $9,355 $9,755
Jun-88 $9,764 $9,884 $10,166
Jul-88 $9,539 $9,588 $9,974
Aug-88 $9,569 $9,668 $10,012
Sep-88 $10,067 $10,146 $10,390
Oct-88 $10,450 $10,546 $10,696
Nov-88 $10,189 $10,287 $10,462
Dec-88 $10,328 $10,328 $10,595
Jan-89 $10,592 $10,743 $10,809
Feb-89 $10,233 $10,365 $10,592
Mar-89 $10,375 $10,480 $10,705
Apr-89 $10,717 $10,800 $10,956
May-89 $11,140 $11,276 $11,392
Jun-89 $11,895 $12,045 $12,038
Jul-89 $12,201 $12,313 $12,312
Aug-89 $11,843 $11,964 $11,985
Sep-89 $11,893 $12,003 $12,030
Oct-89 $12,351 $12,534 $12,513
Nov-89 $12,454 $12,643 $12,615
Dec-89 $12,374 $12,630 $12,597
Jan-90 $11,829 $12,079 $12,168
Feb-90 $11,820 $12,033 $12,115
Mar-90 $11,834 $12,020 $12,084
Apr-90 $11,454 $11,652 $11,774
May-90 $11,996 $12,246 $12,324
Jun-90 $12,287 $12,540 $12,605
Jul-90 $12,415 $12,695 $12,734
Aug-90 $11,857 $12,116 $12,183
Sep-90 $11,982 $12,223 $12,339
Oct-90 $12,318 $12,645 $12,614
Nov-90 $12,863 $13,181 $13,137
Dec-90 $13,155 $13,489 $13,411
Jan-91 $13,255 $13,634 $13,563
Feb-91 $13,305 $13,578 $13,616
Mar-91 $13,366 $13,679 $13,660
Apr-91 $13,558 $13,943 $13,841
May-91 $13,538 $13,861 $13,840
Jun-91 $13,446 $13,773 $13,731
Jul-91 $13,646 $14,001 $13,932
Aug-91 $14,194 $14,514 $14,418
Sep-91 $14,639 $15,028 $14,868
Oct-91 $14,767 $15,073 $14,916
Nov-91 $14,944 $15,362 $14,988
Dec-91 $15,873 $16,320 $15,883
Jan-92 $15,222 $15,641 $15,367
Feb-92 $15,320 $15,730 $15,476
Mar-92 $15,108 $15,482 $15,306
Apr-92 $15,103 $15,580 $15,311
May-92 $15,517 $15,920 $15,714
Jun-92 $15,926 $16,339 $15,939
Jul-92 $16,637 $17,070 $16,590
Aug-92 $16,840 $17,320 $16,731
Sep-92 $17,276 $17,775 $16,987
Oct-92 $16,848 $17,309 $16,649
Nov-92 $16,759 $17,224 $16,700
Dec-92 $17,218 $17,686 $17,144
Jan-93 $17,754 $18,256 $17,652
Feb-93 $18,396 $18,917 $18,237
Mar-93 $18,480 $19,034 $18,286
Apr-93 $18,663 $19,227 $18,420
May-93 $18,605 $19,161 $18,488
Jun-93 $19,322 $19,897 $19,265
Jul-93 $19,391 $19,974 $19,562
Aug-93 $19,972 $20,571 $20,347
Sep-93 $20,120 $20,747 $20,437
Oct-93 $20,131 $20,726 $20,563
Nov-93 $19,772 $20,368 $20,039
Dec-93 $19,880 $20,479 $20,099
Jan-94 $20,275 $20,898 $20,587
Feb-94 $19,572 $20,185 $19,727
Mar-94 $18,899 $19,482 $18,922
Apr-94 $18,652 $19,215 $18,632
May-94 $18,666 $19,246 $18,542
Jun-94 $18,558 $19,148 $18,375
Jul-94 $18,936 $19,551 $18,956
Aug-94 $18,997 $19,613 $18,838
Sep-94 $18,602 $19,206 $18,267
Oct-94 $18,494 $19,113 $18,186
Nov-94 $18,369 $18,989 $18,283
Dec-94 $18,510 $19,132 $18,604
Jan-95 $18,913 $19,586 $19,079
Feb-95 $19,511 $20,236 $19,615
Mar-95 $19,589 $20,311 $19,757
Apr-95 $19,914 $20,640 $20,106
May-95 $20,931 $21,711 $21,661
Jun-95 $21,117 $21,891 $21,922
Jul-95 $20,987 $21,787 $21,580
Aug-95 $21,192 $22,006 $22,045
Sep-95 $21,362 $22,132 $22,443
Oct-95 $21,693 $22,539 $23,104
Nov-95 $22,071 $22,942 $23,670
Dec-95 $22,349 $23,217 $24,310
Jan-96 $22,565 $23,487 $24,297
Feb-96 $22,148 $23,043 $23,112
Mar-96 $21,879 $22,780 $22,672
Apr-96 $21,676 $22,554 $22,293
May-96 $21,579 $22,470 $22,186
Jun-96 $21,848 $22,756 $22,636
Jul-96 $21,898 $22,821 $22,636
Aug-96 $21,876 $22,792 $22,360
Sep-96 $22,222 $23,159 $22,972
Oct-96 $22,673 $23,670 $23,868
Nov-96 $23,022 $24,011 $24,653
Dec-96 $22,794 $23,788 $24,069
Jan-97 $22,867 $23,875 $23,913
Feb-97 $22,869 $23,875 $23,880
Mar-97 $22,674 $23,699 $23,312
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 total return line of the index does not.
PORTFOLIO AT A GLANCE
3/31/97 9/30/96
Number of Securities 47 33
Anticipated Growth Rate 6.00% 5.75%
Weighted Average Maturity Date 11/12/00 11/23/00
Anticipated Value at Maturity $101.00 $101.10
Expense Ratio 0.54%* 0.53%
* Annualized.
You will receive a proxy statement in June. Please read it
carefully and take part in the proxy vote.
Semiannual Report Target Maturities Trust: 2000 5
TARGET MATURITIES TRUST: 2000
Management Q & A
An interview with Dave Schroeder, a vice president and senior portfolio manager
on the Target Maturities Trust management team.
HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED MARCH 31, 1997?
The fund posted a 2.04% total return for the six-month period. Because of its
shorter weighted average maturity (WAM), the fund's returns suffered less than
other Target funds as interest rates rose early in 1997. The fund's benchmark, a
coupon STRIPS issue maturing on November 15, 2000, returned 2.33% for the
six-month period. (See the Total Returns table on the previous page for other
fund performance comparisons.)
WHY DID THE FUND UNDERPERFORM ITS BENCHMARK?
The fund is managed to mimic the performance of its benchmark, but is subject to
operating expenses (such as transaction costs and management fees), while the
benchmark is not. We try to add value to the fund where we can, but mostly try
to stay true to the benchmark. As a result, the fund frequently underperforms by
a few basis points.
HOW DID YOU POSITION THE FUND DURING THE LAST SIX MONTHS?
We kept the fund's WAM date close to the benchmark's November 15, 2000 maturity
date to ensure that the fund closely tracked its benchmark's performance. To
minimize the fund's transaction costs and turnover rate, we used cash inflows
and outflows as
[line graph - data below]
TARGET 2000: SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1987 33.33 98.69
1988 37.16 97.43
1989 44.52 96.21
1990 47.33 97.59
1991 57.11 98.91
1992 61.947 101.16
1993 71.526 100.708
1994 66.598 100.829
1995 80.408 100.992
1996 79.947 101.102
1997
1998
1999
2000 100.00
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM), which has a target of $100 but 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. For more information, please consult the prospectus.
6 Target Maturities Trust: 2000 American Century Investments
TARGET MATURITIES TRUST: 2000
opportunities to buy or sell securities. We also made slight adjustments to the
fund's average maturity when these opportunities presented themselves.
To meet the cash outflows that the fund experienced during the period, we sold
some STRIPS. These securities were sold instead of REFCORPs or other non-STRIPS
holdings because STRIPS generally have lower yields and higher prices. We also
continued to avoid coupon STRIPS because their yields are typically lower than
principal STRIPS.
LOOKING AHEAD, WHAT IS YOUR OUTLOOK FOR THE TREASURY MARKET OVER THE NEXT SIX
MONTHS?
Bond yields rose dramatically in the first quarter of 1997, largely because the
U.S. economy has shown faster-than-normal growth and wages have been rising.
These factors also led the Federal Reserve to raise short-term interest rates in
March. The Fed appears to be in a rate-raising mode; our only question is how
high rates will go.
Historically, the average Fed "tightening cycle"--a series of consecutive
short-term interest rate increases designed to restrain economic growth and head
off inflation--consisted of four rate hikes totaling 200 basis points (2
percentage points). That magnitude of tightening seems unlikely this time
around, especially because rising wage pressures have not materialized in the
consumer inflation figures. In addition, the rise in bond yields over the past
few months may already be enough to slow economic activity and keep inflation at
bay. Overall, we believe that this will be a mild Fed tightening cycle.
Nevertheless, the bond market has already priced in another Fed rate increase,
even though inflation remained tame in the first quarter of 1997.
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, 2000 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.
