SEMIANNUAL
REPORT
[american century logo(reg.sm)]
American
Century(reg.tm)
MARCH 31, 1998
BENHAM
GROUP
Target Maturities Trust: 2000
Target Maturities Trust: 2005
Target Maturities Trust: 2010
Target Maturities Trust: 2015
Target Maturities Trust: 2020
Target Maturities Trust: 2025
TABLE OF CONTENTS
Our Message to You ........................................................ 1
Report Highlights ......................................................... 2
Market Perspective ........................................................ 4
Target Maturities Trust: 2000
Performance & Portfolio Information ............................ 5
Management Q & A ............................................... 6
Schedule of Investments ........................................ 8
Financial Highlights ........................................... 36
Target Maturities Trust: 2005
Performance & Portfolio Information ............................ 9
Management Q & A ............................................... 10
Schedule of Investments ........................................ 12
Financial Highlights ........................................... 37
Target Maturities Trust: 2010
Performance & Portfolio Information ............................ 13
Management Q & A ............................................... 14
Schedule of Investments ........................................ 16
Financial Highlights ........................................... 38
Target Maturities Trust: 2015
Performance & Portfolio Information ............................ 17
Management Q & A ............................................... 18
Schedule of Investments ........................................ 20
Financial Highlights ........................................... 39
Target Maturities Trust: 2020
Performance & Portfolio Information ............................ 21
Management Q & A ............................................... 22
Schedule of Investments ........................................ 24
Financial Highlights ........................................... 40
Target Maturities Trust: 2025
Performance & Portfolio Information ............................ 25
Management Q & A ............................................... 26
Schedule of Investments ........................................ 28
Financial Highlights ........................................... 41
Statements of Assets and Liabilities ...................................... 29
Statements of Operations .................................................. 30
Statements of Changes in Net Assets ....................................... 31
Notes to Financial Statements ............................................. 33
Retirement Account Information ............................................ 42
Background Information .................................................... 44
Glossary .................................................................. 45
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios.
We've organized our funds into three distinct groups, based on investment style
and objectives, to help simplify your fund decisions. These groups appear below.
AMERICAN CENTURY INVESTMENTS--FAMILY OF FUNDS
- -------------------------------------------------------------------------------
Benham American Century Twentieth Century
Group Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
Target Maturities
Trust
We welcome your comments or questions about this report. See the back cover for
ways to contact us by mail, phone or e-mail.
American Century and Benham Group are registered marks of American Century
Services Corporation.
AMERICAN CENTURY INVESTMENTS
OUR MESSAGE TO YOU
[photo of James E. Stowers, Jr. and James E. Stowers III]
The U.S. Treasury market rallied during the six-month period ended March 31,
1998. Low inflation, an improving federal budget and healthy economy created an
ideal environment for bonds. The financial crisis in Asia boosted demand for
Treasurys as global investors looked for a safe place to put their money.
Zero-coupon bonds, which are considerably more sensitive to changes in
interest rates than traditional Treasurys, produced handsome returns during the
six-month period. Rapidly falling interest rates helped longer-maturity zeros to
post double-digit gains.
The past six months have been eventful for American Century. As many of you
may know, we gained a powerful business partner this past January, when J.P.
Morgan became a substantial minority shareholder. J.P. Morgan has been in
business over 150 years, serving institutions, governments and individuals with
complex financial needs. The new business partnership will allow both companies
to offer investors a highly diverse menu of options and services.
Many of you may also know that Jim Benham, founder of the Benham Group,
retired in December. With the integration of Benham and Twentieth Century
successfully completed, Jim felt it was time to step back from the business.
Much of the Benham culture has become a part of American Century, including the
educational investor seminar program Jim created. Two of his sons, Jim A. Benham
and Tim Benham, remain with the company to carry on the Benham tradition.
We're also working hard to prepare our computer systems for year 2000 (Y2K),
which has been widely publicized in the financial press. Y2K refers to the
possible inability of computer systems to distinguish between the years 1900 and
2000. Like other financial companies, a significant percentage of our computer
operations involves some type of date comparison or date calculation. Although
much of our system is already Y2K compliant, we anticipate the rest will be in
compliance by the end of this year.
In closing, we are proud to note that 1998 marks the 40th year since
American Century launched its first mutual funds. Not many fund companies can
claim a 40-year track record, or a fund family that includes nearly 70 stock,
bond, money market and blended (stock and bond) funds that provide investors
with such a wide range of choice and flexibility. Whatever your financial goals,
we believe we have an outstanding group of funds to help you reach them.
Thank you for your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer
SEMIANNUAL REPORT OUR MESSAGE TO YOU 1
REPORT HIGHLIGHTS
MARKET PERSPECTIVE
* Zero-coupon Treasury bonds produced excellent returns in the six months
ended March 31, 1998, when interest rates declined sharply.
* Interest rates fell in part because inflation was low--consumer prices rose
at the slowest pace in a dozen years in 1997.
* While inflation was dormant, the economy surged ahead by 3.7% in the fourth
quarter of 1997 and by 4.2% in the first three months of 1998.
* Economic turmoil in Asia spurred demand for U.S. Treasury securities, which
are considered "safe-haven" investments.
* Demand for Treasurys was also helped by the strong U.S. dollar, high real
yields (nominal interest rates minus the current rate of inflation) and a
healthy economy.
TARGET MATURITIES TRUST: 2000
* The fund returned 3.47% for the six months (see the Total Returns table on
page 5). Target: 2000's positive returns are a result of the recent decline
in interest rates.
* The fund's anticipated value at maturity (AVM) rose by $0.36 because we
lowered the assumption for expenses in our AVM calculation to reflect the
new, unified fee structure.
* We sold some STRIPS (defined on page 45) and bought the principal piece of
an old Treasury bond with a yield to maturity that was 0.20% higher than
STRIPS yields.
* Going forward, we'll continue to keep the portfolio's average maturity date
close to the November 15, 2000 maturity of the benchmark.
TARGET MATURITIES TRUST: 2005
* For the six months, the fund produced a total return of 6.18% (see the Total
Returns table on page 9), reflecting the recent decline in interest rates.
* The fund's anticipated value at maturity (AVM) rose by $0.98 because we
lowered the assumption for expenses in our AVM calculation to reflect the
new, unified fee structure.
* We used new money coming into the fund to buy STRIPS maturing in February
2006. Those securities have a higher yield than 2005-maturity STRIPS and
also helped boost Target: 2005's AVM.
* Going forward, we'll continue to keep the fund's average maturity date close
to the November 15, 2005 maturity of the benchmark.
TARGET MATURITIES TRUST: 2010
* For the six months, the fund produced a total return of 8.79% (see the Total
Returns table on page 13), reflecting the recent decline in interest rates.
* The fund's anticipated value at maturity (AVM) rose by $1.28 because we
lowered the assumption for expenses in our AVM calculation to reflect the
new, unified fee structure.
TARGET: 2000
TOTAL RETURNS: AS OF 3/31/98
6 Months 3.47%*
1 Year 9.16%
NET ASSETS: $239.9 million
(AS OF 3/31/98)
INCEPTION DATE: 3/25/85
TICKER SYMBOL: BTMTX
TARGET: 2005
TOTAL RETURNS: AS OF 3/31/98
6 Months 6.18%*
1 Year 17.05%
NET ASSETS: $406.4 million
(AS OF 3/31/98)
INCEPTION DATE: 3/25/85
TICKER SYMBOL: BTFIX
TARGET: 2010
TOTAL RETURNS: AS OF 3/31/98
6 Months 8.79%*
1 Year 24.23%
NET ASSETS: $183.6 million
(AS OF 3/31/98)
INCEPTION DATE: 3/25/85
TICKER SYMBOL: BTTNX
* Not annualized.
2 REPORT HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
REPORT HIGHLIGHTS
* We used new money coming into the fund to buy November 2010 STRIPS, which
helped lengthen the average maturity date from October 3 to October 7, 2010.
* Going forward, we'll work to get the fund's average maturity date closer to
the November 15, 2010 maturity of the benchmark.
TARGET MATURITIES TRUST: 2015
* The fund returned 12.34% for the six months (see the Total Returns table on
page 17). Those healthy returns are a result of the recent decline in
interest rates and the fund's high degree of sensitivity to rate changes.
* Target: 2015's anticipated value at maturity (AVM) rose by $1.97 because we
lowered the assumption for expenses in our AVM calculation to reflect the
new, unified fee structure.
* We used new money coming into the fund to buy November 2015 STRIPS, which
helped keep the fund's average maturity date very close to that of the
benchmark.
* Going forward, we'll continue to track the benchmark to help the fund reach
its AVM.
TARGET MATURITIES TRUST: 2020
* For the six months, the fund returned 15.27% (see the Total Returns table on
page 21). Those returns reflect the recent decline in interest rates and the
fund's extreme sensitivity to rate changes.
* The fund's anticipated value at maturity (AVM) rose by $2.32 because we
lowered the assumption for expenses in our AVM calculation to reflect the
new, unified fee structure.
* We sold some of our shortest maturity and highest tax cost REFCORPs (defined
on page 45) to meet shareholder redemptions.
* Going forward, we'll work to move the portfolio's average maturity date
closer to the November 15, 2020 maturity of the benchmark.
TARGET MATURITIES TRUST: 2025
* For the six months, the fund returned 16.48% (see the Total Returns table on
page 25). Those returns reflect the recent decline in interest rates and the
fund's extreme sensitivity to rate changes.
* The fund's anticipated value at maturity (AVM) rose by $1.88 because we
lowered the assumption for expenses in our AVM calculation to reflect the
new, unified fee structure.
* Fund assets nearly tripled, and we used that new money to buy STRIPS, which
are the most liquid zero-coupon bonds (the easiest to buy and sell).
* Going forward, we'll continue to move the portfolio's average maturity date
closer to the November 15, 2025 maturity of the benchmark.
TARGET: 2015
TOTAL RETURNS: AS OF 3/31/98
6 Months 12.34%*
1 Year 33.47%
NET ASSETS: $145.1 million
(AS OF 3/31/98)
INCEPTION DATE: 9/1/86
TICKER SYMBOL: BTFTX
TARGET: 2020
TOTAL RETURNS: AS OF 3/31/98
6 Months 15.27%*
1 Year 41.66%
NET ASSETS: $556.9 million
(AS OF 3/31/98)
INCEPTION DATE: 12/29/89
TICKER SYMBOL: BTTTX
TARGET: 2025
TOTAL RETURNS: AS OF 3/31/98
6 Months 16.48%*
1 Year 47.14%
NET ASSETS: $205.5 million
(AS OF 3/31/98)
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
MARKET PERSPECTIVE
[line graph - data below]
Shifting Yield Curve for Treasury Zeros
Years to Maturity 9/30/97 3/31/98
1 5.670% 5.600%
2 5.840% 5.610%
3 5.910% 5.670%
4 5.990% 5.680%
5 6.010% 5.750%
6 6.095% 5.780%
7 6.180% 5.810%
8 6.230% 5.847%
9 6.280% 5.883%
10 6.330% 5.920%
11 6.370% 5.952%
12 6.410% 5.984%
13 6.450% 6.016%
14 6.490% 6.048%
15 6.530% 6.080%
16 6.548% 6.090%
17 6.566% 6.100%
18 6.584% 6.110%
19 6.602% 6.120%
20 6.620% 6.130%
21 6.614% 6.126%
22 6.608% 6.122%
23 6.602% 6.118%
24 6.596% 6.114%
25 6.590% 6.110%
26 6.556% 6.088%
27 6.522% 6.066%
28 6.488% 6.044%
29 6.454% 6.022%
30 6.420% 6.000%
REPRESENTATIVE RETURNS FOR ZEROS (six months ended 3/31/98)
11/15/00 coupon STRIPS 3.77%
11/15/05 coupon STRIPS 6.35%
11/15/10 coupon STRIPS 8.92%
11/15/15 coupon STRIPS 12.68%
11/15/20 coupon STRIPS 15.52%
11/15/25 coupon STRIPS 17.59%
Source: Bloomberg Financial Markets
EXCEPTIONAL PERFORMANCE
Zero-coupon Treasury bonds produced outstanding returns in the six months
ended March 31, 1998, when interest rates declined sharply (see the yield curve
graphic at right). Longer-term zeros, which are most sensitive to changes in
rates, performed best. As shown in the accompanying table, the November 15, 2025
STRIPS issue returned 17.59%, while the shorter-term November 15, 2000 STRIPS
returned 3.77%.
U.S. ECONOMY
Interest rates came down in part because inflation remained low despite
healthy U.S. economic growth. In 1997, consumer prices rose at the slowest pace
in a dozen years. Huge gains in worker productivity and savings on health care
and benefits costs allowed companies to pay higher wages without increasing
prices. Lower energy and commodity prices also played a role in keeping
inflation in check. Oil prices hit a nine-year low in March 1998.
While inflation was dormant, the economy roared ahead, expanding by 3.7% in
the fourth quarter of 1997 and 4.2% in the first three months of 1998. The
unemployment rate reached a 24-year low during the period.
ASIAN FLU
Economic turmoil in Asia also contributed to lower U.S. interest rates.
Analysts expect slower Asian demand for U.S. goods to take the edge off economic
growth going forward. In addition, the dollar appreciated sharply against many
Asian currencies. A stronger dollar makes imports cheaper for American
consumers, limiting the ability of U.S. companies to push through price
increases.
SUPPLY AND DEMAND
Demand for Treasury bonds was given a boost by the Asian crisis--global
investors looking for refuge from volatile world equity markets bought U.S.
Treasury securities for their relative safety.
With inflation so low, "real" yields on Treasurys (nominal interest rates
minus the current rate of inflation) exceeded 4%, compared with a historical
average of around 2%. High real yields, a healthy economy and strong dollar
attracted large global capital flows to the U.S. bond market.
Treasurys also benefited from an improving federal budget picture. Smaller
federal budget deficits mean less need for government borrowing, so Treasury
supply will likely decline going forward. That helped boost prices and lower
yields on existing securities.
4 MARKET PERSPECTIVE AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
TARGET MATURITIES TRUST: 2000
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF MARCH 31, 1998*
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2000 ........ 3.47% 9.16% 8.11% 6.02% 9.86%
11/15/00 Maturity
STRIPS Issue ......................... 3.77% 9.66% 8.56% 6.43% 10.36%
Merrill Lynch Long-Term
Treasury Index ....................... 8.03% 20.49% 12.44% 8.96% 10.78%
</TABLE>
* Returns for periods less than one year are not annualized.
