Distributed by Funds Distributor, Inc.
AMERICAN CENTURY
Prospectus
Target 2000 Fund
Target 2005 Fund
Target 2010 Fund
Target 2015 Fund
Target 2020 Fund
Target 2025 Fund
FEBRUARY 1, 1999
REVISED March 17, 1999
INVESTOR CLASS
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
Distributed by
Funds Distributor, Inc.
[american century logo(reg.sm)]
American
Century
Dear Investor,
Reading a prospectus doesn't have to be a chore. We've done the hard work so
you can focus on what's important--learning about the funds and tracking your
investments. Take a look inside, and you'll see this prospectus is different. It
takes a clear-cut approach to fund information.
Inside you'll find:
* The funds' primary investments and risks
* A description of who may or may not want to invest in the funds
* Fund performance, including returns for each year, best and worst
quarters and average annual returns compared to the funds' benchmarks
* An overview of services available and ways to manage your accounts
* Helpful tips and definitions of key investment terms
The new, simplified prospectus format is not the only step we've taken to make
investing less confusing. As we prepare to welcome in the 21st century, American
Century is bringing our fund names up to date. That's why on March 1, we retired
the "Twentieth Century" and "Benham" fund group names and will use the "American
Century" name for all of our funds. This will make it easier for you to track
your investments in newspapers or on financial Web sites. For example, instead
of "American Century-Twentieth Century Ultra," the new fund name will be simply
"American Century Ultra." Only the fund names are changing; each fund's
objective and investment strategy will stay the same.
In another step toward simplification, we are introducing a more intuitive way
for you to evaluate our family of funds. This new system classifies funds based
on objective and risk.
The four broad objectives are: The three risk categories are:
* Growth * Aggressive
* Growth and Income * Moderate
* Income * Conservative
* Capital Preservation
The new classification presents the risk level of each fund upfront so you can
choose funds you are comfortable with. It also can help you create a diversified
portfolio by identifying funds from different investment categories. Our
Investing with American Century brochure explains this reclassification in more
detail.
If you have questions about the prospectus or would like to receive a copy of
our Investing with American Century brochure, our Investor Relations
Representatives are available weekdays, 7 a.m. to 7 p.m., and Saturdays, 9 a.m.
to 2 p.m., Central time. Our toll-free number is 1-800-345-2021. We look forward
to helping you achieve your financial goals.
Sincerely,
/s/Mark Killen
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
[LEFT MARGIN]
[american century logo(reg.sm)]
American
Century
American Century
Investments
P.O. Box 419200
Kansas City, MO
64141-6200
[END LEFT MARGIN]
TABLE OF CONTENTS
An Overview of the Funds .................................................. 2
Fees and Expenses ......................................................... 3
Information about the Funds ............................................... 4
Target 2000 Fund
Target 2005 Fund
Target 2010 Fund
Target 2015 Fund
Target 2020 Fund
Target 2025 Fund
Basics of Fixed Income Investing .......................................... 8
Management ................................................................ 11
Investing with American Century ........................................... 14
Share Price and Distributions ............................................. 18
Taxes ..................................................................... 19
Multiple Class Information ................................................ 20
Financial Highlights ...................................................... 21
[LEFT MARGIN CALLOUTS]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in GREEN ITALICS, look for its definition
in the left margin.
[image of hand pointing index finger] This symbol highlights special information
and helpful tips.
[END LEFT MARGIN CALLOUTS]
American Century Investments
AN OVERVIEW OF THE FUNDS
WHAT ARE THE FUNDS' INVESTMENT GOALS?
These funds seek the highest return consistent with investment in U.S. Treasury
securities.
WHAT ARE THE FUNDS' PRIMARY INVESTMENTS AND RISKS?
The funds invest in zero-coupon U.S. Treasury securities. Each of the funds
invests in different types of these debt securities and involves different
risks. The chart below shows the primary differences among the funds. Additional
information about the funds' investment strategies and risks begins on page 4.
<TABLE>
Shorter Term Fund Primary Investments Primary Risks
<S> <C> <C> <C>
Less Volatile -------------------------------------------------------------------------------
| Target 2000 Zero-coupon U.S. Treasury securities Lowest interest rate risk
| -------------------------------------------------------------------------------
| Target 2005 Zero-coupon U.S. Treasury securities Low interest rate risk
| -------------------------------------------------------------------------------
| Target 2010 Zero-coupon U.S. Treasury securities Interest rate risk
| -------------------------------------------------------------------------------
| Target 2015 Zero-coupon U.S. Treasury securities High interest rate risk
| -------------------------------------------------------------------------------
| Target 2020 Zero-coupon U.S. Treasury securities Higher interest rate risk
| -------------------------------------------------------------------------------
Longer Term Target 2025 Zero-coupon U.S. Treasury securities Highest interest rate risk
More Volatile -------------------------------------------------------------------------------
</TABLE>
WHO MAY WANT TO INVEST IN THE FUNDS?
The funds may be a good investment if you are
* investing through an IRA or other tax-advantaged retirement plan
* seeking long-term financial goals that correspond to the year identified in
the name of a particular fund
* comfortable with fluctuating share prices, which increase as each funds'
maturity year increases
* comfortable with the funds' other investment risks
WHO MAY NOT WANT TO INVEST IN THE FUNDS?
The funds may not be a good investment if you are
* seeking current income
* a short-term investor
* investing for long-term capital appreciation
* looking for the added security of FDIC insurance
[LEFT MAFGIN CALLOUT]
[image of hand pointing index finger] An investment in the funds is not a bank
deposit, and it is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any other government agency.
[END LEFT MARGIN CALLOUT]
2 American Century Investments 1-800-345-2021
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Investor Class shares of other American Century funds
The following table describes the fees and expenses you will pay if you buy and
hold shares of the funds.
Annual Operating Expenses (expenses that are deducted from fund assets)
Management Distribution and Other Total Annual Fund
Fee(1) Service (12b-1) Fees Expenses(2) Operating Expenses
- --------------------------------------------------------------------------------
Target 2000 0.59% None 0.00% 0.59%
- --------------------------------------------------------------------------------
Target 2005 0.59% None 0.00% 0.59%
- --------------------------------------------------------------------------------
Target 2010 0.59% None 0.00% 0.59%
- --------------------------------------------------------------------------------
Target 2015 0.59% None 0.00% 0.59%
- --------------------------------------------------------------------------------
Target 2020 0.59% None 0.00% 0.59%
- --------------------------------------------------------------------------------
Target 2025 0.59% None 0.00% 0.59%
(1) Based on expenses incurred during the funds' most recent fiscal year. The
funds have stepped fee schedules. As a result, the funds' management fees
generally decrease as fund assets increase. Please consult the Statement of
Additional Information for more details about the funds' management fees. A
portion of the management fee may be paid by the funds' advisor to unaffiliated
third parties who provide recordkeeping and administrative services that would
otherwise be performed by an affiliate of the advisor.
(2) Other expenses, which include the fees and expenses of the funds'
independent trustees, their legal counsel, interest and extraordinary expenses,
were less than 0.005% for the most recent fiscal year.
Example
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------
Target 2000 $60 $189 $329 $736
- --------------------------------------------------------------------------------
Target 2005 $60 $189 $329 $736
- --------------------------------------------------------------------------------
Target 2010 $60 $189 $329 $736
- --------------------------------------------------------------------------------
Target 2015 $60 $189 $329 $736
- --------------------------------------------------------------------------------
Target 2020 $60 $189 $329 $736
- --------------------------------------------------------------------------------
Target 2025 $60 $189 $329 $736
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[image of hand pointing index finger] Use this example to compare the costs of
investing in other funds. Of course, your actual costs may be higher or lower.
[END LEFT MARGIN CALLOUT]
www.americancentury.com American Century Investments 3
INFORMATION ABOUT THE FUNDS
TARGET 2000 FUND
TARGET 2005 FUND
TARGET 2010 FUND
TARGET 2015 FUND
TARGET 2020 FUND
TARGET 2025 FUND
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
These funds seek the highest return consistent with investment in U.S. Treasury
securities.
HOW DO THE FUNDS IMPLEMENT THEIR INVESTMENT OBJECTIVES?
The funds invest primarily in zero-coupon U.S. Treasury securities. Each fund is
designed to provide an investment experience that is similar to a direct
investment in a zero-coupon investment.
WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?
Each fund is managed to mature in the year identified in its name; therefore,
the funds' WEIGHTED AVERAGE MATURITIES are different. Funds with longer weighted
average maturities have the most volatile share prices. For example, Target 2025
has the longest weighted average maturity, and its share price will fluctuate
the most.
WHAT ARE ZERO-COUPON TREASURY SECURITIES?
U.S. Treasury bonds have a traditional design. Interest is paid periodically
until maturity, when the principal is repaid. Zero-coupon Treasury securities,
however, do not make any periodic interest payments. Instead, all of the
interest and principal is paid when the securities mature.
Zero-coupon Treasury securities are created by separating a traditional Treasury
bond's interest and principal parts. Each part can be used to create zero-coupon
Treasury securities. These securities are created by financial institutions
(like a dealer), the U.S. Treasury and other agencies of the federal government.
The important characteristic is that the final maturity value of a zero-coupon
Treasury security is supported by Treasury securities.
Zero-coupon Treasury securities are beneficial for investors who wish to invest
for a fixed period of time at a selected rate. When an investor purchases a
traditional bond, it is paid periodic interest at a predetermined rate. This
interest payment must be reinvested elsewhere. However, the investor may not be
able to reinvest this interest payment in an investment that has a return
similar to a traditional bond. This is called reinvestment risk. Because
zero-coupon securities do not pay interest periodically, there is no
reinvestment risk.
HOW IS AN INVESTMENT IN THE FUNDS LIKE AN INVESTMENT IN ZERO-COUPON U.S.
TREASURY SECURITIES?
If you invest in a fund, reinvest all distributions and hold your shares until
the fund is liquidated, your investment experience will be similar to that of an
investment in a zero-coupon U.S. Treasury security that matures at the end of
the fund's maturity year. Each fund is managed to provide an investment return
that does not differ substantially from the ANTICIPATED GROWTH RATE (AGR) and
ANTICIPATED VALUE AT MATURITY (AVM) calculated on the day the shares were
purchased.
[LEFT MARGIN CALLOUT]
WEIGHTED AVERAGE MATURITY is a measure of a fund's interest rate sensitivity.
See "Weighted Average Maturity," page 7.
[image of hand pointing index finger] Because all of the interest and principal
is paid when the securities mature, zero-coupon securities are bought and sold
at prices below their face value.
A fund's ANTICIPATED GROWTH RATE is a calculation of the annualized rate of
growth that an investor may expect from the purchase date to the fund's target
maturity date.
The ANTICIPATED VALUE AT MATURITY is the calculated value of a fund's investment
portfolio. It is based on the maturity values of the fund's zero-coupon Treasury
securities.
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4 American Century Investments 1-800-345-2021
The advisor calculates each fund's AGR and AVM each business day. While many
factors can influence each fund's daily AGR and AVM, they tend to fluctuate
within narrow ranges. The following table shows how each fund's AVM has
fluctuated in the last five years.
Anticipated Values at Maturity
9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
- ----------------------------------------------------------------------------
Target 2000 $100.86 $100.99 $101.10 $101.13 $101.78
- ----------------------------------------------------------------------------
Target 2005 $100.58 $100.32 $100.71 $100.85 $101.53
- ----------------------------------------------------------------------------
Target 2010 $101.38 $101.02 $102.53 $103.40 $104.85
- ----------------------------------------------------------------------------
Target 2015 $107.95 $109.62 $110.11 $110.52 $112.63
- ----------------------------------------------------------------------------
Target 2020 $102.11 $102.31 $103.60 $104.84 $106.96
- ----------------------------------------------------------------------------
Target 2025 N/A N/A $109.24 $110.88 $112.23
WHAT HAPPENS WHEN A FUND REACHES ITS MATURITY YEAR?
* The fund managers may begin buying traditional Treasury securities
consistent with a fund's investment objective and pending maturity.
* As a fund's zero-coupon Treasury securities mature, its proceeds will be
invested in Treasury bills.
* In January of the year following maturity, the fund will be liquidated.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUNDS?
The funds have different weighted average maturities. Because of this, the funds
will respond differently to changes in interest rates. Funds with longer
weighted average maturities are more sensitive to interest rate changes. When
interest rates rise, the values of the funds usually fall, but the values of
funds with longer weighted average maturities generally will fall farther. This
interest rate sensitivity is greater in the funds than for traditional Treasury
funds.
The funds' share values will fluctuate. In general, the funds that have higher
potential income have a higher potential loss. If you sell your shares when
their value is less than the price you paid, you will lose money.
While we recommend that shareholders hold their investment in the funds, we do
not restrict your (or any other shareholders') ability to redeem shares. When a
fund's shareholders redeem their shares before the target maturity year,
unanticipated capital gains or losses may result. The fund will distribute these
capital gains and losses to all shareholders.
The funds are designed to provide an investment that is similar to investing in
a zero-coupon U.S. Treasury security that matures in the year identified in its
name. The fund managers adhere to investment policies that are designed to
ensure that this happens. However, precise forecasts of a fund's final maturity
value and its yield to maturity are not possible.
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger] This table is designed to show the narrow
ranges in which each fund's AVMs vary. There is no guarantee that the funds'
AVMs will fluctuate as little in the future.
[image of hand pointing index finger] The investment performance of the funds is
designed to be similar to an investment in an equivalent zero-coupon U.S.
Treasury security. However, an investment in the funds involves different risks.
[END LEFT MARGIN CALLOUT]
www.americancentury.com American Century Investments 5
FUND PERFORMANCE HISTORY
Annual Total Returns
The following bar chart shows the performance of the funds' Investor Class
shares for each of the last 10 calendar years or for each full calendar year in
the life of the fund if less than 10 years. It indicates the volatility of the
funds' historical returns from year to year.
[bar chart - data below]
Target Target Target Target Target Target
2000 2005 2010 2015 2020 2025
1998 7.36% 12.87% 15.07% 14.60% 16.49% 21.81%
1997 7.05% 11.63% 16.75% 22.92% 28.62% 30.11%
1996 1.99% -1.24% -3.54% -6.03% -8.42%
1995 20.74% 32.65% 42.09% 52.72% 61.34%
1994 -6.89% -8.90% -11.56% -14.08% -17.66%
1993 15.46% 21.56% 26.28% 30.51% 35.62%
1992 8.47% 9.56% 9.78% 7.77% 8.33%
1991 20.66% 21.47% 21.06% 22.47% 17.36%
1990 6.31% 3.58% 0.27% -3.38% -4.50%
1989 19.81% 23.89% 28.02% 33.49%
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger] The performance information on this page
is designed to help you see how fund returns can vary. Keep in mind that past
performance does not predict how the funds will perform in the future.
[END LEFT MARGIN CALLOUT]
6 American Century Investments 1-800-345-2021
Highest and Lowest Quarterly Returns
The highest and lowest returns of the funds' Investor Class shares for a
calendar quarter during the period reflected by the preceding bar chart are
provided in the following chart to indicate the funds' historical short-term
volatility. Shareholders should be aware, however, that the funds are intended
for investors whose investment horizon permits them to hold a fund until it is
liquidated. The funds are not managed for results before maturity.
[bar chart - data below]
Lowest Highest
Target 2000 -4.93% 1Q 1994 14.65% 2Q 1989
Target 2005 -7.65% 1Q 1990 18.27% 2Q 1989
Target 2010 -10.88% 1Q 1990 23.61% 2Q 1989
Target 2015 -13.82% 1Q 1996 27.42% 2Q 1989
Target 2020 -16.61% 1Q 1996 21.44% 2Q 1995
Target 2025 -10.19% 1Q 1997 14.68% 4Q 1997
Average Annual Returns
The following table shows the average annual returns of the funds' Investor
Class shares for the periods indicated during the last 10 calendar years or for
the life of the fund if less than 10 years. The benchmarks are unmanaged indices
(except as noted) that have no operating costs and are included in the table for
performance comparison.
<TABLE>
<CAPTION>
For the calendar year
ended December 31, 1998 1 year 5 years 10 years Life of Fund(1)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Target 2000 7.36% 5.67% 9.75% 12.12%
11/15/00 Maturity STRIPS Issue(2) 7.91% 6.15% 10.33% 13.43%
Merrill Lynch Long-Term Treasury Index 13.55% 9.34% 11.48% 12.53%
- ----------------------------------------------------------------------------------
Target 2005 12.87% 8.50% 12.05% 14.43%
11/15/05 Maturity STRIPS Issue(2) 13.45% 8.73% 12.39% 16.03%
Merrill Lynch Long-Term Treasury Index 13.55% 9.34% 11.48% 12.53%
- ----------------------------------------------------------------------------------
Target 2010 15.07% 10.24% 13.37% 16.03%
11/15/10 Maturity STRIPS Issue(2) 16.09% 10.94% 14.09% 17.51%
Merrill Lynch Long-Term Treasury Index 13.55% 9.34% 11.48% 12.53%
- ----------------------------------------------------------------------------------
Target 2015 14.60% 11.68% 14.45% 11.62%
11/15/15 Maturity STRIPS Issue(2) 15.13% 12.19% 15.11% 11.62%
Merrill Lynch Long-Term Treasury Index 13.55% 9.34% 11.48% 9.72%
- ----------------------------------------------------------------------------------
Target 2020 16.49% 12.76% N/A 12.98%
11/15/20 Maturity STRIPS Issue(2) 17.59% 13.25% N/A 12.61%
Merrill Lynch Long-Term Treasury Index 13.55% 9.34% N/A 10.69%
- ----------------------------------------------------------------------------------
Target 2025 21.81% N/A N/A 16.92%
11/15/25 Maturity STRIPS Issue(2) 22.67% N/A N/A 18.31%
Merrill Lynch Long-Term Treasury Index 13.55% N/A N/A 11.44%
</TABLE>
(1) The inception dates are: Target 2000, Target 2005 and Target 2010: March 25,
1985; Target 2015: September 1, 1986; Target 2020: December 29, 1989; and Target
2025: February 15, 1996.
(2) The Target funds are designed to have a performance behavior that is like a
zero-coupon security of the maturity suggested by each fund's name. The STRIPS
issues listed in this table are examples of these zero-coupon securities. The
STRIPS issues are not indices, but are important benchmarks of the Target funds'
performance.
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger] For current performance information,
including yields, please call us at 1-800-345-2021 or visit American Century's
Web site at www.americancentury.com
[END LEFT MARGIN CALLOUT]
www.americancentury.com American Century Investments 7
BASICS OF FIXED INCOME INVESTING
DEBT SECURITIES
When a fund buys a debt security, which also is also called a fixed income
security, it is essentially lending money to the issuer of the security. Debt
securities also are referred to as fixed income securities. Notes, bonds,
commercial paper and Treasury bills are examples of debt securities. After the
debt security is first sold by the issuer, it may be bought and sold by other
investors. The price of the security may rise or fall based on many factors,
including changes in interest rates, inflation and liquidity.
The fund managers decide which debt securities to buy and sell by
* determining which securities help a fund meet its maturity requirements
* identifying securities that do not satisfy a fund's credit quality
requirements
* evaluating the current economic conditions and assessing the risk of
inflation
* evaluating special features of the securities that may make them more or less
attractive
WEIGHTED AVERAGE MATURITY
Like most loans, debt securities eventually must be repaid (or refinanced) at
some date. This date is called the maturity date. The number of days left to a
debt security's maturity date is called the remaining maturity. The longer a
debt security's remaining maturity, the more sensitive it is to changes in
interest rates.
Because a bond fund will own many debt securities, the fund managers calculate
the average of the remaining maturities of all the debt securities the fund owns
to evaluate the interest rate sensitivity of the entire portfolio. This average
is weighted according to the size of the fund's individual holdings and is
called WEIGHTED AVERAGE MATURITY. The following chart shows how a fund manager
would calculate the weighted average maturity for a fund that owned only two
debt securities.
Amount of Percent of Remaining Weighted
Security Owned Portfolio Maturity Maturity
- --------------------------------------------------------------------------------
Debt Security A $100,000 25% 1,000 days 250 days
- --------------------------------------------------------------------------------
Debt Security B $300,000 75% 10,000 days 7,500 days
- --------------------------------------------------------------------------------
Weighted Average Maturity 7,750 days
TYPES OF RISK
The basic types of risk that the funds face are described below.