We will also continue looking for opportunities to improve the fund's liquidity
by replacing receipt zeros with STRIPS when we can do so without sacrificing
yield.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
STRIPS 66%
TRs 26%
Other 8%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/96)
STRIPS 68%
TRs 24%
Other 8%
Semiannual Report Target Maturities Trust: 2000 7
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2000
MARCH 31, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 71,250 CUBES, 6.57%, 8/15/99 $ 61,107
75,000 ETR, 6.70%, 11/15/99 63,100
153,000 STRIPS -- COUPON, 6.56%,
11/15/99 129,183
2,836,700 TBR, 6.71%, 11/15/99 2,386,005
424,800 TR, 6.63%, 11/15/99 358,034
133,000 CATS, 6.665%, 2/15/00 110,147
88,125 CUBES, 6.675%, 2/15/00 72,962
13,069,000 STRIPS-- PRINCIPAL, 6.615%,
2/15/00 10,838,383
306,945 TBR, 6.745%, 2/15/00 253,638
30,036,209 TR, 6.665%, 2/15/00 24,875,087
149,000 CATS, 6.70%, 5/15/00 121,295
5,850,000 CUBES, 6.80%, 5/15/00 4,747,919
1,494,525 TBR, 6.78%, 5/15/00 1,213,704
47,967,000 STRIPS -- PRINCIPAL, 6.685%,
8/15/00 38,418,689
894,045 TBR, 6.80%, 8/15/00 713,385
3,932,000 COUGAR, 6.78%, 11/15/00 3,088,468
410,625 CUBES, 6.75%, 11/15/00 322,874
78,191,000 STRIPS -- PRINCIPAL, 6.705%,
11/15/00 61,578,540
3,754,000 TIGR, 6.75%, 11/15/00 2,951,770
2,252,886 TR, 6.74%, 11/15/00 1,772,053
75,000 CATS, 6.755%, 2/15/01 57,975
58,184,000 STRIPS-- PRINCIPAL, 6.725%,
2/15/01 45,026,852
4,657,000 TIGR, 6.765%, 2/15/01 3,598,510
20,422,328 TR, 6.755%, 2/15/01 15,786,460
1,400,000 COUGAR, 6.81%, 5/15/01 1,062,334
1,496,250 CUBES, 6.87%, 5/15/01 1,132,661
44,000 TIGR, 6.78%, 5/15/01 33,428
24,350,000 TR, 6.77%, 5/15/01 18,506,487
18,450,000 STRIPS -- PRINCIPAL, 6.78%,
8/15/01 13,781,228
7,060,020 TR, 6.79%, 8/15/01 5,271,293
----------
TOTAL INVESTMENT SECURITIES--100.0% $258,333,571
(Cost $256,034,676) ============
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 March 31, 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 MARCH 31, 1997
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2005 ............. 1.25% 2.29% 7.69% 10.30% 9.53%
11/15/05 Maturity
STRIPS Issue .............................. 1.61% 2.62% 8.16% 10.55% 9.90%
Merrill Lynch Long-Term
Treasury Index ............................ 1.48% 2.83% 7.20% 8.78% 8.83%
See pages 44-45 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
Value on 3/31/97
$10,000 investment made 3/31/87
Target: 2005 11/15/05 STRIPS Issue Merrill Lynch Long-Term Index
Mar-87 $10,000 $10,000 $10,000
Apr-87 $9,219 $9,196 $9,581
May-87 $9,003 $8,986 $9,496
Jun-87 $9,020 $9,168 $9,606
Jul-87 $8,608 $8,720 $9,424
Aug-87 $8,226 $8,312 $9,270
Sep-87 $7,610 $7,684 $8,857
Oct-87 $8,659 $8,769 $9,508
Nov-87 $8,654 $8,673 $9,512
Dec-87 $9,032 $9,061 $9,702
Jan-88 $9,898 $10,109 $10,288
Feb-88 $10,072 $10,200 $10,415
Mar-88 $9,359 $9,507 $10,092
Apr-88 $9,126 $9,137 $9,929
May-88 $8,816 $8,969 $9,755
Jun-88 $9,648 $9,772 $10,166
Jul-88 $9,202 $9,289 $9,974
Aug-88 $9,257 $9,368 $10,012
Sep-88 $9,830 $9,980 $10,390
Oct-88 $10,386 $10,543 $10,696
Nov-88 $10,030 $10,197 $10,462
Dec-88 $10,340 $10,456 $10,595
Jan-89 $10,649 $10,864 $10,809
Feb-89 $10,272 $10,508 $10,592
Mar-89 $10,433 $10,690 $10,705
Apr-89 $10,772 $11,004 $10,956
May-89 $11,312 $11,628 $11,392
Jun-89 $12,339 $12,587 $12,038
Jul-89 $12,521 $12,732 $12,312
Aug-89 $12,110 $12,253 $11,985
Sep-89 $12,143 $12,295 $12,030
Oct-89 $12,831 $13,071 $12,513
Nov-89 $12,971 $13,217 $12,615
Dec-89 $12,810 $13,099 $12,597
Jan-90 $11,957 $12,213 $12,168
Feb-90 $11,851 $12,127 $12,115
Mar-90 $11,829 $12,049 $12,084
Apr-90 $11,320 $11,454 $11,774
May-90 $12,101 $12,373 $12,324
Jun-90 $12,475 $12,793 $12,605
Jul-90 $12,517 $12,831 $12,734
Aug-90 $11,626 $11,825 $12,183
Sep-90 $11,774 $11,976 $12,339
Oct-90 $12,101 $12,373 $12,614
Nov-90 $12,950 $13,274 $13,137
Dec-90 $13,268 $13,619 $13,411
Jan-91 $13,357 $13,773 $13,563
Feb-91 $13,425 $13,667 $13,616
Mar-91 $13,447 $13,738 $13,660
Apr-91 $13,663 $13,936 $13,841
May-91 $13,570 $13,822 $13,840
Jun-91 $13,396 $13,683 $13,731
Jul-91 $13,633 $13,998 $13,932
Aug-91 $14,308 $14,584 $14,418
Sep-91 $14,911 $15,275 $14,868
Oct-91 $14,890 $15,192 $14,916
Nov-91 $14,970 $15,310 $14,988
Dec-91 $16,116 $16,547 $15,883
Jan-92 $15,420 $15,833 $15,367
Feb-92 $15,501 $15,908 $15,476
Mar-92 $15,225 $15,563 $15,306
Apr-92 $15,102 $15,423 $15,311
May-92 $15,666 $15,992 $15,714
Jun-92 $15,942 $16,250 $15,939
Jul-92 $16,880 $17,196 $16,590
Aug-92 $17,037 $17,372 $16,731
Sep-92 $17,479 $17,859 $16,987
Oct-92 $16,940 $17,280 $16,649
Nov-92 $16,995 $17,349 $16,700
Dec-92 $17,657 $18,056 $17,144
Jan-93 $18,234 $18,685 $17,652
Feb-93 $19,189 $19,637 $18,237
Mar-93 $19,151 $19,661 $18,286
Apr-93 $19,414 $19,917 $18,420
May-93 $19,431 $19,996 $18,488
Jun-93 $20,632 $21,234 $19,265
Jul-93 $20,913 $21,523 $19,562
Aug-93 $21,783 $22,425 $20,347
Sep-93 $22,003 $22,749 $20,437
Oct-93 $22,110 $22,816 $20,563
Nov-93 $21,295 $21,946 $20,039
Dec-93 $21,464 $22,127 $20,099
Jan-94 $22,207 $22,851 $20,587
Feb-94 $20,951 $21,593 $19,727
Mar-94 $19,898 $20,310 $18,922
Apr-94 $19,699 $19,998 $18,632
May-94 $19,588 $19,905 $18,542
Jun-94 $19,393 $19,712 $18,375
Jul-94 $20,000 $20,366 $18,956
Aug-94 $19,953 $20,347 $18,838
Sep-94 $19,198 $19,560 $18,267
Oct-94 $19,049 $19,452 $18,186
Nov-94 $19,194 $19,578 $18,283
Dec-94 $19,554 $19,966 $18,604
Jan-95 $20,047 $20,503 $19,079
Feb-95 $20,781 $21,261 $19,615
Mar-95 $20,955 $21,448 $19,757
Apr-95 $21,396 $21,912 $20,106
May-95 $23,268 $23,852 $21,661
Jun-95 $23,565 $24,159 $21,922
Jul-95 $23,124 $23,739 $21,580
Aug-95 $23,608 $24,240 $22,045
Sep-95 $24,028 $24,677 $22,443
Oct-95 $24,622 $25,313 $23,104
Nov-95 $25,327 $26,050 $23,670
Dec-95 $25,938 $26,691 $24,310
Jan-96 $25,972 $26,751 $24,297
Feb-96 $24,754 $25,490 $23,112
Mar-96 $24,295 $25,044 $22,672
Apr-96 $23,803 $24,503 $22,293
May-96 $23,625 $24,330 $22,186
Jun-96 $24,083 $24,839 $22,636
Jul-96 $24,117 $24,856 $22,636
Aug-96 $23,892 $24,619 $22,360
Sep-96 $24,547 $25,294 $22,972
Oct-96 $25,431 $26,299 $23,868
Nov-96 $26,254 $27,082 $24,653
Dec-96 $25,616 $26,419 $24,069
Jan-97 $25,527 $26,383 $23,913
Feb-97 $25,501 $26,336 $23,880
Mar-97 $24,851 $25,700 $23,312
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 total return line of the index does not.
PORTFOLIO AT A GLANCE
3/31/97 9/30/96
Number of Securities 35 36
Anticipated Growth Rate 6.40% 6.17%
Weighted Average Maturity Date 11/16/05 11/18/05
Anticipated Value at Maturity $100.84 $100.71
Expense Ratio 0.56%* 0.58%
* Annualized.
You will receive a proxy statement in June. Please read it
carefully and take part in the proxy vote.
Semiannual Report Target Maturities Trust: 2005 9
TARGET MATURITIES TRUST: 2005
Management Q & A
An interview with Dave Schroeder, a vice president and senior portfolio manager
on the Target Maturities Trust management team.
HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED MARCH 31, 1997?
The fund posted a 1.25% total return for the six-month period, reflecting the
unfavorable U.S. bond market conditions that prevailed in early 1997. The fund's
benchmark, a coupon STRIPS issue maturing on November 15, 2005, returned 1.61%
for the six-month period. (See the Total Returns table on the previous page for
other fund performance comparisons.)
WHY DID THE FUND UNDERPERFORM ITS BENCHMARK?
The fund is managed to mimic the performance of its benchmark, but is subject to
operating expenses (such as transaction costs and management fees) that the
benchmark does not have. We try to add value to the fund where we can, but
mostly try to stay true to the benchmark. As a result, the fund frequently
underperforms by a few basis points.
HOW DID YOU POSITION THE FUND DURING THE LAST SIX MONTHS?
We kept the fund's weighted average maturity (WAM) date close to its benchmark's
November 15, 2005 maturity date to ensure the fund's close tracking with its
benchmark. We added to the fund's
[line graph - data below]
TARGET 2005: SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1987 21.28 94.59
1988 24.36 93.66
1989 30.18 93.14
1990 31.26 97.25
1991 37.97 99.29
1992 41.597 99.625
1993 50.575 100.087
1994 46.066 100.516
1995 61.108 100.34
1996 57.829 100.707
1997
1998
1999
2000
2001
2002
2003
2004
2005 100.00
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM), which has a target of $100 but 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. For more information, please consult the prospectus.
10 Target Maturities Trust: 2005 American Century Investments
TARGET MATURITIES TRUST: 2005
position in REFCORPs by selling STRIPS and using the proceeds to purchase
REFCORP zeros maturing in October 2005. These transactions resulted in a higher
anticipated growth rate (AGR) and anticipated value at maturity (AVM), improving
the fund's returns.
We continue working to keep the fund's transaction costs down by limiting
turnover. To accomplish this we use the inflows and outflows of cash that
typically occur as opportunities to buy or sell securities, adjusting the fund's
average maturity at the same time.
LOOKING AHEAD, WHAT IS YOUR OUTLOOK FOR THE TREASURY MARKET OVER THE NEXT SIX
MONTHS?
Bond yields rose dramatically in the first quarter of 1997, largely because the
U.S. economy has shown faster-than-normal growth and wages have been rising.
These factors also led the Federal Reserve to raise short-term interest rates in
March. The Fed appears to be in a rate-raising mode; our only question is how
high rates will go.
Historically, the average Fed "tightening cycle"--a series of consecutive
short-term interest rate increases designed to restrain economic growth and head
off inflation--consisted of four rate hikes totaling 200 basis points (2
percentage points). That magnitude of tightening seems unlikely this time
around, especially because rising wage pressures have not materialized in the
consumer inflation figures. In addition, the rise in bond yields over the past
few months may already be enough to slow economic activity and keep inflation at
bay. Overall, we believe that this will be a mild Fed tightening cycle.
Nevertheless, the bond market has already priced in another Fed rate increase,
even though inflation remained tame in the first quarter of 1997.