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 Ten Years
$10,000 investment made 3/31/88
Value on 3/31/98
11/15/00 Merrill Lynch
Target: 2000 STRIPS Issue Long-Term Index
Mar-88 $10,000 $10,000 $10,000
Apr-88 $9,796 $9,762 $9,839
May-88 $9,554 $9,644 $9,666
Jun-88 $10,106 $10,189 $10,074
Jul-88 $9,873 $9,884 $9,883
Aug-88 $9,905 $9,967 $9,921
Sep-88 $10,420 $10,459 $10,296
Oct-88 $10,817 $10,872 $10,599
Nov-88 $10,547 $10,604 $10,367
Dec-88 $10,690 $10,647 $10,499
Jan-89 $10,964 $11,075 $10,711
Feb-89 $10,593 $10,685 $10,496
Mar-89 $10,739 $10,803 $10,607
Apr-89 $11,093 $11,134 $10,856
May-89 $11,530 $11,625 $11,288
Jun-89 $12,313 $12,417 $11,928
Jul-89 $12,629 $12,694 $12,200
Aug-89 $12,258 $12,333 $11,876
Sep-89 $12,310 $12,374 $11,921
Oct-89 $12,785 $12,921 $12,399
Nov-89 $12,891 $13,033 $12,500
Dec-89 $12,808 $13,020 $12,483
Jan-90 $12,244 $12,452 $12,057
Feb-90 $12,235 $12,405 $12,005
Mar-90 $12,250 $12,391 $11,974
Apr-90 $11,856 $12,012 $11,667
May-90 $12,417 $12,624 $12,211
Jun-90 $12,719 $12,927 $12,490
Jul-90 $12,851 $13,087 $12,618
Aug-90 $12,273 $12,490 $12,072
Sep-90 $12,402 $12,600 $12,227
Oct-90 $12,750 $13,036 $12,499
Nov-90 $13,314 $13,588 $13,018
Dec-90 $13,616 $13,906 $13,289
Jan-91 $13,720 $14,055 $13,439
Feb-91 $13,772 $13,997 $13,492
Mar-91 $13,835 $14,102 $13,536
Apr-91 $14,033 $14,373 $13,715
May-91 $14,013 $14,289 $13,714
Jun-91 $13,918 $14,199 $13,606
Jul-91 $14,125 $14,434 $13,805
Aug-91 $14,692 $14,962 $14,287
Sep-91 $15,152 $15,492 $14,733
Oct-91 $15,285 $15,538 $14,781
Nov-91 $15,469 $15,836 $14,852
Dec-91 $16,430 $16,824 $15,738
Jan-92 $15,757 $16,124 $15,227
Feb-92 $15,857 $16,216 $15,335
Mar-92 $15,639 $15,960 $15,166
Apr-92 $15,633 $16,061 $15,172
May-92 $16,062 $16,412 $15,571
Jun-92 $16,484 $16,843 $15,794
Jul-92 $17,221 $17,597 $16,439
Aug-92 $17,431 $17,855 $16,578
Sep-92 $17,883 $18,324 $16,833
Oct-92 $17,440 $17,843 $16,498
Nov-92 $17,348 $17,755 $16,548
Dec-92 $17,822 $18,232 $16,988
Jan-93 $18,377 $18,820 $17,491
Feb-93 $19,042 $19,502 $18,071
Mar-93 $19,128 $19,622 $18,120
Apr-93 $19,318 $19,820 $18,252
May-93 $19,258 $19,752 $18,320
Jun-93 $20,000 $20,511 $19,090
Jul-93 $20,072 $20,591 $19,384
Aug-93 $20,673 $21,207 $20,162
Sep-93 $20,826 $21,387 $20,251
Oct-93 $20,837 $21,366 $20,376
Nov-93 $20,466 $20,997 $19,857
Dec-93 $20,578 $21,111 $19,916
Jan-94 $20,987 $21,543 $20,400
Feb-94 $20,259 $20,808 $19,548
Mar-94 $19,563 $20,083 $18,750
Apr-94 $19,307 $19,808 $18,462
May-94 $19,321 $19,840 $18,373
Jun-94 $19,209 $19,739 $18,208
Jul-94 $19,600 $20,154 $18,783
Aug-94 $19,663 $20,218 $18,667
Sep-94 $19,255 $19,799 $18,101
Oct-94 $19,143 $19,703 $18,021
Nov-94 $19,013 $19,576 $18,117
Dec-94 $19,160 $19,722 $18,435
Jan-95 $19,577 $20,190 $18,906
Feb-95 $20,196 $20,861 $19,437
Mar-95 $20,276 $20,939 $19,578
Apr-95 $20,613 $21,278 $19,923
May-95 $21,666 $22,381 $21,464
Jun-95 $21,858 $22,567 $21,723
Jul-95 $21,723 $22,460 $21,384
Aug-95 $21,936 $22,685 $21,845
Sep-95 $22,112 $22,816 $22,239
Oct-95 $22,454 $23,235 $22,894
Nov-95 $22,845 $23,650 $23,455
Dec-95 $23,133 $23,934 $24,089
Jan-96 $23,357 $24,212 $24,076
Feb-96 $22,926 $23,755 $22,901
Mar-96 $22,647 $23,483 $22,465
Apr-96 $22,437 $23,250 $22,090
May-96 $22,336 $23,164 $21,984
Jun-96 $22,615 $23,459 $22,430
Jul-96 $22,667 $23,525 $22,430
Aug-96 $22,644 $23,496 $22,157
Sep-96 $23,002 $23,874 $22,764
Oct-96 $23,469 $24,401 $23,651
Nov-96 $23,830 $24,753 $24,428
Dec-96 $23,594 $24,523 $23,850
Jan-97 $23,670 $24,612 $23,695
Feb-97 $23,672 $24,612 $23,663
Mar-97 $23,471 $24,431 $23,100
Apr-97 $23,750 $24,723 $23,662
May-97 $23,926 $24,920 $23,915
Jun-97 $24,129 $25,144 $24,367
Jul-97 $24,643 $25,667 $25,776
Aug-97 $24,493 $25,528 $25,057
Sep-97 $24,757 $25,819 $25,761
Oct-97 $25,030 $26,093 $26,609
Nov-97 $25,047 $26,147 $26,958
Dec-97 $25,255 $26,370 $27,413
Jan-98 $25,593 $26,741 $27,956
Feb-98 $25,550 $26,701 $27,760
Mar-98 $25,619 $26,792 $27,830
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
3/31/98 9/30/97
Number of Securities 51 31
Anticipated Growth Rate 5.06% 5.24%
Weighted Average Maturity Date 11/14/00 11/14/00
Anticipated Value at Maturity
(AVM--see graph on next page) $101.49 $101.13
Expense Ratio 0.60%* 0.56%
* Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2000 5
TARGET MATURITIES TRUST: 2000
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM OVER THE LAST SIX MONTHS?
Target: 2000 produced positive returns, reflecting the recent decline in
interest rates (see the Market Perspective on page 4). For the six months ended
March 31, 1998, the fund returned 3.47%, while its benchmark, a November 15,
2000 STRIPS issue, returned 3.77%. (See the Total Returns table on the previous
page for other fund performance comparisons.) However, fund returns are reduced
by management expenses and transaction costs, while the benchmark's are not.
TARGET: 2000'S ANTICIPATED VALUE AT MATURITY (AVM) INCREASED BY $0.36 (SEE PAGE
5). WHY?
The higher AVM is a result of the new, unified fee structure shareholders
approved last summer. We approximate the fund's anticipated growth rate and
value at maturity each day, so shareholders have an idea what their investment
should return if they hold their shares to the maturity date. But that
calculation assumes that the expense ratio and portfolio composition remain
constant over the life of the fund. In the past, our AVM calculation was based
on the old expense cap of 0.70%, though actual fund expenses varied. Lowering
the assumption for expenses in our calculation to 0.60%--the fund's current
management fee--caused the anticipated value at maturity to rise.
[line graph - data below]
Target: 2000's Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'85 $26.77 $100
'86 $35.44 $100
'87 $33.33 $98.69
'88 $37.16 $97.43
'89 $44.52 $96.21
'90 $47.33 $97.59
'91 $57.11 $98.91
'92 $61.947 $101.16
'93 $71.526 $100.708
'94 $66.598 $100.829
'95 $80.408 $100.992
'96 $79.947 $101.102
'97 $86.06 $101.13
'98 $89.05 $101.49
'99
'00
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 45), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
6 TARGET MATURITIES TRUST: 2000 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2000
THE CHARTS BELOW SHOW THAT THE FUND'S STRIPS HOLDINGS DECREASED OVER THE LAST
SIX MONTHS. WHY THE CHANGE?
The decrease in STRIPS was partially cash-flow related. Fund assets fell
from about $248 million to around $240 million over the last six months. STRIPS
are the most liquid (the easiest to buy and sell) zero-coupon bonds, so we sold
them to meet shareholder redemptions. We also sold STRIPS and bought PHYSICALs.
WHAT ARE "PHYSICALS" AND WHY BUY THEM?
PHYSICALs are the stripped interest and principal payments from Treasury
bearer bonds traded in physical form. We bought these zeros because their yield
to maturity was 0.20% higher than STRIPS yields. We bought a nearly $15 million
par value piece that consisted of the principal portion of a Treasury long bond.
We'll try to convert these physical zeros into wirable securities, which will
cause their prices to rise relative to STRIPS.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
While it's possible rates could go lower, we think the majority of the
decline in yields is already behind us. In our opinion, economic growth would
have to slow significantly to get bond prices moving higher again, and a
slowdown of that magnitude doesn't seem likely in the near future. Analysts
thought slower demand from Asia would put the brakes on the economy, but a
robust consumer sector has kept growth strong. Continued economic strength helps
establish a floor on how low interest rates can go--the Federal Reserve is
reluctant to lower short-term interest rates as long as the economy remains
robust and there's at least the threat of inflation from higher wages.
WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
We manage Target: 2000 to deliver a pure play on zero-coupon bonds, giving
shareholders the total return and interest rate sensitivity of a zero maturing
November 15, 2000. While there's no assurance that Target: 2000 will reach its
anticipated value at maturity, we'll manage the fund to try to meet or beat that
value. To do that, we'll continue to work to keep the average maturity date
close to that of the benchmark. We'll also try to keep turnover and transaction
costs down by using cash inflows and outflows as opportunities to adjust the
portfolio's composition and weighted average maturity date. We're likely to
continue to use STRIPS to meet liquidity needs, while we'll look for additional
yield in other types of zeros.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
STRIPS 53%
TRs 30%
PHYSICALs 5%
CUBES 5%
Other 7%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
STRIPS 62%
TRs 28%
Other 10%
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2000 7
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2000
MARCH 31, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 71,250 CUBES, 8.76%, 8/15/99 $ 65,971
75,000 ETR, 5.26%, 11/15/99 68,408
153,000 STRIPS -- COUPON, 5.40%,
11/15/99 139,860
2,836,700 TBR, 7.83%, 11/15/99 2,588,178
75,000 TR, 5.20%, 11/15/99 68,483
349,800 TR, 5.46%, 11/15/99 319,406
133,000 CATS, 5.22%, 2/15/00 119,737
88,125 CUBES, 8.60%, 2/15/00 79,337
12,100,000 STRIPS -- COUPON, 5.73%,
2/15/00 10,907,253
306,945 TBR, 8.80%, 2/15/00 276,083
29,708,220 TR, 6.69%, 2/15/00 26,745,584
28,146 TR, 8.50%, 2/15/00 25,339
199,843 TR, 8.88%, 2/15/00 179,914
100,000 TR, 9.28%, 2/15/00 90,028
149,000 CATS, 5.25%, 5/15/00 132,457
5,850,000 CUBES, 5.68%, 5/15/00 5,195,123
645,525 TBR, 8.62%, 5/15/00 573,262
849,000 TBR, 8.72%, 5/15/00 753,959
5,000,000 CUBES, 5.50%, 8/15/00 4,374,037
46,800,000 STRIPS -- COUPON, 5.49%,
8/15/00 41,007,242
9,667,000 STRIPS -- PRINCIPAL, 6.94%,
8/15/00 8,473,385
894,045 TBR, 8.72%, 8/15/00 781,215
2,735,000 COUGAR, 7.38%, 11/15/00 2,358,205
1,197,000 COUGAR, 8.37%, 11/15/00 1,032,092
410,625 CUBES, 9.26%, 11/15/00 354,415
39,391,000 STRIPS -- PRINCIPAL, 7.61%,
11/15/00 34,055,225
3,754,000 TIGR, 7.83%, 11/15/00 3,240,122
265,000 TR, 5.85%, 11/15/00 228,725
1,199,424 TR, 7.17%, 11/15/00 1,035,237
29,600 TR, 8.49%, 11/15/00 25,548
843 TR, 9.43%, 11/15/00 728
381,769 TR, 9.52%, 11/15/00 329,509
376,250 TR, 9.79%, 11/15/00 324,746
75,000 CATS, 5.34%, 2/15/01 63,807
20,700,000 STRIPS -- COUPON, 6.19%,
2/15/01 17,645,295
Principal Amount Value
- --------------------------------------------------------------------------------
$ 4,657,000 TIGR, 5.52%, 2/15/01 $ 3,962,002
3,933,650 TR, 5.52%, 2/15/01 3,346,603
2,052,928 TR, 5.87%, 2/15/01 1,746,555
4,435,750 TR, 6.92%, 2/15/01 3,773,771
10,000,000 TR, 7.80%, 2/15/01 8,507,627
1,400,000 COUGAR, 5.63%, 5/15/01 1,173,120
1,496,250 CUBES, 6.21%, 5/15/01 1,253,391
44,000 TIGR, 5.39%, 5/15/01 36,914
24,350,000 TR, 7.06%, 5/15/01 20,428,689
17,450,000 STRIPS -- PRINCIPAL, 7.44%,
8/15/01 14,451,020
7,060,020 TR, 5.38%, 8/15/01 5,835,173
15,000,000 U.S. Treasury Corpus, 5.99%,
11/15/01 12,200,983
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $240,373,763
===================
(Cost $234,953,553)
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) Rates indicated are the yield to maturity at purchase. 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, 1998*
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2005 ........ 6.18% 17.05% 11.55% 8.72% 12.01%
11/15/05 Maturity
STRIPS Issue ......................... 6.35% 17.52% 12.09% 8.96% 12.25%
Merrill Lynch Long-Term
Treasury Index ....................... 8.03% 20.49% 12.44% 8.96% 10.78%
</TABLE>
* Returns for periods less than one year are not annualized.