Interest Rate Risk
Generally, interest rates and the prices of debt securities move in opposite
directions. So when interest rates fall, the prices of most debt securities
rise; when interest rates rise, prices fall. Because the funds invest primarily
in debt securities, changes in interest rates will affect the funds'
performance.
The degree to which interest rate changes affect the funds' performance varies
and is related to the weighted average maturity of each fund. For example, when
interest rates rise, you can expect the share value of a long-term bond fund to
fall more than that of a short-term bond fund. When rates fall, the opposite is
true. This sensitivity to interest rate changes is called interest rate risk.
[LEFT MARGIN CALLOUT]
WEIGHTED AVERAGE MATURITY is a tool that the fund managers use to approximate
the remaining maturity of a fund's investment portfolio.
[image of hand pointing index finger] The longer a fund's weighted average
maturity, the more sensitive it is to changes in interest rates.
[END LEFT MARGIN CALLOUT]
8 American Century Investments 1-800-345-2021
When interest rates change, longer maturity bonds experience a greater change in
price. The following table shows the effect of a 1% increase in interest rates
on the price of 7% coupon bonds of differing maturities:
Remaining Maturity Current Price Price After 1% Increase Change in Price
- --------------------------------------------------------------------------------
1 year $100.00 $99.06 -0.94%
- --------------------------------------------------------------------------------
3 years $100.00 $97.38 -2.62%
- --------------------------------------------------------------------------------
10 years $100.00 $93.20 -6.80%
- --------------------------------------------------------------------------------
30 years $100.00 $88.69 -11.31%
Credit Risk
Credit risk is the risk that an obligation won't be paid and a loss will result.
A high credit rating indicates a high degree of confidence by the rating
organization that the issuer will be able to withstand adverse business,
financial and economic conditions and be able to make interest and principal
payments on time. Generally, a lower credit rating indicates a greater risk of
nonpayment. A lower rating also may indicate that the issuer has a more senior
series of debt securities, which means that if the issuer has difficulties
making its payments, the more senior series of debt is first in line for
payment.
It's not as simple as buying the highest-rated debt securities. Higher credit
ratings usually mean lower interest rates, so investors often purchase
securities that aren't the highest rated to increase return. If a fund purchases
lower-rated securities, it assumes additional credit risk.
The following chart shows the authorized credit quality ranges for the funds
offered by this Prospectus.
- -------------------------------------------
Quality
- -------------------------------------------
High Quality
- -----------------------------
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1 MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
- --------------------------------------------------------------------------------
Target 2000 X
- --------------------------------------------------------------------------------
Target 2005 X
- --------------------------------------------------------------------------------
Target 2010 X
- --------------------------------------------------------------------------------
Target 2015 X
- --------------------------------------------------------------------------------
Target 2020 X
- --------------------------------------------------------------------------------
Target 2025 X
- --------------------------------------------------------------------------------
- ------------------------------------------- ------------------------------------
INVESTMENT GRADE NON-INVESTMENT GRADE
- ------------------------------------------- ------------------------------------
Strictly speaking, U.S. Treasury securities are not "rated" AAA. However,
Treasury securities are backed by the full faith and credit of the United
States, and are considered among the safest securities in the world. The rating
on U.S. Treasury securities is, therefore, considered to be equivalent to AAA.
Liquidity Risk
Debt securities can become difficult to sell for a variety of reasons, such as
lack of an active trading market. When a fund's investments become difficult to
sell, it is said to have a problem with liquidity. The chance that a fund will
have liquidity issues is called liquidity risk.
Inflation Risk
The safest investments usually have the lowest potential income and performance.
During periods of high inflation, shorter-term fixed income investments
typically perform better. This reflects the high short-term demand for money
when inflation is high. The risk that your short-term performance will suffer
during periods of high inflation is called inflation risk.
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger]
Credit quality may be lower when the issuer has
* a high debt level
* a short operating history
* a senior level of debt
* a difficult, competitive environment
[image of hand pointing index finger] The Statement of Additional Information
provides a detailed description of these securities ratings.
[END LEFT MARGIN CALLOUT]
www.americancentury.com American Century Investments 9
A COMPARISON OF BASIC RISK FACTORS
The following chart depicts the basic risks of investing in the funds. It is
designed to help you compare these funds with each other; it shouldn't be used
to compare these funds with other mutual funds.
Interest Rate Risk Credit Risk(1) Liquidity Risk(2) Inflation Risk
- --------------------------------------------------------------------------------
Target 2000 Lowest Same Same Lowest
- --------------------------------------------------------------------------------
Target 2005 Low Same Same Low
- --------------------------------------------------------------------------------
Target 2010 Medium Same Same Medium
- --------------------------------------------------------------------------------
Target 2015 Medium Same Same Medium
- --------------------------------------------------------------------------------
Target 2020 High Same Same High
- --------------------------------------------------------------------------------
Target 2025 Highest Same Same Highest
(1) Because the funds all invest in zero-coupon Treasury securities, there is no
difference in credit risk. The funds are considered among the safest securities
in the world because Treasury securities are backed by the full faith and credit
of the United States. The funds all feature low credit risk.
(2) The Treasury market is considered the most liquid in the world.
The funds engage in a variety of investment techniques as they pursue their
investment objectives. Each technique has its own characteristics and may pose
some level of risk to the funds. If you would like to learn more about these
techniques, you should review the Statement of Additional Information before
making an investment.
10 American Century Investments 1-800-345-2021
MANAGEMENT
WHO MANAGES THE FUNDS?
The Board of Trustees, investment advisor and fund management team play key
roles in the management of the funds.
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired an investment advisor to do so.
More than two-thirds of the Trustees are independent of the funds' advisor; that
is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958. American Century is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provided to the funds during the most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Investor Class of shares of the funds. The rate of the
management fee for a fund is determined on a class-by-class basis monthly using
a two-step formula that takes into account the fund's strategy (money market,
bond or equity) and the total amount of mutual fund assets the advisor manages.
The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor paid all
expenses of managing and operating the funds except brokerage expenses, taxes,
interest, fees and expenses of the independent trustees (including legal counsel
fees) and extraordinary expenses.
Management Fees Paid by the Funds to the Advisor as a Percentage of Average Net
Assets for the Most Recent Fiscal Year Ended September 30, 1998
- --------------------------------------------------------------------------------
Target 2000 0.59%
- --------------------------------------------------------------------------------
Target 2005 0.59%
- --------------------------------------------------------------------------------
Target 2010 0.59%
- --------------------------------------------------------------------------------
Target 2015 0.59%
- --------------------------------------------------------------------------------
Target 2020 0.59%
- --------------------------------------------------------------------------------
Target 2025 0.59%
www.americancentury.com American Century Investments 11
THE FUND MANAGEMENT TEAM
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. Teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. Team members buy and sell securities
for a fund as they see fit, guided by the fund's investment objective and
strategy.
The portfolio managers on the investment team are identified below:
DAVID SCHROEDER
Mr. Schroeder, Vice President and Senior Portfolio Manager, has been a member of
the team that manages the Target funds since joining American Century in July
1990. He has a bachelor of arts from Pomona College.
JEREMY FLETCHER
Mr. Fletcher, Associate Portfolio Manager, has been a member of the team that
manages the Target funds since August 1997. He joined American Century in
October 1991 as an Investor Services Representative. He has bachelor's degrees
in economics and mathematics from Claremont McKenna College.
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger]
CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or from profiting from the purchase and sale of the same security within 60
calendar days. In addition, the Code of Ethics requires portfolio managers and
other employees with access to information about the purchase or sale of
securities by the funds to obtain approval before executing permitted personal
trades.
[END LEFT MARGIN CALLOUT]
12 American Century Investments 1-800-345-2021
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Trustees may change any other policies
and investment strategies.
YEAR 2000 ISSUES
Many of the world's computer systems currently cannot properly recognize or
process date-sensitive information relating to the Year 2000 and beyond. Because
this may impact the computer systems of various American Century-affiliated and
external service providers for the funds, American Century formally initiated a
Year 2000 readiness project in July 1997. It involves a team of information
technology professionals assisted by outside consultants and guided by a
senior-level steering committee. The team's goal is to assess the impact of the
Year 2000 on American Century's systems, renovate or replace noncompliant
critical systems and test those systems. In addition, the team has been working
to gather information about the Year 2000 efforts of the funds' other major
service providers.
Although American Century believes its critical systems will function properly
in the Year 2000, this is not guaranteed. If the efforts of American Century or
its external service providers are not successful, the funds' business,
particularly the provision of shareholder services, may be hampered.
In addition, the issuers of securities the funds own could have Year 2000
computer problems. These problems could negatively affect the value of their
securities, which, in turn, could impact the funds' performance. The advisor has
established a process to gather publicly available information about the Year
2000 readiness of these issuers. However, this process may not uncover all
relevant information, and the information gathered may not be complete and
accurate. Moreover, an issuer's Year 2000 readiness is only one of many factors
the fund managers may consider when making investment decisions, and other
factors may receive greater weight.
www.americancentury.com American Century Investments 13
INVESTING WITH AMERICAN CENTURY
SERVICES AUTOMATICALLY AVAILABLE TO YOU
Investor Relations Employer-Sponsored Retirement You automatically will have
access to the services listed below when you open your account. If you do not
want these services, see "Conducting Business in Writing" below.
CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
WAYS TO MANAGE YOUR ACCOUNT
- --------------------------------------------------------------------------------
BY TELEPHONE
Investor Relations
1-800-345-2021
Business, Not-For-Profit and Employer-Sponsored Retirement Plans
1-800-345-3533
Automated Information Line
1-800-345-8765
[image of telephone]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account. (This service is not available if you have
chosen to do business in writing only.)
EXCHANGE SHARES
Call us or use our Automated Information Line if you have authorized us to
accept telephone instructions.
MAKE ADDITIONAL INVESTMENTS
Call us or use our Automated Information Line if you have authorized us to
invest from your bank account.
SELL SHARES
Call an Investor Relations Representative.
- --------------------------------------------------------------------------------
BY MAIL OR FAX
P.O. Box 419200
Kansas City, MO 64141-6200
Fax
816-340-7962
[image of envelope]
OPEN AN ACCOUNT
Send a signed and completed application and check or money order payable to
American Century Investments.
EXCHANGE SHARES
Send us written instructions to exchange your shares from one American Century
account to another.
MAKE ADDITIONAL INVESTMENTS
Send us your check or money order for at least $50 with an investment slip or
$250 without an investment slip. If you don't have an investment slip, include
your name, address and account number on your check or money order.
SELL SHARES
Send us written instructions to sell shares or send us a redemption form. Call
an Investor Relations Representative to request a form.
- --------------------------------------------------------------------------------
ONLINE
www.americancentury.com
[image of computer and monitor]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account. (This service is not available if you have
chosen to do business in writing only.)
EXCHANGE SHARES
Exchange shares from another American Century account.
MAKE ADDITIONAL INVESTMENTS
Make an additional investment into an established American Century account if
you have authorized us to invest from your bank account.
SELL SHARES
Not available.
14 American Century Investments 1-800-345-2021
A NOTE ABOUT MAILINGS TO SHAREHOLDERS
To reduce expenses and show respect for our environment, we will deliver most
financial reports, prospectuses and account statements to households in a single
envelope, even if the accounts are registered under different names. If you
would like additional copies of financial reports and prospectuses or separate
mailing of account statements, please call us.
YOUR GUIDE TO SERVICES AND POLICIES
When you open an account, you will receive a services guide, which explains the
services available to you and the policies of the fund and the transfer agent.
- --------------------------------------------------------------------------------
BY WIRE
[image of hand pointing index finger] Please remember that if you request
redemptions by wire, $10 will be deducted from the amount redeemed. Your bank
also may charge a fee.
[image of fax machine]
OPEN AN ACCOUNT
Call us to set up your account or mail a completed application to the address
provided in the "By mail" section and give your bank the following information:
* Our bank information
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name
* Your American Century account number+
* Your name
+ For additional investments only
MAKE ADDITIONAL INVESTMENTS
Follow the wire instructions provided in the "Open an account" section.
SELL SHARES
You can receive redemption proceeds by wire or electronic transfer. (This
service is not available if you have chosen to do business in writing only.)
EXCHANGE SHARES
Not applicable.
- --------------------------------------------------------------------------------
AUTOMATICALLY
[three arrows forming circle]
OPEN AN ACCOUNT
Not available.
EXCHANGE SHARES
Send us written instructions to set up an automatic exchange of shares from one
American Century account to another.
MAKE ADDITIONAL INVESTMENTS
Select "Establish Automatic Investments" on your application to make automatic
purchases of shares on a regular basis. You must invest at least $600 per year
per account.
SELL SHARES
If you have at least $10,000 in your account, sell shares automatically by
establishing a Check-A-Month or an Automatic Redemption.
- --------------------------------------------------------------------------------
IN PERSON
[image of person]
If you prefer to handle your transactions in person, visit one of the Investor
Centers listed below. A representative can help you open an account, make
additional investments and sell or exchange shares.
4500 Main Street
Kansas City, Missouri
8 a.m. to 5:30 p.m., Monday - Friday
1665 Charleston Road
Mountain View, California
8 a.m. to 5 p.m., Monday - Frida
4917 Town Center Drive
Leawood, Kansas
8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday
9445 East County Line Road, Suite A
Englewood, Colorado
8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday
www.americancentury.com American Century Investments 15
MINIMUM INITIAL INVESTMENT AMOUNTS
To open an account, the minimum investments are:
- --------------------------------------------------------------------------------
Individual or Joint $2,500
- --------------------------------------------------------------------------------
Traditional IRA $1,000
- --------------------------------------------------------------------------------
Roth IRA $1,000
- --------------------------------------------------------------------------------
Education IRA $500
- --------------------------------------------------------------------------------
UGMA/UTMA $1,000
- --------------------------------------------------------------------------------
403(b) No minimum
If you establish an automatic investment plan of at least $50 per month, the
minimum may be waived.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
If your redemption activity causes your account balance to fall below the
minimum initial investment amount, we will notify you and give you 90 days to
meet the minimum, or to establish an automatic monthly investment of at least
$50. If you do not meet the deadline, American Century will redeem the shares in
the account and send the proceeds to your address of record.
ABUSIVE TRADING PRACTICES
We do not permit market-timing or other abusive trading practices in our funds.
Excessive, short-term (market-timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds - up to seven days - or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of cash. If we make payment
in securities, we will value the securities, selected by the fund, in the same
manner as we do in computing the fund's net asset value. We may provide these
securities in lieu of cash without prior notice.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
16 American Century Investments 1-800-345-2021
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you own or are considering purchasing fund shares through a financial
intermediary or a retirement plan, your ability to purchase, exchange and redeem
shares will depend on the policies of that entity. Some policy differences may
include
*minimum investment requirements
*exchange policies
*fund choices
*cut-off time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the funds' annual reports, semiannual
reports and Statements of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform for their clients recordkeeping and
administrative services that would otherwise be performed by American Century's
transfer agent. In some circumstances, American Century will pay the service
provider a fee for performing those services.
Although transactions in fund shares may be made directly with American Century
at no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
those intermediaries to accept orders on their behalf up to the time at which
the net asset value is determined. If those orders are transmitted to American
Century and paid for in accordance with the contract, they will be priced at the
net asset value next determined after your request is received in good order by
the intermediary on a fund's behalf.
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger] Financial intermediaries include banks,
broker-dealers, insurance companies and investment advisors.
[END LEFT MARGIN CALLOUT]
www.americancentury.com American Century Investments 17
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE of the funds as of ONE HOUR
BEFORE the close of regular trading on the New York Stock Exchange (usually 4
p.m. Eastern time) each day the Exchange is open. On days when the Exchange is
not open, we do not calculate the net asset value. The net asset value of a fund
share is the current value of the fund's assets, minus any liabilities, divided
by the number of fund shares outstanding.
If current prices of securities owned by a fund are not readily available from
an independent pricing service, the advisor may determine their fair value in
accordance with procedures adopted by the funds' Board of Trustees.
We will price your purchase, exchange or redemption at the net asset value next
determined after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the funds will not be subject to state
or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as CAPITAL GAINS realized on
the sale of investment securities. Each fund generally pays distributions from
net income and capital gains, if any, once a year in December. A fund may make
more frequent distributions, if necessary, to comply with Internal Revenue code
provisions.
You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distributions received
with your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information regarding distributions and your
distribution options.
REVERSE SHARE SPLITS
When a fund pays its distributions, the Board also declares a reverse share
split for each fund that exactly offsets the per-share amount of the
distribution. If you reinvest your dividends, this reverse share split means
that you will hold exactly the same number of shares after a dividend as you did
before. This reverse share split makes changes in the funds' share prices behave
like changes in the values of zero-coupon securities.
FUND LIQUIDATION
During a fund's target maturity year, you will be asked how you want your shares
liquidated. You can choose one of the following
* cash
* shares of another American Century mutual fund
If you do not tell us by December 31 of the target year how you want your shares
liquidated, your money will be exchanged for shares of Capital Preservation, an
American Century Treasury money market fund.
[LEFT MARGIN CALLOUT]
The NET ASSET VALUE of a fund is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased. Tax becomes due on capital gains once an
asset is sold.
[END LEFT MARGIN CALLOUT]
18 American Century Investments 1-800-345-2021
TAXES
TAX-DEFERRED ACCOUNTS
If you purchase fund shares through a tax-deferred account, such as a qualified
employer-sponsored retirement or savings plan, income and capital gains
distributions usually will not be subject to current taxation, but will
accumulate in your account under the plan on a tax-deferred basis.
Complex tax rules govern employer-sponsored retirement and savings plans. If you
elect to participate in your employer's plan, consult your plan administrator,
your summary plan description or a professional tax advisor regarding the tax
consequences of participation in, contributions to, and withdrawals or
distributions from the plan.
TAXABLE ACCOUNTS
Fund dividends and distributions are taxable to most investors. The tax status
of any distribution is not affected by how long you have been in the fund or
whether you reinvest your distributions or take them as income. In general,
distributions are taxable at the federal level as follows:
Type of distribution Tax rate for 15% bracket Tax rate for 28% bracket
or above
- --------------------------------------------------------------------------------
Income Ordinary income rate Ordinary income rate
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
American Century will detail the tax status of fund distributions for each
calendar year in an annual tax statement from the fund.
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
Taxes on Transactions
Your redemptions -- including exchanges to other American Century funds -- are
subject to capital gains tax. A capital gain or loss is the difference between
the cost of your shares and the price you receive when you sell them.
The table above can provide a general guide for your potential tax liability
when selling or exchanging fund shares. Short-term capital gains are gains on
fund shares held less than or equal to 12 months. Long-term capital gains are
gains on fund shares held for more than 12 months.
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger]
BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up a taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. We distribute those gains to you, after subtracting any losses, even
if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
[END LEFT MARGIN CALLOUT]
www.americancentury.com American Century Investments 19
MULTIPLE CLASS INFORMATION
American Century may offer up to two classes of the funds: Investor Class and
Advisor Class. The shares offered by this Prospectus are Investor Class shares
and have no up-front or deferred charges, commissions, or 12b-1 fees.
American Century offers the other class of shares primarily to institutional
investors or through institutional distribution channels, such as
employer-sponsored retirement plans or through banks, broker-dealers, insurance
companies or financial intermediaries. The other class has different fees,
expenses, and/or minimum investment requirements than the Investor Class. The
difference in the fee structures between the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the advisor for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. Different fees and expenses will affect performance. For
additional information concerning the other class of shares not offered by this
Prospectus, call us at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers that class of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; and (d) each class
may have different exchange privileges.
20 American Century Investments 1-800-345-2021
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The tables on the next pages itemize what contributed to the changes in share
price during the period. They also show changes in share price for this period
in comparison to changes over the last five fiscal years or less, if the share
class is not five years old.