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, 2005 maturity of its benchmark. In addition, we
will continue looking for opportunities to improve the fund's liquidity and add
yield by swapping some of our receipt zeros (such as the fund's callable CATS,
which can be combined with STRIPS to reconstitute Treasurys) for REFCORPs. We
will likely continue using STRIPS to meet the fund's cash flow needs.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
REFCORPs 43%
STRIPS 36%
CATS 9%
TRs 6%
Other 6%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/96)
STRIPS 47%
REFCORPs 33%
CATS 8%
TRs 6%
Other 6%
Semiannual Report Target Maturities Trust: 2005 11
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2005
MARCH 31, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 87,000 ETR, 7.13%, 11/15/04 $ 51,006
693,750 PHYSICAL-- COUPON, 7.16%,
11/15/04 405,837
27,000 TIGR, 7.06%, 11/15/04 15,911
11,500,000 REFCORP STRIPS -- COUPON,
7.11%, 1/15/05 6,673,105
15,000,000 STRIPS-- COUPON, 6.99%,
2/15/05 8,731,500
3,200,000 U.S. Treasury Corpus, 7.24%,
2/15/10, Call Date 2/15/05 1,827,648
4,615,672 CUBES, 7.09%, 5/15/05 2,621,148
1,000,000 ETR, 7.16%, 5/15/05 564,770
17,144,000 STRIPS -- COUPON, 7.01%,
5/15/05 9,796,939
28,559,000 STRIPS-- PRINCIPAL, 7.045%,
5/15/05 16,275,489
428,750 TBR, 7.17%, 5/15/05 241,957
6,450,000 TR, 7.17%, 5/15/10, Call Date
5/15/05 3,639,929
12,500,000 REFCORP STRIPS-- COUPON,
7.14%, 7/15/05 6,987,625
56,500,000 STRIPS-- PRINCIPAL, 7.02%,
8/15/05 31,701,020
40,000,000 REFCORP STRIPS-- COUPON,
7.14%, 10/15/05 21,974,000
170,000 CATS, 7.105%, 11/15/05 93,118
491,519 CUBES, 7.115%, 11/15/05 269,008
2,247,000 TBR, 7.195%, 11/15/05 1,221,604
10,900,000 U.S. Treasury Corpus, 7.285%,
11/15/10, Call Date 11/15/05 5,881,749
46,429,000 REFCORP STRIPS-- COUPON,
7.19%, 1/15/06 24,953,730
24,556,000 STRIPS-- COUPON, 7.05%,
2/15/06 13,276,447
19,415,340 TR, 7.13%, 2/15/06 10,425,455
56,800,000 REFCORP STRIPS -- COUPON,
7.20%, 4/15/06 29,970,520
107,000 CATS, 7.13%, 5/15/06 56,475
38,699,000 CATS, 7.22%, 5/15/11, Call Date
5/15/06 20,263,957
566,500 CUBES, 7.14%, 5/15/06 298,733
4,718,000 STRIPS -- COUPON, 7.06%,
5/15/06 2,505,541
Principal Amount Value
- --------------------------------------------------------------------------------
$ 410,000 TBR, 7.22%, 5/15/06 $ 214,688
146,346 TR, 7.14%, 5/15/06 77,173
1,000,000 TR, 7.22%, 5/15/11, Call Date
5/15/06 523,630
11,428,000 REFCORP STRIPS-- COUPON,
7.21%, 7/15/06 5,918,218
2,000,000 STRIPS-- COUPON, 7.065%,
8/15/06 1,043,080
1,299,780 TR, 7.145%, 8/15/06 673,000
8,100,000 REFCORP STRIPS -- COUPON,
7.24%, 10/15/06 4,110,264
----------
TOTAL INVESTMENT SECURITIES--100.0% $233,284,274
(Cost $231,667,160) ============
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
PHYSICAL = U.S. Treasury Bearer Bond Coupons and Corpus
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 March 31, 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 MARCH 31, 1997
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2010 ............. 1.37% 2.04% 8.28% 11.15% 9.48%
11/15/10 Maturity
STRIPS Issue .............................. 1.37% 2.37% 8.96% 11.65% 10.12%
Merrill Lynch Long-Term
Treasury Index ............................ 1.48% 2.83% 7.20% 8.78% 8.83%
See pages 44-45 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
Value on 3/31/97
$10,000 investment made 3/31/87
Target: 2010 11/15/10 STRIPS Issue Merrill Lynch Long-Term Index
Mar-87 $10,000 $10,000 $10,000
Apr-87 $9,029 $9,074 $9,581
May-87 $8,708 $8,794 $9,496
Jun-87 $8,713 $8,862 $9,606
Jul-87 $8,231 $8,296 $9,424
Aug-87 $7,863 $7,909 $9,270
Sep-87 $6,921 $7,029 $8,857
Oct-87 $8,156 $8,228 $9,508
Nov-87 $8,214 $8,239 $9,512
Dec-87 $8,593 $8,637 $9,702
Jan-88 $9,563 $9,851 $10,288
Feb-88 $9,839 $10,010 $10,415
Mar-88 $8,874 $9,146 $10,092
Apr-88 $8,570 $8,672 $9,929
May-88 $8,173 $8,375 $9,755
Jun-88 $9,018 $9,292 $10,166
Jul-88 $8,524 $8,686 $9,974
Aug-88 $8,547 $8,741 $10,012
Sep-88 $9,225 $9,444 $10,390
Oct-88 $9,805 $10,117 $10,696
Nov-88 $9,420 $9,729 $10,462
Dec-88 $9,943 $10,029 $10,595
Jan-89 $10,230 $10,581 $10,809
Feb-89 $9,673 $10,008 $10,592
Mar-89 $9,902 $10,230 $10,705
Apr-89 $10,247 $10,624 $10,956
May-89 $11,034 $11,436 $11,392
Jun-89 $12,240 $12,759 $12,038
Jul-89 $12,384 $12,845 $12,312
Aug-89 $11,809 $12,189 $11,985
Sep-89 $11,827 $12,294 $12,030
Oct-89 $12,642 $13,183 $12,513
Nov-89 $12,820 $13,322 $12,615
Dec-89 $12,728 $13,271 $12,597
Jan-90 $11,603 $12,025 $12,168
Feb-90 $11,436 $11,912 $12,115
Mar-90 $11,344 $11,830 $12,084
Apr-90 $10,758 $11,102 $11,774
May-90 $11,677 $12,338 $12,324
Jun-90 $12,137 $12,865 $12,605
Jul-90 $12,062 $12,858 $12,734
Aug-90 $10,856 $11,286 $12,183
Sep-90 $11,017 $11,540 $12,339
Oct-90 $11,384 $11,881 $12,614
Nov-90 $12,430 $12,968 $13,137
Dec-90 $12,763 $13,312 $13,411
Jan-91 $12,964 $13,406 $13,563
Feb-91 $12,952 $13,264 $13,616
Mar-91 $12,970 $13,352 $13,660
Apr-91 $13,142 $13,603 $13,841
May-91 $13,079 $13,446 $13,840
Jun-91 $12,780 $13,185 $13,731
Jul-91 $12,998 $13,460 $13,932
Aug-91 $13,779 $14,246 $14,418
Sep-91 $14,406 $14,965 $14,868
Oct-91 $14,291 $14,848 $14,916
Nov-91 $14,176 $14,674 $14,988
Dec-91 $15,451 $16,036 $15,883
Jan-92 $14,756 $15,318 $15,367
Feb-92 $14,859 $15,412 $15,476
Mar-92 $14,578 $15,110 $15,306
Apr-92 $14,354 $14,864 $15,311
May-92 $14,997 $15,529 $15,714
Jun-92 $15,078 $15,584 $15,939
Jul-92 $16,014 $16,542 $16,590
Aug-92 $16,083 $16,594 $16,731
Sep-92 $16,387 $16,906 $16,987
Oct-92 $15,991 $16,491 $16,649
Nov-92 $16,198 $16,746 $16,700
Dec-92 $16,962 $17,539 $17,144
Jan-93 $17,490 $18,074 $17,652
Feb-93 $18,484 $19,134 $18,237
Mar-93 $18,409 $19,097 $18,286
Apr-93 $18,587 $19,212 $18,420
May-93 $18,731 $19,385 $18,488
Jun-93 $20,132 $20,867 $19,265
Jul-93 $20,850 $21,626 $19,562
Aug-93 $21,890 $22,716 $20,347
Sep-93 $21,895 $22,761 $20,437
Oct-93 $22,177 $23,106 $20,563
Nov-93 $21,321 $22,193 $20,039
Dec-93 $21,419 $22,302 $20,099
Jan-94 $22,303 $23,226 $20,587
Feb-94 $20,752 $21,600 $19,727
Mar-94 $19,477 $20,263 $18,922
Apr-94 $19,150 $19,837 $18,632
May-94 $18,811 $19,515 $18,542
Jun-94 $18,524 $19,225 $18,375
Jul-94 $19,420 $20,182 $18,956
Aug-94 $19,121 $19,896 $18,838
Sep-94 $18,191 $18,848 $18,267
Oct-94 $18,041 $18,744 $18,186
Nov-94 $18,369 $19,103 $18,283
Dec-94 $18,943 $19,720 $18,604
Jan-95 $19,512 $20,361 $19,079
Feb-95 $20,149 $21,031 $19,615
Mar-95 $20,345 $21,262 $19,757
Apr-95 $20,821 $21,790 $20,106
May-95 $23,153 $24,297 $21,661
Jun-95 $23,573 $24,762 $21,922
Jul-95 $22,964 $24,123 $21,580
Aug-95 $23,619 $24,842 $22,045
Sep-95 $24,204 $25,492 $22,443
Oct-95 $25,135 $26,552 $23,104
Nov-95 $26,008 $27,456 $23,670
Dec-95 $26,916 $28,460 $24,310
Jan-96 $26,766 $28,267 $24,297
Feb-96 $24,865 $26,261 $23,112
Mar-96 $24,233 $25,608 $22,672
Apr-96 $23,515 $24,802 $22,293
May-96 $23,331 $24,673 $22,186
Jun-96 $24,015 $25,436 $22,636
Jul-96 $24,026 $25,420 $22,636
Aug-96 $23,555 $24,909 $22,360
Sep-96 $24,394 $25,860 $22,972
Oct-96 $25,653 $27,241 $23,868
Nov-96 $26,825 $28,441 $24,653
Dec-96 $25,964 $27,508 $24,069
Jan-97 $25,660 $27,188 $23,913
Feb-97 $25,632 $27,149 $23,880
Mar-97 $24,727 $26,215 $23,312
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 total return line of the index does not.
PORTFOLIO AT A GLANCE
3/31/97 9/30/96
Number of Securities 16 16
Anticipated Growth Rate 6.60% 6.44%
Weighted Average Maturity Date 9/21/10 8/29/10
Anticipated Value at Maturity $103.20 $102.53
Expense Ratio 0.62%* 0.67%
* Annualized.
You will receive a proxy statement in June. Please read it
carefully and take part in the proxy vote.
Semiannual Report Target Maturities Trust: 2010 13
TARGET MATURITIES TRUST: 2010
Management Q & A
An interview with Dave Schroeder, a vice president and senior portfolio manager
on the Target Maturities Trust management team.
HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED MARCH 31, 1997?
The fund posted a 1.37% total return for the six-month period, reflecting the
unfavorable U.S. bond market conditions that prevailed in early 1997. (See the
Total Returns table on the previous page for other fund performance
comparisons.)
HOW DID THE FUND PERFORM COMPARED WITH ITS BENCHMARK?
The fund's 1.37% total return matched that of its benchmark, a STRIPS coupon
issue maturing on November 15, 2010. The fund is managed to track the
performance of the benchmark, but it has operating expenses (such as transaction
costs and management fees) that the benchmark does not have. But during the
six-month period, the fund's shorter maturity helped limit the negative effects
of rising interest rates. As a result, the fund kept pace with the benchmark.
HOW DID YOU POSITION THE FUND DURING THE LAST SIX MONTHS?
By selling some of the fund's Novenber 2009-maturity STRIPS and purchasing
STRIPS maturing in November 2010, we extended the fund's weighted average
maturity (WAM) date to September 21, 2010. The fund's WAM date is now closer to
the November 15, 2010 maturity date of its benchmark. We also used some of the
proceeds to purchase REFCORPs
[line graph - data below]
TARGET 2010: SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1987 14.96 95.27
1988 17.31 97.13
1989 22.16 96.66
1990 22.22 97.52
1991 26.9 98.97
1992 29.534 100.179
1993 37.292 100.874
1994 32.981 101.78
1995 46.864 101.788
1996 42.474 102.529
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010 100.00
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM), which has a target of $100 but 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. For more information, please consult the prospectus.
14 Target Maturities Trust: 2010 American Century Investments
TARGET MATURITIES TRUST: 2010
maturing in October 2010, which helped increase the fund's anticipated growth
rate (AGR) and anticipated value at maturity (AVM).
Over the past six months, we continued to bring the fund's WAM date closer to
the maturity date of its benchmark while keeping the fund's transaction costs
down. By using the inflows and outflows of cash that typically occur as
opportunities to buy or sell securities, we reduced fund turnover and adjusted
the fund's WAM in the process.
LOOKING AHEAD, WHAT IS YOUR OUTLOOK FOR THE TREASURY MARKET OVER THE NEXT SIX
MONTHS?
Bond yields rose dramatically in the first quarter of 1997, largely because the
U.S. economy has shown faster-than-normal growth and wages have been rising.
These factors also led the Federal Reserve to raise short-term interest rates in
March. The Fed appears to be in a rate-raising mode; our only question is how
high rates will go.
Historically, the average Fed "tightening cycle"--a series of consecutive
short-term interest rate increases designed to restrain economic growth and head
off inflation--consisted of four rate hikes totaling 200 basis points (2
percentage points). That magnitude of tightening seems unlikely this time
around, especially because rising wage pressures have not materialized in the
consumer inflation figures. In addition, the rise in bond yields over the past
few months may already be enough to slow economic activity and keep inflation at
bay. Overall, we believe that this will be a mild Fed tightening cycle.
Nevertheless, the bond market has already priced in another Fed rate increase,
even though inflation remained tame in the first quarter of 1997.
WHAT IS YOUR STRATEGY GOING FORWARD?
We will likely maintain the fund's current asset allocation, keeping the
majority of the fund's assets in STRIPS and REFCORPs. However, we will look to
add higher-yielding REFCORPs when they become available at attractive prices,
while maintaining at least 25% of the fund's assets in STRIPS to meet liquidity
needs. We will also continue to move the fund's WAM date closer to the maturity
date of its benchmark.
