[front cover]
SEPTEMBER 30, 1999
ANNUAL REPORT
- ------------------
AMERICAN CENTURY
[graphic of stairs]
TARGET MATURITIES TRUST: 2000
TARGET MATURITIES TRUST: 2005
TARGET MATURITIES TRUST: 2010
TARGET MATURITIES TRUST: 2015
TARGET MATURITIES TRUST: 2020
TARGET MATURITIES TRUST: 2025
[american century logo(reg. sm)]
American
Century
[inside front cover]
TARGET MATURITIES TRUST: 2000
(BTMTX)
- ----------------------------------------
TARGET MATURITIES TRUST: 2005
(BTFIX)
- ----------------------------------------
TARGET MATURITIES TRUST: 2010
(BTTNX)
- ----------------------------------------
TARGET MATURITIES TRUST: 2015
(BTFTX)
- ----------------------------------------
TARGET MATURITIES TRUST: 2020
(BTTTX)
- ----------------------------------------
TARGET MATURITIES TRUST: 2025
(BTTRX)
- ----------------------------------------
Y2K TESTING EFFORTS PAY DIVIDENDS IN PREPAREDNESS
- --------------------------------------------------------------------------------
Y2K, short for the Year 2000, refers more specifically to the date change from
December 31, 1999 to January 1, 2000. This date change is significant for
computers because many were originally programmed to process dates with
two-character years--99 instead of 1999.
When the calendar rolls to 2000, this can create problems for computers
programmed this way because they will read the date as "00," and may interpret
it as 1900. Most companies have been working to reprogram their computer systems
with four-digit years. Reprogramming is very labor-intensive and requires
testing to ensure that there are no errors and that all lines of code were
successfully changed.
Recognizing the possible impact of the Y2K issue, our senior-level Steering
Committee, programmers, business partners and Y2K team have been working
diligently to make January 1, 2000 a non-event for American Century investors.
Currently, our systems have been modified, tested and returned to production,
and we have tested our systems with our vendors and business partners.
In March and April of this year, we participated in the Security Industry
Association's (SIA) industry-wide test and successfully processed transactions
for dates up to and beyond 2000. American Century transactions with our partner
firms were processed free of Y2K bugs. We also participated in the Market Data
Test conducted by the SIA and Financial Information Forum in May. Again, the
computer scripts were executed successfully with no Y2K-related errors.
In addition, our Y2K team has developed contingency plans. These plans are
designed to minimize the impact on our investors and help us maintain operations
in the event of any Y2K-related incidents. We have conducted practice drills of
contingency scenarios and will continue to refine our plans during the rest of
1999 to respond quickly and effectively so that the date change is as seamless
as possible for investors. We expect the Year 2000 to be business as usual at
American Century.
Year 2000 Readiness Disclosure
[left margin]
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
RECEIVE YOUR ANNUAL REPORTS ONLINE
CHOOSE OUR ELECTRONIC COMMUNICATION PROGRAM
Access annual reports, newsletters and prospectuses electronically.
All you need is your OnePIN. Don't have a OnePIN? Visit
www.americancentury.com and set up your OnePIN by following two easy steps
using your automated phone line personal access code.
OnePIN opens the door to services that help you stay in control of your
money:
* MONITOR YOUR INVESTMENTS on your Personal Homepage any time, any day
* STAY INFORMED and set up a watch list of securities -- or even a test
portfolio
* REDUCE CLUTTER IN YOUR MAILBOX by selecting the electronic communication
link from your Personal Homepage
Set up your OnePIN and choose the electronic communication program today.
Questions? Call 1-800-345-2021 or go to www.americancentury.com.
Our Message to You
- --------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
Strong economic growth and increasing inflation anxiety resulted in higher
interest rates during the year ended September 30, 1999. The recovery of
overseas economies and unabated U.S. growth reignited inflation fears and pushed
interest rates higher. While the Federal Reserve (the U.S. central bank) saw fit
to cut short-term interest rates three times during the fall of 1998, the Fed
raised rates twice during the summer of 1999.
As market behavior and Fed interest rate policy swung from one extreme to
the other, zero-coupon Treasury bonds posted negative returns. The American
Century Target portfolios, which are managed to closely track the performance of
Treasury zeros, suffered a similar fate.