On a per-share basis, each table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to shareholders
* reverse share split
* share price at the end of the period
Each table also includes some key statistics for the period as appropriate
* Total Return--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* Expense Ratio--operating expenses as a percentage of average net assets
* Net Income Ratio--net investment income as a percentage of average net assets
* Portfolio Turnover--the percentage of the fund's buying and selling activity
The Financial Highlights for the fiscal year ended September 30, 1998, have been
audited by PricewaterhouseCoopers LLP, independent accountants. Their report is
included in the funds' annual report, which is incorporated by reference into
the Statement of Additional Information, and is available upon request. Prior
years' information was audited by other independent auditors, whose report also
is incorporated by reference into the Statement of Additional Information.
www.americancentury.com American Century Investments 21
<TABLE>
<CAPTION>
TARGET 2000
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ........ $ 86.05 $ 79.95 $ 76.86 $ 66.93 $ 72.40
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............ $ 5.13 $ 5.10 $ 4.75 $ 4.37 $ 3.99
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 2.60 $ 1.00 $ (1.66) $ 5.56 $ (9.46)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 7.73 $ 6.10 $ 3.09 $ 9.93 $ (5.47)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (5.64) $ (5.20) $ (3.94) $ (3.42) $ (3.25)
From Net Realized Gains ............. -- -- -- -- $ (2.95)
In Excess of Net Realized Gains ..... -- -- -- -- $ (1.20)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (5.64) $ (5.20) $ (3.94) $ (3.42) $ (7.40)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 5.64 $ 5.20 $ 3.94 $ 3.42 $ 7.40
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 93.78 $ 86.05 $ 79.95 $ 76.86 $ 66.93
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 8.97% 7.64% 4.01% 14.84% (7.54)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.56% 0.53% 0.63% 0.59%
Ratio of Net Investment Income to
Average Net Assets ........................ 5.75% 6.14% 5.99% 6.13% 5.74%
Portfolio Turnover Rate ................... 82% 10% 29% 53% 89%
Net Assets, End of Year
(in thousands) ............................ $ 237,525 $ 248,377 $ 267,757 $ 294,736 $ 243,895
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
22 American Century Investments 1-800-345-2021
TARGET 2005
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Net Asset Value, Beginning of Year ........ $ 64.54 $ 57.83 $ 56.61 $ 45.22 $ 51.84
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............ $ 3.84 $ 3.74 $ 3.50 $ 3.33 $ 3.11
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 8.34 $ 2.97 $ (2.28) $ 8.06 $ (9.73)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 12.18 $ 6.71 $ 1.22 $ 11.39 $ (6.62)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (3.61) $ (3.61) $ (2.06) $ (2.41) $ (2.70)
From Net Realized Gains ............. $ (0.27) $ (0.44) $ (0.58) $ (0.67) $ (8.47)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (3.88) $ (4.05) $ (2.64) $ (3.08) $ (11.17)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 3.88 $ 4.05 $ 2.64 $ 3.08 $ 11.17
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 76.72 $ 64.54 $ 57.83 $ 56.61 $ 45.22
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 18.87% 11.60% 2.15% 25.16% (12.75)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.57% 0.58% 0.71% 0.64%
Ratio of Net Investment Income to
Average Net Assets ........................ 5.53% 6.15% 6.05% 6.58% 6.37%
Portfolio Turnover Rate ................... 35% 15% 31% 34% 68%
Net Assets, End of Year
(in thousands) ............................ $ 533,986 $ 281,677 $ 238,864 $ 183,452 $ 96,207
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 23
TARGET 2010
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Net Asset Value, Beginning of Year ........ $ 49.16 $ 42.47 $ 42.14 $ 31.67 $ 38.13
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............ $ 2.94 $ 2.79 $ 2.58 $ 2.41 $ 2.24
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 9.88 $ 3.90 $ (2.25) $ 8.06 $ (8.70)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 12.82 $ 6.69 $ 0.33 $ 10.47 $ (6.46)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (2.46) $ (2.82) $ (1.57) $ (1.48) $ (1.46)
From Net Realized Gains ............. $ (0.29) $ (1.17) -- $ (0.48) $ (4.31)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (2.75) $ (3.99) $ (1.57) $ (1.96) $ (5.77)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 2.75 $ 3.99 $ 1.57 $ 1.96 $ 5.77
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 61.98 $ 49.16 $ 42.47 $ 42.14 $ 31.67
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 26.08% 15.75% 0.78% 33.06% (16.92)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.62% 0.67% 0.71% 0.68%
Ratio of Net Investment Income to
Average Net Assets ........................ 5.39% 6.15% 5.98% 6.56% 6.35%
Portfolio Turnover Rate ................... 34% 26% 24% 26% 35%
Net Assets, End of Year
(in thousands) ............................ $ 283,828 $ 124,812 $ 111,117 $ 95,057 $ 46,312
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
24 American Century Investments 1-800-345-2021
TARGET 2015
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Net Asset Value, Beginning of Year ........ $ 38.34 $ 31.96 $ 32.20 $ 22.79 $ 29.04
Income From Investment Operations
Net Investment Income(1) ............ $ 2.17 $ 2.00 $ 1.85 $ 1.71 $ 1.57
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 9.36 $ 4.38 $ (2.09) $ 7.70 $ (7.82)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 11.53 $ 6.38 $ (0.24) $ 9.41 $ (6.25)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (2.11) $ (2.05) $ (1.28) $ (0.87) $ (1.19)
From Net Realized Gains ............. $ (1.40) $ (0.34) $ (1.61) -- $ (7.08)
In Excess of Net Realized Gains ..... -- -- -- -- $ (0.37)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (3.51) $ (2.39) $ (2.89) $ (0.87) $ (8.64)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 3.51 $ 2.39 $ 2.89 $ 0.87 $ 8.64
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 49.87 $ 38.34 $ 31.96 $ 32.20 $ 22.79
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 30.07% 19.96% (0.74)% 41.29% (21.52)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.61% 0.65% 0.71% 0.68%
Ratio of Net Investment Income to
Average Net Assets ........................ 4.96% 5.79% 5.63% 6.40% 5.97%
Portfolio Turnover Rate ................... 31% 21% 17% 70% 65%
Net Assets, End of Year
(in thousands) ............................ $ 170,081 $ 114,900 $ 115,654 $ 114,647 $ 66,073
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 25
TARGET 2020
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Net Asset Value, Beginning of Year ........ $ 27.17 $ 22.00 $ 22.47 $ 15.28 $ 20.72
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............ $ 1.53 $ 1.51 $ 1.41 $ 1.19 $ 1.13
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 8.25 $ 3.66 $ (1.88) $ 6.00 $ (6.57)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 9.78 $ 5.17 $ (0.47) $ 7.19 $ (5.44)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (2.35) $ (1.45) $ (0.40) $ (0.21) $ (0.28)
From Net Realized Gains ............. $ (2.19) -- $ (0.04) -- $ (1.31)
In Excess of Net Realized Gains ..... -- -- -- -- $ (1.18)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (4.54) $ (1.45) $ (0.44) $ (0.21) $ (2.77)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 4.54 $ 1.45 $ 0.44 $ 0.21 $ 2.77
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 36.95 $ 27.17 $ 22.00 $ 22.47 $ 15.28
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 36.00% 23.50% (2.09)% 47.05% (26.25)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.53% 0.61% 0.72% 0.70%
Ratio of Net Investment Income to
Average Net Assets ........................ 4.83% 6.29% 6.25% 6.24% 6.28%
Portfolio Turnover Rate ................... 18% 14% 47% 78% 116%
Net Assets, End of Year
(in thousands) ............................ $ 486,052 $ 553,551 $ 926,319 $ 574,702 $ 58,535
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
26 American Century Investments 1-800-345-2021
TARGET 2025
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30 (except as
noted)
PER-SHARE DATA
1998 1997 1996(1)
______________________________________________________________________________________________________
Net Asset Value, Beginning of Period .................. $ 22.27 $ 17.91 $ 19.85
----------- ----------- -----------
Income From Investment Operations
Net Investment Income(2) ........................ $ 1.33 $ 1.21 $ 0.72
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions ...................... $ 8.07 $ 3.15 $ (2.66)
----------- ----------- -----------
Total From Investment Operations ................ $ 9.40 $ 4.36 $ (1.94)
----------- ----------- -----------
Distributions
From Net Investment Income ...................... $ (0.70) $ (0.72) --
From Net Realized Gains ......................... $ (0.05) -- --
----------- ----------- -----------
Total Distributions ............................. $ (0.75) $ (0.72) --
----------- ----------- -----------
Reverse Share Split ................................... $ 0.75 $ 0.72 --
----------- ----------- -----------
Net Asset Value, End of Period ........................ $ 31.67 $ 22.27 $ 17.91
----------- ----------- -----------
Total Return(3) ....................................... 42.21% 24.34% (9.77)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996(1)
________________________________________________________________________________________________________
Ratio of Operating Expenses to Average Net Assets ..... 0.59% 0.62% 0.67%(4)
Ratio of Net Investment Income to Average Net Assets .. 4.94% 6.14% 6.57%(4)
Portfolio Turnover Rate ............................... 52% 58% 61%
Net Assets, End of Period (in thousands) .............. $ 356,122 $ 73,821 $ 35,661
(1) February 15, 1996 (inception) through September 30, 1996.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
</TABLE>
www.americancentury.com American Century Investments 27
NOTES
28 American Century Investments 1-800-345-2021
NOTES
www.americancentury.com American Century Investments 29
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
ANNUAL AND SEMIANNUAL REPORTS
These reports contain more information about the funds' investments and the
market conditions and investment strategies that significantly affected the
funds' performance during the most recent fiscal period.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains a more detailed, legal description of the funds' operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).
* In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
* On the Internet www.sec.gov
* By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying
the documents.)
Investment Company Act File No. 811-4165
[american century logo(reg.sm)]
American
Century
AMERICAN CENTURY INVESTMENTS
P.O. Box 419200
Kansas City, Missouri 64141-6200
1-800-345-2021 or 816-531-5575
9902
SH-PRS-15894
<PAGE>
AMERICAN CENTURY
Prospectus
Target 2000 Fund
Target 2005 Fund
Target 2010 Fund
Target 2015 Fund
Target 2020 Fund
Target 2025 Fund
FEBRUARY 1, 1999
REVISED March 17, 1999
ADVISOR CLASS
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
Distributed by
Funds Distributor, Inc.
[american century logo(reg.sm)]
American
Century
Dear Investor,
Reading a prospectus doesn't have to be a chore. We've done the hard work so
you can focus on what's important--learning about the funds and tracking your
investments. Take a look inside, and you'll see this prospectus is different. It
takes a clear-cut approach to fund information.
Inside you'll find:
* The funds' primary investments and risks
* A description of who may or may not want to invest in the funds
* Fund performance, including returns for each year, best and worst
quarters and average annual returns compared to the funds' benchmarks
* An overview of services available and ways to manage your accounts
* Helpful tips and definitions of key investment terms
The new, simplified prospectus format is not the only step we've taken to make
investing less confusing. As we prepare to welcome in the 21st century, American
Century is bringing our fund names up to date. That's why on March 1, we retired
the "Twentieth Century" and "Benham" fund group names and will use the "American
Century" name for all of our funds. This will make it easier for you to track
your investments in newspapers or on financial Web sites. For example, instead
of "American Century-Twentieth Century Ultra," the new fund name will be simply
"American Century Ultra." Only the fund names are changing; each fund's
objective and investment strategy will stay the same.
In another step toward simplification, we are introducing a more intuitive way
for you to evaluate our family of funds. This new system classifies funds based
on objective and risk.
The four broad objectives are: The three risk categories are:
* Growth * Aggressive
* Growth and Income * Moderate
* Income * Conservative
* Capital Preservation
The new classification presents the risk level of each fund upfront so you can
choose funds you are comfortable with. It also can help you create a diversified
portfolio by identifying funds from different investment categories. Our
Investing with American Century brochure explains this reclassification in more
detail.
If you have questions about the prospectus or would like to receive a copy of
our Investing with American Century brochure, our Service Representatives are
available weekdays, 8 a.m. to 5 p.m., Central time. Our toll-free number is
1-800-345-3533. We look forward to helping you achieve your financial goals.
Sincerely,
/s/Mark Killen
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
[LEFT MARGIN]
[american century logo(reg.sm)]
American
Century
American Century
Investments
P.O. Box 419200
Kansas City, MO
64141-6200
[END LEFT MARGIN]
TABLE OF CONTENTS
An Overview of the Funds .................................................... 2
Fees and Expenses ........................................................... 3
Information about the Funds ................................................. 4
Target 2000 Fund
Target 2005 Fund
Target 2010 Fund
Target 2015 Fund
Target 2020 Fund
Target 2025 Fund
Basics of Fixed Income Investing ............................................ 7
Management .................................................................. 10
Investing with American Century ............................................. 13
Share Price and Distributions ............................................... 15
Taxes ....................................................................... 16
Multiple Class Information .................................................. 17
Financial Highlights ........................................................ 18
Performance Information of Other Class ...................................... 22
[LEFT MARGIN CALLOUT]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in GREEN ITALICS, look for its definition
in the left margin.
[image of hand pointing index finger] This symbol highlights special information
and helpful tips.
[END LEFT MARGIN CALLOUT]
American Century Investments
AN OVERVIEW OF THE FUNDS
WHAT ARE THE FUNDS' INVESTMENT GOALS?
These funds seek the highest return consistent with investment in U.S. Treasury
securities.
WHAT ARE THE FUNDS' PRIMARY INVESTMENTS AND RISKS?
The funds invest in zero-coupon U.S. Treasury securities. Each of the funds
invests in different types of these debt securities and involves different
risks. The chart below shows the primary differences among the funds. Additional
information about the funds' investment strategies and risks begins on page 4.
<TABLE>
Shorter Term Fund Primary Investments Primary Risks
<S> <C> <C> <C>
Less Volatile -------------------------------------------------------------------------------
| Target 2000 Zero-coupon U.S. Treasury securities Lowest interest rate risk
| -------------------------------------------------------------------------------
| Target 2005 Zero-coupon U.S. Treasury securities Low interest rate risk
| -------------------------------------------------------------------------------
| Target 2010 Zero-coupon U.S. Treasury securities Interest rate risk
| -------------------------------------------------------------------------------
| Target 2015 Zero-coupon U.S. Treasury securities High interest rate risk
| -------------------------------------------------------------------------------
| Target 2020 Zero-coupon U.S. Treasury securities Higher interest rate risk
| -------------------------------------------------------------------------------
Longer Term Target 2025 Zero-coupon U.S. Treasury securities Highest interest rate risk
More Volatile -------------------------------------------------------------------------------
</TABLE>
WHO MAY WANT TO INVEST IN THE FUNDS?
The funds may be a good investment if you are
* investing through an IRA or other tax-advantaged retirement plan
* seeking long-term financial goals that correspond to the year identified in
the name of a particular fund
* comfortable with fluctuating share prices, which increase as each funds'
maturity year increases
* comfortable with the funds' other investment risks
WHO MAY NOT WANT TO INVEST IN THE FUNDS?
The funds may not be a good investment if you are
* seeking current income
* a short-term investor
* investing for long-term capital appreciation
* looking for the added security of FDIC insurance
[LEFT MAFGIN CALLOUT]
[image of hand pointing index finger] An investment in the funds is not a bank
deposit, and it is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any other government agency.
[END LEFT MARGIN CALLOUT]
2 American Century Investments 1-800-345-3533
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Advisor Class shares of other American Century funds
The following table describes the fees and expenses you will pay if you buy and
hold shares of the funds.
Annual Operating Expenses (expenses that are deducted from fund assets)
Management Distribution and Other Total Annual Fund
Fee(1) Service (12b-1) Fees(2) Expenses(3) Operating Expenses
- --------------------------------------------------------------------------------
Target 2000 0.34% 0.50% 0.00% 0.84%
- --------------------------------------------------------------------------------
Target 2005 0.34% 0.50% 0.00% 0.84%
- --------------------------------------------------------------------------------
Target 2010 0.34% 0.50% 0.00% 0.84%
- --------------------------------------------------------------------------------
Target 2015 0.34% 0.50% 0.00% 0.84%
- --------------------------------------------------------------------------------
Target 2020 0.34% 0.50% 0.00% 0.84%
- --------------------------------------------------------------------------------
Target 2025 0.34% 0.50% 0.00% 0.84%
(1) Based on expenses incurred during the funds' most recent fiscal year. The
funds have stepped fee schedules. As a result, the funds' management fees
generally decrease as fund assets increase. Please consult the Statement of
Additional Information for more details about the funds' management fees.
(2) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the advisor, and a portion is used to
compensate them for distribution and other shareholder services. See
"Service and Distribution Fees," page 12.
(3) Other expenses, which include the fees and expenses of the funds'
independent trustees, their legal counsel, interest and extraordinary
expenses, were less than 0.005% for the most recent fiscal year.
Example
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------
Target 2000 $86 $268 $465 $1,034
- -------------------------------------------------------------------------------
Target 2005 $86 $268 $465 $1,034
- -------------------------------------------------------------------------------
Target 2010 $86 $268 $465 $1,034
- -------------------------------------------------------------------------------
Target 2015 $86 $268 $465 $1,034
- -------------------------------------------------------------------------------
Target 2020 $86 $268 $465 $1,034
- -------------------------------------------------------------------------------
Target 2025 $86 $268 $465 $1,034
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger] Use this example to compare the costs of
investing in other funds. Of course, your actual costs may be higher or lower.
[END LEFT MARGIN CALLOUT]
www.americancentury.com American Century Investments 3
INFORMATION ABOUT THE FUNDS
TARGET 2000 FUND
TARGET 2005 FUND
TARGET 2010 FUND
TARGET 2015 FUND
TARGET 2020 FUND
TARGET 2025 FUND
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
These funds seek the highest return consistent with investment in U.S. Treasury
securities.
HOW DO THE FUNDS IMPLEMENT THEIR INVESTMENT OBJECTIVES?
The funds invest primarily in zero-coupon U.S. Treasury securities. Each fund is
designed to provide an investment experience that is similar to a direct
investment in a zero-coupon investment.
WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?
Each fund is managed to mature in the year identified in its name; therefore,
the funds' weighted average maturities are different. Funds with longer WEIGHTED
AVERAGE MATURITIES have the most volatile share prices. For example, Target 2025
has the longest weighted average maturity, and its share price will fluctuate
the most.
WHAT ARE ZERO-COUPON TREASURY SECURITIES?
U.S. Treasury bonds have a traditional design. Interest is paid periodically
until maturity, when the principal is repaid. Zero-coupon Treasury securities,
however, do not make any periodic interest payments. Instead, all of the
interest and principal is paid when the securities mature.
Zero-coupon Treasury securities are created by separating a traditional Treasury
bond's interest and principal parts. Each part can be used to create zero-coupon
Treasury securities. These securities are created by financial institutions
(like a dealer), the U.S. Treasury and other agencies of the federal government.
The important characteristic is that the final maturity value of a zero-coupon
Treasury security is supported by Treasury securities.
Zero-coupon Treasury securities are beneficial for investors who wish to invest
for a fixed period of time at a selected rate. When an investor purchases a
traditional bond, it is paid periodic interest at a predetermined rate. This
interest payment must be reinvested elsewhere. However, the investor may not be
able to reinvest this interest payment in an investment that has a return
similar to a traditional bond. This is called reinvestment risk. Because
zero-coupon securities do not pay interest periodically, there is no
reinvestment risk.
HOW IS AN INVESTMENT IN THE FUNDS LIKE AN INVESTMENT IN ZERO-COUPON U.S.
TREASURY SECURITIES?
If you invest in a fund, reinvest all distributions and hold your shares until
the fund is liquidated, your investment experience will be similar to that of an
investment in a zero-coupon U.S. Treasury security that matures at the end of
the fund's maturity year. Each fund is managed to provide an investment return
that does not differ substantially from the ANTICIPATED GROWTH RATE (AGR) and
ANTICIPATED VALUE AT MATURITY (AVM) calculated on the day the shares were
purchased.
[LEFT MARGIN CALLOUT]
WEIGHTED AVERAGE MATURITY is a measure of a fund's interest rate sensitivity.
See "Weighted Average Maturity," page 7.
[image of hand pointing index finger] Because all of the interest and principal
is paid when the securities mature, zero-coupon securities are bought and sold
at prices below their face value.