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 have appreciated in price, but they still
offer a yield that is 23 basis points more than like-maturity STRIPS. Should the
custody bank for ETRs change their custody agreement and allow ETRs to be
reconstituted with STRIPS, we would expect our principal ETRs to appreciate in
value relative to STRIPS.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
REFCORPs 44%
STRIPS 44%
ETRs 12%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/96)
STRIPS 57%
REFCORPs 33%
ETRs 10%
Semiannual Report Target Maturities Trust: 2010 15
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2010
MARCH 31, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$28,520,000 ETR, 7.395%, 5/15/14, Call Date
5/15/09 $ 11,826,959
2,000,000 REFCORP STRIPS-- COUPON,
7.34%, 10/15/09 810,020
11,500,000 STRIPS-- PRINCIPAL, 7.305%,
11/15/14, Call Date 11/15/09 4,649,565
5,772,000 REFCORP STRIPS-- COUPON,
7.35%, 1/15/10 2,292,869
30,728,000 REFCORP STRIPS-- COUPON,
7.36%, 4/15/10 11,974,394
587,000 STRIPS-- COUPON, 7.22%,
5/15/10 231,448
15,000,000 REFCORP STRIPS-- COUPON,
7.37%, 7/15/10 5,732,700
3,277,000 STRIPS-- COUPON, 7.235%,
8/15/10 1,266,528
25,000,000 REFCORP STRIPS-- COUPON,
7.37%, 10/15/10 9,384,250
28,200,000 STRIPS-- COUPON, 7.245%,
11/15/10 10,696,260
20,500,000 REFCORP STRIPS-- COUPON,
7.37%, 1/15/11 7,556,300
29,860,000 STRIPS-- COUPON, 7.255%,
2/15/11 11,107,920
18,850,000 REFCORP STRIPS-- COUPON,
7.37%, 4/15/11 6,824,266
10,000,000 STRIPS-- COUPON, 7.26%,
5/15/11 3,652,900
8,715,000 STRIPS-- COUPON, 7.275%,
8/15/11 3,119,884
26,000,000 STRIPS-- COUPON, 7.285%,
11/15/11 9,132,760
----------
TOTAL INVESTMENT SECURITIES--100.0% $100,259,023
(Cost $100,341,650) ============
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 March 31, 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 MARCH 31, 1997
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2015 ............. 0.97% 1.70% 8.43% 11.54% 8.66%
11/15/15 Maturity
STRIPS Issue .............................. 0.85% 1.93% 8.98% 12.11% 9.13%
Merrill Lynch Long-Term
Treasury Index ............................ 1.48% 2.83% 7.20% 8.78% 8.83%
See pages 44-45 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
Value on 3/31/97
$10,000 investment made 3/31/87
Target: 2015 11/15/15 STRIPS Issue Merrill Lynch Long-Term Index
Mar-87 $10,000 $10,000 $10,000
Apr-87 $9,111 $8,969 $9,581
May-87 $8,521 $8,524 $9,496
Jun-87 $8,329 $8,657 $9,606
Jul-87 $7,895 $7,972 $9,424
Aug-87 $7,411 $7,427 $9,270
Sep-87 $6,422 $6,683 $8,857
Oct-87 $7,568 $7,496 $9,508
Nov-87 $7,674 $7,553 $9,512
Dec-87 $8,087 $8,049 $9,702
Jan-88 $9,282 $9,113 $10,288
Feb-88 $9,545 $9,577 $10,415
Mar-88 $8,471 $8,537 $10,092
Apr-88 $7,959 $8,111 $9,929
May-88 $7,568 $7,555 $9,755
Jun-88 $8,286 $8,386 $10,166
Jul-88 $7,703 $7,667 $9,974
Aug-88 $7,603 $7,651 $10,012
Sep-88 $8,336 $8,441 $10,390
Oct-88 $9,011 $9,144 $10,696
Nov-88 $8,421 $8,544 $10,462
Dec-88 $8,983 $8,945 $10,595
Jan-89 $9,282 $9,512 $10,809
Feb-89 $8,855 $8,981 $10,592
Mar-89 $9,104 $9,211 $10,705
Apr-89 $9,289 $9,463 $10,956
May-89 $10,135 $10,264 $11,392
Jun-89 $11,600 $11,820 $12,038
Jul-89 $11,778 $12,019 $12,312
Aug-89 $11,145 $11,332 $11,985
Sep-89 $11,110 $11,347 $12,030
Oct-89 $11,899 $12,349 $12,513
Nov-89 $12,176 $12,459 $12,615
Dec-89 $11,991 $12,257 $12,597
Jan-90 $10,818 $11,124 $12,168
Feb-90 $10,669 $10,841 $12,115
Mar-90 $10,427 $10,624 $12,084
Apr-90 $9,587 $9,775 $11,774
May-90 $10,718 $10,884 $12,324
Jun-90 $11,138 $11,392 $12,605
Jul-90 $11,145 $11,391 $12,734
Aug-90 $9,666 $9,829 $12,183
Sep-90 $9,780 $9,967 $12,339
Oct-90 $10,171 $10,465 $12,614
Nov-90 $11,238 $11,488 $13,137
Dec-90 $11,586 $11,793 $13,411
Jan-91 $11,821 $12,075 $13,563
Feb-91 $11,721 $12,037 $13,616
Mar-91 $11,735 $12,030 $13,660
Apr-91 $11,935 $12,319 $13,841
May-91 $11,764 $11,976 $13,840
Jun-91 $11,408 $11,665 $13,731
Jul-91 $11,664 $12,004 $13,932
Aug-91 $12,518 $12,750 $14,418
Sep-91 $13,115 $13,417 $14,868
Oct-91 $12,909 $13,200 $14,916
Nov-91 $12,639 $12,864 $14,988
Dec-91 $14,189 $14,465 $15,883
Jan-92 $13,385 $13,627 $15,367
Feb-92 $13,549 $13,805 $15,476
Mar-92 $13,293 $13,529 $15,306
Apr-92 $13,023 $13,285 $15,311
May-92 $13,663 $13,957 $15,714
Jun-92 $13,570 $13,837 $15,939
Jul-92 $14,680 $15,001 $16,590
Aug-92 $14,523 $14,833 $16,731
Sep-92 $14,502 $14,830 $16,987
Oct-92 $14,104 $14,407 $16,649
Nov-92 $14,680 $14,994 $16,700
Dec-92 $15,292 $15,636 $17,144
Jan-93 $15,818 $16,188 $17,652
Feb-93 $16,714 $17,123 $18,237
Mar-93 $16,565 $16,977 $18,286
Apr-93 $16,707 $17,119 $18,420
May-93 $17,063 $17,481 $18,488
Jun-93 $18,272 $18,734 $19,265
Jul-93 $19,211 $19,716 $19,562
Aug-93 $20,832 $21,430 $20,347
Sep-93 $20,654 $21,248 $20,437
Oct-93 $21,024 $21,636 $20,563
Nov-93 $20,085 $20,636 $20,039
Dec-93 $19,957 $20,559 $20,099
Jan-94 $20,768 $21,411 $20,587
Feb-94 $19,232 $19,831 $19,727
Mar-94 $18,001 $18,507 $18,922
Apr-94 $17,553 $18,065 $18,632
May-94 $17,034 $17,540 $18,542
Jun-94 $16,700 $17,186 $18,375
Jul-94 $17,859 $18,409 $18,956
Aug-94 $17,255 $17,776 $18,838
Sep-94 $16,209 $16,663 $18,267
Oct-94 $16,152 $16,609 $18,186
Nov-94 $16,572 $17,044 $18,283
Dec-94 $17,148 $17,663 $18,604
Jan-95 $17,802 $18,383 $19,079
Feb-95 $18,286 $18,846 $19,615
Mar-95 $18,606 $19,196 $19,757
Apr-95 $18,954 $19,617 $20,106
May-95 $21,714 $22,521 $21,661
Jun-95 $22,006 $22,805 $21,922
Jul-95 $21,252 $22,035 $21,580
Aug-95 $22,233 $23,073 $22,045
Sep-95 $22,902 $23,770 $22,443
Oct-95 $24,125 $25,098 $23,104
Nov-95 $25,036 $26,000 $23,670
Dec-95 $26,188 $27,211 $24,310
Jan-96 $25,882 $26,894 $24,297
Feb-96 $23,478 $24,451 $23,112
Mar-96 $22,568 $23,504 $22,672
Apr-96 $21,871 $22,758 $22,293
May-96 $21,821 $22,725 $22,186
Jun-96 $22,504 $23,501 $22,636
Jul-96 $22,511 $23,433 $22,636
Aug-96 $21,757 $22,670 $22,360
Sep-96 $22,731 $23,756 $22,972
Oct-96 $24,245 $25,395 $23,868
Nov-96 $25,717 $26,779 $24,653
Dec-96 $24,609 $25,685 $24,069
Jan-97 $24,082 $25,185 $23,913
Feb-97 $24,082 $25,136 $23,880
Mar-97 $22,952 $23,958 $23,312
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 total return line of the index does not.
PORTFOLIO AT A GLANCE
3/31/97 9/30/96
Number of Securities 12 12
Anticipated Growth Rate 6.71% 6.58%
Weighted Average Maturity Date 11/13/15 11/12/15
Anticipated Value at Maturity $110.34 $110.11
Expense Ratio 0.62%* 0.65%
* Annualized.
You will receive a proxy statement in June. Please read it
carefully and take part in the proxy vote.
Semiannual Report Target Maturities Trust: 2015 17
TARGET MATURITIES TRUST: 2015
Management Q & A
An interview with Dave Schroeder, a vice president and senior portfolio manager
on the Target Maturities Trust management team.
HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED MARCH 31, 1997?
Reflecting the unfavorable U.S. bond market conditions that prevailed in early
1997, the fund posted a 0.97% total return for the six-month period.
Nevertheless, the fund's return was 12 basis points higher than the 0.85% total
return of its benchmark, a coupon STRIPS issue maturing on November 15, 2015.
(See the Total Returns table on the previous page for other fund performance
comparisons.)
HOW DID YOU POSITION THE FUND DURING THE LAST SIX MONTHS?
We kept the fund's weighted average maturity (WAM) date close to the November
15, 2015 maturity date of its benchmark. Because of the volatility in bond
prices caused by shifting interest rate expectations (see the Period Overview on
page 4), we sold STRIPS maturing in November 2015 to meet cash outflow needs.
The fund now holds fewer STRIPS, which increased its anticipated value at
maturity (AVM) and anticipated growth rate (AGR) and improved the fund's return.
We sold STRIPS instead of REFCORPs mainly because REFCORPs offered more yield
and higher potential returns than STRIPS in this maturity
[line graph - data below]
TARGET 2015: SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1987 11.37 102.86
1988 12.63 102.75
1989 16.86 101.77
1990 16.29 102.24
1991 19.95 106.05
1992 21.502 107.792
1993 28.064 106.952
1994 24.11 108.832
1995 36.819 109.462
1996 31.962 110.109
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015 100.00
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM), which has a target of $100 but 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. For more information, please consult the prospectus.
18 Target Maturities Trust: 2015 American Century Investments
TARGET MATURITIES TRUST: 2015
sector. As mentioned in our previous report, the fund holds only STRIPS and
REFCORPs--the only types of zeros available in this maturity sector.
LOOKING AHEAD, WHAT IS YOUR OUTLOOK FOR THE TREASURY MARKET OVER THE NEXT SIX
MONTHS?
Bond yields rose dramatically in the first quarter of 1997, largely because the
U.S. economy has shown faster-than-normal growth and wages have been rising.
These factors also led the Federal Reserve to raise short-term interest rates in
March. The Fed appears to be in a rate-raising mode; our only question is how
high rates will go.
Historically, the average Fed "tightening cycle"--a series of consecutive
short-term interest rate increases designed to restrain economic growth and head
off inflation--consisted of four rate hikes totaling 200 basis points (2
percentage points). That magnitude of tightening seems unlikely this time
around, especially because rising wage pressures have not materialized in the
consumer inflation figures. In addition, the rise in bond yields over the past
few months may already be enough to slow economic activity and keep inflation at
bay. Overall, we believe that this will be a mild Fed tightening cycle.
Nevertheless, the bond market has already priced in another Fed rate increase,
even though inflation remained tame in the first quarter of 1997.
WHAT IS YOUR STRATEGY FOR THE FUND GOING FORWARD?
To better track the performance of the fund's benchmark, we will likely continue
moving the fund's WAM date closer to November 15, 2015. We will also likely
maintain the fund's current asset allocation for the time being, with roughly
50% of its assets invested in REFCORPs and the other 50% in STRIPS. 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.