Turning to corporate matters, American Century has long been an active
supporter of the development and use of technologies that improve the
efficiencies of capital markets, lower the costs of trading securities, and
ultimately offer better returns for shareholders. Toward that end, we've made
strategic investments in several other financial services firms, including
Archipelago, Optimark, Tradepoint Financial Networks, W.R. Hambrecht, and, most
recently, WorldStreet Corporation. WorldStreet, located in Boston, is developing
a customized software application that marries portfolio holdings with real-time
market information.
We're also pleased to announce that American Century's investor account
statement is the first fund company statement to win the Communications Seal
from DALBAR, Inc., an independent financial services research firm. DALBAR
commends us for meeting investors' needs with an attractive document that's easy
to read and understand.
This isn't American Century's first nod of approval from DALBAR. In June,
DALBAR recognized our statement's individual rate of return feature--part of the
personalized performance section--as the key reason it ranked our statement
second out of 88 mutual fund company statements in the nation.
One final note -- in the spirit of our ongoing Year 2000 readiness
disclosures, we've provided an update on our preparations for Y2K on the inside
front cover of this report. We understand that our diligence in this area is
very important to you.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 4
TARGET: 2000
Performance Information ................................................ 5
Management Q&A ......................................................... 6
Schedule of Investments ................................................ 8
TARGET: 2005
Performance Information ................................................ 9
Management Q&A ......................................................... 10
Schedule of Investments ................................................ 12
TARGET: 2010
Performance Information ................................................ 13
Management Q&A ......................................................... 14
Schedule of Investments ................................................ 16
TARGET: 2015
Performance Information ................................................ 17
Management Q&A ......................................................... 18
Schedule of Investments ................................................ 20
TARGET: 2020
Performance Information ................................................ 21
Management Q&A ......................................................... 22
Schedule of Investments ................................................ 24
TARGET: 2025
Performance Information ................................................ 25
Management Q&A ......................................................... 26
Schedule of Investments ................................................ 28
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ......................................................... 29
Statements of Operations ............................................... 31
Statements of Changes
in Net Assets ....................................................... 33
Notes to Financial
Statements .......................................................... 35
Financial Highlights ................................................... 40
Report of Independent
Accountants ......................................................... 52
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 53
Background Information
Investment Philosophy
and Policies ..................................................... 54
Comparative Indices ................................................. 54
Fund Benchmarks ..................................................... 54
Investment Team
Leaders .......................................................... 54
Glossary ............................................................... 55
www.americancentury.com 1
Report Highlights
- --------------------------------------------------------------------------------
MARKET PERSPECTIVE
* Zero-coupon Treasury bonds produced negative returns during the year ended
September 30, 1999.
* Strong economic growth and the threat of rising inflation caused interest
rates and bond yields to increase.
* After cutting short-term interest rates three times in late 1998, the Federal
Reserve reversed course and raised rates twice in mid-1999.
* Bond yields continued to rise late in the period in anticipation of another
Fed rate hike.
* Going forward, we think that most of the increase in yields is behind us, but
rates could rise a little further in the coming months if strong economic
growth continues or more threatening inflation numbers appear.
TARGET: 2000
* The fund produced a positive return despite rising interest rates.
* We reduced Target: 2000's STRIPS position, selling these securities to meet
cash outflows.
* The portfolio's weighted average maturity date shortened during the fiscal
year because we sold zeros maturing after the fund's expected liquidation
date in 2001.
* As we get closer to the portfolio's liquidation date, we'll be looking at
Treasury bills and other short-term Treasury securities as possible fund
investments.
* Some of the fund's zeros have already matured, and more will be maturing in
the coming months.
* Looking ahead, we will focus on reinvesting proceeds from bond maturities in
various Treasury securities.
TARGET: 2005
* The fund produced a negative return, reflecting the rising interest rate
environment.
* We bought STRIPS early in the fiscal year as cash came into the Target: 2005
portfolio, and we sold STRIPS later in the fiscal year to meet cash outflows.
* We sold most of the fund's REFCORPs at attractive prices because of strong
demand from municipal bond issuers.
* We replaced the REFCORPs with STRIPS and other receipt zeros.
* The portfolio's weighted average maturity date shortened during the fiscal
year because we sold zeros maturing in 2006 and bought zeros maturing in
mid-2005.
* Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
TARGET: 2010
* The fund produced a negative return, reflecting the rising interest rate
environment.
* We added REFCORPs to Target: 2010's portfolio, gaining 20 basis points
(0.20%) in yield over STRIPS.
* The portfolio's weighted average maturity date lengthened slightly during the
fiscal year because the REFCORPs we bought mature in 2011.
* Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
[left margin]
TARGET: 2000(1)
(BTMTX)
TOTAL RETURNS: AS OF 9/30/99
6 Months 1.62%(2)
1 Year 2.48%
INCEPTION DATE: 3/25/85
NET ASSETS: $202.9 million(3)
TARGET: 2005(1)
(BTFIX)
TOTAL RETURNS: AS OF 9/30/99
6 Months -1.63%(2)
1 Year -5.44%
INCEPTION DATE: 3/25/85
NET ASSETS: $492.8 million(3)
TARGET: 2010(1)
(BTTNX)
TOTAL RETURNS: AS OF 9/30/99
6 Months -4.06%(2)
1 Year -11.10%
INCEPTION DATE: 3/25/85
NET ASSETS: $241.8 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on pages 5, 9, and 13. Investment terms are defined in the
Glossary on pages 55-56.
2 1-800-345-2021
Report Highlights
- --------------------------------------------------------------------------------
(Continued)
TARGET: 2015
* The fund produced a negative return, reflecting the rising interest rate
environment.
* We expanded Target: 2015's STRIPS position as new investments came into the
portfolio.
* We sold some of the fund's REFCORPs at attractive prices because of strong
demand from municipal bond issuers.
* The portfolio's weighted average maturity date remained very close to the
maturity date of the benchmark.
* Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
TARGET: 2020
* The fund produced a negative return, reflecting the rising interest rate
environment.
* Shareholders withdrew about $120 million from Target: 2020 during the past
year, so we sold STRIPS to meet these withdrawals.
* These sales resulted in some taxable capital gains, which will result in a
fairly large capital gains distribution in December 1999 (see page 22 for
more details).
* The portfolio's weighted average maturity date shortened slightly during the
fiscal year.
* Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
TARGET: 2025
* The fund produced a negative return, reflecting the rising interest rate
environment.
* Target: 2025 brought in more than $400 million in new investments over the
last year, and we invested the new money in STRIPS, which are now 86% of
the portfolio.
* We focused our purchases on STRIPS maturing in early 2025, which performed
better than STRIPS with maturity dates later in 2025.
* We continued to use securities lending as a way to enhance returns.
* Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
[right margin]
TARGET: 2015(1)
(BTFTX)
TOTAL RETURNS: AS OF 9/30/99
6 Months -5.39%(2)
1 Year -13.70%
INCEPTION DATE: 9/1/86
NET ASSETS: $218.2 million(3)
TARGET: 2020(1)
(BTTTX)
TOTAL RETURNS: AS OF 9/30/99
6 Months -7.24%(2)
1 Year -17.16%
INCEPTION DATE: 12/29/89
NET ASSETS: $317.3 million(3)
TARGET: 2025(1)
(BTTRX)
TOTAL RETURNS: AS OF 9/30/99
6 Months -6.69%(2)
1 Year -17.21%
INCEPTION DATE: 2/15/96
NET ASSETS: $755.4 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on pages 17, 21, and 25. Investment terms are defined in the
Glossary on pages 55-56.
www.americancentury.com 3
Market Perspective from Randall W. Merk
- --------------------------------------------------------------------------------
[photo of Randall W. Merk]
Randall W. Merk, chief investment officer of fixed income
PERFORMANCE OVERVIEW
Rising interest rates led to negative returns for zero-coupon Treasury
bonds (zeros) during the year ended September 30, 1999. Short-term zeros, which
are the least sensitive to interest rate changes, produced modest gains for the
year, but the rest of the market suffered losses ranging from 5-20% (see the
table at left).
INTERESTING TIMES
What a difference a year makes. In late 1998, global economic turmoil and
volatile financial markets led investors to seek safe haven in Treasury bonds.
In addition, the Federal Reserve (the U.S. central bank) cut short-term interest
rates three times to help stabilize the markets. In this environment, Treasury
yields fell to all-time lows.