A fund's ANTICIPATED GROWTH RATE is a calculation of the annualized rate of
growth that an investor may expect from the purchase date to the fund's target
maturity date.
The ANTICIPATED VALUE AT MATURITY is the calculated value of a fund's investment
portfolio. It is based on the maturity values of the fund's zero-coupon Treasury
securities.
[END LEFT MARGIN CALLOUT]
4 American Century Investments 1-800-345-3533
The advisor calculates each fund's AGR and AVM each business day. While many
factors can influence each fund's daily AGR and AVM, they tend to fluctuate
within narrow ranges. The following table shows how each fund's AVM has
fluctuated in the last five years.
Anticipated Values at Maturity
9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
- --------------------------------------------------------------------------------
Target 2000 $100.86 $100.99 $101.10 $101.13 $101.78
- --------------------------------------------------------------------------------
Target 2005 $100.58 $100.32 $100.71 $100.85 $101.53
- --------------------------------------------------------------------------------
Target 2010 $101.38 $101.02 $102.53 $103.40 $104.85
- --------------------------------------------------------------------------------
Target 2015 $107.95 $109.62 $110.11 $110.52 $112.63
- --------------------------------------------------------------------------------
Target 2020 $102.11 $102.31 $103.60 $104.84 $106.96
- --------------------------------------------------------------------------------
Target 2025 N/A N/A $109.24 $110.88 $112.23
WHAT HAPPENS WHEN A FUND REACHES ITS MATURITY YEAR?
* The fund managers may begin buying traditional Treasury securities consistent
with a fund's investment objective and pending maturity.
* As a fund's zero-coupon Treasury securities mature, its proceeds will be
invested in Treasury bills.
* In January of the year following maturity, the fund will be liquidated.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUNDS?
The funds have different weighted average maturities. Because of this, the funds
will respond differently to changes in interest rates. Funds with longer
weighted average maturities are more sensitive to interest rate changes. When
interest rates rise, the values of the funds usually fall, but the values of
funds with longer weighted average maturities generally will fall farther. This
interest rate sensitivity is greater in the funds than for traditional Treasury
funds.
The funds' share values will fluctuate. In general, the funds that have higher
potential income have a higher potential loss. If you sell your shares when
their value is less than the price you paid, you will lose money.
While we recommend that shareholders hold their investment in the funds, we do
not restrict your (or any other shareholders') ability to redeem shares. When a
fund's shareholders redeem their shares before the target maturity year,
unanticipated capital gains or losses may result. The fund will distribute these
capital gains and losses to all shareholders.
The funds are designed to provide an investment that is similar to investing in
a zero-coupon U.S. Treasury security that matures in the year identified in its
name. The fund managers adhere to investment policies that are designed to
ensure that this happens. However, precise forecasts of a fund's final maturity
value and its yield to maturity are not possible.
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger] This table is designed to show the narrow
ranges in which each fund's AVMs vary. There is no guarantee that the funds'
AVMs will fluctuate as little in the future.
[image of hand pointing index finger] The investment performance of the funds is
designed to be similar to an investment in an equivalent zero-coupon U.S.
Treasury security. However, an investment in the funds involves different risks.
[END LEFT MARGIN CALLOUT]
www.americancentury.com American Century Investments 5
FUND PERFORMANCE HISTORY
When the Advisor Class of a fund has investment results for a full calendar
year, this section will feature charts that show
* Annual Total Returns
* Highest and Lowest Quarterly Returns
* Average Annual Returns, including a comparison of these returns to a benchmark
index for the Advisor Class of each of the funds
In addition, investors can examine the performance of the funds' Investor Class
of shares. This class has a total expense ratio that is 0.25% lower than the
Advisor Class. If the Advisor Class had existed during the periods presented,
its performance would have been lower because of the additional expense.
All past performance information is designed to help show you how fund returns
can vary. Keep in mind that past performance does not predict how the funds will
perform in the future.
[LEFT MARGIN CALLOUT]
[image of hand pointing index finger] For current performance information,
including yields, please call us at 1-800-345-3533.
[END LEFT MARGIN CALLOUT]
6 American Century Investments 1-800-345-3533
BASICS OF FIXED INCOME INVESTING
DEBT SECURITIES
When a fund buys a debt security, which also is called a fixed income security,
it is essentially lending money to the issuer of the security. Debt securities
also are referred to as fixed income securities. Notes, bonds, commercial paper
and Treasury bills are examples of debt securities. After the debt security is
first sold by the issuer, it may be bought and sold by other investors. The
price of the security may rise or fall based on many factors, including changes
in interest rates, inflation and liquidity.
The fund managers decide which debt securities to buy and sell by
*determining which securities help a fund meet its maturity requirements
*identifying securities that do not satisfy a fund's credit quality
requirements
*evaluating the current economic conditions and assessing the risk of
inflation
*evaluating special features of the securities that may make them more or
less attractive
WEIGHTED AVERAGE MATURITY
Like most loans, debt securities eventually must be repaid (or refinanced) at
some date. This date is called the maturity date. The number of days left to a
debt security's maturity date is called the remaining maturity. The longer a
debt security's remaining maturity, the more sensitive it is to changes in
interest rates.
Because a bond fund will own many debt securities, the fund managers calculate
the average of the remaining maturities of all the debt securities the fund owns
to evaluate the interest rate sensitivity of the entire portfolio. This average
is weighted according to the size of the fund's individual holdings and is
called WEIGHTED AVERAGE MATURITY. The following chart shows how a fund manager
would calculate the weighted average maturity for a fund that owned only two
debt securities.
Amount of Percent of Remaining Weighted
Security Owned Portfolio Maturity Maturity
- --------------------------------------------------------------------------------
Debt Security A $100,000 25% 1,000 days 250 days
- --------------------------------------------------------------------------------
Debt Security B $300,000 75% 10,000 days 7,500 days
- --------------------------------------------------------------------------------
Weighted Average Maturity 7,750 days
TYPES OF RISK
The basic types of risk that the funds face are described below.
Interest Rate Risk
Generally, interest rates and the prices of debt securities move in opposite
directions. So when interest rates fall, the prices of most debt securities
rise; when interest rates rise, prices fall. Because the funds invest primarily
in debt securities, changes in interest rates will affect the funds'
performance.
The degree to which interest rate changes affect the funds' performance varies
and is related to the weighted average maturity of each fund. For example, when
interest rates rise, you can expect the share value of a long-term bond fund to
fall more than that of a short-term bond fund. When rates fall, the opposite is
true. This sensitivity to interest rate changes is called interest rate risk.
[LEFT MARGIN CALLOUT]
WEIGHTED AVERAGE MATURITY is a tool that the fund managers use to approximate
the remaining maturity of a fund's investment portfolio.
[image of hand pointing index finger] The longer a fund's weighted average
maturity, the more sensitive it is to changes in interest rates.
[END LEFT MARGIN CALLOUT]
www.americancentury.com American Century Investments 7
When interest rates change, longer maturity bonds experience a greater change in
price. The following table shows the effect of a 1% increase in interest rates
on the price of 7% coupon bonds of differing maturities:
Remaining Maturity Current Price Price After 1% Increase Change in Price
- --------------------------------------------------------------------------------
1 year $100.00 $99.06 -0.94%
- --------------------------------------------------------------------------------
3 years $100.00 $97.38 -2.62%
- --------------------------------------------------------------------------------
10 years $100.00 $93.20 -6.80%
- --------------------------------------------------------------------------------
30 years $100.00 $88.69 -11.31%
Credit Risk
Credit risk is the risk that an obligation won't be paid and a loss will result.
A high credit rating indicates a high degree of confidence by the rating
organization that the issuer will be able to withstand adverse business,
financial and economic conditions and be able to make interest and principal
payments on time. Generally, a lower credit rating indicates a greater risk of
nonpayment. A lower rating also may indicate that the issuer has a more senior
series of debt securities, which means that if the issuer has difficulties
making its payments, the more senior series of debt is first in line for
payment.
It's not as simple as buying the highest-rated debt securities. Higher credit
ratings usually mean lower interest rates, so investors often purchase
securities that aren't the highest rated to increase return. If a fund purchases
lower-rated securities, it assumes additional credit risk.
The following chart shows the authorized credit quality ranges for the funds
offered by this Prospectus.
- -------------------------------------------
Quality
- -------------------------------------------
High Quality
- -----------------------------
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1 MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
- --------------------------------------------------------------------------------
Target 2000 X
- --------------------------------------------------------------------------------
Target 2005 X
- --------------------------------------------------------------------------------
Target 2010 X
- --------------------------------------------------------------------------------
Target 2015 X
- --------------------------------------------------------------------------------
Target 2020 X
- --------------------------------------------------------------------------------
Target 2025 X
- --------------------------------------------------------------------------------
- ------------------------------------------- ------------------------------------
INVESTMENT GRADE NON-INVESTMENT GRADE
- ------------------------------------------- ------------------------------------
Strictly speaking, U.S. Treasury securities are not "rated" AAA. However,
Treasury securities are backed by the full faith and credit of the United
States, and are considered among the safest securities in the world. The rating
on U.S. Treasury securities is, therefore, considered to be equivalent to AAA.
Liquidity Risk
Debt securities can become difficult to sell for a variety of reasons, such as
lack of an active trading market. When a fund's investments become difficult to
sell, it is said to have a problem with liquidity. The chance that a fund will
have liquidity issues is called liquidity risk.
Inflation Risk
The safest investments usually have the lowest potential income and performance.
During periods of high inflation, shorter-term fixed income investments
typically perform better. This reflects the high short-term demand for money
when inflation is high. The risk that your short-term performance will suffer
during periods of high inflation is called inflation risk.
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[image of hand pointing index finger]
Credit quality may be lower when the issuer has
* a high debt level
* a short operating history
* a senior level of debt
* a difficult, competitive environment
[image of hand pointing index finger] The Statement of Additional Information
provides a detailed description of these securities ratings.
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8 American Century Investments 1-800-345-3533
A COMPARISON OF BASIC RISK FACTORS
The following chart depicts the basic risks of investing in the funds. It is
designed to help you compare these funds with each other; it shouldn't be used
to compare these funds with other mutual funds.
Interest Rate Risk Credit Risk(1) Liquidity Risk(2) Inflation Risk
- --------------------------------------------------------------------------------
Target 2000 Lowest Same Same Lowest
- --------------------------------------------------------------------------------
Target 2005 Low Same Same Low
- --------------------------------------------------------------------------------
Target 2010 Medium Same Same Medium
- --------------------------------------------------------------------------------
Target 2015 Medium Same Same Medium
- --------------------------------------------------------------------------------
Target 2020 High Same Same High
- --------------------------------------------------------------------------------
Target 2025 Highest Same Same Highest
(1) Because the funds invest in zero-coupon Treasury securities, there is no
difference in credit risk. The funds are considered among the safest
securities in the world because Treasury securities are backed by the full
faith and credit of the United States. The funds all feature low credit
risk.
(2) The Treasury market is considered the most liquid in the world.
The funds engage in a variety of investment techniques as they pursue their
investment objectives. Each technique has its own characteristics and may pose
some level of risk to the funds. If you would like to learn more about these
techniques, you should review the Statement of Additional Information before
making an investment.
www.americancentury.com American Century Investments 9
MANAGEMENT
WHO MANAGES THE FUNDS?
The Board of Trustees, investment advisor and fund management team play key
roles in the management of the funds.
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired an investment advisor to do so.
More than two-thirds of the Trustees are independent of the funds' advisor; that
is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958. American Century is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provided to the funds during the most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Advisor Class of shares of the funds. The rate of the
management fee for a fund is determined on a class-by-class basis monthly using
a two-step formula that takes into account the fund's strategy (money market,
bond or equity) and the total amount of mutual fund assets the advisor manages.
The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor paid all
expenses of managing and operating the funds except brokerage expenses, taxes,
interest, fees and expenses of the independent trustees (including legal counsel
fees) and extraordinary expenses.
Management Fees Paid by the Funds to the Advisor as a Percentage of Average
Net Assets for the Most Recent Fiscal Year Ended September 30, 1998
- --------------------------------------------------------------------------------
Target 2000 0.34%
- --------------------------------------------------------------------------------
Target 2005 0.34%
- --------------------------------------------------------------------------------
Target 2010 0.34%
- --------------------------------------------------------------------------------
Target 2015 0.34%
- --------------------------------------------------------------------------------
Target 2020 0.34%
- --------------------------------------------------------------------------------
Target 2025 0.34%
10 American Century Investments 1-800-345-3533
THE FUND MANAGEMENT TEAM
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. Teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. Team members buy and sell securities
for a fund as they see fit, guided by the fund's investment objective and
strategy.
The portfolio managers on the investment team are identified below:
DAVID SCHROEDER
Mr. Schroeder, Vice President and Senior Portfolio Manager, has been a member of
the team that manages the Target funds since joining American Century in July
1990. He has a bachelor of arts from Pomona College.
JEREMY FLETCHER
Mr. Fletcher, Associate Portfolio Manager, has been a member of the team that
manages the Target funds since August 1997. He joined American Century in
October 1991 as an Investor Services Representative. He has bachelor's degrees
in economics and mathematics from Claremont McKenna College.
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CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or from profiting from the purchase and sale of the same security within 60
calendar days. In addition, the Code of Ethics requires portfolio managers and
other employees with access to information about the purchase or sale of
securities by the funds to obtain approval before executing permitted personal
trades.
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www.americancentury.com American Century Investments 11
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Trustees may change any other policies
and investment strategies.
YEAR 2000 ISSUES
Many of the world's computer systems currently cannot properly recognize or
process date-sensitive information relating to the Year 2000 and beyond. Because
this may impact the computer systems of various American Century-affiliated and
external service providers for the funds, American Century formally initiated a
Year 2000 readiness project in July 1997. It involves a team of information
technology professionals assisted by outside consultants and guided by a
senior-level steering committee. The team's goal is to assess the impact of the
Year 2000 on American Century's systems, renovate or replace noncompliant
critical systems and test those systems. In addition, the team has been working
to gather information about the Year 2000 efforts of the funds' other major
service providers.
Although American Century believes its critical systems will function properly
in the Year 2000, this is not guaranteed. If the efforts of American Century or
its external service providers are not successful, the funds' business,
particularly the provision of shareholder services, may be hampered.
In addition, the issuers of securities the funds own could have Year 2000
computer problems. These problems could negatively affect the value of their
securities, which, in turn, could impact the funds' performance. The advisor has
established a process to gather publicly available information about the Year
2000 readiness of these issuers. However, this process may not uncover all
relevant information, and the information gathered may not be complete and
accurate. Moreover, an issuer's Year 2000 readiness is only one of many factors
the fund managers may consider when making investment decisions, and other
factors may receive greater weight.
12 American Century Investments 1-800-345-3533
INVESTING WITH AMERICAN CENTURY
ELIGIBILITY FOR ADVISOR CLASS SHARES
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include
*minimum investment requirements
*exchange policies
*fund choices
*cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the funds' annual reports, semiannual
reports and Statements of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform for their clients recordkeeping and
administrative services that would otherwise be performed by American Century's
transfer agent. In some circumstances, American Century will pay the service
provider a fee for performing those services.
Although transactions in fund shares may be made directly with American Century
at no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
those intermediaries to accept orders on the funds' behalf up to the time at
which the net asset value is determined. If those orders are transmitted to
American Century and paid for in accordance with the contract, they will be
priced at the net asset value next determined after your request is received in
good order by the intermediary on a fund's behalf.
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[image of hand pointing index finger] Financial intermediaries include banks,
broker-dealers, insurance companies and investment advisors.
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www.americancentury.com American Century Investments 13
ABUSIVE TRADING PRACTICES
We do not permit market-timing or other abusive trading practices in our funds.
Excessive, short-term (market-timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds - up to seven days - or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of cash. If we make payment
in securities, we will value the securities, selected by the fund, in the same
manner as we do in computing the fund's net asset value. We may provide these
securities in lieu of cash without prior notice.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
14 American Century Investments 1-800-345-3533
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE of the funds as of ONE HOUR
BEFORE the close of regular trading on the New York Stock Exchange (usually 4
p.m. Eastern time) each day the Exchange is open. On days when the Exchange is
not open, we do not calculate the net asset value. The net asset value of a fund
share is the current value of the fund's assets, minus any liabilities, divided
by the number of fund shares outstanding.
If current prices of securities owned by a fund are not readily available from
an independent pricing service, the advisor may determine their fair value in
accordance with procedures adopted by the funds' Board of Trustees.
We will price your purchase, exchange or redemption at the net asset value next
determined after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the funds will not be subject to state
or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as CAPITAL GAINS realized on
the sale of investment securities. Each fund generally pays distributions from
net income and capital gains, if any, once a year in December. A fund may make
more frequent distributions, if necessary, to comply with Internal Revenue code
provisions.
You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distributions received
with your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information regarding distributions and your
distribution options.
REVERSE SHARE SPLITS
When a fund pays its distributions, the Board also declares a reverse share
split for each fund that exactly offsets the per-share amount of the
distribution. If you reinvest your dividends, this reverse share split means
that you will hold exactly the same number of shares after a dividend as you did
before. This reverse share split makes changes in the funds' share prices behave
like changes in the values of zero-coupon securities.
FUND LIQUIDATION
During a fund's target maturity year, you will be asked how you want your shares
liquidated. You can choose one of the following
* cash
* shares of another American Century mutual fund
If you do not tell us by December 31 of the target year how you want your shares
liquidated, your money will be exchanged for shares of Capital Preservation, an
American Century Treasury money market fund.
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The NET ASSET VALUE of a fund is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased. Tax becomes due on capital gains once an
asset is sold.
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www.americancentury.com American Century Investments 15
TAXES
TAX-DEFERRED ACCOUNTS
If you purchase fund shares through a tax-deferred account, such as a qualified
employer-sponsored retirement or savings plan, income and capital gains
distributions usually will not be subject to current taxation, but will
accumulate in your account under the plan on a tax-deferred basis.
Complex tax rules govern employer-sponsored retirement and savings plans. If you
elect to participate in your employer's plan, consult your plan administrator,
your summary plan description or a professional tax advisor regarding the tax
consequences of participation in, contributions to, and withdrawals or
distributions from the plan.
TAXABLE ACCOUNTS
Fund dividends and distributions are taxable to most investors. The tax status
of any distribution is not affected by how long you have been in the fund or
whether you reinvest your distributions or take them as income. In general,
distributions are taxable at the federal level as follows:
Type of distribution Tax rate for 15% bracket Tax rate for 28% bracket
or above
- --------------------------------------------------------------------------------
Income Ordinary income rate Ordinary income rate
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
American Century will detail the tax status of fund distributions for each
calendar year in an annual tax statement.
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
Taxes on Transactions
Your redemptions -- including exchanges to other American Century funds -- are
subject to capital gains tax. A capital gain or loss is the difference between
the cost of your shares and the price you receive when you sell them.
The table above can provide a general guide for your potential tax liability
when selling or exchanging fund shares. Short-term capital gains are gains on
fund shares held less than or equal to 12 months. Long-term capital gains are
gains on fund shares held for more than 12 months.
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BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. We distribute those gains to you, after subtracting any losses, even
if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
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16 American Century Investments 1-800-345-3533
MULTIPLE CLASS INFORMATION
American Century may offer up to two classes of the funds: Investor Class and
Advisor Class. The shares offered by this Prospectus are Advisor Class shares
and are offered primarily to institutional investors, through institutional
distribution channels, such as employer-sponsored retirement plans, or through
banks, broker-dealers and insurance companies.
American Century offers another class of shares that has no up-front or deferred
charges, commissions, or 12b-1 fees. The other class has different fees,
expenses, and/or minimum investment requirements than the Advisor Class. The
difference in the fee structures between the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the advisor for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. Different fees and expenses will affect performance. For
additional information concerning the other class of shares not offered by this
Prospectus, call us at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers that class of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; and (d) each class
may have different exchange privileges.