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 Ten Years
$10,000 investment made 3/31/88
Value on 3/31/98
11/15/05 Merrill Lynch
Target: 2005 STRIPS Issue Long-Term Index
Mar-88 $10,000 $10,000 $10,000
Apr-88 $9,751 $9,610 $9,839
May-88 $9,420 $9,434 $9,666
Jun-88 $10,308 $10,278 $10,074
Jul-88 $9,832 $9,770 $9,883
Aug-88 $9,891 $9,853 $9,921
Sep-88 $10,503 $10,497 $10,296
Oct-88 $11,098 $11,089 $10,599
Nov-88 $10,717 $10,725 $10,367
Dec-88 $11,048 $10,998 $10,499
Jan-89 $11,379 $11,427 $10,711
Feb-89 $10,975 $11,053 $10,496
Mar-89 $11,147 $11,243 $10,607
Apr-89 $11,510 $11,574 $10,856
May-89 $12,086 $12,231 $11,288
Jun-89 $13,184 $13,239 $11,928
Jul-89 $13,379 $13,392 $12,200
Aug-89 $12,939 $12,888 $11,876
Sep-89 $12,975 $12,933 $11,921
Oct-89 $13,710 $13,748 $12,399
Nov-89 $13,859 $13,902 $12,500
Dec-89 $13,687 $13,777 $12,483
Jan-90 $12,776 $12,845 $12,057
Feb-90 $12,662 $12,755 $12,005
Mar-90 $12,639 $12,673 $11,974
Apr-90 $12,095 $12,047 $11,667
May-90 $12,930 $13,014 $12,211
Jun-90 $13,329 $13,456 $12,490
Jul-90 $13,374 $13,496 $12,618
Aug-90 $12,422 $12,438 $12,072
Sep-90 $12,580 $12,597 $12,227
Oct-90 $12,930 $13,014 $12,499
Nov-90 $13,837 $13,961 $13,018
Dec-90 $14,177 $14,325 $13,289
Jan-91 $14,272 $14,487 $13,439
Feb-91 $14,345 $14,375 $13,492
Mar-91 $14,367 $14,450 $13,536
Apr-91 $14,599 $14,658 $13,715
May-91 $14,499 $14,538 $13,714
Jun-91 $14,313 $14,392 $13,606
Jul-91 $14,567 $14,724 $13,805
Aug-91 $15,288 $15,340 $14,287
Sep-91 $15,932 $16,067 $14,733
Oct-91 $15,909 $15,980 $14,781
Nov-91 $15,995 $16,103 $14,852
Dec-91 $17,220 $17,405 $15,738
Jan-92 $16,476 $16,654 $15,227
Feb-92 $16,562 $16,732 $15,335
Mar-92 $16,268 $16,369 $15,166
Apr-92 $16,136 $16,223 $15,172
May-92 $16,739 $16,821 $15,571
Jun-92 $17,034 $17,092 $15,794
Jul-92 $18,036 $18,087 $16,439
Aug-92 $18,204 $18,272 $16,578
Sep-92 $18,676 $18,784 $16,833
Oct-92 $18,100 $18,175 $16,498
Nov-92 $18,159 $18,248 $16,548
Dec-92 $18,866 $18,991 $16,988
Jan-93 $19,483 $19,653 $17,491
Feb-93 $20,503 $20,654 $18,071
Mar-93 $20,463 $20,680 $18,120
Apr-93 $20,744 $20,949 $18,252
May-93 $20,762 $21,032 $18,320
Jun-93 $22,045 $22,334 $19,090
Jul-93 $22,345 $22,639 $19,384
Aug-93 $23,274 $23,587 $20,162
Sep-93 $23,510 $23,928 $20,251
Oct-93 $23,624 $23,998 $20,376
Nov-93 $22,753 $23,083 $19,857
Dec-93 $22,934 $23,274 $19,916
Jan-94 $23,728 $24,035 $20,400
Feb-94 $22,385 $22,712 $19,548
Mar-94 $21,261 $21,362 $18,750
Apr-94 $21,048 $21,034 $18,462
May-94 $20,930 $20,937 $18,373
Jun-94 $20,721 $20,733 $18,208
Jul-94 $21,370 $21,422 $18,783
Aug-94 $21,320 $21,402 $18,667
Sep-94 $20,512 $20,574 $18,101
Oct-94 $20,354 $20,459 $18,021
Nov-94 $20,508 $20,593 $18,117
Dec-94 $20,893 $21,000 $18,435
Jan-95 $21,419 $21,565 $18,906
Feb-95 $22,204 $22,362 $19,437
Mar-95 $22,390 $22,560 $19,578
Apr-95 $22,862 $23,047 $19,923
May-95 $24,862 $25,088 $21,464
Jun-95 $25,179 $25,411 $21,723
Jul-95 $24,707 $24,969 $21,384
Aug-95 $25,224 $25,496 $21,845
Sep-95 $25,673 $25,955 $22,239
Oct-95 $26,308 $26,625 $22,894
Nov-95 $27,061 $27,399 $23,455
Dec-95 $27,714 $28,074 $24,089
Jan-96 $27,751 $28,137 $24,076
Feb-96 $26,449 $26,811 $22,901
Mar-96 $25,959 $26,341 $22,465
Apr-96 $25,433 $25,773 $22,090
May-96 $25,243 $25,591 $21,984
Jun-96 $25,732 $26,126 $22,430
Jul-96 $25,769 $26,144 $22,430
Aug-96 $25,528 $25,895 $22,157
Sep-96 $26,228 $26,605 $22,764
Oct-96 $27,172 $27,662 $23,651
Nov-96 $28,052 $28,486 $24,428
Dec-96 $27,371 $27,788 $23,850
Jan-97 $27,275 $27,750 $23,695
Feb-97 $27,248 $27,701 $23,663
Mar-97 $26,553 $27,032 $23,100
Apr-97 $27,166 $27,661 $23,662
May-97 $27,484 $27,974 $23,915
Jun-97 $27,888 $28,453 $24,367
Jul-97 $29,266 $29,831 $25,776
Aug-97 $28,587 $29,160 $25,057
Sep-97 $29,273 $29,872 $25,761
Oct-97 $29,999 $30,618 $26,609
Nov-97 $30,161 $30,742 $26,958
Dec-97 $30,556 $31,181 $27,413
Jan-98 $31,250 $31,957 $27,956
Feb-98 $31,037 $31,709 $27,760
Mar-98 $31,079 $31,767 $27,830
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
3/31/98 9/30/97
Number of Securities 38 34
Anticipated Growth Rate 5.23% 5.57%
Weighted Average Maturity Date 12/02/05 11/16/05
Anticipated Value at Maturity
(AVM--see graph on next page) $101.83 $100.85
Expense Ratio 0.60%* 0.57%
* Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2005 9
TARGET MATURITIES TRUST: 2005
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM OVER THE LAST SIX MONTHS?
Target: 2005 performed well, producing a 6.18% return for the six months
ended March 31, 1998. For the year ended in March, the fund returned 17.05%.
Those positive returns are a product of lower interest rates overall (see the
Market Perspective on page 4).
The fund's benchmark, a November 15, 2005 STRIPS issue, returned 6.35% for
the six months. (See the Total Returns table on the previous page for additional
fund performance comparisons.) Keep in mind that fund returns are reduced by
management expenses and transaction costs, while the benchmark's are not.
TARGET: 2005'S ANTICIPATED VALUE AT MATURITY (AVM) INCREASED BY $0.98 (SEE PAGE
9). WHY?
The higher AVM is a result of the new, unified fee structure shareholders
approved last summer. We approximate the fund's anticipated growth rate and
value at maturity each day, so shareholders have an idea what their investment
should return if they hold their shares to the maturity date. But that
calculation assumes that the expense ratio and portfolio composition remain
constant over the life of the fund. In the past, our AVM calculation was based
on the old expense cap of 0.70%, though actual fund expenses varied. Lowering
the assumption for expenses in our calculation to 0.60%--the fund's current
management fee--caused the anticipated value at maturity to rise.
[line graph - data below]
Target: 2005's Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'85 $16.69 $98
'86 $23.74 $97
'87 $21.28 $94.59
'88 $24.36 $93.66
'89 $30.18 $93.14
'90 $31.26 $97.25
'91 $37.97 $99.29
'92 $41.597 $99.625
'93 $50.575 $100.087
'94 $46.066 $100.516
'95 $61.108 $100.34
'96 $57.829 $100.707
'97 $64.54 $100.85
'98 $68.53 $101.82
'99
'00
'01
'02
'03
'04
'05
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 45), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
10 TARGET MATURITIES TRUST: 2005 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2005
THE CHARTS BELOW SHOW THE FUND'S STRIPS HOLDINGS INCREASED SUBSTANTIALLY OVER
THE LAST SIX MONTHS. WHY THE CHANGE?
The increase in STRIPS was largely cash-flow related. Fund assets grew from
$282 million to $406 million over the last six months. Some of that increase was
from appreciation, but the vast majority was from new money. STRIPS are the most
liquid (easiest to buy and sell) zero-coupon bonds, so we used them to put the
new cash to work quickly.
One of the things we do to keep the fund's turnover and transaction costs
down is use cash inflows and outflows as opportunities to adjust the fund's
portfolio and average maturity date. Because there was some additional yield to
be had by buying longer-maturity STRIPS, we used the new money to extend the
fund's weighted average maturity date out to early December 2005. We did that by
buying STRIPS maturing in February 2006. Those securities carried about five
extra basis points in yield over 2005-maturity STRIPS. That additional yield
also contributed slightly to the increase in the fund's anticipated value at
maturity.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
While it's possible rates could go lower, we think the majority of the
decline in yields is already behind us. In our opinion, economic growth would
have to slow significantly to get bond prices moving higher again, and a
slowdown of that magnitude doesn't seem likely in the near future. Analysts
thought slower demand from Asia would put the brakes on the economy, but a
robust consumer sector has kept growth strong. Continued economic strength helps
establish a floor on how low interest rates can go--the Federal Reserve is
reluctant to lower short-term interest rates as long as the economy remains
robust and there's at least the threat of inflation from higher wages.
WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
We manage Target: 2005 to deliver a pure play on zero-coupon bonds, giving
shareholders the total return and interest rate sensitivity of a zero maturing
November 15, 2005. While there's no assurance that Target: 2005 will reach its
anticipated value at maturity, we'll manage the fund to try to meet or beat that
value. To do that, we'll continue to work to keep the average maturity date
close to that of the benchmark. We'll also try to keep turnover and transaction
costs down by using cash inflows and outflows as opportunities to adjust the
portfolio's composition and weighted average maturity date. We're likely to
continue to use STRIPS to meet liquidity needs, while we'll look for additional
yield in other types of zeros.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
STRIPS 56%
REFCORPs 30%
CATS 6%
TRs 4%
Other 4%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
STRIPS 41%
REFCORPs 40%
CATS 8%
TRs 6%
Other 5%
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2005 11
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2005
MARCH 31, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 693,750 CUBES, 6.56%, 11/15/04 $ 473,879
87,000 ETR, 5.96%, 11/15/04 59,122
27,000 TIGR, 5.90%, 11/15/04 18,443
11,500,000 REFCORP STRIPS -- COUPON,
5.95%, 1/15/05 7,766,641
4,500,000 STRIPS -- COUPON, 6.37%,
2/15/05 3,044,386
3,200,000 U.S. Treasury Corpus, 9.00%,
2/15/05 2,139,021
2,000,000 REFCORP STRIPS -- COUPON,
5.84%, 4/15/05 1,330,553
4,615,672 CUBES, 8.59%, 5/15/05 3,060,192
1,000,000 ETR, 6.67%, 5/15/05 659,341
38,374,000 STRIPS -- COUPON, 6.79%,
5/15/05 25,583,219
33,059,000 STRIPS -- PRINCIPAL, 6.62%,
5/15/05 22,039,809
428,750 TBR, 9.37%, 5/15/05 282,693
6,450,000 TR, 8.38%, 5/15/05 4,261,586
12,500,000 REFCORP STRIPS -- COUPON,
6.76%, 7/15/05 8,189,884
9,000,000 STRIPS -- COUPON, 5.50%,
8/15/05 5,909,701
59,500,000 STRIPS -- PRINCIPAL, 6.58%,
8/15/05 39,069,693
50,270,000 REFCORP STRIPS -- COUPON,
6.51%, 10/15/05 32,453,413
170,000 CATS, 6.21%, 11/15/05 109,383
491,519 CUBES, 8.86%, 11/15/05 316,257
6,500,000 STRIPS -- COUPON, 6.24%,
11/15/05 4,207,134
2,247,000 TBR, 8.45%, 11/15/05 1,437,246
10,900,000 U.S. Treasury Corpus, 7.73%,
11/15/05 6,961,641
46,429,000 REFCORP STRIPS -- COUPON,
7.45%, 1/15/06 29,494,482
187,056,000 STRIPS -- COUPON, 6.03%,
2/15/06 119,146,134
19,415,340 TR, 8.23%, 2/15/06 12,291,214
56,800,000 REFCORP STRIPS -- COUPON,
7.09%, 4/15/06 35,564,472
107,000 CATS, 6.05%, 5/15/06 66,778
Principal Amount Value
- --------------------------------------------------------------------------------
$ 36,132,000 CATS, 8.83%, 5/15/06 $ 22,461,083
2,567,000 CATS, 8.84%, 5/15/06 1,595,749
566,500 CUBES, 6.53%, 5/15/06 353,551
4,718,000 STRIPS -- COUPON, 7.66%,
5/15/06 2,963,133
410,000 TBR, 8.46%, 5/15/06 254,270
1,000,000 TR, 8.40%, 5/15/06 621,640
146,346 TR, 8.89%, 5/15/06 91,334
11,428,000 REFCORP STRIPS -- COUPON,
7.03%, 7/15/06 7,045,706
8,000,000 STRIPS -- COUPON, 5.80%,
8/15/06 4,947,757
1,299,780 TR, 8.86%, 8/15/06 798,658
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $407,069,198
===================
(Cost $380,831,587)
NOTES TO SCHEDULE OF INVESTMENTS
CATS = Certificates of Accrual of Treasury Securities
CUBES = Coupons Under Book Entry Safekeeping
ETR = Easy Growth Treasury Receipts
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TBR = Treasury Bond Receipts
TIGR = Treasury Investment Growth Receipts
TR = Treasury Receipts
(1) Rates indicated are the yield to maturity at purchase. 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, 1998*
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2010 ....... 8.79% 24.23% 14.72% 10.78% 13.22%
11/15/10 Maturity
STRIPS Issue ........................ 8.92% 24.94% 15.49% 11.39% 13.61%
Merrill Lynch Long-Term
Treasury Index ...................... 8.03% 20.49% 12.44% 8.96% 10.78%
</TABLE>
* Returns for periods less than one year are not annualized.