Fast forward to September 1999. Economies worldwide showed signs of
rebounding, led by the surprising resurgence of economic growth in Japan. The
U.S economy was also humming along at a healthy clip, and evidence of rising
inflation began to appear. The Fed responded by raising short-term rates twice
during the summer. By the end of September, Treasury bond yields had risen to
their highest levels in two years.
REVERSAL OF FORTUNE
Why the dramatic change? The series of rate cuts by the Fed in late 1998
were successful--overseas economies stabilized, investor confidence returned,
and the financial markets settled down.
But the Fed's rate cuts also provided fuel to a domestic economic engine
that was already cruising at high speed. With low interest rates and
stock-market wealth encouraging rampant consumer spending, the U.S. economy grew
at a 6% annual rate in the fourth quarter of 1998 and a 4.3% annual pace in the
first quarter of 1999.
This level of economic growth, as well as a surprisingly strong inflation
report in April, pushed bond yields higher. By May, the bond market began to
fret about the possibility of a short-term interest rate increase. The Fed
complied, raising rates at the end of June and again in late August.
The Fed characterized these rate increases as a reversal of the rate cuts
made late last year. The Fed stated that returning short-term rates to mid-1998
levels "should markedly diminish the risk of rising inflation going forward."
NO SATISFACTION
However, the Fed's words weren't all that soothing for the bond market.
Signs of continued economic strength and anecdotal evidence of rising wages were
a source of stress for bond investors. Yields continued to rise in anticipation
of another Fed rate hike by year's end.
By the end of September, nearly all zero-coupon Treasury yields were more
than 120 basis points (or 1.20%) higher than they were a year ago (see the graph
at left). Zeros maturing in 10-15 years took the worst of it, experiencing yield
increases of nearly 180 basis points.
[left margin]
"RISING INTEREST RATES LED TO NEGATIVE RETURNS FOR ZERO-COUPON TREASURY BONDS
DURING THE YEAR ENDED SEPTEMBER 30, 1999."
[line graph - data below]
RISING YIELD CURVE
FOR TREASURY ZEROS
Years to
Maturity 9/30/98 3/31/99 9/30/99
1 4.41% 4.88% 5.34%
2 4.24% 5.04% 5.50%
3 4.23% 5.16% 5.65%
4 4.19% 5.20% 5.81%
5 4.22% 5.25% 5.96%
6 4.29% 5.35% 6.12%
7 4.36% 5.44% 6.18%
8 4.42% 5.45% 6.24%
9 4.45% 5.53% 6.31%
10 4.59% 5.63% 6.36%
11 4.66% 5.68% 6.43%
12 4.73% 5.73% 6.46%
13 4.81% 5.77% 6.49%
14 4.88% 5.82% 6.53%
15 4.95% 5.87% 6.56%
16 4.99% 5.88% 6.59%
17 5.03% 5.90% 6.60%
18 5.07% 5.91% 6.60%
19 5.11% 5.93% 6.59%
20 5.15% 5.94% 6.59%
21 5.14% 5.93% 6.59%
22 5.14% 5.92% 6.54%
23 5.13% 5.92% 6.48%
24 5.13% 5.91% 6.43%
25 5.12% 5.90% 6.37%
26 5.11% 5.88% 6.32%
27 5.10% 5.86% 6.29%
28 5.08% 5.85% 6.26%
29 5.07% 5.83% 6.24%
30 5.06% 5.81% 6.21%
ZERO-COUPON TREASURY BOND
RETURNS (FOR THE YEAR ENDED 9/30/99)
Coupon STRIPS maturing 11/15/00 3.07%
Coupon STRIPS maturing 11/15/05 -4.97%
Coupon STRIPS maturing 11/15/10 -10.62%
Coupon STRIPS maturing 11/15/15 -13.31%
Coupon STRIPS maturing 11/15/20 -16.82%
Coupon STRIPS maturing 11/15/25 -17.19%
Source: Bloomberg Financial Markets
4 1-800-345-2021
Target: 2000--Performance
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 1999
INVESTOR CLASS (INCEPTION 3/25/85) ADVISOR CLASS (INCEPTION 8/20/98)
TARGET 11/15/00 MERRILL LYNCH TARGET 11/15/00 MERRILL LYNCH
MATURITIES MATURITY LONG-TERM MATURITIES MATURITY LONG-TERM
TRUST: 2000 STRIPS ISSUE TREASURY INDEX TRUST: 2000 STRIPS ISSUE TREASURY INDEX
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 1.62% 1.88% -2.56% 1.48% 1.88% -2.56%
1 YEAR 2.48% 3.07% -7.59% 2.23% 3.07% -7.59%
===========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 6.33% 6.87% 8.45% -- -- --
5 YEARS 7.51% 8.03% 9.91% -- -- --
10 YEARS 8.43% 8.94% 9.31% -- -- --
LIFE OF FUND 11.61% 12.89%(2) 11.31%(2) 4.36% 4.38%(3) -3.89%(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Since 3/31/85, the date nearest the class's inception for which data are
available.