SERVICE AND DISTRIBUTION FEES
Investment Company Act Rule 12b-1 permits mutual funds that adopt a written plan
to pay out of fund assets certain expenses associated with the distribution of
their shares. The funds' Advisor Class shares have a 12b-1 Plan. Under the Plan,
the funds pay an annual fee of 0.50% of fund assets, half for certain
shareholder and administrative services and half for distribution services. The
advisor, as paying agent for the funds, pays all or a portion of such fees to
the banks, broker-dealers and insurance companies that make such shares
available. Because these fees are paid out of the funds' assets on an ongoing
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. For additional
information about the Plan and its terms, see "Multiple Class Structure --
Master Distribution and Shareholder Services Plan" in the Statement of
Additional Information.
www.americancentury.com American Century Investments 17
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The tables on the next pages itemize what contributed to the changes in share
price during the period.
On a per-share basis, each table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to shareholders
* reverse share split
* share price at the end of the period
Each table also includes some key statistics for the period as appropriate
* Total Return--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* Expense Ratio--operating expenses as a percentage of average net assets
* Net Income Ratio--net investment income as a percentage of average net assets
* Portfolio Turnover--the percentage of the fund's buying and selling activity
The Financial Highlights for the fiscal year ended September 30, 1998, have been
audited by PricewaterhouseCoopers LLP, independent accountants. Their report is
included in the funds' annual report, which is incorporated by reference into
the Statement of Additional Information, and is available upon request. Prior
years' information was audited by other independent auditors, whose report also
is incorporated by reference into the Statement of Additional Information.
18 American Century Investments 1-800-345-3533
TARGET 2000
ADVISOR CLASS
For a Share Outstanding Throughout the Period Indicated
PER-SHARE DATA
1998(1)
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............................. $ 91.41
--------
Income From Investment Operations
Net Investment Income(2) ..................................... $ 0.54
Net Realized and Unrealized Gain on Investment Transactions .. $ 1.81
--------
Total From Investment Operations ............................. $ 2.35
--------
Net Asset Value, End of Period ................................... $ 93.76
--------
Total Return(3) .................................................. 2.57%
RATIOS/SUPPLEMENTAL DATA
1998(1)
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets ................ 0.84%(4)
Ratio of Net Investment Income to Average Net Assets ............. 5.06%(4)
Portfolio Turnover Rate .......................................... 82%
Net Assets, End of Period (in thousands) ......................... $ 64
(1) August 20, 1998 (commencement of sale) through September 30, 1998.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total return is not annualized.
(4) Annualized.
www.americancentury.com American Century Investments 19
TARGET 2005
ADVISOR CLASS
For a Share Outstanding Throughout the Period Indicated
PER-SHARE DATA
1998(1)
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............................. $ 70.91
--------
Income From Investment Operations
Net Investment Income(2) ..................................... $ 0.58
Net Realized and Unrealized Gain on Investment Transactions .. $ 5.20
--------
Total From Investment Operations ............................. $ 5.78
--------
Net Asset Value, End of Period ................................... $ 76.69
--------
Total Return(3) .................................................. 8.15%
RATIOS/SUPPLEMENTAL DATA
1998(1)
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets ................ 0.84%(4)
Ratio of Net Investment Income to Average Net Assets ............. 4.87%(4)
Portfolio Turnover Rate .......................................... 35%
Net Assets, End of Period (in thousands) ......................... $ 100
(1) August 3, 1998 (commencement of sale) through September 30, 1998.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total return is not annualized.
(4) Annualized.
20 American Century Investments 1-800-345-3533
TARGET 2025
ADVISOR CLASS
For a Share Outstanding Throughout the Period Indicated
PER-SHARE DATA
1998(1)
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............................. $ 27.27
--------
Income From Investment Operations
Net Investment Income(2) ..................................... $ 0.41
Net Realized and Unrealized Gain on Investment Transactions .. $ 3.96
--------
Total From Investment Operations ............................. $ 4.37
--------
Net Asset Value, End of Period ................................... $ 31.64
--------
Total Return(3) .................................................. 16.02%
RATIOS/SUPPLEMENTAL DATA
1998(1)
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets ................ 0.84%(4)
Ratio of Net Investment Income to Average Net Assets ............. 4.37%(4)
Portfolio Turnover Rate .......................................... 52%
Net Assets, End of Period (in thousands) ......................... $ 89
(1) June 1, 1998 (commencement of sale) through September 30, 1998.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total return is not annualized.
(4) Annualized.
www.americancentury.com American Century Investments 21
PERFORMANCE INFORMATION OF OTHER CLASS
The following financial information is provided to show the performance of the
funds' original class of shares. This class, the Investor Class, has a total
expense ratio that is 0.25% lower than the Advisor Class. If the Advisor Class
had existed during the periods presented, its performance would have been lower
because of the additional expense.
The tables on the next pages itemize what contributed to the changes in share
price during the period. They also show changes in share price for this period
in comparison to changes over the last five fiscal years (or less, if the share
class is not five years old).
On a per-share basis, each table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to shareholders
* reverse share split
* share price at the end of the period
Each table also includes some key statistics for the period as appropriate
* Total Return--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* Expense Ratio--operating expenses as a percentage of average net assets
* Net Income Ratio--net investment income as a percentage of average net assets
* Portfolio Turnover--the percentage of the fund's buying and selling activity
The following Financial Highlights for the fiscal year ended September 30, 1998,
have been audited by PricewaterhouseCoopers LLP, independent accountants. Their
report is included in the funds' annual report, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request. Prior years' information was audited by other independent auditors,
whose report is also incorporated by reference into the Statement of Additional
Information.
22 American Century Investments 1-800-345-3533
<TABLE>
<CAPTION>
TARGET 2000
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ........ $ 86.05 $ 79.95 $ 76.86 $ 66.93 $ 72.40
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............ $ 5.13 $ 5.10 $ 4.75 $ 4.37 $ 3.99
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 2.60 $ 1.00 $ (1.66) $ 5.56 $ (9.46)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 7.73 $ 6.10 $ 3.09 $ 9.93 $ (5.47)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (5.64) $ (5.20) $ (3.94) $ (3.42) $ (3.25)
From Net Realized Gains ............. -- -- -- -- $ (2.95)
In Excess of Net Realized Gains ..... -- -- -- -- $ (1.20)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (5.64) $ (5.20) $ (3.94) $ (3.42) $ (7.40)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 5.64 $ 5.20 $ 3.94 $ 3.42 $ 7.40
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 93.78 $ 86.05 $ 79.95 $ 76.86 $ 66.93
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 8.97% 7.64% 4.01% 14.84% (7.54)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.56% 0.53% 0.63% 0.59%
Ratio of Net Investment Income to
Average Net Assets ........................ 5.75% 6.14% 5.99% 6.13% 5.74%
Portfolio Turnover Rate ................... 82% 10% 29% 53% 89%
Net Assets, End of Year
(in thousands) ............................ $ 237,525 $ 248,377 $ 267,757 $ 294,736 $ 243,895
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 23
TARGET 2005
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Net Asset Value, Beginning of Year ........ $ 64.54 $ 57.83 $ 56.61 $ 45.22 $ 51.84
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............ $ 3.84 $ 3.74 $ 3.50 $ 3.33 $ 3.11
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 8.34 $ 2.97 $ (2.28) $ 8.06 $ (9.73)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 12.18 $ 6.71 $ 1.22 $ 11.39 $ (6.62)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (3.61) $ (3.61) $ (2.06) $ (2.41) $ (2.70)
From Net Realized Gains ............. $ (0.27) $ (0.44) $ (0.58) $ (0.67) $ (8.47)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (3.88) $ (4.05) $ (2.64) $ (3.08) $ (11.17)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 3.88 $ 4.05 $ 2.64 $ 3.08 $ 11.17
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 76.72 $ 64.54 $ 57.83 $ 56.61 $ 45.22
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 18.87% 11.60% 2.15% 25.16% (12.75)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.57% 0.58% 0.71% 0.64%
Ratio of Net Investment Income to
Average Net Assets ........................ 5.53% 6.15% 6.05% 6.58% 6.37%
Portfolio Turnover Rate ................... 35% 15% 31% 34% 68%
Net Assets, End of Year
(in thousands) ............................ $ 533,986 $ 281,677 $ 238,864 $ 183,452 $ 96,207
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
24 American Century Investments 1-800-345-3533
TARGET 2010
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Net Asset Value, Beginning of Year ........ $ 49.16 $ 42.47 $ 42.14 $ 31.67 $ 38.13
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............ $ 2.94 $ 2.79 $ 2.58 $ 2.41 $ 2.24
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 9.88 $ 3.90 $ (2.25) $ 8.06 $ (8.70)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 12.82 $ 6.69 $ 0.33 $ 10.47 $ (6.46)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (2.46) $ (2.82) $ (1.57) $ (1.48) $ (1.46)
From Net Realized Gains ............. $ (0.29) $ (1.17) -- $ (0.48) $ (4.31)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (2.75) $ (3.99) $ (1.57) $ (1.96) $ (5.77)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 2.75 $ 3.99 $ 1.57 $ 1.96 $ 5.77
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 61.98 $ 49.16 $ 42.47 $ 42.14 $ 31.67
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 26.08% 15.75% 0.78% 33.06% (16.92)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.62% 0.67% 0.71% 0.68%
Ratio of Net Investment Income to
Average Net Assets ........................ 5.39% 6.15% 5.98% 6.56% 6.35%
Portfolio Turnover Rate ................... 34% 26% 24% 26% 35%
Net Assets, End of Year
(in thousands) ............................ $ 283,828 $ 124,812 $ 111,117 $ 95,057 $ 46,312
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 25
TARGET 2015
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Net Asset Value, Beginning of Year ........ $ 38.34 $ 31.96 $ 32.20 $ 22.79 $ 29.04
Income From Investment Operations
Net Investment Income(1) ............ $ 2.17 $ 2.00 $ 1.85 $ 1.71 $ 1.57
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 9.36 $ 4.38 $ (2.09) $ 7.70 $ (7.82)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 11.53 $ 6.38 $ (0.24) $ 9.41 $ (6.25)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (2.11) $ (2.05) $ (1.28) $ (0.87) $ (1.19)
From Net Realized Gains ............. $ (1.40) $ (0.34) $ (1.61) -- $ (7.08)
In Excess of Net Realized Gains ..... -- -- -- -- $ (0.37)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (3.51) $ (2.39) $ (2.89) $ (0.87) $ (8.64)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 3.51 $ 2.39 $ 2.89 $ 0.87 $ 8.64
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 49.87 $ 38.34 $ 31.96 $ 32.20 $ 22.79
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 30.07% 19.96% (0.74)% 41.29% (21.52)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.61% 0.65% 0.71% 0.68%
Ratio of Net Investment Income to
Average Net Assets ........................ 4.96% 5.79% 5.63% 6.40% 5.97%
Portfolio Turnover Rate ................... 31% 21% 17% 70% 65%
Net Assets, End of Year
(in thousands) ............................ $ 170,081 $ 114,900 $ 115,654 $ 114,647 $ 66,073
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
26 American Century Investments 1-800-345-3533
TARGET 2020
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30
PER-SHARE DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Net Asset Value, Beginning of Year ........ $ 27.17 $ 22.00 $ 22.47 $ 15.28 $ 20.72
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............ $ 1.53 $ 1.51 $ 1.41 $ 1.19 $ 1.13
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions .......... $ 8.25 $ 3.66 $ (1.88) $ 6.00 $ (6.57)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .... $ 9.78 $ 5.17 $ (0.47) $ 7.19 $ (5.44)
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income .......... $ (2.35) $ (1.45) $ (0.40) $ (0.21) $ (0.28)
From Net Realized Gains ............. $ (2.19) -- $ (0.04) -- $ (1.31)
In Excess of Net Realized Gains ..... -- -- -- -- $ (1.18)
----------- ----------- ----------- ----------- -----------
Total Distributions ................. $ (4.54) $ (1.45) $ (0.44) $ (0.21) $ (2.77)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ....................... $ 4.54 $ 1.45 $ 0.44 $ 0.21 $ 2.77
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year .............. $ 36.95 $ 27.17 $ 22.00 $ 22.47 $ 15.28
----------- ----------- ----------- ----------- -----------
Total Return(3) ........................... 36.00% 23.50% (2.09)% 47.05% (26.25)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996 1995 1994
_________________________________________________________________________________________________________________
Ratio of Operating Expenses to
Average Net Assets ........................ 0.59% 0.53% 0.61% 0.72% 0.70%
Ratio of Net Investment Income to
Average Net Assets ........................ 4.83% 6.29% 6.25% 6.24% 6.28%
Portfolio Turnover Rate ................... 18% 14% 47% 78% 116%
Net Assets, End of Year
(in thousands) ............................ $ 486,052 $ 553,551 $ 926,319 $ 574,702 $ 58,535
(1) Computed using average shares outstanding throughout the year.
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions to
shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 27
TARGET 2025
INVESTOR CLASS
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
PER-SHARE DATA
1998 1997 1996(1)
______________________________________________________________________________________________________
Net Asset Value, Beginning of Period .................. $ 22.27 $ 17.91 $ 19.85
----------- ----------- -----------
Income From Investment Operations
Net Investment Income(2) ........................ $ 1.33 $ 1.21 $ 0.72
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions ...................... $ 8.07 $ 3.15 $ (2.66)
----------- ----------- -----------
Total From Investment Operations ................ $ 9.40 $ 4.36 $ (1.94)
----------- ----------- -----------
Distributions
From Net Investment Income ...................... $ (0.70) $ (0.72) --
From Net Realized Gains ......................... $ (0.05) -- --
----------- ----------- -----------
Total Distributions ............................. $ (0.75) $ (0.72) --
----------- ----------- -----------
Reverse Share Split ................................... $ 0.75 $ 0.72 --
----------- ----------- -----------
Net Asset Value, End of Period ........................ $ 31.67 $ 22.27 $ 17.91
----------- ----------- -----------
Total Return(3) ....................................... 42.21% 24.34% (9.77)%
RATIOS/SUPPLEMENTAL DATA
1998 1997 1996(1)
________________________________________________________________________________________________________
Ratio of Operating Expenses to Average Net Assets ..... 0.59% 0.62% 0.67%(4)
Ratio of Net Investment Income to Average Net Assets .. 4.94% 6.14% 6.57%(4)
Portfolio Turnover Rate ............................... 52% 58% 61%
Net Assets, End of Period (in thousands) .............. $ 356,122 $ 73,821 $ 35,661
(1) February 15, 1996 (inception) through September 30, 1996.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
</TABLE>
28 American Century Investments 1-800-345-3533
NOTES
www.americancentury.com American Century Investments 29
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
ANNUAL AND SEMIANNUAL REPORTS
These reports contain more information about the funds' investments and the
market conditions and investment strategies that significantly affected the
funds' performance during the most recent fiscal period.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains a more detailed, legal description of the funds' operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).
* In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
* On the Internet www.sec.gov
* By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying
the documents.)
Investment Company Act File No. 811-4165
[american century logo(reg.sm)]
American
Century
AMERICAN CENTURY INVESTMENTS
P.O. Box 419200
Kansas City, Missouri 64141-6385
1-800-345-2021 or 816-531-5575
9902
SH-PRS-15895
<PAGE>
AMERICAN CENTURY
Statement of
Additional Information
Target 2000 Fund
Target 2005 Fund
Target 2010 Fund
Target 2015 Fund
Target 2020 Fund
Target 2025 Fund
FEBRUARY 1, 1999
Revised March 17, 1999
THIS STATEMENT OF ADDITIONAL INFORMATION ADDS TO THE DISCUSSION IN THE FUNDS'
PROSPECTUS, DATED FEBRUARY 1, 1999, AND REVISED March 17, 1999, BUT IS NOT A
PROSPECTUS. IF YOU WOULD LIKE A COPY OF THE PROSPECTUS, PLEASE CONTACT US AT ONE
OF THE ADDRESSES OR TELEPHONE NUMBERS LISTED ON THE BACK COVER OR VISIT AMERICAN
CENTURY'S WEB SITE AT WWW.AMERICANCENTURY.COM.
THIS STATEMENT OF ADDITIONAL INFORMATION INCORPORATES BY REFERENCE CERTAIN
INFORMATION THAT APPEARS IN THE FUNDS' ANNUAL AND SEMIANNUAL REPORTS, WHICH ARE
DELIVERED TO ALL SHAREHOLDERS. YOU MAY OBTAIN A FREE COPY OF THE FUNDS' ANNUAL
OR SEMIANNUAL REPORTS BY CALLING 1-800-345-2021.
Distributed by Funds Distributor, Inc.
[american century logo(reg.sm)]
American
Century
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1999
Revised March 17, 1999
TABLE OF CONTENTS
The Funds' History ........................................................ 2
Fund Investment Guidelines ................................................ 2
Detailed Information About the Funds ...................................... 2
Investment Strategies and Risks ....................................... 2
Coupon-Bearing U.S. Treasury Securities ............................... 5
Cash Management ....................................................... 5
Loans of Portfolio Securities ......................................... 5
Investment Policies ................................................... 6
Temporary Defensive Measures .......................................... 7
Portfolio Turnover .................................................... 7
Management ................................................................ 8
The Board of Trustees ................................................. 8
Officers .............................................................. 10
The Funds' Principal Shareholders ......................................... 12
Service Providers ......................................................... 12
Investment Advisor .................................................... 12
Distributor ........................................................... 14
Transfer Agent and Administrator ...................................... 14
Other Service Providers ................................................... 15
Custodian Banks ....................................................... 15
Independent Accountants ............................................... 15
Brokerage Allocation ...................................................... 15
Information About Fund Shares ............................................. 15
Fund Liquidations ..................................................... 16
Multiple Class Structure .............................................. 16
Rule 12b-1 ............................................................ 16
Master Distribution and Shareholder Services Plan ..................... 17
Buying and Selling Fund Shares ........................................ 18
Valuation of a Fund's Securities ...................................... 18
Taxes ..................................................................... 18
Federal Income Tax .................................................... 18
How Fund Performance Information Is Calculated ............................ 19
Financial Statements ...................................................... 21
Explanation of Fixed Income Securities Ratings ............................ 21
Statement of Additional Information 1
THE FUNDS' HISTORY
American Century Target Maturities Trust is a registered open-end management
investment company that was organized as a Massachusetts business trust on March
25, 1985. The Trust was known as Benham Target Maturities Trust until January
1997. Throughout this Statement of Additional Information we refer to American
Century Target Maturities Trust as the Trust.
Each fund described in this Statement of Additional Information is a
separate series of the Trust and operates for many purposes as if it were an
independent company. Each fund has its own investment objective, strategy,
management team, assets, tax identification and stock registration number.
FUND INVESTMENT GUIDELINES
This section explains the extent to which the funds' advisor, American
Century Investment Management, Inc., can use various investment vehicles and
strategies in managing a fund's assets. Descriptions of the investment
techniques and risks associated with each appear in the section, "Investment
Strategies and Risks," which begins on this page. In the case of the funds'
principal investment strategies, these descriptions elaborate upon discussion
contained in the Prospectus.
Each fund is a diversified open-end investment company as defined in the
Investment Company Act of 1940 (the Investment Company Act). Diversified means
that, with respect to 75% of its total assets, each fund will not invest more
than 5% of its total assets in the securities of a single issuer.
To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year (1) no more than 25% of its total assets are
invested in the securities of a single issuer (other than the U.S. government or
a regulated investment company), and (2) with respect to at least 50% of its
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer.
DETAILED INFORMATION ABOUT THE FUNDS
INVESTMENT STRATEGIES AND RISKS
This section describes various investment vehicles and strategies that the
fund managers can use in managing a fund's assets. It also details the risks
associated with each, because each technique contributes to a fund's overall
risk profile.