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 Ten Years
$10,000 investment made 3/31/88
Value on 3/31/98
11/15/10 Merrill Lynch
Target: 2010 STRIPS Issue Long-Term Index
Mar-88 $10,000 $10,000 $10,000
Apr-88 $9,657 $9,482 $9,839
May-88 $9,210 $9,157 $9,666
Jun-88 $10,162 $10,160 $10,074
Jul-88 $9,605 $9,497 $9,883
Aug-88 $9,631 $9,557 $9,921
Sep-88 $10,395 $10,326 $10,296
Oct-88 $11,049 $11,061 $10,599
Nov-88 $10,615 $10,638 $10,367
Dec-88 $11,204 $10,965 $10,499
Jan-89 $11,528 $11,569 $10,711
Feb-89 $10,900 $10,942 $10,496
Mar-89 $11,159 $11,186 $10,607
Apr-89 $11,547 $11,616 $10,856
May-89 $12,434 $12,504 $11,288
Jun-89 $13,793 $13,951 $11,928
Jul-89 $13,955 $14,044 $12,200
Aug-89 $13,307 $13,328 $11,876
Sep-89 $13,327 $13,442 $11,921
Oct-89 $14,246 $14,414 $12,399
Nov-89 $14,447 $14,566 $12,500
Dec-89 $14,343 $14,511 $12,483
Jan-90 $13,074 $13,148 $12,057
Feb-90 $12,887 $13,024 $12,005
Mar-90 $12,783 $12,935 $11,974
Apr-90 $12,123 $12,139 $11,667
May-90 $13,159 $13,490 $12,211
Jun-90 $13,676 $14,067 $12,490
Jul-90 $13,592 $14,059 $12,618
Aug-90 $12,233 $12,340 $12,072
Sep-90 $12,414 $12,618 $12,227
Oct-90 $12,828 $12,991 $12,499
Nov-90 $14,006 $14,179 $13,018
Dec-90 $14,382 $14,555 $13,289
Jan-91 $14,608 $14,658 $13,439
Feb-91 $14,595 $14,502 $13,492
Mar-91 $14,615 $14,599 $13,536
Apr-91 $14,809 $14,873 $13,715
May-91 $14,738 $14,701 $13,714
Jun-91 $14,401 $14,417 $13,606
Jul-91 $14,647 $14,717 $13,805
Aug-91 $15,528 $15,576 $14,287
Sep-91 $16,233 $16,362 $14,733
Oct-91 $16,104 $16,234 $14,781
Nov-91 $15,974 $16,044 $14,852
Dec-91 $17,411 $17,533 $15,738
Jan-92 $16,628 $16,748 $15,227
Feb-92 $16,744 $16,851 $15,335
Mar-92 $16,427 $16,521 $15,166
Apr-92 $16,175 $16,252 $15,172
May-92 $16,900 $16,979 $15,571
Jun-92 $16,990 $17,040 $15,794
Jul-92 $18,045 $18,086 $16,439
Aug-92 $18,123 $18,143 $16,578
Sep-92 $18,466 $18,484 $16,833
Oct-92 $18,019 $18,031 $16,498
Nov-92 $18,252 $18,310 $16,548
Dec-92 $19,113 $19,177 $16,988
Jan-93 $19,709 $19,762 $17,491
Feb-93 $20,828 $20,921 $18,071
Mar-93 $20,744 $20,880 $18,120
Apr-93 $20,945 $21,006 $18,252
May-93 $21,107 $21,195 $18,320
Jun-93 $22,686 $22,815 $19,090
Jul-93 $23,495 $23,646 $19,384
Aug-93 $24,667 $24,837 $20,162
Sep-93 $24,673 $24,887 $20,251
Oct-93 $24,990 $25,264 $20,376
Nov-93 $24,026 $24,266 $19,857
Dec-93 $24,136 $24,384 $19,916
Jan-94 $25,133 $25,395 $20,400
Feb-94 $23,385 $23,617 $19,548
Mar-94 $21,948 $22,156 $18,750
Apr-94 $21,579 $21,690 $18,462
May-94 $21,197 $21,338 $18,373
Jun-94 $20,874 $21,021 $18,208
Jul-94 $21,883 $22,067 $18,783
Aug-94 $21,547 $21,755 $18,667
Sep-94 $20,498 $20,608 $18,101
Oct-94 $20,330 $20,495 $18,021
Nov-94 $20,699 $20,887 $18,117
Dec-94 $21,346 $21,562 $18,435
Jan-95 $21,987 $22,262 $18,906
Feb-95 $22,705 $22,995 $19,437
Mar-95 $22,926 $23,248 $19,578
Apr-95 $23,463 $23,825 $19,923
May-95 $26,091 $26,566 $21,464
Jun-95 $26,563 $27,074 $21,723
Jul-95 $25,877 $26,376 $21,384
Aug-95 $26,615 $27,162 $21,845
Sep-95 $27,275 $27,873 $22,239
Oct-95 $28,324 $29,031 $22,894
Nov-95 $29,307 $30,020 $23,455
Dec-95 $30,330 $31,118 $24,089
Jan-96 $30,162 $30,907 $24,076
Feb-96 $28,019 $28,714 $22,901
Mar-96 $27,307 $27,999 $22,465
Apr-96 $26,498 $27,118 $22,090
May-96 $26,291 $26,978 $21,984
Jun-96 $27,062 $27,812 $22,430
Jul-96 $27,074 $27,794 $22,430
Aug-96 $26,544 $27,236 $22,157
Sep-96 $27,489 $28,275 $22,764
Oct-96 $28,907 $29,786 $23,651
Nov-96 $30,228 $31,097 $24,428
Dec-96 $29,258 $30,077 $23,850
Jan-97 $28,915 $29,727 $23,695
Feb-97 $28,884 $29,684 $23,663
Mar-97 $27,867 $28,663 $23,100
Apr-97 $28,675 $29,556 $23,662
May-97 $29,045 $29,919 $23,915
Jun-97 $29,678 $30,643 $24,367
Jul-97 $31,910 $32,952 $25,776
Aug-97 $30,720 $31,677 $25,057
Sep-97 $31,820 $32,877 $25,761
Oct-97 $33,010 $34,158 $26,609
Nov-97 $33,442 $34,633 $26,958
Dec-97 $34,154 $35,292 $27,413
Jan-98 $34,906 $36,092 $27,956
Feb-98 $34,571 $35,763 $27,760
Mar-98 $34,615 $35,810 $27,830
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
3/31/98 9/30/97
Number of Securities 16 16
Anticipated Growth Rate 5.44% 5.80%
Weighted Average Maturity Date 10/07/10 10/03/10
Anticipated Value at Maturity
(AVM--see graph on next page) $104.68 $103.40
Expense Ratio 0.60%* 0.62%
* Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2010 13
TARGET MATURITIES TRUST: 2010
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM OVER THE LAST SIX MONTHS?
Target: 2010 performed well, producing an 8.79% return for the six months
ended March 31, 1998. For the year ended in March, the fund returned 24.23%. The
fund's impressive returns reflect the recent decline in interest rates (see the
Market Perspective on page 4).
Target: 2010's benchmark, a November 15, 2010 STRIPS issue, returned 8.92%.
(See the Total Returns table on the previous page for other fund performance
comparisons.) Keep in mind that fund returns are reduced by management fees and
transaction costs, while the benchmark's are not.
TARGET: 2010'S ANTICIPATED VALUE AT MATURITY (AVM) INCREASED BY $1.28 (SEE PAGE
13). WHY?
The higher AVM is largely a result of the new, unified fee structure
shareholders approved last summer. We approximate the fund's anticipated growth
rate and value at maturity each day, so shareholders have an idea what their
investment should return if they hold their shares to the maturity date. But
that calculation assumes that the expense ratio and portfolio composition remain
constant over the life of the fund. In the past, our AVM calculation was based
on the old expense cap of 0.70%, though actual fund expenses varied. Lowering
the assumption for expenses in our calculation to 0.60%--the fund's current
management fee--caused the anticipated value at maturity to rise.
[line graph - data below]
Target: 2010's Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'85 $11.43 $97
'86 $17.65 $97
'87 $14.96 $95.27
'88 $17.31 $97.13
'89 $22.16 $96.66
'90 $22.22 $97.52
'91 $26.9 $98.97
'92 $29.534 $100.179
'93 $37.292 $100.874
'94 $32.981 $101.78
'95 $46.864 $101.788
'96 $42.474 $102.529
'97 $49.16 $103.4
'98 $53.48 $104.67
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 45), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
14 TARGET MATURITIES TRUST: 2010 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2010
THE CHARTS BELOW SHOW THE FUND'S STRIPS HOLDINGS INCREASED SUBSTANTIALLY. WHY
THE CHANGE?
The increase in STRIPS was largely cash-flow related. Fund assets grew from
about $125 million to around $184 million over the last six months. While some
of that increase was from appreciation, the vast majority was from new money.
STRIPS are the most liquid zero-coupon bonds (the easiest to buy and sell), so
we used them to help meet cash flow needs.
One of the things we do to keep turnover and transaction costs down is use
cash inflows and outflows as opportunities to adjust the portfolio and maturity
date. The most recent six months were no different. We used the new money to
increase our position in November 2010 STRIPS, which went from 10% to about a
quarter of assets during the six-month period. Buying those longer-term
securities extended Target: 2010's weighted average maturity date from October 3
to October 7, 2010, moving it a little closer to the November 15, 2010 maturity
of the benchmark.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
While it's possible rates could go lower, we think the majority of the
decline in yields is already behind us. In our opinion, economic growth would
have to slow significantly to get bond prices moving higher again, and a
slowdown of that magnitude doesn't seem likely in the near future. Analysts
thought slower demand from Asia would put the brakes on the economy, but a
robust consumer sector has kept growth strong. Continued economic strength helps
establish a floor on how low interest rates can go--the Federal Reserve is
reluctant to lower short-term interest rates as long as the economy remains
robust and there's at least the threat of inflation from higher wages.
WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
We manage Target: 2010 to deliver a pure play on zero-coupon bonds, giving
shareholders the total return and interest rate sensitivity of a zero maturing
November 15, 2010. While there's no assurance that Target: 2010 will reach its
anticipated value at maturity, we'll manage the portfolio to try to meet or beat
that value. To do that, we'll continue to work to move the average maturity date
closer to that of the benchmark. We'll also try to keep turnover and transaction
costs down by using cash inflows and outflows as opportunities to adjust the
portfolio's composition and weighted average maturity date. We're likely to
continue to use STRIPS to meet liquidity needs, while we'll look for additional
yield in other types of zeros.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
STRIPS 59%
REFCORPs 33%
ETRs 8%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
STRIPS 48%
REFCORPs 41%
ETRs 11%
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2010 15
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2010
MARCH 31, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$28,520,000 ETR, 7.11%, 5/15/09 $ 14,556,168
2,000,000 REFCORP STRIPS -- COUPON,
7.98%, 10/15/09 1,001,502
11,500,000 STRIPS -- PRINCIPAL, 7.18%,
11/15/09 5,775,453
8,772,000 REFCORP STRIPS -- COUPON,
7.30%, 1/15/10 4,324,365
34,728,000 REFCORP STRIPS -- COUPON,
7.18%, 4/15/10 16,837,225
2,587,000 STRIPS -- COUPON, 6.80%,
5/15/10 1,267,244
15,000,000 REFCORP STRIPS -- COUPON,
7.89%, 7/15/10 7,146,202
29,277,000 STRIPS -- COUPON, 6.50%,
8/15/10 14,094,460
26,000,000 REFCORP STRIPS -- COUPON,
6.86%, 10/15/10 12,187,663
91,700,000 STRIPS -- COUPON, 6.71%,
11/15/10 43,456,223
20,500,000 REFCORP STRIPS -- COUPON,
6.28%, 1/15/11 9,452,775
40,360,000 STRIPS -- COUPON, 7.91%,
2/15/11 18,817,442
18,850,000 REFCORP STRIPS -- COUPON,
7.84%, 4/15/11 8,562,238
14,000,000 STRIPS -- COUPON, 6.32%,
5/15/11 6,432,943
11,715,000 STRIPS -- COUPON, 7.23%,
8/15/11 5,299,085
30,000,000 STRIPS -- COUPON, 6.56%,
11/15/11 13,364,717
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $182,575,705
===================
(Cost $163,868,666)
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) Rates indicated are the yield to maturity at purchase. 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, 1998*
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2015 ........ 12.34% 33.47% 18.08% 13.08% 13.72%
11/15/15 Maturity
STRIPS Issue ......................... 12.68% 34.42% 18.82% 13.66% 14.20%
Merrill Lynch Long-Term
Treasury Index ....................... 8.03% 20.49% 12.44% 8.96% 10.78%
</TABLE>
* Returns for periods less than one year are not annualized.
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 Ten Years
$10,000 investment made 3/31/88
Value on 3/31/98
11/15/15 Merrill Lynch
Target: 2015 STRIPS Issue Long-Term Index
Mar-88 $10,000 $10,000 $10,000
Apr-88 $9,395 $9,501 $9,839
May-88 $8,934 $8,850 $9,666
Jun-88 $9,782 $9,823 $10,074
Jul-88 $9,093 $8,981 $9,883
Aug-88 $8,976 $8,962 $9,921
Sep-88 $9,840 $9,887 $10,296
Oct-88 $10,638 $10,711 $10,599
Nov-88 $9,941 $10,008 $10,367
Dec-88 $10,605 $10,478 $10,499
Jan-89 $10,957 $11,142 $10,711
Feb-89 $10,453 $10,520 $10,496
Mar-89 $10,747 $10,789 $10,607
Apr-89 $10,966 $11,084 $10,856
May-89 $11,965 $12,023 $11,288
Jun-89 $13,694 $13,845 $11,928
Jul-89 $13,904 $14,079 $12,200
Aug-89 $13,157 $13,273 $11,876
Sep-89 $13,115 $13,291 $11,921
Oct-89 $14,047 $14,465 $12,399
Nov-89 $14,374 $14,593 $12,500
Dec-89 $14,156 $14,358 $12,483
Jan-90 $12,771 $13,030 $12,057
Feb-90 $12,594 $12,699 $12,005
Mar-90 $12,309 $12,445 $11,974
Apr-90 $11,318 $11,450 $11,667
May-90 $12,653 $12,748 $12,211
Jun-90 $13,149 $13,344 $12,490
Jul-90 $13,157 $13,343 $12,618
Aug-90 $11,411 $11,513 $12,072
Sep-90 $11,545 $11,675 $12,227
Oct-90 $12,007 $12,259 $12,499
Nov-90 $13,266 $13,457 $13,018
Dec-90 $13,678 $13,814 $13,289
Jan-91 $13,955 $14,144 $13,439
Feb-91 $13,837 $14,099 $13,492
Mar-91 $13,854 $14,092 $13,536
Apr-91 $14,089 $14,430 $13,715
May-91 $13,887 $14,029 $13,714
Jun-91 $13,468 $13,664 $13,606
Jul-91 $13,770 $14,061 $13,805
Aug-91 $14,777 $14,935 $14,287
Sep-91 $15,483 $15,716 $14,733
Oct-91 $15,239 $15,462 $14,781
Nov-91 $14,920 $15,068 $14,852
Dec-91 $16,751 $16,944 $15,738
Jan-92 $15,802 $15,962 $15,227
Feb-92 $15,995 $16,171 $15,335
Mar-92 $15,693 $15,847 $15,166
Apr-92 $15,374 $15,562 $15,172
May-92 $16,129 $16,349 $15,571
Jun-92 $16,020 $16,208 $15,794
Jul-92 $17,330 $17,571 $16,439
Aug-92 $17,145 $17,375 $16,578
Sep-92 $17,120 $17,371 $16,833
Oct-92 $16,650 $16,876 $16,498
Nov-92 $17,330 $17,564 $16,548
Dec-92 $18,052 $18,315 $16,988
Jan-93 $18,673 $18,962 $17,491
Feb-93 $19,731 $20,057 $18,071
Mar-93 $19,555 $19,887 $18,120
Apr-93 $19,723 $20,053 $18,252
May-93 $20,143 $20,476 $18,320
Jun-93 $21,570 $21,945 $19,090
Jul-93 $22,678 $23,094 $19,384
Aug-93 $24,593 $25,102 $20,162
Sep-93 $24,383 $24,889 $20,251
Oct-93 $24,819 $25,343 $20,376
Nov-93 $23,711 $24,172 $19,857
Dec-93 $23,560 $24,082 $19,916
Jan-94 $24,517 $25,080 $20,400
Feb-94 $22,704 $23,229 $19,548
Mar-94 $21,251 $21,679 $18,750
Apr-94 $20,722 $21,161 $18,462
May-94 $20,109 $20,545 $18,373
Jun-94 $19,715 $20,131 $18,208
Jul-94 $21,083 $21,564 $18,783
Aug-94 $20,369 $20,822 $18,667
Sep-94 $19,135 $19,518 $18,101
Oct-94 $19,068 $19,455 $18,021
Nov-94 $19,563 $19,964 $18,117
Dec-94 $20,243 $20,690 $18,435
Jan-95 $21,016 $21,533 $18,906
Feb-95 $21,587 $22,075 $19,437
Mar-95 $21,965 $22,486 $19,578
Apr-95 $22,376 $22,978 $19,923
May-95 $25,634 $26,380 $21,464
Jun-95 $25,978 $26,713 $21,723
Jul-95 $25,088 $25,811 $21,384
Aug-95 $26,247 $27,026 $21,845
Sep-95 $27,036 $27,843 $22,239
Oct-95 $28,480 $29,399 $22,894
Nov-95 $29,555 $30,455 $23,455
Dec-95 $30,915 $31,873 $24,089
Jan-96 $30,554 $31,502 $24,076
Feb-96 $27,716 $28,641 $22,901
Mar-96 $26,641 $27,532 $22,465
Apr-96 $25,819 $26,657 $22,090
May-96 $25,760 $26,619 $21,984
Jun-96 $26,566 $27,528 $22,430
Jul-96 $26,574 $27,448 $22,430
Aug-96 $25,684 $26,555 $22,157
Sep-96 $26,835 $27,827 $22,764
Oct-96 $28,622 $29,747 $23,651
Nov-96 $30,360 $31,368 $24,428
Dec-96 $29,051 $30,086 $23,850
Jan-97 $28,429 $29,500 $23,695
Feb-97 $28,429 $29,443 $23,663
Mar-97 $27,093 $28,063 $23,100
Apr-97 $28,101 $29,102 $23,662
May-97 $28,478 $29,639 $23,915
Jun-97 $29,343 $30,567 $24,367
Jul-97 $32,424 $33,649 $25,776
Aug-97 $30,703 $31,921 $25,057
Sep-97 $32,189 $33,477 $25,761
Oct-97 $33,901 $35,226 $26,609
Nov-97 $34,732 $36,154 $26,958
Dec-97 $35,704 $37,171 $27,413
Jan-98 $36,500 $38,011 $27,956
Feb-98 $36,062 $37,532 $27,760
Mar-98 $36,163 $37,723 $27,830
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
3/31/98 9/30/97
Number of Securities 12 11
Anticipated Growth Rate 5.52% 5.93%
Weighted Average Maturity Date 11/18/15 11/17/15
Anticipated Value at Maturity
(AVM--see graph on next page) $112.49 $110.52
Expense Ratio 0.60%* 0.61%
* Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2015 17
TARGET MATURITIES TRUST: 2015
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM OVER THE LAST SIX MONTHS?