(3) Since 8/31/98, the date nearest the class's inception for which data are
available.
See pages 53-55 for more information about share classes, returns, the
comparative index, and the fund's benchmark.
[mountain graph - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 9/30/99
Merrill Lynch Long-Term
Treasury Index $24,356
11/15/00 STRIPS Issue $23,547
Target Maturities Trust: 2000 $22,461
Merrill Lynch
Long-Term 11/15/00 STRIPS
Target: 2000 Treasury Index Issue
DATE VALUE VALUE VALUE
9/30/1989 $10,000 $10,000 $10,000
9/30/1990 $10,075 $10,256 $10,183
9/30/1991 $12,310 $12,358 $12,520
9/30/1992 $14,528 $14,120 $14,808
9/30/1993 $16,919 $16,987 $17,284
9/30/1994 $15,643 $15,183 $16,000
9/30/1995 $17,965 $18,654 $18,438
9/30/1996 $18,687 $19,094 $19,293
9/30/1997 $20,115 $21,609 $20,865
9/30/1998 $21,919 $26,357 $22,845
9/30/1999 $22,461 $24,356 $23,547
$10,000 investment made 9/30/89
The graph at left shows the growth of a $10,000 investment in the fund over 10
years. The Merrill Lynch Long-Term Treasury Index and the fund's benchmark are
provided for comparison. The Target: 2000 portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the index and the benchmark do not.
[line graph - data below]
SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
TARGET: 2000
Anticipated Value at Maturity
(Estimated Share Price) $101.51
Actual Share Price (Historical) $96.11
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1985 $26.77 $100.00
$35.44 $100.00
$33.33 $98.69
$37.16 $97.43
$44.52 $96.21
1990 $47.33 $97.59
$57.11 $98.91
$61.947 $101.16
$71.526 $100.708
$66.598 $100.829
1995 $80.408 $100.992
$79.947 $101.102
$86.06 $101.13
$93.78 $101.78
$94.58 $101.71
2000 $96.11 $101.51
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 55), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM. While this
graph demonstrates the fund's expected long-term growth pattern, please keep in
mind that the fund may experience significant share-price volatility over the
short term. Even if fund shares are held to maturity, there is no guarantee that
the fund's share price will reach its AVM. There is also no guarantee that the
AVM will fluctuate as little in the future as it has in the past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 5
Target: 2000--Q&A
- --------------------------------------------------------------------------------
[photo of Jeremy Fletcher] [photo of Dave Schroeder]
An interview with Jeremy Fletcher and Dave Schroeder, portfolio managers on
the Target Maturities Trust investment team.
HOW DID THE FUND PERFORM?
Despite rising interest rates (see page 4 for details), Target: 2000
managed a positive return. For the fiscal year ended September 30, 1999, the
portfolio returned 2.48%, compared with the 3.07% return of its benchmark, a
STRIPS issue maturing on November 15, 2000.* (See the previous page for other
fund performance comparisons.)
It's important to note that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's return is not.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PAST YEAR?
Most of the changes we make in an effort to add value revolve around cash
flows into or out of the portfolio. It's the most efficient way to make
adjustments, and it helps keep transaction costs down.
In the last year, we saw about $35 million move out of the Target: 2000
portfolio. To meet these cash outflows, we sold some of the fund's STRIPS, which
are the easiest Treasury zero-coupon bonds (zeros) to sell. As a result, STRIPS
fell from 40% of the portfolio a year ago to 25% at the end of the period (see
the charts on page 7).
DID THESE SALES HAVE ANY IMPACT ON THE PORTFOLIO'S WEIGHTED AVERAGE MATURITY
(WAM) DATE?