ZERO-COUPON SECURITIES
Zero-coupon U.S. Treasury securities (or zeros) are the unmatured interest
coupons and underlying principal portions of U.S. Treasury bonds. Originally,
these securities were created by broker-dealers who bought Treasury bonds and
deposited these securities with a custodian bank. The broker-dealers then sold
receipts representing ownership interests in the coupons or principal portions
of the bonds. Some examples of zero-coupon securities sold through custodial
receipt programs are CATS (Certificates of Accrual on Treasury Securities),
TIGRs (Treasury Investment Growth Receipts) and generic TRs (Treasury Receipts)
The U.S. Treasury subsequently introduced a program called Separate Trading
of Registered Interest and Principal of Securities (STRIPS), through which it
exchanges eligible securities for their component parts and then allows the
component parts to trade in book-entry form. (Book-entry trading eliminates the
bank credit risks associated with broker-dealer-sponsored custodial receipt
<TABLE>
<CAPTION>
Fund-Class Inception Date Ticker Symbol Inception Date Ticker Symbol
(Investor Class) (Investor Class) (Advisor Class) (Advisor Class)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Target 2000 Fund 03/25/1985 BTMTX 08/20/1998 N/A
- --------------------------------------------------------------------------------
Target 2005 Fund 03/25/1985 BTFIX 08/03/1998 N/A
- --------------------------------------------------------------------------------
Target 2010 Fund 03/25/1985 BTTNX N/A N/A
- --------------------------------------------------------------------------------
Target 2015 Fund 09/01/1986 BTFTX N/A N/A
- --------------------------------------------------------------------------------
Target 2020 Fund 12/29/1989 BTTTX N/A N/A
- --------------------------------------------------------------------------------
Target 2025 Fund 02/15/1996 BTTRX 06/01/1998 N/A
</TABLE>
2 American Century Investments
programs.) STRIPS are direct obligations of the U.S. government and have the
same credit risks as other U.S. Treasury securities.
The Resolution Funding Corporation (REFCORP) issues bonds whose interest
payments are guaranteed by the U.S. Treasury and whose principal amounts are
secured by zero-coupon U.S. Treasury securities held in a separate custodial
account at the Federal Reserve Bank of New York. The principal amount and
maturity date of REFCORP bonds are the same as the par amount and maturity date
of the corresponding zeros; upon maturity, REFCORP bonds are repaid from the
proceeds of the zeros. REFCORP zeros are the unmatured coupons and principal
portions of Resolution Funding Corporation bonds. The U.S. government and its
agencies may issue securities in zero-coupon form. These securities are referred
to as original issue zero-coupon securities.
MANAGING TO THE TARGET YEAR
ANTICIPATED VALUE AT MATURITY
The maturity values of zero-coupon bonds are specified at the time the bonds
are issued, and this feature, combined with the ability to calculate yield to
maturity, has made these instruments popular investment vehicles for investors
seeking reliable investments to meet long-term financial goals.
To provide a comparable investment opportunity while allowing investors the
flexibility to purchase or redeem shares each day the Trust is open for
business, each fund consists primarily of zero-coupon bonds but is actively
managed to accommodate shareholder activity and to take advantage of perceived
market opportunities. Because of this active management approach, the fund
advisor does not guarantee that a certain price per share will be attained by
the time a fund is liquidated. Instead, the fund managers attempt to track the
price behavior of a directly held zero-coupon bond by:
(1) Maintaining a weighted average maturity within the fund's target
maturity year;
(2) Investing at least 90% of assets in securities that mature within one
year of the fund's target maturity year;
(3) Investing a substantial portion of assets in Treasury STRIPS (the most
liquid Treasury zero);
(4) Under normal conditions, maintaining a cash balance of less than 1%;
(5) Executing portfolio transactions necessary to accommodate net
shareholder purchases or redemptions on a daily basis; and
(6) Whenever feasible, contacting several U.S. government securities dealers
for each intended transaction in an effort to obtain the best price on
each transaction.
These measures enable the fund managers to calculate an anticipated value at
maturity (AVM) for each fund that approximates the price per share the fund will
achieve by its weighted average maturity date. The AVM calculation is as
follows:
AVM = P(1+AGR)(2t)
-----
2
where P = the fund's current price per share, T = the fund's weighted average
term to maturity in years, and AGR = the anticipated growth rate.
This calculation assumes that the shareholder will reinvest all dividend and
capital gain distributions (if any). It also assumes an expense ratio and a
portfolio composition that remain constant for the life of the fund. Because
fund expenses and composition do not remain constant, however, the fund managers
calculate AVM for each fund each day the Trust is open for business.
In addition to the measures described above, which the advisor believes are
adequate to ensure close correspondence between the price behavior of each fund
and the price behavior of directly held zero-coupon bonds with comparable
maturities, the Trust has made an undertaking to the staff of the Securities and
Exchange Commission (SEC) that each fund will invest at least 90% of its net
assets in zero-coupon bonds until it is within four years of its target maturity
year and at least 80% of its net assets in zero-coupon securities while the fund
is within two to four years of its target maturity year. This undertaking may be
revoked if the market supply of zero-coupon securities diminishes unexpectedly,
although it will not be revoked without prior consultation with the SEC staff.
In addition, the advisor has undertaken that any coupon-bearing bond purchased
on behalf of a fund will have a duration that falls within the fund's target
maturity year.
Statement of Additional Information 3
ANTICIPATED GROWTH RATE
The fund managers also calculate an anticipated growth rate (AGR) for each
fund each day the Trust is open for business. AGR is a calculation of the
annualized rate of growth an investor may expect from his or her purchase date
to the fund's target maturity date. As is the case with calculations of AVM, the
AGR calculation assumes that the investor will reinvest all dividends and
capital gain distributions (if any) and that the fund's expense ratio and
portfolio composition will remain constant. Each fund's AGR changes from day to
day primarily because of changes in interest rates and, to a lesser extent, to
changes in portfolio composition and other factors that affect the value of the
fund's investments.
The advisor expects that shareholders who hold their shares until a fund's
weighted average maturity date and who reinvest all dividends and capital gain
distributions (if any), will realize an investment return and maturity value
that do not differ substantially from the AGR and AVM calculated on the day his
or her shares were purchased.
The following table illustrates investor experience with Target 1990, a
series of the Trust that was first offered on March 25, 1985, and that was
liquidated on January 25, 1991. This table is not indicative of the future
performance of the existing funds.
Calculations in the table may not reconcile precisely due to rounding to two
decimal points of share price, AGR and weighted average maturity.
Date Share Price (P) AGR Weighted Average Maturity (T) AVM
- --------------------------------------------------------------------------------
April 1985 $ 56.03 10.58 5.64 $100.25
June $ 60.62 9.68 5.42 $101.17
September $ 62.72 9.44 5.08 $100.23
December $ 67.75 8.26 4.95 $101.15
- --------------------------------------------------------------------------------
March 1986 $ 73.60 6.86 4.69 $100.98
June $ 74.80 6.83 4.38 $100.38
September $ 76.82 6.59 4.16 $100.63
December $ 79.01 6.27 3.86 $100.26
- --------------------------------------------------------------------------------
March 1987 $ 79.88 6.34 3.59 $ 99.93
June $ 79.01 7.21 3.27 $ 99.63
September $ 77.28 8.57 3.14 $100.62
December $ 81.02 7.52 2.76 $ 99.33
- --------------------------------------------------------------------------------
March 1988 $ 83.61 6.98 2.51 $ 99.33
June $ 83.97 6.55 2.62 $ 99.42
September $ 84.96 6.97 2.09 $ 98.04
December $ 85.70 8.39 1.68 $ 98.38
- --------------------------------------------------------------------------------
March 1989 $ 86.76 9.18 1.50 $ 99.25
June $ 90.47 7.57 1.23 $ 99.16
September $ 91.91 7.81 0.98 $ 99.08
December $ 94.00 7.38 0.74 $ 99.17
- --------------------------------------------------------------------------------
March 1990 $ 95.62 7.68 0.52 $ 99.44
June $ 97.48 7.44 0.32 $ 99.82
September $ 99.32 6.73 0.15 $100.31
December $101.13 4.33 0.07 $101.43
4 American Century Investments
Note that the Target 1990's share price on December 31, 1990, was not the
same as its AVM on that date because the fund had not yet been liquidated and
still held short-term Treasury securities with a 25-day maturity. The fund was
liquidated on January 25, 1991, at a final share price of $101.46.
As a further demonstration of how the funds have behaved over time, the
following tables show each fund's AGR and AVM as of September 30 for each of the
past five years.
The funds' share prices and growth rates are not guaranteed by the Trust or
any of its affiliates. There is no guarantee that the funds' AVMs will fluctuate
as little in the future as they have in the past.
COUPON-BEARING U.S. TREASURY SECURITIES
U.S. Treasury bills, notes and bonds are direct obligations of the U.S.
Treasury. Historically, they have involved no risk of loss of principal if held
to maturity. Between issuance and maturity, however, the prices of these
securities change in response to changes in market interest rates.
Coupon-bearing securities generate current interest payments, and part of a
fund's return may come from reinvesting interest earned on these securities.
CASH MANAGEMENT
Each fund may invest in any money market fund, including those managed by
the advisor, provided that the investment is consistent with the fund's
investment policies and restrictions.
Up to 5% of each fund's total assets may be invested in this manner.
LOANS OF PORTFOLIO SECURITIES
Each fund may lend its portfolio securities to earn additional income. If a
borrower defaults on a securities loan, the lending fund could experience delays
in recovering the securities it loaned; if the value of the loaned securities
increased over the value of the collateral, the fund could suffer a loss. To
minimize the risk of default on securities loans, the advisor, American Century
Investment Management, Inc., adheres to the following guidelines prescribed by
the Board of Trustees governing lending of securities. These guidelines strictly
govern (1) the type and amount of collateral that must be received by the fund;
(2) the circumstances under which additions to that collateral must be made by
borrowers; (3) the return received by the fund on the loaned securities; (4) the
limitations on the percentage of fund assets on loan; and (5) the credit
standards applied in evaluating potential borrowers of portfolio securities. In
addition, the guidelines require that the fund have the option to terminate any
loan of a portfolio security at any time and set requirements for recovery of
securities from borrowers.
<TABLE>
<CAPTION>
Anticipated Growth Rate 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Target 2000 6.76% 5.37% 5.75% 5.24% 3.81%
- --------------------------------------------------------------------------------------
Target 2005 7.33% 5.75% 6.17% 5.57% 3.98%
- --------------------------------------------------------------------------------------
Target 2010 7.54% 6.04% 6.44% 5.80% 4.41%
- --------------------------------------------------------------------------------------
Target 2015 7.56% 6.21% 6.58% 5.93% 4.81%
- --------------------------------------------------------------------------------------
Target 2020 7.52% 6.20% 6.59% 5.98% 4.90%
- --------------------------------------------------------------------------------------
Target 2025 N/A N/A 6.43% 5.86% 4.80%
Anticipated Value at Maturity 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
- --------------------------------------------------------------------------------------
Target 2000 $100.86 $100.99 $101.10 $101.13 $101.78
- --------------------------------------------------------------------------------------
Target 2005 $100.58 $100.32 $100.71 $100.85 $101.53
- --------------------------------------------------------------------------------------
Target 2010 $101.38 $101.02 $102.53 $103.40 $104.85
- --------------------------------------------------------------------------------------
Target 2015 $107.95 $109.62 $110.11 $110.52 $112.63
- --------------------------------------------------------------------------------------
Target 2020 $102.11 $102.31 $103.60 $104.84 $106.96
- --------------------------------------------------------------------------------------
Target 2025 N/A N/A $109.24 $110.88 $112.23
</TABLE>
Statement of Additional Information 5
INVESTMENT POLICIES
Unless otherwise indicated, with the exception of the percentage limitations
on borrowing, the restrictions apply at the time transactions are entered into.
Accordingly, any later increase or decrease beyond the specified limitation
resulting from a change in a fund's net assets will not be considered in
determining whether it has complied with its investment restrictions.
FUNDAMENTAL INVESTMENT POLICIES
The funds' investment restrictions are set forth below. These investment
restrictions are fundamental and may not be changed without approval of a
majority of the outstanding votes of shareholders of a fund, as determined in
accordance with the Investment Company Act.
For purposes of the investment restriction relating to concentration, a fund
shall not purchase any securities that would cause 25% or more of the value of
the fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments, (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents, (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be considered a
separate industry, and (d) personal credit and business credit businesses will
be considered separate industries.
Subject Policy
- --------------------------------------------------------------------------------
Senior Securities A fund may not issue senior securities, except as
permitted under the Investment Company Act.
- --------------------------------------------------------------------------------
Borrowing A fund may not borrow money, except for temporary or
emergency purposes (not for leveraging or investment) in an
amount not exceeding 33-1/3% of the fund's total assets
(including the amount borrowed) less liabilities (other than
borrowings).
- --------------------------------------------------------------------------------
Lending A fund may not lend any security or make any other loan if,
as a result, more than 33-1/3% of the fund's total assets
would be lent to other parties, except, (i) through the
purchase of debt securities in accordance with its investment
objective, policies and limitations or (ii) by engaging in
repurchase agreements with respect to portfolio securities.
- --------------------------------------------------------------------------------
Real Estate A fund may not purchase or sell real estate unless acquired
as a result of ownership of securities or other instruments.
This policy shall not prevent a fund from investing in
securities or other instruments backed by real estate or
securities of companies that deal in real estate or are
engaged in the real estate business.
- --------------------------------------------------------------------------------
Concentration A fund may not concentrate its investments in securities of
issuers in a particular industry (other than securities
issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities).
- --------------------------------------------------------------------------------
Underwriting A fund may not act as an underwriter of securities issued by
others, except to the extent that the fund may be considered
an underwriter within the meaning of the Securities Act of
1933 in the disposition of restricted securities.
- --------------------------------------------------------------------------------
Commodities A fund may not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other
instruments; provided that this limitation shall not prohibit
the fund from purchasing or selling options and futures
contracts or from investing in securities or other
instruments backed by physical commodities.
- --------------------------------------------------------------------------------
Control A fund may not invest for purposes of exercising control over
management.
- --------------------------------------------------------------------------------
6 American Century Investments
NONFUNDAMENTAL INVESTMENT POLICIES
In addition, the funds are subject to the following additional investment
restrictions that are not fundamental and may be changed by the Board of
Trustees.
Subject Policy
- --------------------------------------------------------------------------------
Diversification A fund may not purchase additional investment securities at any
time during which outstanding borrowings exceed 5% of the total
assets of the fund.
- --------------------------------------------------------------------------------
Liquidity A fund may not purchase any security or enter into a repurchase
agreement if, as a result, more than 15% of its net assets
would be invested in repurchase agreements not entitling the
holder to payment of principal and interest within seven days
and in securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily
available market.
- --------------------------------------------------------------------------------
Short Sales A fund may not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in
futures contracts and options are not deemed to constitute
selling securities short.
- --------------------------------------------------------------------------------
Margin A fund may not purchase securities on margin, except to obtain
such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection
with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
- --------------------------------------------------------------------------------
The Investment Company Act imposes certain additional restrictions upon
acquisition by the corporation of securities issued by insurance companies,
broker-dealers, underwriters or investment advisors, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership. Neither the Securities and Exchange Commission
nor any other agency of the federal or state agency participates in or
supervises the management of the funds or their investment practices or
policies.
The Investment Company Act also provides that the funds may not invest more
than 25% of their assets in the securities of issuers engaged in a single
industry. In determining industry groups for purposes of this restriction, the
SEC ordinarily uses the Standard Industry Classification codes developed by the
United States Office of Management and Budget. In the interest of ensuring
adequate diversification, the funds monitor industry concentration using a more
restrictive list of industry groups than that recommended by the SEC. The funds
believe that these classifications are reasonable and are not so broad that the
primary economic characteristics of the companies in a single class are
materially different. The use of these restrictive industry classifications may,
however, cause the funds to forego investment possibilities that may otherwise
be available to them under the Investment Company Act.
TEMPORARY DEFENSIVE MEASURES
For temporary defensive purposes, a fund may invest in securities that may
not fit its investment objective or its stated market. During a temporary
defensive period, a fund may direct its assets to the following investment
vehicles
* interest-bearing bank accounts or certificates of deposit
* U.S. government securities and repurchase agreements collateralized by
U.S. government securities
* money market funds
PORTFOLIO TURNOVER
Under normal conditions, the funds' annual portfolio turnover rates are not
expected to exceed 100%. Because a higher turnover rate increases transaction
costs and may increase taxable capital gains, the advisor carefully weighs the
potential benefits of short-term investing against these considerations. The
funds' portfolio turnover rates are listed in the Financial Highlights table in
the Prospectus.
Statement of Additional Information 7
MANAGEMENT
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the funds and meets at
least quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired the advisor to do so. More than
half of the trustees are "independent" of the funds' advisor, that is, they are
not employed by and have no financial interest in the advisor.
The individuals listed in the table on this page and the next page whose
names are marked by an asterisk (*) are interested persons of the funds (as
defined in the Investment Company Act) by virtue of, among other considerations,
their affiliation with either the advisor, American Century Investment
Management, Inc. (ACIM); the funds' agent for transfer and administrative
services, American Century Services Corporation (ACSC); the parent corporation
of ACIM and ACSC, American Century Companies, Inc. (ACC) or ACC's subsidiaries;
the funds' distribution agent and co-administrator, Funds Distributor, Inc.
(FDI); the funds or other funds advised by the advisor. Each trustee listed
below serves as a trustee or director of seven registered investment companies
in the American Century family of funds, which are also advised by the advisor.
Name (Age) Position(s) Held Principal Occupation(s)
Address With Fund During Past Five Years
- --------------------------------------------------------------------------------
Albert A. Eisenstat (68) Trustee General Partner, Discovery Ventures (venture
1665 Charleston Road capital firm, since 1996)
Mountain View, CA 94043 Independent Director, Commercial Metals Co.
(since 1982)
Independent Director, Sungard Data Systems
(since 1991)
Independent Director, Business Objects S/A
(software & programming, since 1994)
- --------------------------------------------------------------------------------
Ronald J. Gilson (52) Trustee Charles J. Meyers Professor of Law and
1665 Charleston Road Business, Stanford Law School (since 1979)
Mountain View, CA 94043 Marck and Eva Stern Professor of Law and
Business, Columbia University School of Law
(since 1992)
Counsel, Marron, Reid & Sheehy (a San
Francisco law firm, since 1984)
- --------------------------------------------------------------------------------
William M. Lyons* (43) Trustee Director, President, Chief Operating Officer
4500 Main Street and Assistant Secretary, ACC
Kansas City, MO 64111 Director, Executive Vice President, Chief
Operating Officer, Secretary and
Director, ACSC, ACIM and ACIS
- --------------------------------------------------------------------------------
Myron S. Scholes (57) Trustee Principal, Long-Term Capital Management
1665 Charleston Road (investment advisor, since 1993)
Mountain View, CA 94043 Frank E. Buck Professor Emeritus of Finance,
Stanford Graduate School of Business (since
1983) Director, Dimensional Fund Advisors
(investment advisor, since 1982) Director,
Smith Breeden Family of Funds (since 1992)
Managing Director, Salomon Brothers Inc.
(securities brokerage, 1991 to 1993)
- --------------------------------------------------------------------------------
Kenneth E. Scott (70) Trustee Ralph M. Parsons Professor of Law and
1665 Charleston Road Business, Stanford Law School (since 1972)
Mountain View, CA 94043 Director, RCM Capital Funds, Inc. (since
1994)
- --------------------------------------------------------------------------------
(continued on next page)
8 American Century Investments
Name (Age) Position(s) Held Principal Occupation(s)
Address With Fund During Past Five Years
- --------------------------------------------------------------------------------
Isaac Stein (52) Trustee President, Waverley Associates, Inc.
1665 Charleston Road (private investment firm, since 1983)
Mountain View, CA 94043 Director, ALZA Corporation (pharmaceuticals,
since 1987)
Director, Raychem Corporation (electrical
equipment, since 1993)
Trustee, Stanford University (since 1994)
Chairman, Stanford Health Services (since
1994)
Director, CV Therapeutics, Inc.