Target: 2015 performed well, producing a 12.34% return for the six months
ended March 31, 1998. For the year ended in March, the fund returned a hefty
33.47%. The fund's excellent returns are a product of lower interest rates (see
the Market Perspective on page 4).
Target: 2015 slightly underperformed its benchmark, a November 15, 2015
STRIPS issue, which returned 12.68% for the six months and 34.42% for the year.
However, fund returns are reduced by management expenses and transaction costs,
while the benchmark's are not. (See the Total Returns table on the previous page
for other fund performance comparisons.)
TARGET: 2015'S ANTICIPATED VALUE AT MATURITY (AVM) INCREASED BY $1.97 (SEE PAGE
17). WHY?
The higher AVM is largely a result of the new, unified fee structure
shareholders approved last summer. We approximate the fund's anticipated growth
rate and value at maturity each day, so shareholders have an idea what their
investment should return if they hold their shares to the maturity date. But
that calculation assumes that the expense ratio and portfolio composition remain
constant over the life of the fund. In the past, our AVM calculation was based
on the old expense cap of 0.70%, though
Target: 2015's Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'86 $14.24 $101
'87 $11.37 $102.86
'88 $12.63 $102.75
'89 $16.86 $101.77
'90 $16.29 $102.24
'91 $19.95 $106.05
'92 $21.502 $107.792
'93 $28.064 $106.952
'94 $24.11 $108.832
'95 $36.819 $109.462
'96 $31.962 $110.109
'97 $38.34 $110.52
'98 $43.07 $112.49
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 45), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
18 TARGET MATURITIES TRUST: 2015 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2015
actual fund expenses varied. Lowering the assumption for expenses in our
calculation to 0.60%--the fund's current management fee--caused the anticipated
value at maturity to rise.
DID YOU MAKE ANY CHANGES TO THE PORTFOLIO?
We increased the fund's holdings of November 2015 STRIPS, which helped keep
the weighted average maturity date close to that of the benchmark. The change
was largely cash-flow related--assets grew from around $115 million to about
$145 million. Because STRIPS are the most liquid zero-coupon bonds (the easiest
to buy and sell), we used them to put the new money to work quickly. The other
reason we bought STRIPS is that in this area of the zero-coupon yield curve,
REFCORP yields aren't significantly higher than STRIPS yields. And because
REFCORPs tend to be less liquid than STRIPS, it generally doesn't make sense to
buy REFCORPs unless we can find them at very attractive yields.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
While it's possible rates could go lower, we think the majority of the
decline in yields is already behind us. In our opinion, economic growth would
have to slow significantly to get bond prices moving higher again, and a
slowdown of that magnitude doesn't seem likely in the near future. Analysts
thought slower demand from Asia would put the brakes on the economy, but a
robust consumer sector has kept growth strong. Continued economic strength helps
establish a floor on how low interest rates can go--the Federal Reserve is
reluctant to lower short-term interest rates as long as the economy remains
robust and there's also the threat of inflation from higher wages.
WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
We manage Target: 2015 to deliver a pure play on zero-coupon bonds, giving
shareholders the total return and interest rate sensitivity of a zero maturing
November 15, 2015. While there's no assurance that Target: 2015 will reach its
anticipated value at maturity, we'll manage the portfolio to try to meet or beat
that value. To do that, we'll continue to work to keep the average maturity date
close to that of the benchmark. We'll also try to keep turnover and transaction
costs down by using cash inflows and outflows as opportunities to adjust the
fund's composition and weighted average maturity date. We're likely to continue
to use STRIPS to meet liquidity needs, while we'll look for additional yield in
other types of zeros.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
STRIPS 56%
REFCORPs 44%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
STRIPS 50%
REFCORPs 50%
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2015 19
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2015
MARCH 31, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 9,350,000 STRIPS -- COUPON, 7.52%,
2/15/15 $ 3,402,877
39,440,000 REFCORP STRIPS -- COUPON,
8.21%, 4/15/15 13,912,484
43,408,000 STRIPS -- COUPON, 8.88%,
5/15/15 15,567,154
29,644,000 REFCORP STRIPS -- COUPON,
8.55%, 7/15/15 10,297,277
35,050,000 STRIPS -- COUPON, 9.17%,
8/15/15 12,379,890
48,421,000 REFCORP STRIPS -- COUPON,
8.38%, 10/15/15 16,566,158
77,808,000 STRIPS -- COUPON, 7.63%,
11/15/15 27,080,574
36,300,000 STRIPS -- COUPON, 8.38%,
2/15/16 12,443,127
17,700,000 STRIPS -- COUPON, 8.39%,
5/15/16 5,973,366
46,500,000 REFCORP STRIPS -- COUPON,
7.67%, 7/15/16 15,180,773
25,500,000 REFCORP STRIPS -- COUPON,
8.18%, 10/15/16 8,199,330
12,000,000 STRIPS -- COUPON, 5.91%,
11/15/16 3,930,165
------------------
TOTAL INVESTMENT SECURITIES--100.0% $144,933,175
==================
(Cost $103,796,839)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. 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(2)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF MARCH 31, 1998(1)
<S> <C> <C> <C> <C> <C>
Target Maturities Trust: 2020 ....... 15.27% 41.66% 20.91% 14.33% 12.33%
Fund Benchmark(3) ................... 15.52% 42.60% 21.74% 14.75% 11.81%(4)
Merrill Lynch Long-Term
Treasury Index ...................... 8.03% 20.49% 12.44% 8.96% 9.18%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Inception date was December 29, 1989.
(3) From December 1989 through April 1990, the fund's benchmark was an 8/15/19
STRIPS issue; from May 1990 through October 1991, it was an 11/15/19 STRIPS
issue; and from November 1991 to the present, it has been an 11/15/20
STRIPS issue.
(4) Returns since December 31, 1989, the date nearest the fund's inception for
which data are available.
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 Life of Fund
$10,000 investment made 12/31/89*
Value on 3/31/98
Fund Merrill Lynch
Target: 2020 Benchmark Long-Term Index
Dec-89 $10,000 $10,000 $10,000
Jan-90 $9,083 $9,063 $9,659
Feb-90 $8,767 $8,518 $9,617
Mar-90 $8,658 $8,407 $9,593
Apr-90 $7,967 $7,781 $9,346
May-90 $8,917 $8,351 $9,783
Jun-90 $9,258 $8,818 $10,006
Jul-90 $9,308 $9,237 $10,108
Aug-90 $7,950 $7,837 $9,671
Sep-90 $8,025 $7,976 $9,795
Oct-90 $8,458 $8,356 $10,013
Nov-90 $9,275 $8,845 $10,429
Dec-90 $9,550 $9,080 $10,646
Jan-91 $9,800 $9,373 $10,766
Feb-91 $9,850 $9,275 $10,809
Mar-91 $9,717 $9,257 $10,844
Apr-91 $9,808 $9,399 $10,987
May-91 $9,633 $9,133 $10,986
Jun-91 $9,208 $8,774 $10,900
Jul-91 $9,458 $9,058 $11,059
Aug-91 $10,117 $9,601 $11,446
Sep-91 $10,450 $10,012 $11,803
Oct-91 $10,117 $9,551 $11,841
Nov-91 $9,792 $9,257 $11,898
Dec-91 $11,208 $10,623 $12,608
Jan-92 $10,558 $10,005 $12,199
Feb-92 $10,742 $10,094 $12,285
Mar-92 $10,592 $9,970 $12,150
Apr-92 $10,408 $9,818 $12,154
May-92 $10,942 $10,295 $12,474
Jun-92 $10,842 $10,226 $12,653
Jul-92 $11,708 $11,110 $13,170
Aug-92 $11,533 $10,884 $13,281
Sep-92 $11,358 $10,690 $13,485
Oct-92 $10,925 $10,305 $13,217
Nov-92 $11,508 $10,861 $13,257
Dec-92 $12,142 $11,474 $13,609
Jan-93 $12,675 $11,985 $14,013
Feb-93 $13,383 $12,716 $14,477
Mar-93 $13,358 $12,631 $14,516
Apr-93 $13,300 $12,608 $14,622
May-93 $13,708 $12,951 $14,676
Jun-93 $14,692 $13,854 $15,293
Jul-93 $15,775 $14,963 $15,529
Aug-93 $17,542 $16,680 $16,152
Sep-93 $17,267 $16,421 $16,223
Oct-93 $17,583 $16,769 $16,324
Nov-93 $16,625 $15,862 $15,907
Dec-93 $16,467 $15,625 $15,955
Jan-94 $17,100 $16,254 $16,342
Feb-94 $15,800 $14,984 $15,660
Mar-94 $14,508 $13,672 $15,021
Apr-94 $14,142 $13,354 $14,790
May-94 $13,750 $12,955 $14,719
Jun-94 $13,375 $12,613 $14,587
Jul-94 $14,417 $13,623 $15,048
Aug-94 $13,767 $12,992 $14,954
Sep-94 $12,733 $11,974 $14,501
Oct-94 $12,608 $11,832 $14,437
Nov-94 $12,992 $12,212 $14,513
Dec-94 $13,558 $12,775 $14,768
Jan-95 $14,175 $13,401 $15,146
Feb-95 $14,533 $13,750 $15,571
Mar-95 $14,767 $13,925 $15,684
Apr-95 $15,075 $14,250 $15,961
May-95 $17,642 $16,707 $17,195
Jun-95 $17,933 $17,009 $17,402
Jul-95 $17,117 $16,274 $17,131
Aug-95 $18,008 $17,105 $17,500
Sep-95 $18,725 $17,816 $17,816
Oct-95 $19,917 $18,972 $18,340
Nov-95 $20,667 $19,659 $18,790
Dec-95 $21,875 $20,861 $19,298
Jan-96 $21,492 $20,480 $19,288
Feb-96 $19,067 $18,155 $18,347
Mar-96 $18,242 $17,378 $17,997
Apr-96 $17,583 $16,761 $17,697
May-96 $17,608 $16,824 $17,612
Jun-96 $18,133 $17,361 $17,969
Jul-96 $18,150 $17,391 $17,969
Aug-96 $17,450 $16,655 $17,750
Sep-96 $18,333 $17,558 $18,236
Oct-96 $19,741 $19,071 $18,947
Nov-96 $21,107 $20,130 $19,570
Dec-96 $20,033 $19,111 $19,107
Jan-97 $19,408 $18,529 $18,983
Feb-97 $19,415 $18,543 $18,957
Mar-97 $18,423 $17,620 $18,506
Apr-97 $19,265 $18,424 $18,956
May-97 $19,573 $18,742 $19,159
Jun-97 $20,264 $19,504 $19,520
Jul-97 $22,964 $21,958 $20,649
Aug-97 $21,464 $20,593 $20,073
Sep-97 $22,638 $21,752 $20,648
Oct-97 $24,080 $23,179 $20,648
Nov-97 $24,981 $24,036 $20,648
Dec-97 $25,765 $24,758 $20,648
Jan-98 $26,347 $25,385 $20,648
Feb-98 $26,039 $25,055 $20,648
Mar-98 $26,100 $25,127 $20,648
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
* 12/31/89 is the date nearest the fund's inception for which comparable
performance data exist. The fund's actual inception date is 12/29/89.
PORTFOLIO AT A GLANCE
3/31/98 9/30/97
Number of Securities 15 15
Anticipated Growth Rate 5.56% 5.98%
Weighted Average Maturity Date 9/09/20 9/01/20
Anticipated Value at Maturity
(AVM--see graph on next page) $107.16 $104.84
Expense Ratio 0.60%* 0.53%
* Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2020 21
TARGET MATURITIES TRUST: 2020
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM OVER THE LAST SIX MONTHS?
Target: 2020 performed very well, producing a 15.27% return for the six
months ended March 31, 1998. For the year ended in March, the fund returned
41.66%. The fund's benchmark, a November 15, 2020 STRIPS issue, returned 15.52%
for the six months and 42.60% for the year. However, fund returns are reduced by
management expenses and transaction costs, while the benchmark's are not.
Nevertheless, since its inception in December 1989, Target: 2020 has
outperformed its benchmark by more than half a percentage point even after
expenses. (See the Total Returns table on the previous page for other fund
performance comparisons.)
CAN YOU EXPLAIN HOW TARGET: 2020 MANAGED TO PRODUCE THOSE STOCK-LIKE RETURNS?
Those impressive returns are a product of the recent decline in interest
rates. Long-term zero-coupon bonds and funds that buy them are extremely
sensitive to rate changes--their prices rise faster than interest-paying bonds
when rates fall, but zeros also suffer more price depreciation than other bonds
when rates rise. That means zeros can be a great asset to own when the outlook
for inflation is good and nominal interest rates are falling, which was the case
over the last year or so (see the Market Perspective on page 4). The potential
for huge returns explains why a high-profile equity investor such as Warren
Buffett was such a big buyer of long-term zeros during the last year.
[line graph - data below]
Target: 2020's Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'90 $11.46 $92.6
'91 $13.45 $97.77
'92 $14.575 $102.184
'93 $19.765 $101.274
'94 $16.273 $102.175
'95 $26.245 $102.54
'96 $22 $103.598
'97 $27.17 $104.84
'98 $31.32 $107.16
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 45), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
22 TARGET MATURITIES TRUST: 2020 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2020
TARGET: 2020'S ANTICIPATED VALUE AT MATURITY (AVM) INCREASED BY $2.32 (SEE PAGE
21). WHY?
The higher AVM is a result of the new, unified fee structure shareholders
approved last summer. We approximate the fund's anticipated growth rate and
value at maturity each day, so shareholders have an idea what their investment
should return if they hold their shares to the maturity date. But that
calculation assumes that the expense ratio and portfolio composition remain
constant over the life of the fund. In the past, our AVM calculation was based
on the old expense cap of 0.70%, though actual fund expenses varied. Lowering
the assumption for expenses in our calculation to 0.60%--the fund's current
management fee--caused the anticipated value at maturity to rise. The size of
the increase is a good illustration of the power of compounding. In a fund that
has only a few years to run, such as Target: 2000, the revision meant an
increase of $0.36 to the approximated ending share price. But in this fund, with
more than 20 years to run, it works out to a gain of $2.32.
THE FUND'S REFCORP HOLDINGS FELL. WHY THE CHANGE?