Currently, all of the fund's zeros are coupon zeros. With coupon zeros yielding
more than principal zeros in this maturity sector, we prefer holding coupon
zeros. The relative values of coupon and principal zeros in the fund's maturity
sector are based on several factors, including (1) the level of stripping or
reconstitution activity in the Treasury market; (2) the value of the underlying
Treasury bonds maturing in 2014-2016 compared to other maturity sectors; and (3)
dealer and investor activity in the fund's maturity sector. We focus on each of
these factors when tracking the relative values of coupon and principal zeros.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
STRIPS 50%
REFCORPs 50%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/96)
STRIPS 56%
REFCORPs 44%
Semiannual Report Target Maturities Trust: 2015 19
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2015
MARCH 31, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 4,350,000 STRIPS -- COUPON, 7.36%,
2/15/15 $ 1,195,032
35,440,000 REFCORP STRIPS-- COUPON,
7.50%, 4/15/15 9,390,537
39,408,000 STRIPS-- COUPON, 7.36%,
5/15/15 10,635,431
29,644,000 REFCORP STRIPS-- COUPON,
7.51%, 7/15/15 7,697,065
48,550,000 STRIPS-- COUPON, 7.37%,
8/15/15 12,841,475
48,421,000 REFCORP STRIPS-- COUPON,
7.50%, 10/15/15 12,366,239
49,308,000 STRIPS-- COUPON, 7.37%,
11/15/15 12,811,698
36,300,000 STRIPS-- COUPON, 7.37%,
2/15/16 9,259,767
44,788,000 REFCORP STRIPS-- COUPON,
7.52%, 4/15/16 10,984,705
17,700,000 STRIPS-- COUPON, 7.37%,
5/15/16 4,435,620
25,000,000 REFCORP STRIPS-- COUPON,
7.52%, 7/15/16 6,018,750
23,000,000 REFCORP STRIPS-- COUPON,
7.53%, 10/15/16 5,426,390
-----------
TOTAL INVESTMENT SECURITIES--100.0% $103,062,709
(Cost $84,601,170) ============
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 March 31, 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
TOTAL RETURNS AS OF MARCH 31, 1997
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2020 ............. 0.50% 1.01% 8.29% 11.71% 8.79%
Fund
Benchmark(1) .............................. 0.35% 1.39% 8.82% 12.06% 8.13%(2)
Merrill Lynch Long-Term
Treasury Index ............................ 1.48% 2.83% 7.20% 8.78% 8.86%(2)
(1) From December 1989 through April 1990, the fund's benchmark was a 8/15/19
STRIPS issue; from May 1990 through October 1991, it was a 11/15/19 STRIPS
issue; and from November 1991 to the present, it has been a 11/15/20 STRIPS
issue.
(2) Returns since December 31, 1989, the date nearest the fund's inception for
which data are available. Inception date was December 29, 1989.
</TABLE>
See pages 44-45 for more information about returns, the comparative index and
the fund's benchmark.
[mountain graph - data below]
GROWTH OF $10,000 OVER THE LIFE OF THE FUND
Value on 3/31/97
$10,000 investment made 12/31/89
Target: 2020 Fund Benchmark Merrill Lynch 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 $18,425 $17,620 $18,506
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. This chart begins on 12/31/89 because that is the date nearest
the fund's inception 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 total return line of the index
does not.
PORTFOLIO AT A GLANCE
3/31/97 9/30/96
Number of Securities 19 19
Anticipated Growth Rate 6.73% 6.59%
Weighted Average Maturity Date 9/12/20 8/21/20
Anticipated Value at Maturity $104.41 $103.60
Expense Ratio 0.52%* 0.61%
* Annualized.
You will receive a proxy statement in June. Please read it
carefully and take part in the proxy vote.
Semiannual Report Target Maturities Trust: 2020 21
TARGET MATURITIES TRUST: 2020
Management Q & A
An interview with Dave Schroeder, a vice president and senior portfolio manager
on the Target Maturities Trust management team.
HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED MARCH 31, 1997?
The fund posted a 0.50% total return for the six-month period, reflecting the
unfavorable U.S. bond market conditions that prevailed in early 1997. The fund
outperformed the 0.35% total return of its benchmark, a coupon STRIPS issue
maturing on November 15, 2020. (See the Total Returns table on the previous page
for other fund performance comparisons.) One of the primary reasons behind this
outperformance was the fund's shorter average maturity relative to its
benchmark, which insulated the fund from some of the negative effects of rising
interest rates.
HOW DID YOU POSITION THE FUND DURING THE LAST SIX MONTHS?
We extended the fund's weighted average maturity (WAM) date from August 21,
2020, to September 12, 2020, bringing it closer to the November 15, 2020
maturity date of its benchmark. This shift improved the fund's ability to track
the performance of the benchmark. The longer maturity also increased the fund's
anticipated value at maturity (AVM) and anticipated growth rate (AGR).
We also increased the fund's holdings of REFCORPs (see the graphs on page 23)
because of the higher yields that REFCORPs offer over STRIPS. REFCORPs and
STRIPS are the only securities held
[line graph - data below]
TARGET 2020: SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1987
1988
1989
1990 11.46 92.6
1991 13.45 97.77
1992 14.575 102.184
1993 19.765 101.274
1994 16.273 102.175
1995 26.245 102.54
1996 22 103.598
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020 100.00
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM), which has a target of $100 but 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. For more information, please consult the prospectus.
22 Target Maturities Trust: 2020 American Century Investments
TARGET MATURITIES TRUST: 2020
in the fund because they are the only types of government zeros available in
this maturity sector.
We have also been working to keep the fund's transaction costs down. We have
reduced fund turnover by using the inflows and outflows of cash that typically
occur as opportunities to buy or sell securities, adjusting the fund's WAM at
the same time.
WERE THERE ANY OTHER WAYS THAT YOU ATTEMPTED TO ENHANCE THE FUND'S PERFORMANCE?
Yes. We continued to make securities loans during the last six months. Because
of its size, the fund owns a significant percentage of the outstanding supply of
coupon STRIPS maturing in 2020, sometimes holding as much as 30%-40% of the
available securities in the marketplace. This has made the outstanding supply of
2020 coupon STRIPS more scarce and consequently more expensive. As a result, the
fund is an attractive source for dealers who need to borrow securities to cover
sales. Fees from securities loans have been a successful way to boost the fund's
returns.
LOOKING AHEAD, WHAT IS YOUR OUTLOOK FOR THE TREASURY MARKET OVER THE NEXT SIX
MONTHS?
Bond yields rose dramatically in the first quarter of 1997, largely because the
U.S. economy has shown faster-than-normal growth and wages have been rising.
These factors also led the Federal Reserve to raise short-term interest rates in
March. The Fed appears to be in a rate-raising mode; our only question is how
high rates will go.
Historically, the average Fed "tightening cycle"--a series of consecutive
short-term interest rate increases designed to restrain economic growth and head
off inflation--consisted of four rate hikes totaling 200 basis points (2
percentage points). That magnitude of tightening seems unlikely this time
around, especially because rising wage pressures have not materialized in the
consumer inflation figures. In addition, the rise in bond yields over the past
few months may already be enough to slow economic activity and keep inflation at
bay. Overall, we believe that this will be a mild Fed tightening cycle.
Nevertheless, the bond market has already priced in another Fed rate increase,
even though inflation remained tame in the first quarter of 1997.
WHAT IS YOUR STRATEGY FOR THE FUND GOING FORWARD?
We will likely continue shifting the fund's WAM date closer to the November 15,
2020, maturity date of its benchmark. We will also likely keep the fund's asset
mix close to its current allocation of 51% REFCORPS and 49% STRIPS. In an effort
to enhance returns, we will continue to lend the fund's securities when
opportunities arise.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
REFCORPs 51%
STRIPS 49%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/96)
STRIPS 61%
REFCORPs 39%
Semiannual Report Target Maturities Trust: 2020 23
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2020
MARCH 31, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$62,000,000 REFCORP STRIPS -- PRINCIPAL,
7.52%, 10/15/19 $ 11,744,040
77,823,000 REFCORP STRIPS-- COUPON,
7.53%, 1/15/20 14,437,723
451,000,000 STRIPS-- COUPON, 7.38%,
2/15/20 85,938,050
43,344,000 REFCORP STRIPS-- COUPON,
7.53%, 4/15/20 7,895,110
410,500,000 STRIPS-- COUPON, 7.385%,
5/15/20 76,755,290
95,000,000 STRIPS-- PRINCIPAL, 7.38%,
5/15/20 17,783,050
112,400,000 REFCORP STRIPS-- COUPON,
7.53%, 7/15/20 20,095,996
645,000,000 REFCORP STRIPS-- PRINCIPAL,
7.53%, 7/15/20 115,319,550
217,135,000 STRIPS-- COUPON, 7.385%,
8/15/20 39,857,301
181,000,000 STRIPS-- PRINCIPAL, 7.38%,
8/15/20 33,262,370
139,165,000 REFCORP STRIPS-- COUPON,
7.53%, 10/15/20 24,429,024
600,000,000 REFCORP STRIPS-- PRINCIPAL,
7.53%, 10/15/20 105,324,000
251,707,000 STRIPS-- COUPON, 7.39%,
11/15/20(2) 45,337,465
42,505,000 REFCORP STRIPS-- COUPON,
7.53%, 1/15/21 7,323,612
672,945,000 REFCORP STRIPS-- PRINCIPAL,
7.53%, 1/15/21 115,948,423
204,250,000 STRIPS-- COUPON, 7.385%,
2/15/21 36,158,378
374,500,000 STRIPS-- COUPON, 7.38%,
5/15/21 65,200,450
50,000,000 STRIPS-- COUPON, 7.38%,
8/15/21 8,546,500
14,500,000 STRIPS-- COUPON, 7.37%,
11/15/21 2,440,495
-----------
TOTAL INVESTMENT SECURITIES--100.0% $833,796,827
(Cost $841,708,925) ============
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 March 31, 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 Notes to Financial Statements
24 Target Maturities Trust: 2020 American Century Investments
<TABLE>
<CAPTION>
TARGET MATURITIES TRUST: 2025
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR LIFE OF FUND
TOTAL RETURNS AS OF MARCH 31, 1997
<S> <C> <C> <C>
Target Maturities Trust: 2025 -1.56% -2.65% -10.04%
8/15/25 Maturity
STRIPS Issue -2.85% -5.76% -8.54%(1)
Merrill Lynch Long-Term
Treasury Index 1.48% 2.83% 0.80%(1)
(1) Returns since February 29, 1996, the date nearest the fund's inception for
which data are available. Inception date was February 15, 1996.
</TABLE>
See pages 44-45 for more information about returns, the comparative index and
the fund's benchmark.
[mountain graph - data below]
GROWTH OF $10,000 OVER THE LIFE OF THE FUND
Value on 3/31/97
$10,000 investment made 2/29/96
Target: 2025 8/15/25 STRIPS Issue Merrill Lynch Long-Term Index
Feb-96 $10,000 $10,000 $10,000
Mar-96 $9,562 $9,632 $9,810
Apr-96 $9,176 $8,975 $9,646
May-96 $9,166 $9,028 $9,600
Jun-96 $9,414 $9,361 $9,794
Jul-96 $9,398 $9,288 $9,794
Aug-96 $8,939 $8,808 $9,675
Sep-96 $9,456 $9,343 $9,940
Oct-96 $10,270 $10,159 $10,327
Nov-96 $11,046 $10,856 $10,667
Dec-96 $10,364 $10,158 $10,414
Jan-97 $9,948 $9,721 $10,347
Feb-97 $9,879 $9,612 $10,333
Mar-97 $9,308 $9,077 $10,087
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. This chart begins on 2/29/96 because that is the date nearest the
fund's inception 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 total return line of the index
does not.
PORTFOLIO AT A GLANCE
3/31/97 9/30/96
Number of Securities 13 12
Anticipated Growth Rate 6.62% 6.43%
Weighted Average Maturity Date 4/9/25 4/9/25
Anticipated Value at Maturity $109.32 $109.24
Expense Ratio 0.62%* 0.67%*
* Annualized.
You will receive a proxy statement in June. Please read it
carefully and take part in the proxy vote.
Semiannual Report Target Maturities Trust: 2025 25
TARGET MATURITIES TRUST: 2025
Management Q & A
An interview with Dave Schroeder, a vice president and senior portfolio manager
on the Target Maturities Trust management team.
HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED MARCH 31, 1997?
The extreme sensitivity of long-term zero-coupon bonds to changes in interest
rates is clearly demonstrated by the fund's returns. As a result of rising
yields on long-term zeros, the fund posted a -1.56% total return for the
six-month period. (See the Total Returns table on the previous page for other
fund performance comparisons.)