Yes. The WAM date shortened by about a month, from December 1, 2000, to
November 3, 2000. The shorter WAM date caused the fund's anticipated value at
maturity to fall 27 cents over the past year.
The WAM date shortened because the STRIPS we sold had maturity dates in
mid-2001. We wanted to start selling some of the zeros that will mature after
the expected liquidation date of the portfolio, something we'll have to do
eventually anyway.
ARE PLANS ALREADY IN PLACE FOR THE LIQUIDATION OF THE PORTFOLIO?
Not yet, but it's on our radar screen. Based on what we did with the 1990
and 1995 portfolios, we expect to liquidate the Target: 2000 portfolio right
after the end of next year. Shareholders will get notification and more details
next fall.
One thing we're doing right now is to start positioning the portfolio with
an eye toward liquidation. Selling the longer-maturity zeros in the portfolio is
one aspect of that, and we're also looking at Treasury bills and other
short-term Treasury securities as possible fund investments going forward.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"WE EXPECT TO LIQUIDATE THE TARGET: 2000 PORTFOLIO RIGHT AFTER THE END OF NEXT
YEAR."
PORTFOLIO AT A GLANCE
9/30/99 9/30/98
NUMBER OF SECURITIES 56 52
ANTICIPATED GROWTH
RATE 5.08% 3.81%
WEIGHTED AVERAGE
MATURITY DATE 11/3/00 12/1/00
ANTICIPATED VALUE AT
MATURITY (AVM)* $101.51 $101.78
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 5.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 55-56.
6 1-800-345-2021
Target: 2000--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHY WOULD YOU INVEST IN SECURITIES OTHER THAN ZEROS?
It gives us more investment options and opportunities to add value. And
when you're looking at maturities of one year or less, most Treasury securities
behave like zeros anyway. Treasury bills are a good example--you buy them at a
discount and get full face value at maturity, just like a zero.
Another good thing about T-bills is they are very easy to buy and sell.
This high degree of liquidity will be helpful in the coming year as investors
begin to cash out of the portfolio.
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
A year ago, Treasury yields were as low as they've ever been. Since then,
the economy has shown continued strength, so it's not surprising that yields
have risen significantly in the past year. We think that Treasury yields have
returned to "fair value" based on current economic conditions.
Although we believe that most of the increase in yields is behind us, it's
possible that rates could rise a little further in the coming months. The U.S.
economy grew by 4.1% over the past year, a healthy pace that the Federal Reserve
probably considers inflationary.
So far, though, inflation has remained modest--consumer prices rose 2.6% in
the last year, which is below the long-term average and within the Fed's comfort
level. But inflation has been on the upswing lately, surging at an annual rate
of more than 4% in the last three months.
As a result, it's likely that the Fed will raise short-term rates again in
November, a move that's already been priced into the bond market. After that,
the Fed will probably be on hold until early next year as it focuses its
attention on the banking system during the transition into the year 2000.
So, if we continue to see strong economic growth or more threatening
inflation numbers through the end of this year, bond yields could rise as much
as 25-50 basis points (0.25%- 0.50%) from their current levels. On the other
hand, if the economy and inflation rate level off, then yields should be more
stable.
WHAT ARE YOUR PLANS FOR TARGET: 2000 GOING FORWARD?
One thing we'll be focusing on is reinvesting proceeds from maturing zeros.
We already had some zeros mature back in May, and we have a more sizable amount
maturing in mid-November.
We'll probably invest the proceeds from the November maturities in STRIPS
that mature in November 2000. These zeros currently offer an extra 20 basis
points (0.20%) in yield over one-year Treasury bills.
As other maturities occur in 2000, we'll look at the various types of
short-term Treasury securities and invest in those that offer the most
attractive yields.