We sold some of our shorter-maturity REFCORPs to meet shareholder
redemptions. The portfolio's weighted average maturity date was in September
2020, compared with a mid-November maturity for our benchmark. Selling our
longer-term securities would have shortened our maturity and hurt performance
relative to the benchmark. We also attempted to limit our year-end capital gains
distribution by selling our highest cost tax lots. As a result, we reduced our
holdings of July 2020 REFCORPs from about 20% of assets last September to around
13% by March.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
While it's possible rates could go lower, we think the majority of the
decline in yields is already behind us, so investors shouldn't expect a repeat
of the 40%-plus return of the last year. In our opinion, economic growth would
have to slow significantly to get bond prices moving higher again, and a
slowdown of that magnitude doesn't seem likely in the near future. Analysts
thought slower demand from Asia would put the brakes on the economy, but a
robust consumer sector has kept growth strong. Continued economic strength helps
establish a floor on how low interest rates can go--the Federal Reserve is
reluctant to lower short-term interest rates as long as the economy remains
robust and there's also the threat of inflation from higher wages.
WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
We manage Target: 2020 to deliver a pure play on zero-coupon bonds, giving
shareholders the total return and interest rate sensitivity of a zero maturing
November 15, 2020. While there's no assurance that Target: 2020 will reach its
anticipated value at maturity, we'll manage the fund to try to meet or beat that
value. To do that, we'll continue to work to move the average maturity date
closer to that of the benchmark, using cash inflows and outflows as
opportunities to adjust the portfolio. We're also likely to continue to use
STRIPS to meet liquidity needs.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
REFCORPs 55%
STRIPS 45%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
REFCORPs 63%
STRIPS 37%
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2020 23
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2020
MARCH 31, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 57,823,000 REFCORP STRIPS -- COUPON,
8.49%, 1/15/20 $ 15,173,097
240,000,000 STRIPS -- COUPON, 7.96%,
2/15/20 64,399,491
38,344,000 REFCORP STRIPS -- COUPON,
7.64%, 4/15/20 9,909,399
70,500,000 STRIPS -- COUPON, 8.38%,
5/15/20 18,639,715
59,400,000 REFCORP STRIPS -- COUPON,
8.16%, 7/15/20 15,115,680
291,000,000 REFCORP STRIPS -- PRINCIPAL,
8.27%, 7/15/20 74,051,562
247,135,000 STRIPS -- COUPON, 7.47%,
8/15/20 64,349,757
16,165,000 REFCORP STRIPS -- COUPON,
7.23%, 10/15/20 4,051,289
436,000,000 REFCORP STRIPS -- PRINCIPAL,
7.38%, 10/15/20 109,270,777
249,407,000 STRIPS -- COUPON, 7.53%,
11/15/20 63,988,252
20,482,000 REFCORP STRIPS -- COUPON,
8.41%, 1/15/21 5,054,535
294,945,000 REFCORP STRIPS -- PRINCIPAL,
7.32%, 1/15/21 72,786,343
88,250,000 STRIPS -- COUPON, 7.19%,
2/15/21 22,298,150
61,500,000 STRIPS -- COUPON, 6.52%,
5/15/21 15,276,850
14,500,000 STRIPS -- COUPON, 7.40%,
11/15/21 3,494,999
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $557,859,896
===================
(Cost $408,803,791)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
See Notes to Financial Statements
24 TARGET MATURITIES TRUST: 2020 AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
TARGET MATURITIES TRUST: 2025
6 MONTHS 1 YEAR LIFE OF FUND(2)
- --------------------------------------------------------------------------------------
TOTAL RETURNS AS OF MARCH 31, 1998(1)
<S> <C> <C> <C>
Target Maturities Trust: 2025 .......... 16.48% 47.14% 13.45%
Fund Benchmark(3) ...................... 17.59% 47.14% 10.80%
Merrill Lynch Long-Term
Treasury Index ......................... 8.03% 20.49% 7.79%
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Inception date was February 15, 1996.
(3) The fund's benchmark was an 8/15/25 STRIPS issue from inception through
January 1998, when the benchmark was changed to an 11/15/25 STRIPS issue.
See pages 44-45 for more information about returns, the comparative index and
the fund's benchmark.
[mountain graph - data graph]
Growth of 10,000 Over Life of Fund
$10,000 investment made 2/15/96
Value on 3/31/98
Fund Merrill Lynch
Target: 2025 Benchmark Long-Term Index
15-Feb $10,000 $10,000 $10,000
Feb-96 $9,542 $9,308 $9,650
Mar-96 $9,124 $8,965 $9,466
Apr-96 $8,756 $8,354 $9,308
May-96 $8,746 $8,403 $9,263
Jun-96 $8,983 $8,713 $9,451
Jul-96 $8,968 $8,645 $9,451
Aug-96 $8,529 $8,198 $9,336
Sep-96 $9,023 $8,696 $9,591
Oct-96 $9,799 $9,456 $9,965
Nov-96 $10,540 $10,105 $10,293
Dec-96 $9,890 $9,455 $10,049
Jan-97 $9,492 $9,048 $9,984
Feb-97 $9,427 $8,946 $9,970
Mar-97 $8,883 $8,449 $9,733
Apr-97 $9,392 $8,854 $9,970
May-97 $9,558 $9,002 $10,077
Jun-97 $9,966 $9,432 $10,267
Jul-97 $11,463 $10,865 $10,861
Aug-97 $10,561 $9,989 $10,558
Sep-97 $11,221 $10,572 $10,855
Oct-97 $12,016 $11,370 $11,212
Nov-97 $12,419 $11,834 $11,359
Dec-97 $12,867 $12,218 $11,551
Jan-98 $13,246 $12,616 $11,779
Feb-98 $13,009 $12,336 $11,697
Mar-98 $13,068 $12,432 $11,726
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.
PORTFOLIO AT A GLANCE
3/31/98 9/30/97
Number of Securities 19 14
Anticipated Growth Rate 5.48% 5.86%
Weighted Average Maturity Date 6/10/25 7/10/25
Anticipated Value at Maturity
(AVM--see graph on next page) $112.76 $110.88
Expense Ratio 0.60%* 0.62%
* Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2025 25
TARGET MATURITIES TRUST: 2025
MANAGEMENT Q & A
An interview with Dave Schroeder, a portfolio manager on the Target
Maturities Trust investment team.
HOW DID THE FUND PERFORM OVER THE LAST SIX MONTHS?
Target: 2025 performed very well, producing a 16.48% return for the six
months ended March 31, 1998. For the year ended in March, the fund returned
47.14%. The fund's benchmark,* returned 17.59% for the six months and 47.14% for
the year. However, fund returns are reduced by management expenses and
transaction costs, while the benchmark's are not. Since its inception on
February 15, 1996, Target: 2025 has outperformed its benchmark by 2.65% even
after expenses. (See the Total Returns table on the previous page for other fund
performance comparisons.)
CAN YOU EXPLAIN HOW TARGET: 2025 MANAGED TO PRODUCE THOSE STOCK-LIKE RETURNS?
Those impressive returns are a product of the recent decline in interest
rates. Long-term zero-coupon bonds and funds that buy them are extremely
sensitive to rate changes--their prices rise faster than interest-paying bonds
when rates fall, but zeros also suffer more price depreciation than other bonds
when rates rise. That means zeros can be a great asset to own when the outlook
for inflation is good and nominal interest rates are falling, which was the case
over the last year or so (see the Market Perspective on page 4). The potential
for huge returns explains why a high-profile equity investor such as Warren
Buffett was such a big buyer of long-term zeros during the last year.
* The fund's benchmark was an 8/15/25 STRIPS issue from inception through
January 1998, when the benchmark was changed to an 11/15/25 STRIPS issue.
[line graph - data below]
Target: 2025's Share Price vs. Anticipated Value at Maturity
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
'96 $17.91 $109.24
'97 $22.27 $110.88
'98 $25.94 $112.76
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
'23
'24
'25
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 45), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM.
While this graph demonstrates the fund's expected long-term growth pattern,
please keep in mind that the fund may experience significant share-price
volatility over the short term.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
26 TARGET MATURITIES TRUST: 2025 AMERICAN CENTURY INVESTMENTS
TARGET MATURITIES TRUST: 2025
TARGET: 2025'S ANTICIPATED VALUE AT MATURITY (AVM) INCREASED BY $1.88 (SEE PAGE
25). WHY?
The higher AVM is a result of the new, unified fee structure shareholders
approved last summer. We approximate the fund's anticipated growth rate and
value at maturity each day, so shareholders have an idea what their investment
should return if they hold their shares to the maturity date. But that
calculation assumes that the expense ratio and portfolio composition remain
constant over the life of the fund. In the past, our AVM calculation was based
on the old expense cap of 0.70%, though actual fund expenses varied. Lowering
the assumption for expenses in our calculation to 0.60%--the fund's current
management fee--caused the anticipated value at maturity to rise. The size of
the increase is a good illustration of the power of compounding. In a fund that
has only a few years to run, such as Target: 2000, the revision meant an
increase of $0.36 to the approximated ending share price. But in this fund, with
more than 25 years to run, it works out to a gain of more than five times as
much.
REFCORPS DECLINED AS A PERCENT OF THE PORTFOLIO. WHY THE CHANGE?
The fund's assets nearly tripled, going from $74 million to almost $206
million, and we used that new money to buy STRIPS. We used them to put the new
money to work quickly because STRIPS are the most liquid zero-coupon bonds (the
easiest to buy and sell). The other reason we bought STRIPS is that the
difference in yield between them and REFCORPs narrowed at the long end of the
zero-coupon yield curve. When we opened Target: 2025 in 1996, REFCORP yields
were 20 to 25 basis points higher than STRIPS yields. But that premium is now
down to about 10 basis points. We don't think it makes sense to buy REFCORPs
unless we can find them at much more attractive yields.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
While it's possible rates could go lower, we think the majority of the
decline in yields is already behind us, so investors shouldn't expect a repeat
of the 45%-plus return of the last year. In our opinion, economic growth would
have to slow significantly to get bond prices moving higher again, and a
slowdown of that magnitude doesn't seem likely in the near future. Analysts
thought slower demand from Asia would put the brakes on the economy, but a
robust consumer sector has kept growth strong. Continued economic strength helps
establish a floor on how low interest rates can go--the Federal Reserve is
reluctant to lower short-term interest rates as long as the economy remains
robust and there's also the threat of inflation from higher wages.
WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
We manage Target: 2025 to deliver a pure play on zero-coupon bonds, giving
shareholders the total return and interest rate sensitivity of a zero maturing
November 15, 2025. While there's no assurance Target: 2025 will reach its
anticipated value at maturity, we'll manage the fund to try to meet or beat that
value. To do that, we'll continue to work to move the fund's average maturity
date closer to that of the benchmark, using cash inflows and outflows as
opportunities to adjust the portfolio.
[pie charts]
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
STRIPS 57%
REFCORPs 43%
PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
REFCORPs 63%
STRIPS 37%
SEMIANNUAL REPORT TARGET MATURITIES TRUST: 2025 27
SCHEDULE OF INVESTMENTS
TARGET MATURITIES TRUST: 2025
MARCH 31, 1998 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1)
$ 10,000,000 REFCORP STRIPS -- COUPON,
6.19%, 1/15/24 $ 2,094,140
12,000,000 REFCORP STRIPS -- COUPON,
6.50%, 4/15/24 2,475,410
3,926,000 REFCORP STRIPS -- COUPON,
7.10%, 7/15/24 797,613
72,083,000 REFCORP STRIPS -- COUPON,
6.83%, 10/15/24 14,351,543
13,000,000 STRIPS -- COUPON, 7.27%,
11/15/24 2,663,172
17,500,000 STRIPS -- PRINCIPAL, 7.26%,
11/15/24 3,585,039
41,645,000 REFCORP STRIPS -- COUPON,
6.93%, 1/15/25 8,154,911
156,900,000 STRIPS -- COUPON, 6.45%,
2/15/25 31,618,340
275,300,000 STRIPS -- PRINCIPAL, 6.44%,
2/15/25 55,478,197
23,399,000 REFCORP STRIPS -- COUPON,
7.00%, 4/15/25 4,542,923
8,500,000 REFCORP STRIPS -- COUPON,
6.95%, 7/15/25 1,616,715
26,000,000 STRIPS -- COUPON, 6.05%,
8/15/25 5,092,416
73,000,000 STRIPS -- PRINCIPAL, 5.90%,
8/15/25 14,297,937
95,167,000 REFCORP STRIPS -- COUPON,
6.79%, 10/15/25 17,829,539
45,000,000 REFCORP STRIPS -- COUPON,
6.81%, 1/15/26 8,336,377
21,000,000 STRIPS -- PRINCIPAL, 5.99%,
2/15/26 4,008,671
43,000,000 REFCORP STRIPS -- COUPON,
6.68%, 4/15/26 7,911,016
36,000,000 REFCORP STRIPS -- COUPON,
7.29%, 7/15/26 6,523,324
80,042,000 REFCORP STRIPS -- COUPON,
6.99%, 10/15/26 14,287,971
-------------------
TOTAL INVESTMENT SECURITIES--100.0% $205,665,254
===================
(Cost $181,475,172)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
See Notes to Financial Statements
28 TARGET MATURITIES TRUST: 2025 AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED) 2000 2005 2010 2015 2020 2025
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities, at value
(identified cost of
$234,953,553, $380,831,587,
$163,868,666, $103,796,839,
$408,803,791 and $181,475,172,
respectively) (Note 3) ....... $ 240,373,763 $ 407,069,198 $ 182,575,705 $ 144,933,175 $ 557,859,896 $205,665,25
Cash ........................... 12,720 1,172,801 1,524,994 409,739 585,438 1,012,847
Other receivable ............... -- -- -- -- 15,135 --
------------- ------------- ------------- ------------- ------------- -------------
240,386,483 408,241,999 184,100,699 145,342,914 558,460,469 206,678,101
------------- ------------- ------------- ------------- ------------- -------------
LIABILITIES
Disbursements in excess
of demand deposit cash ....... 224,710 295,691 256,679 43,001 514,685 240,321
Payable for capital shares
redeemed ..................... 131,451 1,353,147 132,216 99,918 738,311 801,163
Accrued management
fee (Note 2) ................. 120,182 202,392 90,356 72,362 281,863 103,922
Payable for trustees'
fees and expenses ............ 758 935 695 655 1,096 720
------------- ------------- ------------- ------------- ------------- -------------
477,101 1,852,165 479,946 215,936 1,535,955 1,146,126
------------- ------------- ------------- ------------- ------------- -------------
Net Assets ..................... $ 239,909,382 $ 406,389,834 $ 183,620,753 $ 145,126,978 $ 556,924,514 $205,531,97
============= ============= ============= ============= ============= =============
CAPITAL SHARES
Outstanding (Unlimited
number of shares
authorized) .................. 2,694,025 5,930,051 3,433,442 3,369,568 17,781,654 7,922,723
============= ============= ============= ============= ============= =============
Net Asset Value Per Share ...... $ 89.05 $ 68.53 $ 53.48 $ 43.07 $ 31.32 $ 25.94