HOW DID THE FUND PERFORM COMPARED WITH ITS BENCHMARK?
Despite the fund's negative returns, it still outperformed the -2.85% total
return of its benchmark, a coupon STRIPS issue maturing on August 15, 2025. The
fund's shorter average maturity relative to its benchmark, which insulated the
fund from some of the negative effects of rising interest rates, was one reason
behind its outperformance. In addition, the fund performed better because we
carefully invested the additional cash inflows we received during the period.
Given that the fund's assets nearly doubled over the six-month period, we were
constantly on the lookout for attractively valued zeros that we felt would
enhance the fund's returns. Because they are the only types of government zeros
available in this maturity sector, REFCORPs and STRIPS were the only securities
held in the fund.
WERE THERE OTHER SIGNIFICANT FACTORS THAT HELPED IMPROVE THE FUND'S RETURNS?
Another factor buoying returns was the fund's holdings of REFCORPs. The slope of
the Treasury zero-coupon bond curve resulted in lower returns for STRIPS that
mature in 2024 through 2026 than for similar-maturity REFCORPs.
We used incoming assets to purchase REFCORPs because they offered more yield and
higher potential returns than STRIPS in this maturity sector. While we continue
to look for REFCORPs in this maturity, we will continue to monitor the relative
values of REFCORPs and STRIPS, shifting the fund's assets toward the more
attractively priced sector.
WHY IS THE FUND'S BENCHMARK A COUPON STRIPS ISSUE MATURING ON AUGUST 15, 2025,
WHEN THE BENCHMARKS FOR THE OTHER TARGET FUNDS MATURE ON NOVEMBER 15 OF THE
TARGET YEAR?
Until recently, a coupon STRIPS issue maturing on November 15, 2025, was not
available. Since these securities are now available, we will likely change the
fund's benchmark in the near future. This latter maturity better matches the
fund's targeted maturity date of December 31, 2025.
LOOKING AHEAD, WHAT IS YOUR OUTLOOK FOR THE TREASURY MARKET OVER THE NEXT SIX
MONTHS?
Bond yields rose dramatically in the first quarter of 1997, largely because the
U.S. economy has shown faster-than-normal growth and wages have been rising.
These factors also led the Federal Reserve to raise short-term interest rates in
March. The Fed appears to be in a rate-raising mode; our only question is how
high rates will go.
26 Target Maturities Trust: 2025 American Century Investments
TARGET MATURITIES TRUST: 2025
Historically, the average Fed "tightening cycle"--a series of consecutive
short-term interest rate increases designed to restrain economic growth and head
off inflation--consisted of four rate hikes totaling 200 basis points (2
percentage points). That magnitude of tightening seems unlikely this time
around, especially because rising wage pressures have not materialized in the
consumer inflation figures. In addition, the rise in bond yields over the past
few months may already be enough to slow economic activity and keep inflation at
bay. Overall, we believe that this will be a mild Fed tightening cycle.
Nevertheless, the bond market has already priced in another Fed rate increase,
even though inflation remained tame in the first quarter of 1997.
WHAT IS YOUR STRATEGY FOR THE FUND GOING FORWARD?
We will likely continue our efforts to extend the fund's weighted average
maturity (WAM) date so that it can better track the performance of its
benchmark. In addition, we will work to keep turnover and transaction costs to a
minimum by using cash inflows and outflows as opportunities to buy or sell
securities.
Despite the fact that supply at the long end of the zero-coupon curve is
inconsistent, we expect to keep the fund fully invested in zeros. In the
process, we will continue to concentrate the bulk of the fund's assets in
REFCORPs, investing the remainder in STRIPS.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/97)
REFCORPs 58%
STRIPS 42%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/96)
STRIPS 64%
REFCORPs 36%
Semiannual Report Target Maturities Trust: 2025 27
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2025
MARCH 31, 1997 (UNAUDITED)
Principal Amount Value
- -------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 3,926,000 REFCORP STRIPS -- COUPON,
7.43%, 7/15/24 $ 536,174
74,083,000 REFCORP STRIPS-- COUPON,
7.42%, 10/15/24 9,962,682
13,000,000 STRIPS-- COUPON, 7.28%,
11/15/24(2) 1,803,750
17,500,000 STRIPS-- PRINCIPAL, 7.27%,
11/15/24 2,434,600
30,500,000 REFCORP STRIPS-- COUPON,
7.41%, 1/15/25 4,037,895
95,900,000 STRIPS-- COUPON, 7.285%,
2/15/25(2) 13,048,154
40,300,000 STRIPS-- PRINCIPAL, 7.255%,
2/15/25 5,527,951
19,759,000 REFCORP STRIPS-- COUPON,
7.40%, 4/15/25 2,575,982
8,500,000 REFCORP STRIPS-- COUPON,
7.39%, 7/15/25 1,091,060
71,425,000 REFCORP STRIPS-- COUPON,
7.38%, 10/15/25 9,028,834
6,000,000 REFCORP STRIPS-- COUPON,
7.37%, 1/15/26 746,820
6,000,000 REFCORP STRIPS-- COUPON,
7.36%, 4/15/26 735,600
27,000,000 REFCORP STRIPS-- COUPON,
7.35%, 7/15/26 3,259,710
---------
TOTAL INVESTMENT SECURITIES--100.0% $54,789,212
(Cost $58,998,378) ===========
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 March 31, 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 Notes to Financial Statements
28 Target Maturities Trust: 2025 American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
2000 2005 2010 2015 2020 2025
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities, at value
(identified cost of
$256,034,676, $231,667,160,
$100,341,650, $84,601,170,
$841,708,925 and
$58,998,378,
respectively) (Note 3) ............$258,333,571 $233,284,274 $100,259,023 $103,062,709 $833,796,827 $54,789,212
Cash ................................ 548,286 1,351,268 881,757 2,295,859 1,402,658 1,159,903
Collateral for securities
loaned (Note 4) ................... -- -- -- -- 34,287,879 4,745,386
Receivable for capital shares sold .. 2,340 22,886 -- 1,120 8,039 379
Securities lending fee receivable ... -- -- -- -- 59,298 7,083
Prepaid expenses and other assets ... 6,490 5,862 4,369 4,434 13,519 20,998
------------ ----------- ----------- ----------- ----------- ----------
258,890,687 234,664,290 101,145,149 105,364,122 869,568,220 60,722,961
------------ ----------- ----------- ----------- ----------- ----------
LIABILITIES
Disbursements in excess
of demand deposit cash ............ 319,676 268,466 298,199 304,157 899,770 3,342
Payable for capital shares redeemed . 56,497 280,102 72,113 75,796 2,557,424 605,301
Payable for securities loaned
(Note 4) .......................... -- -- -- -- 34,287,879 4,745,386
Payable to affiliates (Note 2) ...... 114,166 105,912 52,512 53,026 356,936 27,363
Accrued expenses and other
liabilities ....................... 10,133 9,359 6,014 8,002 50,403 3,335
------------ ----------- ----------- ----------- ----------- ----------
500,472 663,839 428,838 440,981 38,152,412 5,384,727
------------ ----------- ----------- ----------- ----------- ----------
Net Assets Applicable to
Outstanding Shares ..................$258,390,215 $234,000,451 $100,716,311 $104,923,141 $831,415,808 $55,338,234
============ ============ ============ ============ ============ ===========
CAPITAL SHARES
Outstanding (Unlimited number
of shares authorized) ............. 3,167,164 3,996,476 2,339,359 3,251,275 37,598,656 3,139,679
============ ============ ============ ============ ============ ===========
Net Asset Value Per Share ........... $81.58 $58.55 $43.05 $32.27 $22.11 $17.63
============ ============ ============ ============ ============ ===========
NET ASSETS CONSIST OF:
Capital paid in .....................$256,110,115 $227,818,201 $98,493,902 $ 85,168,860 $824,246,552 $59,632,704
Undistributed net investment income . 4,054,387 3,703,596 1,627,246 1,688,342 13,920,333 822,666
Accumulated net realized gain (loss)
on investment transactions ........ (4,073,182) 861,540 677,790 (395,600) 1,161,021 (907,970)
Net unrealized appreciation
(depreciation)
on investments (Note 3) ........... 2,298,895 1,617,114 (82,627) 18,461,539 (7,912,098) (4,209,166)
------------ ------------ ------------ ------------ ------------ -----------
$258,390,215 $234,000,451 $100,716,311 $104,923,141 $831,415,808 $55,338,234
============ ============ ============ ============ ============ ===========
See Notes to Financial Statements
</TABLE>
Semiannual Report Statements of Assets and Liabilities 29
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
MARCH 31, 1997 (UNAUDITED)
2000 2005 2010 2015 2020 2025
---- ---- ---- ---- ---- ----
INVESTMENT INCOME
Income:
<S> <C> <C> <C> <C> <C> <C>
Interest ............................. $8,886,031 $8,120,635 $3,712,025 $3,693,767 $30,684,353 $1,558,032
Income from securities lending ....... -- -- -- -- 106,901 12,773
--------- --------- --------- --------- ---------- ---------
8,886,031 8,120,635 3,712,025 3,693,767 30,791,254 1,570,805
--------- --------- --------- --------- ---------- ---------
Expenses (Note 2):
Investment advisory fees ............. 391,222 355,430 160,940 169,436 1,324,006 67,347
Administrative fees .................. 125,102 113,558 51,397 54,108 422,791 21,469
Transfer agency fees ................. 119,685 126,185 79,175 79,660 363,914 30,485
Printing and postage ................. 32,131 29,969 15,231 15,649 97,672 5,823
Custodian fees ....................... 9,682 9,377 6,412 8,401 52,525 4,427
Auditing and legal fees .............. 10,349 9,485 5,283 5,453 30,942 3,379
Telephone expenses ................... 4,253 3,488 1,902 2,747 14,510 2,743
Registration and filing fees ......... 15,748 17,323 12,335 14,226 13,243 15,178
Directors' fees and expenses ......... 5,243 5,054 4,023 4,068 10,235 3,504
Other operating expenses ............. 4,398 3,798 2,093 1,676 7,935 3,132
--------- --------- --------- --------- ---------- ---------
Total expenses ..................... 717,813 673,667 338,791 355,424 2,337,773 157,487
Amount waived ........................ -- -- -- -- -- (15,244)
--------- --------- --------- --------- ---------- ---------
Net expenses ....................... 717,813 673,667 338,791 355,424 2,337,773 142,243
--------- --------- --------- --------- ---------- ---------
Net investment income ................ 8,168,218 7,446,968 3,373,234 3,338,343 28,453,481 1,428,562
--------- --------- --------- --------- ---------- ---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (NOTE 3)
Net realized gain (loss) on
investments ........................ 519,509 1,310,852 980,759 96,753 7,435,024 (406,621)
Change in net unrealized appreciation
(depreciation) on investments ...... (3,136,902) (5,494,210) (2,286,142) (1,553,136) (21,841,819) (3,527,424)
--------- --------- --------- --------- ---------- ---------
Net realized and unrealized (loss)
on investments ....................... (2,617,393) (4,183,358) (1,305,383) (1,456,383) (14,406,795) (3,934,045)
--------- --------- --------- --------- ---------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations ............ $5,550,825 $3,263,610 $2,067,851 $1,881,960 $14,046,686 ($2,505,483)
========== ========== ========== ========== =========== ===========
See Notes to Financial Statements
</TABLE>
30 Statements of Operations American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND YEAR ENDED
SEPTEMBER 30, 1996
2000 2005 2010
--------------------- ---------------------- -----------------------
March 31, Sept. 30, March 31, Sept. 30, March 31, Sept. 30,
Increase (Decrease) in Net Assets 1997 1996 1997 1996 1997 1996
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ............... $ 8,168,218 $ 7,234,905 $ 7,446,968 $ 13,769,131 $ 3,373,234 $ ,720,988
Net realized gain
on investments .................... 519,509 1,066,551 1,310,852 1,459,753 980,759 3,276,781
Change in net unrealized
appreciation (depreciation)
on investments .................... (3,136,902) (6,811,361) (5,494,210) (12,781,340) (2,286,142) (10,369,618)
---------- ---------- ---------- ----------- ---------- -----------
Net increase (decrease)
in net assets resulting
from operations ................... 5,550,825 11,490,095 3,263,610 2,447,544 2,067,851 (371,849)
--------- ---------- --------- --------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .......... (17,081,069) (14,295,441) (14,550,326) (8,101,012) (6,941,406) (4,075,907)
From net realized gains on
investment transactions ........... -- -- (1,764,814) (2,276,770) (2,886,955) --
--------- ---------- --------- --------- --------- --------
Decrease in nets assets from
distributions to shareholders ..... (17,081,069) (14,295,441) (16,315,140) (10,377,782) (9,828,361) (4,075,907)
----------- ----------- ----------- ----------- ---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........... 40,805,240 119,660,626 57,196,500 148,911,501 27,753,974 70,823,974
Proceeds from reinvestment
of distributions .................. 16,712,104 13,909,269 15,993,070 10,138,688 9,617,856 3,967,590
Payments for shares redeemed ........ (55,353,473)(157,743,941) (65,001,517) (95,708,098) (40,012,200) (54,283,235)
----------- ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from capital share transactions ... 2,163,871 (24,174,046) 8,188,053 63,342,091 (2,640,370) 20,508,329