(biotechnology, since 1995)
Director, Symyx Technologies (combinatorial
materials production, since 1995)
Director, Knowmed, Inc. (healthcare
services, since 1996)
Director, Maxygen, Inc. (biotechnology,
since 1997)
- --------------------------------------------------------------------------------
James E. Stowers III* (39)Trustee, Chairman, Chief Executive Office and
4500 Main Street Chairman Director, ACC Chief Executive Officer and
Kansas City, MO 64111 of the Director, ACSC, ACIM and ACIS
Board
- --------------------------------------------------------------------------------
Jeanne D. Wohlers (53) Trustee Director and Partner, Windy Hill
1665 Charleston Road Productions, LP(education software, since
Mountain View, CA 94043 1994)
Director, Quintus Corporation (automation
solutions, since 1995)
- --------------------------------------------------------------------------------
COMMITTEES
The Board has four committees to oversee specific functions of the Trust's
operations. Only independent trustees serve on the Audit, Nominating and
Portfolio committees. Information about these committees appears in the table
below:
Committee Members Function of Committee
- --------------------------------------------------------------------------------
Audit Albert A. Eisenstat The Audit Committee selects and oversees
Kenneth E. Scott the activities of the Trust's independent
Jeanne D. Wohlers auditor. The Committee receives reports
from the advisor's Internal Audit
Department, which is accountable solely to
the Committee. The Committee also receives
reporting about compliance matters
affecting the Trust.
- --------------------------------------------------------------------------------
Nominating Albert A. Eisenstat The Nominating Committee primarily
Ronald J. Gilson considers and recommends individuals for
Myron S. Scholes nomination as trustees. The names of
Kenneth E. Scott potential trustee candidates are drawn from
Isaac Stein a number of sources, including
Jeanne D. Wohlers recommendations from members of the Board,
management and shareholders. This committee
also reviews and makes recommendations to
the Board with respect to the composition
of Board committees and other Board-related
matters, including its organization, size,
composition, responsibilities, functions
and compensation.
- --------------------------------------------------------------------------------
Portfolio Ronald J. Gilson The Portfolio Committee reviews quarterly
Myron S. Scholes the investment activities and strategies
Isaac Stein used to manage fund assets. The Committee
regularly receives reports from portfolio
managers, credit analysts and other
investment personnel concerning the funds'
investments.
- --------------------------------------------------------------------------------
Quality of Ronald J. Gilson The Quality of Service Committee reviews
Service Myron S. Scholes the level and quality of transfer agent and
(ad hoc) administrative services provided to the
Isaac Stein funds and their shareholders. It receives
William M. Lyons and reviews reports comparing those
services to fund competitors and seeks to
improve such services where feasible and
appropriate.
- --------------------------------------------------------------------------------
Statement of Additional Information 9
COMPENSATION OF TRUSTEES
The trustees also serve as trustees for six American Century investment
companies other than American Century Target Maturities Trust. Each trustee who
is not an "interested person" as defined in the Investment Company Act receives
compensation for service as a member of the Board of all seven such companies
based on a schedule that takes into account the number of meetings attended and
the assets of the funds for which the meetings are held. These fees and expenses
are divided among the seven investment companies based, in part, upon their
relative net assets. Under the terms of the management agreement with the
advisor, the funds are responsible for paying such fees and expenses.
The table below shows the aggregate compensation paid by the Trust for the
periods indicated and by the American Century family of funds to each trustee
who is not an "interested person" as defined in the Investment Company Act.
Aggregate Trustee Compensation for Fiscal Year Ended September 30, 1998
- --------------------------------------------------------------------------------
Total Total Compensation
Compensation from the
from the American Century
Name of Trustee(1) Funds(1) Family of Funds(2)
- --------------------------------------------------------------------------------
Albert A. Eisenstat $7,725 $68,500
Ronald J. Gilson $8,074 $71,750
Myron S. Scholes $7,077 $62,250
Kenneth E. Scott $7,920 $70,250
Isaac Stein $7,418 $65,500
Jeanne D. Wohlers $7,920 $70,250
- --------------------------------------------------------------------------------
(1) Includes compensation paid to the trustees during the fiscal year ended
September 30, 1998, and also includes amounts deferred at the election of the
trustees under the American Century Mutual Funds Deferred Compensation Plan for
Non-Interested Directors and Trustees. The total amount of deferred compensation
included in the preceding table is as follows: Mr. Eisenstat, $1,303; Mr.
Gilson, $1,652; Mr. Scholes, $813 and Mr. Scott, $828.
(2) Includes compensation paid by the 13 investment company members of the
American Century family of funds.
The Trust has adopted the American Century Deferred Compensation Plan for
Non-Interested Directors and Trustees. Under the plan, the independent trustees
may defer receipt of all or any part of the fees to be paid to them for serving
as trustees of the funds.
All deferred fees are credited to an account established in the name of the
trustees. The amounts credited to the account then increase or decrease, as the
case may be, in accordance with the performance of one or more of the American
Century funds that are selected by the trustee. The account balance continues to
fluctuate in accordance with the performance of the selected fund or funds until
final payment of all amounts is credited to the account. Trustees are allowed to
change their designation of mutual funds from time to time.
No deferred fees are payable until such time as a trustee resigns, retires
or otherwise ceases to be a member of the Board of Trustees. Trustees may
receive deferred fee account balances either in a lump sum payment or in
substantially equal installment payments to be made over a period not to exceed
10 years. Upon the death of a trustee, all remaining deferred fee account
balances are paid to the trustee's beneficiary or, if none, to the trustee's
estate.
The plan is an unfunded plan and, accordingly, the Trust has no obligation
to segregate assets to secure or fund the deferred fees. The rights of trustees
to receive their deferred fee account balances are the same as the rights of a
general unsecured creditor of the Trust. The plan may be terminated at any time
by the administrative committee of the plan. If terminated, all deferred fee
account balances will be paid in a lump sum.
No deferred fees were paid to any trustee under the plan during the fiscal
year ended September 30, 1998.
OFFICERS
Background information for the officers of the Trust is provided on the next
page. All persons named as officers of the Trust also serve in similar
capacities for the 12 other investment companies advised by American Century.
Not all officers of the Trust are listed; only those officers with policy-making
functions for the Trust are listed. No officer is compensated for his or her
service as an officer of the Trust. The individuals listed in this table are
interested persons of the funds (as defined in the Investment Company Act) by
virtue of, among other considerations, their affiliation with either the funds,
ACIM, ACSC, FDI, ACC or ACC's subsidiaries as specified in the table.
10 American Century Investments
Position(s)
Name (Age) Held With Principal Occupation(s)
Address Fund During Past Five Years
- --------------------------------------------------------------------------------
George A. Rio (44) President Executive Vice President and Director
4500 Main Street of Client Services, FDI (March 1998
Kansas City, MO 64111 to present)
Senior Vice President and Senior Key
Account Manager, Putnam Mutual Funds
(June 1995 to March 1998)
Director Business Development, First
Data Corporation (May 1994 to June
1995)
Senior Vice President and Manager of
Client Services and Director of
Internal Audit, The Boston Company,
Inc. (September 1983 to May 1994)
- --------------------------------------------------------------------------------
Mary A. Nelson (34) Vice President Vice President and Manager of
4500 Main Street Treasury Services and Administration,
Kansas City, MO 64111 FDI (1994 to present)
Assistant Vice President and Client
Manager, The Boston Company, Inc.
(1989 to 1994)
- --------------------------------------------------------------------------------
Maryanne Roepke, CPA (42) Vice President Senior Vice President, Treasurer and
4500 Main Street Principal Accounting Officer, ACSC
Kansas City, MO 64111 and Treasurer
- --------------------------------------------------------------------------------
David Tucker (40) Vice President Senior Vice President and General
4500 Main Street Counsel, ACSC and ACIM (June 1998
Kansas City, MO 64111 to present)
General Counsel, ACC (June 1998 to
present)
Consultant to Mutual Fund Industry
(May 1997 to April 1998)
Vice President and General Counsel,
Janus Companies (1990 to May 1997)
- --------------------------------------------------------------------------------
Christopher J. Kelley (34) Vice President Vice President and Associate General
4500 Main Street Counsel, FDI (since July 1996)
Kansas City, MO 64111 Assistant Counsel, Forum Financial
Group (April 1994 to July 1996)
Compliance Officer, Putnam
Investments (1992 to April 1994)
- --------------------------------------------------------------------------------
Douglas A. Paul (52) Secretary and Vice President and Associate General
1665 Charleston Road Vice President Counsel, ACSC
Mountain View, CA 94043
- --------------------------------------------------------------------------------
C. Jean Wade (34) Controller Controller -- Fund Accounting, ACSC
4500 Main Street
Kansas City, MO 64111
- --------------------------------------------------------------------------------
Jon Zindel (31) Tax Officer Director of Taxation, ACSC (since
4500 Main Street 1996)
Kansas City, MO 64111 Tax Manager, Price Waterhouse LLP
(1989)
- --------------------------------------------------------------------------------
Statement of Additional Information 11
THE FUNDS' PRINCIPAL SHAREHOLDERS
As of December 31, 1998, the following companies were the record owners of
more than 5% of a fund's outstanding shares:
Percentage
of Shares
Fund Shareholder Outstanding
- ------------------------------------------------------------------------------
Target 2000 Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94101 16.1%
- ------------------------------------------------------------------------------
Target 2005 Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94101 11.7%
- ------------------------------------------------------------------------------
Target 2010 Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94101 20.4%
- ------------------------------------------------------------------------------
Target 2015 Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94101 24.2%
- ------------------------------------------------------------------------------
Target 2020 Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94101 28.3%
- ------------------------------------------------------------------------------
Target 2025 Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94101 33.3%
- ------------------------------------------------------------------------------
The funds are unaware of any other shareholders, beneficial or of record,
who own more than 5% of a fund's outstanding shares. As of December 31, 1998,
the officers and trustees of the funds, as a group, own less than 1% of any
fund's outstanding shares.
SERVICE PROVIDERS
The funds have no employees. To conduct the funds' day-to-day activities,
the Trust has hired a number of service providers. Each service provider has a
specific function to fill on behalf of the Trust and is described below.
The advisor and ACSC are both wholly owned by ACC. James E. Stowers Jr.,
Chairman of ACC, controls ACC by virtue of his ownership of a majority of its
common stock.
INVESTMENT ADVISOR
Each fund has an investment management agreement with the advisor, American
Century Investment Management, Inc., dated August 1, 1997. This agreement was
approved by the shareholders of each of the funds on July 30, 1997.
A description of the responsibilities of the advisor appears in the
Prospectus under the heading, "Management."
For the services provided to the funds, the advisor receives a monthly fee
based on a percentage of the average net assets of the fund. The annual rate at
which this fee is assessed is determined monthly in a two-step process. First, a
fee rate schedule is applied to the assets of all of the funds in a fund's
investment category which are managed by the advisor (the "Investment Category
Fee"). For
12 American Century Investments
example, when calculating the fee for a money market fund, all of the assets of
the money market funds managed by the advisor are aggregated. The three
investment categories are money market funds, bond funds and equity funds.
Second, a separate fee rate schedule is applied to the assets of all of the
funds managed by the advisor (the "Complex Fee"). The Investment Category Fee
and the Complex Fee are then added to determine the unified management fee
payable by the fund to the advisor.
The Investment Category Fee is determined according to the schedule on the
table below.
INVESTMENT CATEGORY FEE SCHEDULE
Category Assets Fee Rate
- --------------------------------------
First $1 billion 0.3600%
Next $1 billion 0.3080%
Next $3 billion 0.2780%
Next $5 billion 0.2580%
Next $15 billion 0.2450%
Next $25 billion 0.2430%
Thereafter 0.2425%
- --------------------------------------
The Complex Fee is determined according to the schedule on the table below.
COMPLEX FEE SCHEDULE
Complex Assets Fee Rate
- --------------------------------------
First $2.5 billion 0.3100%
Next $7.5 billion 0.3000%
Next $15 billion 0.2985%
Next $25 billion 0.2970%
Next $50 billion 0.2960%
Next $100 billion 0.2950%
Next $100 billion 0.2940%
Next $200 billion 0.2930%
Next $250 billion 0.2920%
Next $500 billion 0.2910%
Thereafter 0.2900%
- --------------------------------------
On the first business day of each month, the funds pay a management fee to
the advisor for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the fund by
the aggregate average daily closing value of a fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually by (1) the funds'
Board of Trustees, or by the vote of a majority of outstanding votes (as defined
in the Investment Company Act) and (2) the vote of a majority of the trustees of
the funds who are not parties to the agreement or interested persons of the
advisor, cast in person at a meeting called for the purpose of voting on such
approval.
The management agreement provides that it may be terminated at any time
without payment of any penalty by the funds' Board of Trustees, or by a vote of
a majority of outstanding votes, on 60 days' written notice to the advisor, and
that it shall be automatically terminated if it is assigned.
The management agreement provides that the advisor shall not be liable to
the funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the advisor and its officers,
trustees and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
Certain investments may be appropriate for the funds and also for other
clients advised by the advisor. Investment decisions for the funds and other
clients are made with a view to achieving their respective investment objectives
after consideration of such factors as their current holdings, availability of
cash for investment and the size of their investment generally. A particular
security may be bought or sold for only one client or fund, or in different
amounts and at different times for more than one but less than all clients or
funds. In addition, purchases or sales of the same security may be made for two
or more clients or funds on the same date. Such transactions will be allocated
among clients in a manner believed by the advisor to be equitable to each. In
some cases this procedure could have an adverse effect on the price or amount of
the securities purchased or sold by a fund.
Statement of Additional Information 13
The advisor may aggregate purchase and sale orders of the funds with
purchase and sale orders of its other clients when the advisor believes that
such aggregation provides the best execution for the funds. The funds' Board of
Trustees has approved the policy of the advisor with respect to the aggregation
of portfolio transactions. Where portfolio transactions have been aggregated,
the funds participate at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
advisor will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the management agreement. The advisor
receives no additional compensation or remuneration as a result of such
aggregation.
Prior to August 1, 1997, Benham Management Corporation served as the
investment advisor to the funds. Benham Management Corporation was merged into
the advisor in late 1997.
Investment management fees paid by each fund for the fiscal periods ended
September 30, 1998, 1997 and 1996, are indicated in the following table. Fee
amounts are net of amounts reimbursed or recouped under the funds' previous
investment advisory agreement with Benham Management Corporation.
MANAGEMENT FEES*
Fund 1998 1997 1996
- ------------------------------------------------------------------------
Target 2000 $1,410,866 $902,194 $815,109
Target 2005 $2,246,858 $875,825 $672,052
Target 2010 $1,092,458 $380,066 $368,802
Target 2015 $845,121 $386,638 $410,846
Target 2020 $3,309,715 $2,691,970 $2,525,244
Target 2025 $1,240,147 $181,630 $13,420
- ------------------------------------------------------------------------
*Net of reimbursements
OTHER ADVISORY RELATIONSHIPS
In addition to managing the funds, the advisor also acts as an investment
advisor to nine institutional accounts and to the following registered
investment companies:
American Century Mutual Funds, Inc.
American Century World Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Variable Portfolios, Inc.
American Century Capital Portfolios, Inc.
American Century Strategic Asset Allocations, Inc.
American Century Municipal Trust
American Century Government Income Trust
American Century Investment Trust
American Century California Tax-Free and Municipal Funds
American Century Quantitative Equity Funds
American Century International Bond Funds
DISTRIBUTOR
The funds' shares are distributed by Funds Distributor, Inc., a registered
broker-dealer. The distributor is a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. The distributor's principal business address is 60
State Street, Suite 1300, Boston, Massachusetts 02109.
The distributor is the principal underwriter of the funds' shares. The
distributor makes a continuous, best-efforts underwriting of the funds' shares.
This means that the distributor has no liability for unsold shares.
TRANSFER AGENT AND ADMINISTRATOR
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent for the funds.
It provides physical facilities, computer hardware and software and personnel
for the day-to-day administration of the funds and of the advisor. The advisor
pays American Century Services Corporation for such services.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the advisor
Pursuant to a Sub-Administration Agreement with the advisor, Funds
Distributor, Inc. (FDI) serves as the Co-Administrator for the funds. FDI is
responsible for (i) providing certain officers of the funds and (ii) reviewing
and filing marketing and sales literature on behalf of the funds. The fees and
expenses of FDI are paid by the advisor out of its unified fee.
14 American Century Investments
Prior to August 1, 1997, the funds paid American Century Services
Corporation directly for its services as transfer agent and administrative
services agent.
Administrative service and transfer agent fees paid by each fund for the
fiscal years ended September 30, 1998, 1997 and 1996, are indicated in the table
below. Fee amounts are net of expense limitations.
ADMINISTRATIVE FEES
Fund Fiscal 1998(1) Fiscal 1997 Fiscal 1996
- ---------------------------------------------------------------------------
Target 2000 $207,663 $274,837
Target 2005 $193,216 $217,047
Target 2010 $85,820 $106,951
Target 2015 $89,672 $117,664
Target 2020 $685,160 $744,692
Target 2025 $42,716 $14,090
- ---------------------------------------------------------------------------
TRANSFER AGENT FEES
Fund Fiscal 1998(1) Fiscal 1997 Fiscal 1996
- ---------------------------------------------------------------------------
Target 2000 $196,492 $267,353
Target 2005 $213,613 $266,687
Target 2010 $131,294 $178,493
Target 2015 $132,040 $178,562
Target 2020 $618,798 $858,442
Target 2025 $57,380 $32,597
- ---------------------------------------------------------------------------
(1) Administrative fees and transfer agent fees are included in the unified
management fees effective August 1, 1997.
OTHER SERVICE PROVIDERS
CUSTODIAN BANKS
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York
10003-9598, and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105,
each serves as custodian of the assets of the funds. The custodians take no part
in determining the investment policies of the funds or in deciding which
securities are purchased or sold by the funds. The funds, however, may invest in
certain obligations of the custodians and may purchase or sell certain
securities from or to the custodians.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP is the independent accountant of the funds. The
address of Pricewater-houseCoopers LLP is, 1055 Broadway, 10th floor, Kansas
City, Missouri 64105. As the independent accountant of the funds,
PricewaterhouseCoopers LLP services includes (1) audit of the annual financial
statements, (2) assistance and consultation in connection with SEC filings and
(3) review of the annual federal income tax return filed for each fund.
BROKERAGE ALLOCATION
Under the management agreement between the funds and the advisor, the
advisor has the responsibility of selecting brokers and dealers to execute
portfolio transactions. In many transactions, the selection of the broker or
dealer is determined by the availability of the desired security and its
offering price. In other transactions, the selection of a broker or dealer is a
function of the selection of market and the negotiation of price, as well as the
broker's general execution and operational and financial capabilities in the
type of transaction involved. The advisor will seek to obtain prompt execution
of orders at the most favorable prices or yields. The advisor may choose to
purchase and sell portfolio securities to and from dealers who provide services
or research, statistical and other information to the funds and to the advisor.
Such information or services will be in addition to and not in lieu of the
services required to be performed by the advisor, and the expenses of the
advisor will not necessarily be reduced as a result of the receipt of such
supplemental information.
INFORMATION ABOUT FUND SHARES
The Declaration of Trust permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest without par value,
which may be issued in series (or funds). Shares issued are fully paid and
nonassessable and have no preemptive, conversion or similar rights.
Each fund votes separately on matters affecting that fund exclusively.
Voting rights are not cumulative, so that investors holding more than 50% of the
Trust's (i.e., all funds') outstanding shares may be able to elect a Board of
Trustees. The Trust instituted dollar-based voting, meaning that the number of
votes you are entitled to is based upon the dollar amount of your investment.
The election of trustees is determined by the votes received from all Trust
shareholders without regard to whether a majority of shares of any one fund
voted in favor of a particular nominee or all nominees as a group.
Statement of Additional Information 15
Each shareholder has rights to dividends and distributions declared by the
fund he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.
Shares of each fund have equal voting rights, although each fund votes
separately on matters affecting that fund exclusively.
Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the Trust may maintain
appropriate insurance (for example, fidelity, bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, trustees,
officers, employees and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss as a result of
shareholder liability is limited to circumstances in which both inadequate
insurance exists and the Trust is unable to meet its obligations.
FUND LIQUIDATIONS
On or before January 31st of the year following a fund's target maturity
year, its investments will be sold or allowed to mature; its liabilities will be
discharged, or a provision will be made for their discharge, and its accounts
will be closed. A shareholder may choose to redeem his or her shares in one of
the following ways: (1) by receiving redemption proceeds or (2) by exchanging
shares for shares of another American Century fund. If the fund receives no
instructions from a shareholder, his or her shares will be exchanged for shares
of American Century Capital Preservation Fund (or a similar fund if Capital
Preservation Fund is not available). The estimated expenses of terminating and
liquidating a fund will be accrued ratably over its target maturity year. These
expenses, which are charged to income (as are all expenses), are not expected to
exceed significantly the ordinary annual expenses incurred by a fund and,
therefore, should have little or no effect on the maturity value of the fund.