============= ============= ============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital paid in ................ $ 231,079,950 $ 375,139,588 $ 162,613,311 $ 102,313,656 $ 387,434,248 $179,008,72
Undistributed net
investment income ............ 3,450,030 5,091,331 2,401,190 1,880,513 6,966,926 2,699,246
Accumulated undistributed
net realized gain (loss)
on investment transactions ... (40,808) (78,696) (100,787) (203,527) 13,467,235 (366,082)
Net unrealized appreciation on
investments (Note 3) ......... 5,420,210 26,237,611 18,707,039 41,136,336 149,056,105 24,190,082
------------- ------------- ------------- ------------- ------------- -------------
$ 239,909,382 $ 406,389,834 $ 183,620,753 $ 145,126,978 $ 556,924,514 $ 205,531,975
============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements
SEMIANNUAL REPORT STATEMENTS OF ASSETS AND LIABILITIES 29
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
MARCH 31, 1998 (UNAUDITED) 2000 2005 2010 2015 2020 2025
INVESTMENT INCOME
Income:
<S> <C> <C> <C> <C> <C> <C>
Interest ..................... $ 7,885,705 $ 10,348,378 $ 4,866,675 $ 3,839,580 $ 16,244,930 $ 4,850,340
Income from securities
lending ...................... -- -- -- -- 105,086 32,906
------------ ------------ ------------ ------------ ------------ ------------
7,885,705 10,348,378 4,866,675 3,839,580 16,350,016 4,883,246
------------ ------------ ------------ ------------ ------------ ------------
Expenses (Note 2):
Management fees .............. 720,818 971,465 466,312 398,512 1,721,154 502,049
Trustees' fees and expenses .. 5,515 6,177 4,637 4,410 9,123 4,920
------------ ------------ ------------ ------------ ------------ ------------
726,333 977,642 470,949 402,922 1,730,277 506,969
------------ ------------ ------------ ------------ ------------ ------------
Net investment income ........ 7,159,372 9,370,736 4,395,726 3,436,658 14,619,739 4,376,277
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS)
ON INVESTMENTS (NOTE 3)
Net realized gain (loss)
on investments ............. 3,361,323 238,868 (15,540) (100,044) 16,529,698 138,234
Change in net unrealized
appreciation on
investments ................ (2,124,152) 7,472,926 7,391,483 10,878,643 49,616,228 15,040,285
------------ ------------ ------------ ------------ ------------ ------------
Net realized and
unrealized gain
on investments ............. 1,237,171 7,711,794 7,375,943 10,778,599 66,145,926 15,178,519
------------ ------------ ------------ ------------ ------------ ------------
Net Increase in Net Assets
Resulting from Operations .... $ 8,396,543 $ 17,082,530 $ 11,771,669 $ 14,215,257 $ 80,765,665 $ 19,554,796
============ ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
30 STATEMENTS OF OPERATIONS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED MARCH 31, 1998
(UNAUDITED) AND YEAR ENDED
SEPTEMBER 30, 1997 2000 2005 2010
Increase (Decrease) in Net Assets 1998 1997 1998 1997 1998 1997
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ......... $ 7,159,372 $ 16,169,545 $ 9,370,736 $ 15,451,023 $ 4,395,726 $ 6,845,706
Net realized gain (loss)
on investments .............. 3,361,323 1,190,560 238,868 1,348,958 (15,540) 1,066,854
Change in net unrealized
appreciation (depreciation)
on investments ................ (2,124,152) 2,108,565 7,472,926 11,653,361 7,391,483 9,112,041
------------- ------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations ... 8,396,543 19,468,670 17,082,530 28,453,342 11,771,669 17,024,601
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income .... (15,765,056) (17,081,069) (15,987,498) (14,549,884) (7,094,254) (6,941,406)
From net realized gains on
investment transactions ..... -- -- (1,217,264) (1,764,760) (849,134) (2,886,953)
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets from
distributions to
shareholders ................ (15,765,056) (17,081,069) (17,204,762) (16,314,644) (7,943,388) (9,828,359)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ..... 31,197,059 68,953,917 167,807,747 121,523,893 79,977,881 63,762,772
Proceeds from reinvestment
of distributions ............ 15,630,391 16,712,103 17,061,205 15,992,574 7,879,476 9,617,856
Payments for shares redeemed .. (47,926,689) (107,433,075) (60,034,027) (106,841,952) (32,876,714) (66,882,232)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets from capital
share transactions .......... (1,099,239) (21,767,055) 124,834,925 30,674,515 54,980,643 6,498,396
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets ............... (8,467,752) (19,379,454) 124,712,693 42,813,213 58,808,924 13,694,638
NET ASSETS
Beginning of period ........... 248,377,134 267,756,588 281,677,141 238,863,928 124,811,829 111,117,191
------------- ------------- ------------- ------------- ------------- -------------
End of period ................. $ 239,909,382 $ 248,377,134 $ 406,389,834 $ 281,677,141 $ 183,620,753 $124,811,82
============= ============= ============= ============= ============= =============
Undistributed net
investment income ........... $ 3,450,030 $ 12,055,714 $ 5,091,331 $ 11,708,093 $ 2,401,190 $ 5,099,718
============= ============= ============= ============= ============= =============
TRANSACTIONS IN
SHARES OF THE FUNDS
Sold .......................... 353,356 833,120 2,455,653 1,988,109 1,519,604 1,383,983
Issued in reinvestment
of distributions ............ 191,104 217,238 270,807 282,750 159,950 233,038
Redeemed ...................... (544,056) (1,291,432) (887,881) (1,748,806) (624,118) (1,456,337)
Reverse share split ........... (192,640) (221,717) (272,951) (288,036) (161,116) (237,690)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) ....... (192,236) (462,791) 1,565,628 234,017 894,320 (77,006)
============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements
SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS 31
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED MARCH 31, 1998
(UNAUDITED) AND YEAR ENDED
SEPTEMBER 30, 1997 2000 2005 2010
Increase (Decrease) in Net Assets 1998 1997 1998 1997 1998 1997
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ........ $ 3,436,658 $ 6,594,789 $ 14,619,739 $ 51,768,641 $ 4,376,277 $ 3,478,019
Net realized gain (loss)
on investments ............. (100,044) 4,715,347 16,529,698 45,078,260 138,234 302,702
Change in net unrealized
appreciation (depreciation)
on investments ............. 10,878,643 10,243,018 49,616,228 85,510,156 15,040,285 9,831,539
--------------- --------------- --------------- --------------- --------------- ---------------
Net increase in net assets
resulting from operations .. 14,215,257 21,553,154 80,765,665 182,357,057 19,554,796 13,612,260
--------------- --------------- --------------- --------------- --------------- ---------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income ... (6,501,208) (6,897,189) (44,888,306) (54,220,221) (4,549,154) (1,603,280)
From net realized gains on
investment transactions .... (4,326,523) (1,134,946) (41,866,720) (831) (305,669) --
--------------- --------------- --------------- --------------- --------------- ---------------
Decrease in net assets from
distributions to shareholders (10,827,731) (8,032,135) (86,755,026) (54,221,052) (4,854,823) (1,603,280)
--------------- --------------- --------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .... 54,491,617 62,777,456 229,709,543 528,512,319 286,488,492 147,285,096
Proceeds from reinvestment
of distributions ........... 10,744,494 7,799,177 85,814,004 51,887,629 4,802,866 1,500,130
Payments for shares redeemed.. (38,396,228) (84,851,908) (306,160,699) (1,081,304,136) (174,280,671) (122,633,493)
--------------- --------------- --------------- --------------- --------------- ---------------
Net increase (decrease)
in net assets from capital
share transactions ......... 26,839,883 (14,275,275) 9,362,848 (500,904,188) 117,010,687 26,151,733
--------------- --------------- --------------- --------------- --------------- ---------------
Net increase (decrease)
in net assets .............. 30,227,409 (754,256) 3,373,487 (372,768,183) 131,710,660 38,160,713
NET ASSETS
Beginning of period .......... 114,899,569 115,653,825 553,551,027 926,319,210 73,821,315 35,660,602
--------------- --------------- --------------- --------------- --------------- ---------------
End of period ................ $ 145,126,978 $ 114,899,569 $ 556,924,514 $ 553,551,027 $ 205,531,975 $ 73,821,315
=============== =============== =============== =============== =============== ===============
Undistributed net
investment income .......... $ 1,880,513 $ 4,945,063 $ 6,966,926 $ 37,235,493 $ 2,699,246 $ 2,872,123
=============== =============== =============== =============== =============== ===============
TRANSACTIONS IN
SHARES OF THE FUNDS
Sold ......................... 1,285,998 1,812,323 7,622,420 21,885,096 11,496,672 7,508,353
Issued in reinvestment
of distributions ........... 281,652 241,373 3,356,693 2,286,212 199,764 79,036
Redeemed ..................... (911,156) (2,427,375) (10,186,143) (43,514,345) (6,886,063) (6,180,587)
Reverse share split .......... (283,585) (248,086) (3,387,874) (2,383,074) (201,848) (84,260)
--------------- --------------- --------------- --------------- --------------- ---------------
Net increase (decrease) ...... 372,909 (621,765) (2,594,904) (21,726,111) 4,608,525 1,322,542
=============== =============== =============== =============== =============== ===============
</TABLE>
See Notes to Financial Statements
32 STATEMENTS OF CHANGES IN NET ASSETS AMERICAN CENTURY INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 (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 Funds are authorized to
issue two classes of shares: the Investor Class and the Advisor Class. The two
classes of shares differ principally in their respective shareholder servicing
and distribution expenses and arrangements. All shares of the Funds represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes. Sale of the Advisor Class had
not commenced as of the report date. The following significant accounting
policies, related to both classes of the Funds, are in accordance with
accounting policies generally accepted in the investment company industry.
SECURITY VALUATIONS -- Securities are valued through a commercial pricing
service or at the mean of the most recent bid and asked prices. When valuations
are not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Trustees.
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 accretion of discounts and amortization of premiums.
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 income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized gains are declared and paid annually in December. At September
30, 1997 accumulated capital loss carryovers of $3,399,216 for 2000 (expiring
2003) may be used to offset future taxable gains.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net capital gains and losses for financial statement
and tax purposes and may result in reclassification among certain capital
accounts.
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.
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.
ADDITIONAL INFORMATION -- Effective January 15, 1998, Funds Distributor,
Inc. (FDI) became the Trust's distributor. Certain officers of FDI are also
officers of the Trust.
SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 33
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The Trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM) that provides each Fund with investment
advisory and management services in exchange for a single, unified management
fee per class. Expenses excluded from this agreement are brokerage, taxes,
portfolio insurance, interest, fees and expenses of the Trustees who are not
considered "interested persons" as defined in the Investment Company Act of 1940
(including counsel fees) and extraordinary expenses. The annual rate at which
this fee is assessed is determined monthly in a two-step process: First, a fee
rate schedule is applied to the net assets of all of the funds in the Fund's
investment category which are managed by ACIM (the "Investment Category Fee").
The overall investment objective of each Fund determines its Investment
Category. The three investment categories are: the Money Market Fund Category,
the Bond Fund Category and the Equity Fund Category. The Funds are included in
the Bond Fund Category. Second, a separate fee rate schedule is applied to the
net assets of all of the funds managed by ACIM (the "Complex Fee"). The
Investment Category Fee and the Complex Fee are then added to determine the
unified management fee rate. The management fee is paid monthly by each Fund
based on each Fund's aggregate average daily net assets during the previous
month multiplied by the monthly management fee rate. The annualized Investment
Category Fee schedule for each Fund is as follows:
0.3600% of the first $1 billion
0.3080% of the next $1 billion
0.2780% of the next $3 billion
0.2580% of the next $5 billion
0.2450% of the next $15 billion
0.2430% of the next $25 billion
0.2425% of the average daily net assets over $50 billion
The annualized Complex Fee schedule (Investor Class) is as follows:
0.3100% of the first $2.5 billion
0.3000% of the next $7.5 billion
0.2985% of the next $15 billion
0.2970% of the next $25 billion
0.2960% of the next $50 billion
0.2950% of the next $100 billion
0.2940% of the next $100 billion
0.2930% of the next $200 billion
0.2920% of the next $250 billion
0.2910% of the next $500 billion
0.2900% of the average daily net assets over $1,250 billion
The Complex Fee schedule for the Advisor Class is lower by 0.2500% at each
graduated step. For example, if the Investor Class Complex Fee is 0.3100% for
the first $2.5 billion, the Advisor Class Complex Fee is 0.0600% (0.3100% minus
0.2500%) for the first $2.5 billion.
The Board of Trustees has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the Plan), pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The Plan provides that the Funds will pay ACIM an annual
distribution fee equal to 0.25% and service fee equal to 0.25%. The fees are
computed daily and paid monthly based on the Advisor Class's average daily
closing net assets during the previous month. The distribution fee provides
compensation for distribution expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the Funds. The service
fee provides compensation for shareholder and administrative services rendered
by ACIM, its affiliates or independent third party providers.
Certain officers and trustees of the Trust are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the Trust's investment manager, ACIM, the Trust's
transfer agent, American Century Services Corporation, and the registered
broker-dealer, American Century Investment Services, Inc.