--------- ----------- --------- ---------- ---------- ----------
Net increase (decrease)
in net assets ..................... (9,366,373) (26,979,392) (4,863,477) 55,411,853 (10,400,880) 16,060,573
NET ASSETS
Beginning of period ................. 267,756,588 294,735,980 238,863,928 183,452,075 111,117,191 95,056,618
----------- ----------- ----------- ----------- ----------- ----------
End of period .......................$258,390,215 $267,756,588 $234,000,451 $238,863,928 $100,716,311 $111,117,191
============ ============ ============ ============ ============ ============
TRANSACTIONS IN SHARES OF THE FUNDS
Sold ................................ 496,402 1,519,287 945,664 2,554,065 611,992 1,630,076
Issued in reinvestment
of distributions .................. 217,238 183,642 282,758 177,478 233,037 89,942
Redeemed ............................ (673,811) (1,999,924) (1,074,308) (1,660,147) (884,108) (1,267,142)
Reverse share split ................. (221,717) (188,515) (288,044) (181,450) (237,690) (92,308)
-------- -------- -------- -------- -------- -------
Net increase (decrease) ............. (181,888) (485,510) (133,930) 889,946 (276,769) 360,568
======== ======== ======== ======= ======== =======
See Notes to Financial Statements
</TABLE>
Semiannual Report Statements of Changes in Net Assets 31
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND YEAR ENDED
SEPTEMBER 30, 1996
2000 2005 2010
March 31, Sept. 30, March 31, Sept. 30, March 31, Sept. 30,
Increase (Decrease) in Net Assets 1997 1996 1997 1996 1997 1996(1)
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ................$ 3,338,343 $ 6,946,156 $ 28,453,481 $ 9,119,311 $ 1,428,562 $ 997,384
Net realized gain
(loss) on investments .............. 96,753 718,224 7,435,024 (5,541,503) (406,621) (501,349)
Change in net unrealized
appreciation (depreciation)
on investments ..................... (1,553,136) (9,126,013) (21,841,819) (53,272,683) (3,527,424) (681,742)
---------- ---------- ----------- ----------- ---------- --------
Net increase (decrease)
in net assets resulting
from operations .................... 1,881,960 (1,461,633) 14,046,686 (9,694,875) (2,505,483) (185,707)
--------- ---------- ---------- ---------- ---------- --------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ........... (6,897,464) (4,803,254) (54,220,221) (13,777,349) (1,603,280) --
From net realized gains on
investment transactions ............ (1,134,992) (6,017,851) (831) (1,324,633) -- --
---------- ----------- ----------- ----------- ---------- ----------
Decrease in nets assets from
distributions to shareholders ...... (8,032,456) (10,821,105) (54,221,052) (15,101,982) (1,603,280) --
---------- ----------- ----------- ----------- ---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............ 35,324,355 77,986,100 377,861,552 1,028,945,392 77,198,993 67,610,593
Proceeds from reinvestment
of distributions ................... 7,800,160 10,455,098 51,887,592 14,532,555 1,500,130 --
Payments for shares redeemed .........(47,704,703) (75,152,046)(484,478,180) (667,063,399) (54,912,728) (31,764,284)
----------- ----------- ------------ ------------ ----------- -----------
Net increase (decrease) in net assets
from capital share transactions .... (4,580,188) 13,289,152 (54,729,036) 376,414,548 23,786,395 35,846,309
---------- ---------- ----------- ----------- ---------- ----------
Net increase (decrease)
in net assets ......................(10,730,684) 1,006,414 (94,903,402) 351,617,691 19,677,632 35,660,602
NET ASSETS
Beginning of period ..................115,653,825 114,647,411 926,319,210 574,701,519 35,660,602 --
------------ ----------- ----------- ----------- ---------- -----------
End of period .......................$104,923,141 $115,653,825 $831,415,808 $926,319,210 $55,338,234 $35,660,602
============ ============ ============ ============ =========== ===========
TRANSACTIONS IN SHARES OF THE FUNDS
Sold ................................. 1,031,865 2,345,915 15,728,707 45,297,616 4,013,674 3,762,927
Issued in reinvestment of
distributions ...................... 241,403 318,306 2,286,213 585,620 79,037 --
Redeemed ............................. (1,392,320) (2,277,097) (20,135,859) (28,747,471) (2,860,427) (1,771,271)
Reverse share split .................. (248,097) (328,626) (2,383,074) (608,060) (84,261) -
-------- -------- ---------- -------- ------- ---------
Net increase (decrease) .............. (367,149) 58,498 (4,504,013) 16,527,705 1,148,023 1,991,656
======== ====== ========== ========== ========= =========
(1) February 15, 1996 (inception) through September 30, 1996.
See Notes to Financial Statements
</TABLE>
32 Statements of Changes in Net Assets American Century Investments
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
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. Premiums and discounts 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 are
declared and paid annually in December. Distributions from net realized gains
are declared and paid annually.
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. (ACC), the parent of the Trust's investment advisor,
Benham Management Corporation (BMC), the Trust's distributor, American Century
Investment Services, Inc. (ACIS), 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.
Semiannual Report Notes to Financial Statements 33
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
2. Transactions with Related Parties
The Trust has entered into an Investment Advisory Agreement with BMC that
provides the Trust with investment advisory services in exchange for an
investment advisory fee. ACSC pays all compensation of Trust officers and
trustees who are officers or directors of ACC or any of its subsidiaries. In
addition, promotion and distribution expenses are paid by BMC. The investment
advisory fee is paid monthly by each Fund based on its pro rata share of the
dollar amount derived from applying the Trust's average daily closing net assets
to the following annualized investment advisory fee schedule:
0.35% of the first $750 million
0.25% of the next $750 million
0.24% of the next $1 billion
0.23% of the next $1 billion
0.22% of the next $1 billion
0.21% of the next $1 billion
0.20% of the next $1 billion
0.19% of the average daily net assets over $6.5 billion
The Trust has an Administrative Services and Transfer Agency Agreement with
ACSC. Under the Agreement, ACSC provides substantially all administrative and
transfer agency services necessary to operate the Funds. Fees for these services
are based on transaction volume, number of accounts and average daily closing
net assets for funds advised by BMC. The Agreement was formerly with Benham
Financial Services, Inc.
The Trust has an additional agreement with BMC pursuant to which BMC established
a contractual expense guarantee that limits Fund expenses (excluding items such
as brokerage commissions, taxes, interest, custodian earnings credits, and
extraordinary expenses) to 0.62% (0.70% prior to June 1, 1996) of average daily
closing net assets. The agreement provides that BMC may recover amounts
(representing expenses in excess of the Fund's expense guarantee rate) absorbed
during the preceding 11 months, if, and to the extent that, for any given month,
the Fund's expenses are less than the expense guarantee rate in effect at that
time. On April 25, 1997, the Board of Trustees approved a plan to implement a
unified management fee, which would replace the existing contracts, previously
mentioned, between the Funds and related parties. Such plan is subject to
shareholder approval and will be voted on in July, 1997.
The payables to affiliates as of March 31, 1997, based on the above agreements
were as follows:
2000 2005 2010
---- ---- ----
Investment Advisor ............ $ 65,599 $ 59,398 $ 29,001
Administrative Services
and Transfer Agent ............ 48,567 46,514 23,511
--------- -------- --------
$114,166 $105,912 $ 52,512
========= ======== ========
2015 2020 2025
---- ---- ----
Investment Advisor ........... $ 28,955 $214,728 $ 14,551
Administrative Services
and Transfer Agent ........... 24,071 142,208 12,812
--------- -------- --------
$ 53,026 $356,936 $ 27,363
========= ======== ========
The Trust has a Distribution Agreement with ACIS, which is responsible for
promoting sales of and distributing the Trust's shares. This Agreement was
formerly with Benham Distributors, Inc.
34 Notes to Financial Statements American Century Investments
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
3. Investment Transactions
Investment transactions in U.S. Treasury securities (excluding short-term
investments) for the six months ended March 31, 1997, were as follows:
<TABLE>
2000 2005 2010 2015 2020 2025
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Purchases ........................... $ 1,985,725 $24,600,109 $16,417,092 $ 3,159,650 $109,099,840 $36,377,014
Proceeds From Sales ................. $17,789,782 $33,801,433 $29,592,540 $17,618,110 $216,008,210 $12,964,105
On March 31, 1997, the composition of unrealized appreciation and (depreciation)
of investment securities based on the aggregate cost of investments was as
follows:
2000 2005 2010 2015 2020 2025
---- ---- ---- ---- ---- ----
Appreciation ....................... $ 3,475,796 $ 6,934,551 $ 3,767,522 $18,461,539 $21,928,576 $ 7,039
(Depreciation) ..................... (1,176,901) (5,317,437) (3,850,149) - (29,840,674) (4,216,205)
Net ................................ 2,298,895 1,617,114 (82,627) 18,461,539 (7,912,098) (4,209,166)
The aggregate cost of investments for federal income tax purposes was the same
as the cost for financial reporting purposes.
</TABLE>
- --------------------------------------------------------------------------------
4. Securities Lending
At March 31, 1997, securities valued at $33,322,200 (2020) and $4,524,950 (2025)
were on loan to brokers. Securities received as collateral, at this date, were
valued at $34,287,879 (2020) and $4,745,386 (2025). The Funds' risks in
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
Semiannual Report Notes to Financial Statements 35
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
5. Corporate Events
The following name changes became effective January 1, 1997:
<TABLE>
NEW NAMES FORMER NAMES
--------- ------------
<S> <C> <C>
Funds' Issuer: American Century Target Maturities Trust Benham Target Maturities Trust
Funds: American Century-- Benham Target Maturities Trust: 2000 Benham Target Maturities Trust 2000 Portfolio
American Century-- Benham Target Maturities Trust: 2005 Benham Target Maturities Trust 2005 Portfolio
American Century-- Benham Target Maturities Trust: 2010 Benham Target Maturities Trust 2010 Portfolio
American Century-- Benham Target Maturities Trust: 2015 Benham Target Maturities Trust 2015 Portfolio
American Century-- Benham Target Maturities Trust: 2020 Benham Target Maturities Trust 2020 Portfolio
American Century-- Benham Target Maturities Trust: 2025 Benham Target Maturities Trust 2025 Portfolio
Parent Company: American Century Companies, Inc. Twentieth Century Companies, Inc.
Distributor: American Century Investment Services, Inc. Twentieth Century Securities, Inc.
Transfer Agent: American Century Services Corporation Twentieth Century Services, Inc.
</TABLE>
36 Notes to Financial Statements American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2000
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
1997(1) 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ----
PER-SHARE DATA(2)
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ................ $79.95 $76.86 $66.93 $72.40 $62.16 $52.67
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ............ 2.61 4.75 4.37 3.99 3.94 3.90
Net Realized and Unrealized Gain
(Loss) on Investment
Transactions ..................... (0.98) (1.66) 5.56 (9.46) 6.30 5.59
------ ------ ------ ------ ------ ------
Total From
Investment Operations ............ 1.63 3.09 9.93 (5.47) 10.24 9.49
------ ------ ------ ------ ------ ------
Distributions
From Net Investment Income ....... (5.20) (3.94) (3.42) (3.25) (2.34) (2.22)
From Net Realized
Capital Gains .................... -- -- -- (2.95) (1.83) (0.16)
In Excess of Net
Realized Gains ................... -- -- -- (1.20) -- --
------ ------ ------ ------ ------ ------
Total Distributions .............. (5.20) (3.94) (3.42) (7.40) (4.17) (2.38)
------ ------ ------ ------ ------ ------
Reverse Share Split ................ 5.20 3.94 3.42 7.40 4.17 2.38
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ..... $81.58 $79.95 $76.86 $66.93 $72.40 $62.16
====== ====== ====== ====== ====== ======
Total Return(3) .................. 2.04% 4.01% 14.84% (7.54)% 16.46% 18.02%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..............0.54%(4) 0.53% 0.63% 0.59% 0.60% 0.66%
Ratio of Net Investment Income
to Average Net Assets ..............6.16%(4) 5.99% 6.13% 5.74% 5.94% 6.90%
Portfolio Turnover Rate ............ 1% 29% 53% 89% 77% 93%
Net Assets, End
of Period (in thousands) ...........$258,390 $267,757 $294,736 $243,895 $291,418 $190,063
(1) Six months ended March 31,1997 (unaudited).