MULTIPLE CLASS STRUCTURE
The funds' Board of Trustees has adopted a multiple class plan (the
"Multiclass Plan") pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such
plan, the funds may issue up to three classes of shares: an Investor Class, an
Institutional Class and an Advisor Class. Not all funds offer all three classes
The Investor Class is made available to investors directly by the advisor
through its affiliated broker-dealer, American Century Investment Services,
Inc., for a single unified management fee, without any load or commission. The
Institutional and Advisor Classes are made available to institutional
shareholders or through financial intermediaries that do not require the same
level of shareholder and administrative services from the advisor as Investor
Class shareholders. As a result, the advisor is able to charge these classes a
lower unified management fee. In addition to the management fee, however, the
Advisor Class shares are subject to a Master Distribution and Shareholder
Services Plan. The plan has been adopted by the funds' Board of Trustees and
initial shareholder in accordance with Rule 12b-1 adopted by the SEC under the
Investment Company Act.
RULE 12B-1
Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by the investment
company's Board of Trustees and approved by its shareholders. Pursuant to such
rule, the Board of Trustees and initial shareholder of the funds' Advisor Class
have approved and entered into a Master Distribution and Shareholder Services
Plan, with respect to the Advisor Class (the "Plan"). The Master Distribution
and Shareholder Services Plan is described below.
In adopting the Plan, the Board of Trustees [including a majority who are
not "interested persons" of the funds (as defined in the Investment Company
Act), hereafter referred to as the "independent trustees"] determined that there
Was a reasonable likelihood that
16 American Century Investments
the Plan would benefit the funds and the shareholders of the affected class.
Pursuant to Rule 12b-1, information with respect to revenues and expenses under
the Plan is presented to the Board of Trustees quarterly for its consideration
in connection with its deliberations as to the continuance of the Plan.
Continuance of the Plan must be approved by the Board of Trustees (including a
majority of the independent trustees) annually. The Plan may be amended by a
vote of the Board of Trustees (including a majority of the independent trustees)
, except that the Plan may not be amended to materially increase the amount to
be spent for distribution without majority approval of the shareholders of the
affected class. The Plan terminates automatically in the event of an assignment
and may be terminated upon a vote of a majority of the independent trustees or
by vote of a majority of the outstanding voting securities of the affected
class.
All fees paid under the Plan will be made in accordance with Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers
(NASD).
MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
As described in the Prospectuses, the funds' Advisor Class of shares are
made available to participants in employer-sponsored retirement or savings plans
and to persons purchasing through financial intermediaries, such as banks,
broker- dealers and insurance companies. The funds' distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries, with respect to the sale of the funds' shares and/or
the use of the funds' shares in various investment products or in connection
with various financial services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for shareholders in
the Advisor Class. In addition to such services, the financial intermediaries
provide various distribution services.
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
advisor has reduced its management fee by 0.25% per annum with respect to the
Advisor Class shares, and the funds' Board of Trustees has adopted a Master
Distribution and Shareholder Services Plan (the "Distribution Plan"). Pursuant
to such Plan, the Advisor Class shares pay the Distributor a fee of 0.50%
annually of the aggregate average daily assets of the funds' Advisor Class
shares, 0.25% of which is paid for shareholder services (described below) and
0.25% of which is paid for distribution services.
Payments may be made for a variety of shareholder services, including, but
are not limited to, (a) receiving, aggregating and processing purchase, exchange
and redemption requests from beneficial owners (including contract owners of
insurance products that utilize the funds as underlying investment media) of
shares and placing purchase, exchange and redemption orders with the funds'
distributor; (b) providing shareholders with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(c) processing dividend payments from a fund on behalf of shareholders and
assisting shareholders in changing dividend options, account designations and
addresses; (d) providing and maintaining elective services such as check writing
and wire transfer services; (e) acting as shareholder of record and nominee for
beneficial owners; (f) maintaining account records for shareholders and/or other
beneficial owners; (g) issuing confirmations of transactions; (h) providing
subaccounting with respect to shares beneficially owned by customers of third
parties or providing the information to a fund as necessary for such
subaccounting; (i) preparing and forwarding shareholder communications from the
funds (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to shareholders and/or
other beneficial owners; (j) providing other similar administrative and
sub-transfer agency services; and (k) paying "service fees" for the provision of
personal, continuing services to investors, as contemplated by the Rules of Fair
Practice of the NASD (collectively referred to as "Shareholder Services").
Shareholder services do not include those activities and expenses that are
primarily intended to result in the sale of additional shares of the funds.
Statement of Additional Information 17
Distribution services include any activity undertaken or expense incurred
that is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to, (a) the payment of sales
commission, ongoing commissions and other payments to brokers, dealers,
financial institutions or others who sell Advisor Class shares pursuant to
Selling Agreements; (b) compensation to registered representatives or other
employees of distributor who engage in or support distribution of the funds'
Advisor Class shares; (c) compensation to, and expenses (including overhead and
telephone expenses) of the distributor; (d) the printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; (e) the preparation, printing and distribution of sales literature
and advertising materials provided to the funds' shareholders and prospective
shareholders; (f) receiving and answering correspondence from prospective
shareholders, including distributing prospectuses, statements of additional
information, and shareholder reports; (g) the providing of facilities to answer
questions from prospective investors about fund shares; (h) complying with
federal and state securities laws pertaining to the sale of fund shares; (i)
assisting investors in completing application forms and selecting dividend and
other account options; (j) the providing of other reasonable assistance in
connection with the distribution of fund shares; (k) the organizing and
conducting of sales seminars and payments in the form of transactional
compensation or promotional incentives; (l) profit on the foregoing; (m) the
payment of "service fees" for the provision of personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD and (n)
such other distribution and services activities as the advisor determines may be
paid for by the funds pursuant to the terms of this Agreement and in accordance
with Rule 12b-1 of the Investment Company Act.
BUYING AND SELLING FUND SHARES
Information about buying, selling and exchanging fund shares is contained in
the American Century Investor Services Guide. This guide is available to
investors without charge and may be obtained by calling us.
VALUATION OF A FUND'S SECURITIES
Each fund's net asset value per share (NAV) is calculated as of one hour
before the close of business of the New York Stock Exchange (the Exchange),
usually at 2 p.m. Central time each day the Exchange is open for business. The
Exchange has designated the following holiday closings for 1999: New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Although the
funds expect the same holiday schedule to be observed in the future, the
Exchange may modify its holiday schedule at any time.
The advisor typically completes its trading on behalf of each fund in
various markets before the Exchange closes for the day. Each fund's share price
is calculated by adding the value of all portfolio securities and other assets,
deducting liabilities and dividing the result by the number of shares
outstanding. Expenses and interest earned on portfolio securities are accrued
daily.
Securities held by the funds normally are priced by an independent pricing
service, provided that such prices are believed by the advisor to reflect the
fair market value of portfolio securities.
Securities maturing within 60 days of the valuation date may be valued at
cost, plus or minus any amortized discount or premium, unless the trustees
determine that this would not result in fair valuation of a given security.
Other assets and securities for which quotations are not readily available are
valued in good faith at their fair value using methods approved by the Board of
Trustees.
TAXES
FEDERAL INCOME TAX
Each fund intends to qualify annually as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). By so qualifying, a fund will be exempt from federal income taxes to
the extent that it distributes substantially all of its net investment income
and net realized capital gains (if any) to shareholders. If a fund fails to
qualify as a regulated investment company, it will be liable for taxes,
significantly reducing its distributions to
18 American Century Investments
shareholders and eliminating shareholders' ability to treat distributions of the
funds in the manner they were realized by the funds.
Certain bonds purchased by the funds may be treated as bonds that were
originally issued at a discount. Original issue discount represents interest for
federal income tax purposes and can generally be defined as the difference
between the price at which a security was issued and its stated redemption price
at maturity. Although no cash is actually received by a fund until the maturity
of the bond, original issue discount is treated for federal income tax purposes
as income earned by a fund over the term of the bond, and therefore is subject
to the distribution requirements of the Code. The annual amount of income earned
on such a bond by a fund generally is determined on the basis of a constant
yield to maturity that takes into account the semiannual compounding of accrued
interest. Original issue discount on an obligation with interest exempt from
federal income tax will constitute tax-exempt interest income to the fund.
In addition, some of the bonds may be purchased by a fund at a discount that
exceeds the original issue discount on such bonds, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any bond having market discount generally will be
treated as taxable ordinary income to the extent it does not exceed the accrued
market discount on such bond (unless a fund elects to include market discount in
income in tax years to which it is attributable or if the amount is considered
de minimis). Generally, if the fund elects to include the discount in income,
market discount accrues on a daily basis for each day the bond is held by a fund
on a constant yield to maturity basis. In the case of any debt security having a
fixed maturity date of not more than one year from date of issue, the gain
realized on disposition generally will be treated as short-term capital gain. In
general, gain realized on disposition of a security held less than one year is
treated as short-term capital gain taxable to the shareholder as ordinary
income.
Under the Code, any distribution of a fund's net realized long-term capital
gains designated by the fund as a capital gain dividend is taxable to
shareholders as long-term capital gains, regardless of the length of time shares
are held. If a capital gain dividend is paid with respect to any shares of a
fund sold at a loss after being held for six months or less, the loss will be
treated as a long-term capital loss for tax purposes. The Code also provides
that if a shareholder holds shares of a fund for six months or less, the
deduction of any loss on the sale or exchange of those shares is disallowed to
the extent that the shareholder received exempt-interest dividends with respect
to those shares.
When a fund has a capital loss carryover, it does not make capital gain
distributions until the loss has been offset or expired.
The information above is only a summary of some of the tax considerations
affecting the funds and their shareholders. No attempt has been made to discuss
individual tax consequences. A prospective investor should consult with his or
her tax advisor or state or local tax authorities to determine whether the funds
are suitable investments.
HOW FUND PERFORMANCE INFORMATION IS CALCULATED
The funds may quote performance in various ways. Historical performance
information will be used in advertising and sales literature.
Yield quotations are based on the investment income per share earned during
a particular 30-day period, less expenses accrued during the period (net
investment income), and are computed by dividing the fund's net investment
income by its share price on the last day of the period according to the
following formula:
YIELD = (2 [(a - b + 1)6 - 1])
-----
cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends, and d =
the maximum offering price per share on the last day of the period.
Statement of Additional Information 19
FUND YIELDS
(30-day period ended September 30, 1998)
30-Day Yield 30-Day Yield
Fund Investor Class Advisor Class
- -------------------------------------------------------------------------------
Target 2000 4.22% 3.97%
Target 2005 4.28% 4.04%
Target 2010 4.60% N/A
Target 2015 4.92% N/A
Target 2020 5.03% N/A
Target 2025 4.84% 4.61%
- -------------------------------------------------------------------------------
Total returns quoted in advertising and sales literature reflect all aspects
of a fund's return, including the effect of reinvesting dividends and capital
gain distributions (if any) and any change in the fund's NAV during the period.
Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in a fund during a
stated period and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant throughout the period. For example, a cumulative total return
of 100% over 10 years would produce an average annual return of 7.18%, which is
the steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the funds' performance is
not constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.
The following tables set forth the average annual total return for the
various classes of the funds for the periods indicated as of September 30, 1998.
AVERAGE ANNUAL TOTAL RETURNS - INVESTOR CLASS
(Fiscal Year Ended September 30, 1998)
Fund 1 year 5 years 10 years Life of fund(1)
- ---------------------------------------------------------------------
Target 2000 8.97% 5.31% 9.98% 12.31%
Target 2005 18.87% 8.16% 12.72% 14.79%
Target 2010 26.08% 10.21% 14.46% 16.53%
Target 2015 30.07% 11.42% 15.58% 12.09%
Target 2020 36.00% 12.27% N/A 13.71%
Target 2025 42.21% N/A N/A 19.50%
- ---------------------------------------------------------------------
(1) The inception dates are: Target 2000, Target 2005 and Target 2010: March 25,
1985; Target 2015: September 1, 1986; Target 2020: December 29, 1989; and Target
2025:
February 15, 1996.
AVERAGE ANNUAL TOTAL RETURNS - ADVISOR CLASS
(Fiscal Year Ended September 30, 1998)
Fund Life of fund(1)
- --------------------------------------
Target 2000 2.57%
Target 2005 8.15%
Target 2010 N/A
Target 2015 N/A
Target 2020 N/A
Target 2025 16.02%
- --------------------------------------
(1) The inception dates are: Target 2000: August 20, 1998; Target 2005: August
3, 1998; and Target 2025: June 1, 1998. Target 2010, Target 2015 and Target 2020
had not commenced operations as of the fiscal year end September 30, 1998.
In addition to average annual total returns, each fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as percentages or as dollar amounts and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) to illustrate the
relationship of these factors and their contributions to total return.
20 American Century Investments
The funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indices of market
performance. This may include comparisons with funds that, unlike the American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for such comparisons may include, but are not
limited to, U.S. Treasury bill, note and bond yields, money market fund yields,
U.S. government debt and percentage held by foreigners, the U.S. money supply,
net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper, Inc. or Morningstar, Inc.; mutual fund
rankings published in major, nationally distributed periodicals; data provided
by the Investment Company Institute; Ibbotson Associates, Stocks, Bonds, Bills,
and Inflation; major indices of stock market performance; and indices and
historical data supplied by major securities brokerage or investment advisory
firms. The funds also may utilize reprints from newspapers and magazines
furnished by third parties to illustrate historical performance.
MULTIPLE CLASS PERFORMANCE ADVERTISING
Pursuant to the Multiple Class Plan, the funds may issue additional classes
of existing funds or introduce new funds with multiple classes available for
purchase. To the extent a new class is added to an existing fund, the manager
may, in compliance with SEC and NASD rules, regulations and guidelines, market
the new class of shares using the historical performance information of the
original class of shares. When quoting performance information for the new class
of shares for periods prior to the first full quarter after inception, the
original class's performance will be restated to reflect the expenses of the new
class. For periods after the first full quarter after inception, actual
performance of the new class will be used.
FINANCIAL STATEMENTS
The financial statements of the funds, including the Statement of Assets and
Liabilities as of September 30, 1998, the Statements of Operations for the year
then ended, the Statements of Changes in Net Assets for the two years then ended
and the financial highlights for the five years in the period then ended are
included in the Annual Reports to shareholders. Information included in the
Annual Report for years ended 1997, 1996, 1995 and 1994 was audited by other
auditors. The Annual Report for each such reporting period has been incorporated
herein by reference. You may receive copies of the reports without charge upon
request to American Century at the address and telephone number on the back
cover of this Statement of Additional Information.
EXPLANATION OF FIXED INCOME SECURITIES RATINGS
As described in the Prospectus, the funds may invest in fixed income
securities. Those investments, however, are subject to certain credit quality
restrictions, as noted in the Prospectus. The following is a summary of the
rating categories referenced in the prospectus disclosure.
Statement of Additional Information 21
BOND RATINGS
S&P Moody's Description
- --------------------------------------------------------------------------------
AAA Aaa These are the highest ratings assigned by S&P and Moody's to a debt
obligation and indicates an extremely strong capacity to pay
interest and repay principal.
- --------------------------------------------------------------------------------
AA Aa Debt rated in this category is considered to have a very strong
capacity to pay interest and repay principal and differs from
AAA/Aaa issues only in a small degree.
- --------------------------------------------------------------------------------
A A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher-rated categories.
- --------------------------------------------------------------------------------
BBB Baa Debt rated BBB/Baa is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.
- --------------------------------------------------------------------------------
BB Ba Debt rated BB/Ba has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions that could lead to inadequate capacity to meet
timely interest and principal payments. The BB rating category also
is used for debt subordinated to senior debt that is assigned an
actual or implied BBB-rating.
- --------------------------------------------------------------------------------
B B Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely
Impair capacity or willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB/Ba or BB-/Ba3 rating.
- --------------------------------------------------------------------------------
CCC Caa Debt rated CCC/Caa has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial and
economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business, financial
or economic conditions, it is not likely to have the capacity to
pay interest and repay principal. The CCC/Caa rating category is
also used for debt subordinated to senior debt that is assigned an
actual or implied B or B-/B3 rating.
- --------------------------------------------------------------------------------
CC Ca The rating CC/Ca typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC/Caa rating.
- --------------------------------------------------------------------------------
C C The rating C typically is applied to debt subordinated to senior
debt, which is assigned an actual or implied CCC-/Caa3 debt rating.
The C rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
- --------------------------------------------------------------------------------
CI -- The rating CI is reserved for income bonds on which no interest
is being paid.
- --------------------------------------------------------------------------------
D D Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
22 American Century Investments
To provide more detailed indications of credit quality, the Standard &
Poor's ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within these major rating categories. Similarly,
Moody's adds numerical modifiers (1,2,3) to designate relative standing within
its major bond rating categories. Fitch Investors Service, Inc. also rates bonds
and uses a ratings system that is substantially similar to that used by Standard
& Poor's.
COMMERCIAL PAPER RATINGS
S&P Moody's Description
- --------------------------------------------------------------------------------
A-1 Prime-1 This indicates that the degree of safety regarding
(P-1) timely payment is strong. Standard & Poor's
rates those issues determined to possess extremely
strong safety characteristics as A-1+.
- --------------------------------------------------------------------------------
A-2 Prime-2 Capacity for timely payment on commercial paper is
(P-2) satisfactory, but the relative degree of
safety is not as high as for issues designated A-1.
Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization
characteristics, while still appropriated, may be more
affected by external conditions. Ample alternate
liquidity is maintained.
- --------------------------------------------------------------------------------
A-3 Prime-3 Satisfactory capacity for timely repayment. Issues that
(P-3) carry this rating are somewhat more vulnerable to the
adverse changes in circumstances than obligations
carrying the higher designations.
- --------------------------------------------------------------------------------
NOTE RATINGS
S&P Moody's Description
- --------------------------------------------------------------------------------
SP-1 MIG-1; VMIG-1 Notes are of the highest quality enjoying
strong protection from established cash flows of funds
for their servicing or from established and broad-based
access to the market for refinancing, or both.
- --------------------------------------------------------------------------------
SP-2 MIG-2; VMIG-2 Notes are of high quality, with margins
of protection ample, although not so large as in the
preceding group.
- --------------------------------------------------------------------------------
SP-3 MIG-3; VMIG-3 Notes are of favorable quality, with all security
elements accounted for, but lacking the undeniable
strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well
established.
- --------------------------------------------------------------------------------
SP-4 MIG-4; VMIG-4 Notes are of adequate quality, carrying specific risk
but having protection and not distinctly or
predominantly speculative.
- --------------------------------------------------------------------------------
Statement of Additional Information 23
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
ANNUAL AND SEMIANNUAL REPORTS
These contain more information about the funds' investments and the market
conditions and investment strategies that significantly affected the funds'
performance during the most recent fiscal period. The annual and semiannual
reports are incorporated by reference into this SAI. This means that these are
legally part of this SAI.
You can receive a free copy of the annual and semiannual reports, for free and
ask any questions about the funds, by contacting us at one of the addresses or
phone numbers listed below.
If you own or are considering purchasing fund shares through
* an employer-sponsored retirement plan
* a bank
* a broker-dealer
* an insurance company
* another financial intermediary
you can receive the annual and semiannual reports directly from them.
You also can get information about the funds from the Securities and Exchange
Commission (SEC).
* In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location
and hours.
* On the Internet www.sec.gov
* By mail SEC Public Reference Section
Washington, D.C.
20549-6009
(The SEC will charge a fee for copying the
documents.)
Investment Company Act File No. 811-4165
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[american century logo(reg.sm)]
American
Century
AMERICAN CENTURY INVESTMENTS
P.O. Box 419200
Kansas City, Missouri 64141-6200
INVESTOR RELATIONS
1-800-345-2021 or 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
WWW.AMERICANCENTURY.COM
FAX
816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 or 816-444-3485
BUSINESS, NOT-FOR-PROFIT AND EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
SH-SAI-15896 9903