34 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions in U.S. Treasury securities, excluding short-term
investments were as follows:
<TABLE>
2000 2005 2010 2015 2020 2025
<S> <C> <C> <C> <C> <C> <C>
Purchases .................. $75,219,477 $129,551,823 $51,905,205 $27,933,010 $56,869,480 $156,668,890
Proceeds From Sales ........ $92,752,230 $17,269,825 $5,337,310 $12,284,160 $137,297,920 $44,666,880
On March 31, 1998, the composition of unrealized appreciation and depreciation
of investment securities based on the aggregate cost of investments for federal
income tax purposes was as follows:
2000 2005 2010 2015 2020 2025
Appreciation ............... $5,704,825 $26,057,936 $18,622,752 $41,263,112 $148,465,484 $24,395,570
Depreciation ............... (284,615) (136,933) -- (126,776) -- (595,655)
------------- ------------- ------------- ------------- ------------- -------------
Net ........................ $5,420,210 $25,921,003 $18,622,752 $41,136,336 $148,465,484 $23,799,915
------------- ------------- ------------- ------------- ------------- -------------
Federal Tax Cost ........... $234,953,553 $381,148,195 $163,952,953 $103,796,839 $409,394,412 $181,865,339
============= ============= ============= ============= ============= =============
</TABLE>
SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 35
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2000
For a Share Outstanding Throughout the Years Ended September 30 (except as
noted)
1998(1) 1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ............. $ 86.05 $ 79.95 $ 76.86 $ 66.93 $ 72.40 $ 62.16
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income(2) ...... 2.57 5.10 4.75 4.37 3.99 3.94
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions .................. 0.43 1.00 (1.66) 5.56 (9.46) 6.30
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations .................... 3.00 6.10 3.09 9.93 (5.47) 10.24
----------- ----------- ----------- ----------- ----------- -----------
Distributions(3)
From Net Investment
Income ........................ (5.64) (5.20) (3.94) (3.42) (3.25) (2.34)
From Net Realized
Capital Gains ................. -- -- -- -- (2.95) (1.83)
In Excess of Net
Realized Gains ................ -- -- -- -- (1.20) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ........... (5.64) (5.20) (3.94) (3.42) (7.40) (4.17)
----------- ----------- ----------- ----------- ----------- -----------
Reverse Share Split ............. 5.64 5.20 3.94 3.42 7.40 4.17
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period ................... $ 89.05 $ 86.05 $ 79.95 $ 76.86 $ 66.93 $ 72.40
=========== =========== =========== =========== =========== ===========
Total Return(4) ............... 3.47% 7.64% 4.01% 14.84% (7.54)% 16.46%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........... 0.60%(5) 0.56% 0.53% 0.63% 0.59% 0.60%
Ratio of Net Investment
Income to Average
Net Assets .................... 5.87%(5) 6.14% 5.99% 6.13% 5.74% 5.94%
Portfolio Turnover Rate ......... 31% 10% 29% 53% 89% 77%
Net Assets, End
of Period (in thousands) ........ $ 239,909 $ 248,377 $ 267,757 $ 294,736 $ 243,895 $ 291,418
</TABLE>
(1) Six months ended March 31, 1998 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
36 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2005
For a Share Outstanding Throughout the Years Ended September 30
(except as noted)
1998(1) 1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .............. $ 64.54 $ 57.83 $ 56.61 $ 45.22 $ 51.84 $ 41.18
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income(2) ....... 1.90 3.74 3.50 3.33 3.11 2.90
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ................... 2.09 2.97 (2.28) 8.06 (9.73) 7.76
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ..................... 3.99 6.71 1.22 11.39 (6.62) 10.66
----------- ----------- ----------- ----------- ----------- -----------
Distributions(3)
From Net Investment
Income ......................... (3.61) (3.61) (2.06) (2.41) (2.70) (2.51)
From Net Realized
Capital Gains .................. (0.27) (0.44) (0.58) (0.67) (8.47) (1.01)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ............ (3.88) (4.05) (2.64) (3.08) (11.17) (3.52)
----------- ----------- ----------- ----------- ----------- -----------
Reverse Share Split .............. 3.88 4.05 2.64 3.08 11.17 3.52
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period .................... $ 68.53 $ 64.54 $ 57.83 $ 56.61 $ 45.22 $ 51.84
=========== =========== =========== =========== =========== ===========
Total Return(4) ................ 6.18% 11.60% 2.15% 25.16% (12.75)% 25.89%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............ 0.60%(5) 0.57% 0.58% 0.71% 0.64% 0.62%
Ratio of Net Investment
Income to Average
Net Assets ..................... 5.71%(5) 6.15% 6.05% 6.58% 6.37% 6.44%
Portfolio Turnover Rate .......... 5% 15% 31% 34% 68% 50%
Net Assets, End
of Period (in thousands) ......... $ 406,390 $ 281,677 $ 238,864 $ 183,452 $ 96,207 $ 149,890
</TABLE>
(1) Six months ended March 31, 1998 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS 37
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2010
For a Share Outstanding Throughout the Years Ended September 30
(except as noted)
1998(1) 1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ................ $ 49.16 $ 42.47 $ 42.14 $ 31.67 $ 38.13 $ 28.53
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income(2) ......... 1.46 2.79 2.58 2.41 2.24 2.05
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ..................... 2.86 3.90 (2.25) 8.06 (8.70) 7.55
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ....................... 4.32 6.69 0.33 10.47 (6.46) 9.60
----------- ----------- ----------- ----------- ----------- -----------
Distributions(3)
From Net Investment
Income ........................... (2.46) (2.82) (1.57) (1.48) (1.46) (1.58)
From Net Realized
Capital Gains .................... (0.29) (1.17) -- (0.48) (4.31) (1.14)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions .............. (2.75) (3.99) (1.57) (1.96) (5.77) (2.72)
----------- ----------- ----------- ----------- ----------- -----------
Reverse Share Split ................ 2.75 3.99 1.57 1.96 5.77 2.72
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period ...................... $ 53.48 $ 49.16 $ 42.47 $ 42.14 $ 31.67 $ 38.13
=========== =========== =========== =========== =========== ===========
Total Return(4) .................. 8.79% 15.75% 0.78% 33.06% (16.92)% 33.61%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .............. 0.60%(5) 0.62% 0.67% 0.71% 0.68% 0.66%
Ratio of Net Investment
Income to Average
Net Assets ....................... 5.56%(5) 6.15% 5.98% 6.56% 6.35% 6.32%
Portfolio Turnover Rate ............ 3% 26% 24% 26% 35% 132%
Net Assets, End
of Period (in thousands) ........... $ 183,621 $ 124,812 $ 111,117 $ 95,057 $ 46,312 $ 70,551
</TABLE>
(1) Six months ended March 31, 1998 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
38 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2015
For a Share Outstanding Throughout the Years Ended September 30
(except as noted)
1998(1) 1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ............... $ 38.34 $ 31.96 $ 32.20 $ 22.79 $ 29.04 $ 20.39
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income(2) ........ 1.06 2.00 1.85 1.71 1.57 1.46
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions .................... 3.67 4.38 (2.09) 7.70 (7.82) 7.19
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ...................... 4.73 6.38 (0.24) 9.41 (6.25) 8.65
----------- ----------- ----------- ----------- ----------- -----------
Distributions(3)
From Net Investment
Income .......................... (2.11) (2.05) (1.28) (0.87) (1.19) (1.45)
From Net Realized
Capital Gains ................... (1.40) (0.34) (1.61) -- (7.08) (0.34)
In Excess of Net
Realized Gains .................. -- -- -- -- (0.37) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ............. (3.51) (2.39) (2.89) (0.87) (8.64) (1.79)
----------- ----------- ----------- ----------- ----------- -----------
Reverse Share Split ............... 3.51 2.39 2.89 0.87 8.64 1.79
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period ..................... $ 43.07 $ 38.34 $ 31.96 $ 32.20 $ 22.79 $ 29.04
Total Return(4) ................. 12.34% 19.96% (0.74)% 41.29% (21.52)% 42.42%
=========== =========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............. 0.60%(5) 0.61% 0.65% 0.71% 0.68% 0.63%
Ratio of Net Investment
Income to Average
Net Assets ...................... 5.09%(5) 5.79% 5.63% 6.40% 5.97% 6.28%
Portfolio Turnover Rate ........... 9% 21% 17% 70% 65% 138%
Net Assets, End
of Period (in thousands) .......... $ 145,127 $ 114,900 $ 115,654 $ 114,647 $ 66,073 $ 89,023
</TABLE>
(1) Six months ended March 31, 1998 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS 39
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2020
For a Share Outstanding Throughout the Years Ended September 30
(except as noted)
1998(1) 1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ............... $ 27.17 $ 22.00 $ 22.47 $ 15.28 $ 20.72 $ 13.63
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income(2) ........ 0.76 1.51 1.41 1.19 1.13 1.00
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions .................... 3.39 3.66 (1.88) 6.00 (6.57) 6.09
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ...................... 4.15 5.17 (0.47) 7.19 (5.44) 7.09
----------- ----------- ----------- ----------- ----------- -----------
Distributions(3)
From Net Investment
Income .......................... (2.35) (1.45) (0.40) (0.21) (0.28) (0.53)
From Net Realized
Capital Gains ................... (2.19) -- (0.04) -- (1.31) (0.72)
In Excess of Net
Realized Gains .................. -- -- -- -- (1.18) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ............. (4.54) (1.45) (0.44) (0.21) (2.77) (1.25)
----------- ----------- ----------- ----------- ----------- -----------
Reverse Share Split ............... 4.54 1.45 0.44 0.21 2.77 1.25
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period ..................... $ 31.32 $ 27.17 $ 22.00 $ 22.47 $ 15.28 $ 20.72
=========== =========== =========== =========== =========== ===========
Total Return(4) ................. 15.27% 23.50% (2.09)% 47.05% (26.25)% 52.02%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............. 0.60%(5) 0.53% 0.61% 0.72% 0.70% 0.70%
Ratio of Net Investment
Income to Average
Net Assets ...................... 5.03%(5) 6.29% 6.25% 6.24% 6.28% 6.10%
Portfolio Turnover Rate ........... 10% 14% 47% 78% 116% 179%
Net Assets, End
of Period (in thousands) .......... $ 556,925 $ 553,551 $ 926,319 $ 574,702 $ 58,535 $ 56,125
</TABLE>
(1) Six months ended March 31, 1998 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
40 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
FINANCIAL HIGHLIGHTS
TARGET MATURITIES TRUST: 2025
For a Share Outstanding Throughout the Years Ended September 30
(except as noted)
1998(1) 1997 1996(2)
PER-SHARE DATA
Net Asset Value,
Beginning of Period ......... $ 22.27 $ 17.91 $ 19.85
----------- ----------- -----------
Income From Investment
Operations
Net Investment Income(3) .. 0.66 1.21 0.72
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions .............. 3.01 3.15 (2.66)
----------- ----------- -----------
Total From Investment
Operations ................ 3.67 4.36 (1.94)
----------- ----------- -----------
Distributions
From Net Investment
Income .................... (0.70) (0.72) --
From Net Realized
Capital Gains ............. (0.05) -- --
----------- ----------- -----------
Total Distributions ....... (0.75) (0.72) --
----------- ----------- -----------
Reverse Share Split ......... 0.75 0.72 --
----------- ----------- -----------
Net Asset Value,
End of Period ............... $ 25.94 $ 22.27 $ 17.91
=========== =========== ===========
Total Return(4) ........... 16.48% 24.34% (9.77)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ....... 0.60%(5) 0.62% 0.67%(5)
Ratio of Net Investment
Income to Average
Net Assets ................ 5.16%(5) 6.14% 6.57%(5)
Portfolio Turnover Rate ..... 27% 58% 61%
Net Assets, End
of Period (in thousands) .... $ 205,532 $ 73,821 $ 35,661
(1) Six months ended March 31, 1998 (unaudited).
(2) February 15, 1996 (inception) through September 30, 1996.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS 41
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)]
are subject to federal income tax withholding at the rate of 10% of the total
amount withdrawn, unless you elect not to have withholding apply. If you don't
want us to withhold on this amount, you may send us a written notice not to have
the federal income tax withheld. Your written notice is valid for six months
from the date of receipt at American Century. Even if you plan to roll over the
amount you withdraw to another tax-deferred account, the withholding rate still
applies to the withdrawn amount unless we have received a written notice not to
withhold federal income tax within six months prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/ Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid for only six months from the date of
receipt at American Century. You may revoke your election at any time by sending
a written notice to us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
42 RETIREMENT ACCOUNT INFORMATION AMERICAN CENTURY INVESTMENTS
NOTES
SEMIANNUAL REPORT NOTES 43
BACKGROUND INFORMATION
INVESTMENT PHILOSOPHY & POLICIES
The Benham Group offers 39 fixed-income funds, ranging from money market
funds to long-term bond funds and including both taxable and tax-exempt funds.
Each fund is managed to provide a "pure play" on a specific sector of the
fixed-income market. To ensure adherence to this principle, the basic structure
of each fund's portfolio is tied to a specific market index. Fund managers
attempt to add value by making modest portfolio adjustments based on their
analysis of prevailing market conditions. Investment decisions are made by
management teams, which meet regularly to discuss market analysis and investment
strategies.
In addition to these principles, each fund has its own investment policies:
The six TARGET MATURITIES TRUST funds, including TARGET: 2000, TARGET: 2005,
TARGET: 2010, TARGET: 2015, TARGET: 2020 and TARGET: 2025, are variable-priced
bond funds that invest primarily in zero-coupon U.S. Treasury securities and
will be liquidated shortly after the conclusion of their target maturity year.
Although these funds offer a relatively predictable return if held to maturity,
they may be subject to dramatic price fluctuations that can result in
significant gains or losses if sold prior to maturity.
COMPARATIVE INDICES
The following index is used in the report for fund performance comparisons.
The index is not an investment product available for purchase.
The MERRILL LYNCH LONG-TERM TREASURY INDEX is an index of U.S. Treasury
securities with maturities greater than 10 years.
FUND BENCHMARKS
The benchmarks for the Target Maturities Trust funds are coupon STRIPS
issues maturing in the target year of each portfolio.
The benchmark for the Target: 2000 fund is the 11/15/00 STRIPS ISSUE--a
zero-coupon Treasury bond that matures November 15, 2000.
The benchmark for the Target: 2005 fund is the 11/15/05 STRIPS ISSUE--a
zero-coupon Treasury bond that matures November 15, 2005.
The benchmark for the Target: 2010 fund is the 11/15/10 STRIPS ISSUE--a
zero-coupon Treasury bond that matures November 15, 2010.
The benchmark for the Target: 2015 fund is the 11/15/15 STRIPS ISSUE--a
zero-coupon Treasury bond that matures November 15, 2015.
The benchmark for the Target: 2020 fund is 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 11/15/25 STRIPS ISSUE--a
zero-coupon Treasury bond that matures November 15, 2025.
- --------------------------------------------------------------------------------
INVESTMENT TEAM LEADERS
- --------------------------------------------------------------------------------
Portfolio Manager Dave Schroeder
- --------------------------------------------------------------------------------
44 BACKGROUND INFORMATION AMERICAN CENTURY INVESTMENTS
GLOSSARY
INVESTMENT TERMS
* BASIS POINT--one one-hundredth of a percentage point (or 0.01%). 100 basis
points equal one percentage point (or 1%).
* COUPON--the stated interest rate of a security.
* YIELD CURVE--a graphic representation of the relationship between maturity and
yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical axis.
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on pages 36-41.
STATISTICAL TERMINOLOGY
* NUMBER OF SECURITIES--the number of different securities held by a fund on a
given date.
* ANTICIPATED GROWTH RATE (AGR)--an approximation of the annualized rate of
return that an investor may expect from his purchase date to the fund's WAM
date, assuming all dividends and capital gains distributions are reinvested. It
assumes that the Anticipated Value at Maturity is reached on the Weighted
Average Maturity date.
* WEIGHTED AVERAGE MATURITY (WAM)--a measurement of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount.
* WAM DATE (WEIGHTED AVERAGE MATURITY DATE)--an average of the maturity dates of
a portfolio's securities, weighted by dollar amount. The WAM date is calculated
based on the WAM of the portfolio's investments on a given day.
* ANTICIPATED VALUE AT MATURITY (AVM)--the expected redemption value of a
portfolio share on the portfolio's WAM date. (Even if fund shares are held to
maturity, there is no guarantee that the fund's share price will reach its AVM
or that the AGR will be realized.)
* EXPENSE RATIO--the operating expenses of the fund, expressed as a percentage
of average net assets. (See Note 2 in the Notes to Financial Statements.)
TYPES OF SECURITIES
* ZERO-COUPON BONDS (ZEROS)--bonds that make no periodic interest payments.
Instead, they are sold at a deep discount and then redeemed for their full face
value at maturity. When held to maturity, a zero's entire return comes from the
difference between its purchase price and its value at maturity.
TYPES OF ZEROS
* STRIPS (SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES)
- --the U.S. Treasury Department program that allows broker-dealers to "strip"
Treasury securities into their component parts. The securities created by this
"stripping" activity are also known as STRIPS. STRIPS are direct obligations of
the U.S. government and are the most liquid (easily bought and sold) Treasury
zeros.
* REFCORPS (RESOLUTION FUNDING CORPORATION ZEROS)--zeros created from bonds
issued by the Resolution Funding Corporation, a U.S. government agency. The
principal portions of these bonds are secured by Treasury zeros, and the
interest portions are guaranteed by the U.S. Treasury. REFCORPs are also
relatively liquid.
* RECEIPT ZEROS--zeros created and issued by broker-dealers before the STRIPS
program was implemented in 1985. The effective maturities of existing receipt
zeros do not extend beyond 2009. Broker-dealers created receipt zeros by
purchasing Treasury bonds, depositing them in a custodian bank, and then selling
receipts representing ownership interest in the coupons or principal portions of
the bonds. The custodial accounts that hold the underlying Treasury bonds are
kept separate from the bank's assets. The types of receipt zeros include:
CATS (CERTIFICATES OF ACCRUAL OF TREASURY SECURITIES)--issued by Salomon
Brothers, Inc.
TRS (TREASURY RECEIPTS)--general receipt zeros.
ETRS (EASY-GROWTH TREASURY RECEIPTS)--issued by Dean Witter Reynolds, Inc.
SEMIANNUAL REPORT GLOSSARY 45
[american century logo(reg.sm)]
American
Century(reg.tm)
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES:
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE:
1-800-345-8765
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 OR 816-444-3485
FAX: 816-340-7962
INTERNET: WWW.AMERICANCENTURY.COM
AMERICAN CENTURY TARGET MATURITIES TRUST
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION FUNDS DISTRIBUTOR, INC.
9805 [RECYCLED LOGO]
SH-BKT-12403 RECYCLED