(2) For periods prior to March 31, 1997, per-share data was calculated using
average shares outstanding during the period. Distributions shown for those
periods will be different than the actual per-share distributions to
shareholders.
(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.
</TABLE>
See Notes to Financial Statements
Semiannual Report Financial Highlights 37
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2005
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
1997(1) 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ----
PER-SHARE DATA(2)
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .................$57.83 $56.61 $45.22 $51.84 $41.18 $35.13
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ............. 1.92 3.50 3.33 3.11 2.90 2.69
Net Realized and Unrealized Gain
(Loss) on Investment Transactions . (1.20) (2.28) 8.06 (9.73) 7.76 3.36
----- ----- ---- ----- ---- ----
Total From
Investment Operations ............. 0.72 1.22 11.39 (6.62) 10.66 6.05
---- ---- ----- ----- ----- ----
Distributions
From Net Investment Income ........ (3.61) (2.06) (2.41) (2.70) (2.51) (1.75)
From Net Realized Capital Gains ... (0.44) (0.58) (0.67) (8.47) (1.01) (0.37)
----- ----- ----- ----- ----- -----
Total Distributions ............... (4.05) (2.64) (3.08) (11.17) (3.52) (2.12)
----- ----- ----- ------ ----- -----
Reverse Share Split ................. 4.05 2.64 3.08 11.17 3.52 2.12
---- ---- ---- ----- ---- ----
Net Asset Value, End of Period ......$58.55 $57.83 $56.61 $45.22 $51.84 $41.18
====== ====== ====== ====== ====== ======
Total Return(3) ................... 1.25% 2.15% 25.16% (12.75)% 25.89% 17.22%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 0.56%(4) 0.58% 0.71% 0.64% 0.62% 0.63%
Ratio of Net Investment Income
to Average Net Assets ............... 6.19%(4) 6.05% 6.58% 6.37% 6.44% 7.27%
Portfolio Turnover Rate ............. 10% 31% 34% 68% 50% 64%
Net Assets, End
of Period (in thousands) ............$234,000 $238,864 $183,452 $96,207 $149,890 $168,697
(1) Six months ended March 31,1997 (unaudited).
(2) For periods prior to March 31, 1997, per-share data was calculated using
average shares outstanding during the period. Distributions shown for those
periods will be different than the actual per-share distributions to
shareholders.
(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
</TABLE>
38 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2010
For a Share Outstanding Throughout the Years Ended September 30 (except as
noted)
1997(1) 1996 1995 1994 1993 1992
PER-SHARE DATA(2)
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .................$42.47 $42.14 $31.67 $38.13 $28.53 $25.08
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ............. 1.53 2.58 2.41 2.24 2.05 1.88
Net Realized and Unrealized Gain
(Loss) on Investment Transactions . (0.95) (2.25) 8.06 (8.70) 7.55 1.57
------ ------ ------ ------ ------ ------
Total From
Investment Operations ............. 0.58 0.33 10.47 (6.46) 9.60 3.45
------ ------ ------ ------ ------ ------
Distributions
From Net Investment Income ........ (2.82) (1.57) (1.48) (1.46) (1.58) (1.14)
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) (1.14)
------ ------ ------ ------ ------ ------
Reverse Share Split ................. 3.99 1.57 1.96 5.77 2.72 1.14
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ......$43.05 $42.47 $42.14 $31.67 $38.13 $28.53
====== ====== ====== ====== ====== ======
Total Return(3) ................... 1.37% 0.78% 33.06% (16.92)% 33.61% 13.76%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..............0.62%(4) 0.67% 0.71% 0.68% 0.66% 0.70%
Ratio of Net Investment Income
to Average Net Assets ..............6.20%(4) 5.98% 6.56% 6.35% 6.32% 7.20%
Portfolio Turnover Rate ............ 15% 24% 26% 35% 132% 95%
Net Assets, End
of Period (in thousands) ...........$100,716 $111,117 $95,057 $46,312 $70,551 $55,565
(1) Six months ended March 31,1997 (unaudited).
(2) For periods prior to March 31, 1997, per-share data was calculated using
average shares outstanding during the period. Distributions shown for those
periods will be different than the actual per-share distributions to
shareholders.
(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
</TABLE>
Semiannual Report Financial Highlights 39
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2015
For a Share Outstanding Throughout the Years Ended September 30 (except as
noted)
1997(1) 1996 1995 1994 1993 1992
PER-SHARE DATA(2)
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .................$31.96 $32.20 $22.79 $29.04 $20.39 $18.44
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ............. 1.12 1.85 1.71 1.57 1.46 1.33
Net Realized and Unrealized Gain
(Loss) on Investment Transactions . (0.81) (2.09) 7.70 (7.82) 7.19 0.62
------ ------ ------ ------ ------ ------
Total From
Investment Operations ............. 0.31 (0.24) 9.41 (6.25) 8.65 1.95
------ ------ ------ ------ ------ ------
Distributions
From Net Investment Income ........ (2.05) (1.28) (0.87) (1.19) (1.45) (1.23)
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) (1.23)
------ ------ ------ ------ ------ ------
Reverse Share Split ................. 2.39 2.89 0.87 8.64 1.79 1.23
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ......$32.27 $31.96 $32.20 $22.79 $29.04 $20.39
====== ====== ====== ====== ====== ======
Total Return(3) ................... 0.97% (0.74)% 41.29% (21.52)% 42.42% 10.57%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..............0.62%(4) 0.65% 0.71% 0.68% 0.63% 0.62%
Ratio of Net Investment Income
to Average Net Assets ..............5.83%(4) 5.63% 6.40% 5.97% 6.28% 7.04%
Portfolio Turnover Rate ............ 3% 17% 70% 65% 138% 103%
Net Assets, End
of Period (in thousands) ...........$104,923 $115,654 $114,647 $66,073 $89,023 $131,106
(1) Six months ended March 31,1997 (unaudited).
(2) For periods prior to March 31, 1997, per-share data was calculated using
average shares outstanding during the period. Distributions shown for those
periods will be different than the actual per-share distributions to
shareholders.
(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
</TABLE>
40 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2020
For a Share Outstanding Throughout the Years Ended September 30 (except as
noted)
1997(1) 1996 1995 1994 1993 1992
PER-SHARE DATA(2)
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .................$22.00 $22.47 $15.28 $20.72 $13.63 $12.54
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ............. 0.88 1.41 1.19 1.13 1.00 0.92
Net Realized and Unrealized Gain
(Loss) on Investment Transactions . (0.77) (1.88) 6.00 (6.57) 6.09 0.17
------ ------ ------ ------ ------ ------
Total From
Investment Operations ............. 0.11 (0.47) 7.19 (5.44) 7.09 1.09
------ ------ ------ ------ ------ ------
Distributions
From Net Investment Income ........ (1.45) (0.40) (0.21) (0.28) (0.53) (0.63)
From Net Realized Capital Gains ... -- (0.04) -- (1.31) (0.72) (0.08)
In Excess of Net Realized Gains ... -- -- -- (1.18) -- --
------ ------ ------ ------ ------ ------
Total Distributions ............... (1.45) (0.44) (0.21) (2.77) (1.25) (0.71)
------ ------ ------ ------ ------ ------
Reverse Share Split ................. 1.45 0.44 0.21 2.77 1.25 0.71
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ......$22.11 $22.00 $22.47 $15.28 $20.72 $13.63
====== ====== ====== ====== ====== ======
Total Return(3) ................... 0.50% (2.09)% 47.05% (26.25)% 52.02% 8.69%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..............0.52%(4) 0.61% 0.72% 0.70% 0.70% 0.66%
Ratio of Net Investment Income
to Average Net Assets ..............6.33%(4) 6.25% 6.24% 6.28% 6.10% 7.19%
Portfolio Turnover Rate ............ 12% 47% 78% 116% 179% 144%
Net Assets, End
of Period (in thousands) ..........$831,416 $926,319 $574,702 $58,535 $56,125 $41,793
(1) Six months ended March 31,1997 (unaudited).
(2) For periods prior to March 31, 1997, per-share data was calculated using
average shares outstanding during the period. Distributions shown for those
periods will be different than the actual per-share distributions to
shareholders.
(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
</TABLE>
Semiannual Report Financial Highlights 41
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2025
For a Share Outstanding Throughout the Periods Indicated
1997(1) 1996(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C>
Beginning of Period ....................................................... $17.91 $19.85
------ ------
Income From Investment Operations
Net Investment Income .................................................. 0.48 0.72
Net Realized and Unrealized (Loss) on Investment Transactions .......... (0.76) (2.66)
----- -----
Total From Investment Operations ....................................... (0.28) (1.94)
----- -----
Distributions
From Net Investment Income ............................................. (0.72) --
----- -----
Reverse Share Split ....................................................... 0.72 --
----- -----
Net Asset Value, End of Period ............................................ $17.63 $17.91
====== ======
Total Return(3) ........................................................ (1.56)% (9.77)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ......................... 0.62%(4) 0.67%(4)
Ratio of Net Investment Income to Average Net Assets ...................... 6.26%(4) 6.57%(4)
Portfolio Turnover Rate ................................................... 29% 61%
Net Assets, End of Period (in thousands) .................................. $55,338 $35,661
(1) Six months ended March 31,1997 (unaudited).
(2) February 15, 1996 (inception) through September 30, 1996. Per-share data
was calculated using average shares outstanding during the period.
Distributions shown for this period will be different than the actual
per-share distributions to shareholders.
(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
</TABLE>
42 Financial Highlights American Century Investments
IMPORTANT NOTICE FOR
ALL IRA AND 403(b) SHAREHOLDERS
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.
Semiannual Report Important Notice 43
BACKGROUND INFORMATION
Investment Philosophy and Policies
The American Century group offers 42 fixed-income funds, ranging from money
market funds to long-term bond funds and including both taxable and tax-exempt
funds.
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.
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.
Comparative Index
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 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.
PORTFOLIO MANAGEMENT TEAM
-------------------------
Vice President and
Senior Portfolio Manager Dave Schroeder
Portfolio Manager Casey Colton
44 Background Information American Century Investments
GLOSSARY
Investment Terms
o Basis Point--one one-hundredth of a percentage point (or 0.01%). 100 basis
points equal one percentage point (or 1%).
o Coupon--the stated interest rate of a security.
o 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
o 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.
o 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 37-42.
Statistical Terminology
o Number of Securities--the number of different securities held by a fund on
a given date.
o Anticipated Growth Rate (AGR)--the annualized rate of return that an
investor "locks in" after investing in a portfolio on a specific day.
o 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.
o 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.
o Anticipated Value at Maturity (AVM)--the calculated redemption value of a
portfolio share on the portfolio's WAM date. The portfolios are managed to
have an AVM of approximately $100.
o Expense Ratio--the operating expenses of the fund, expressed as a
percentage of average net assets. Shareholders pay an annual fee to the
investment advisor for investment advisory and management services. The
expenses and fees are deducted from fund income, not from each shareholder.
The annual fee has a contractual expense limit guarantee based on the terms
of the Investment Advisory Agreement. (See Note 2 in the Notes to Financial
Statements.)
Types of Securities
o 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
o 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.
o 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.
o 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.
Semiannual Report Glossary 45
[american century logo]
American
Century(sm)
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-Person Assistance:
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 816-7444-3485
Fax: 816-340-7962
Internet: www.americancentury.com
AMERICAN CENTURY TARGET MATURITIES TRUST
Investment Manager
BENHAM MANAGEMENT CORPORATION
This report and the statements it
contains are submitted for the general
information of our shareholders. The
report is not authorized for
distribution to prospective investors
unless preceded or accompanied by an
effective prospectus.
American Century Investment Services, Inc.
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