[right margin]
"TARGET: 2000 ALREADY HAD SOME OF ITS ZEROS MATURE BACK IN MAY, AND WE HAVE A
MORE SIZABLE AMOUNT MATURING IN MID-NOVEMBER."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 1999
STRIPS 25%
TRs 49%
REFCORPs 14%
BECCs 4%
Other 8%
AS OF MARCH 31, 1999
STRIPS 30%
TRs 43%
REFCORPs 14%
BECCs 4%
Other 9%
Investment terms are defined in the Glossary on pages 55-56.
www.americancentury.com 7
Target: 2000--Schedule of Investments
- --------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
SEPTEMBER 30, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 86.4%
$ 75,000 ETR, 5.26%, 11/15/99 $ 74,534
81,000 ETR, 5.63%, 11/15/99 80,497
153,000 STRIPS -- COUPON, 5.40%,
11/15/99 152,102
2,000,000 STRIPS -- PRINCIPAL, 4.88%,
11/15/99 1,988,450
2,836,700 TBR, 7.83%, 11/15/99 2,819,187
75,000 TR, 5.20%, 11/15/99 74,542
349,800 TR, 5.46%, 11/15/99 347,662
133,000 CATS, 5.22%, 2/15/00 130,417
88,125 CUBES, 8.60%, 2/15/00 86,414
100,000 STRIPS -- COUPON, 4.63%,
2/15/00 98,122
306,945 TBR, 8.80%, 2/15/00 300,907
5,000 TR, 5.50%, 2/15/00 4,903
29,708,220 TR, 6.69%, 2/15/00 29,129,136
28,146 TR, 8.50%, 2/15/00 27,597
199,843 TR, 8.88%, 2/15/00 195,948
100,000 TR, 9.28%, 2/15/00 98,051
12,100,000 STRIPS -- PRINCIPAL, 4.88%,
5/15/00 11,720,994
645,525 TBR, 8.62%, 5/15/00 624,188
849,000 TBR, 8.72%, 5/15/00 820,938
13,000 TIGR, 5.05%, 5/15/00 12,576
5,000,000 CUBES, 5.50%, 8/15/00 4,764,828
633,000 STRIPS -- COUPON, 5.71%,
8/15/00 604,150
3,667,000 STRIPS -- PRINCIPAL, 7.49%,
8/15/00 3,499,869
894,045 TBR, 8.72%, 8/15/00 851,488
15,427,980 TR, 4.89%, 8/15/00 14,779,759
500,000 STRIPS -- COUPON, 4.16%,
11/15/00 470,334
14,391,000 STRIPS -- PRINCIPAL, 7.97%,
11/15/00 13,537,152
289,250 TBR, 5.63%, 11/15/00 271,347
29,600 TR, 8.49%, 11/15/00 27,783
843 TR, 9.43%, 11/15/00 791
75,000 CATS, 5.34%, 2/15/01 69,340
1,700,000 STRIPS -- PRINCIPAL, 5.57%,
2/15/01 1,576,337
Principal Amount Value
- --------------------------------------------------------------------------------
$ 87,280 TBR, 5.63%, 2/15/01 $ 80,618
1,368,000 TIGR, 5.52%, 2/15/01 1,264,769
1,631,000 TIGR, 5.52%, 2/15/01 1,507,923
1,658,000 TIGR, 5.52%, 2/15/01 1,532,886
2,790,000 TR, 5.52%, 2/15/01 2,578,776
1,143,650 TR, 5.52%, 2/15/01 1,057,067
1,952,980 TR, 5.81%, 2/15/01 1,805,124
2,343,928 TR, 5.86%, 2/15/01 2,166,475
9,464,850 TR, 6.53%, 2/15/01 8,748,289
23,877,000 TR, 6.64%, 2/15/01 22,069,329
1,400,000 COUGAR, 5.63%, 5/15/01 1,273,474
1,496,250 CUBES, 6.21%, 5/15/01 1,361,239
44,000 TIGR, 5.39%, 5/15/01 40,068
992,275 TR, 5.57%, 5/15/01 903,309
2,735,705 TR, 5.57%, 5/15/01 2,490,424
14,235,000 STRIPS -- PRINCIPAL, 7.44%,
8/15/01 12,824,872
6,320,000 TR, 4.84%, 8/15/01 5,668,092
7,060,020 TR, 5.38%, 8/15/01 6,331,779
8,900,000 BEC, 5.99%, 11/15/01 7,848,959
5,100,000 STRIPS -- PRINCIPAL, 5.06%,
11/15/01 4,529,830
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 175,323,645
------------
(Cost $174,364,956)
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 13.6%
10,000,000 REFCORP STRIPS -- COUPON,
4.93%, 1/15/00 9,851,309
8,000,000 REFCORP STRIPS -- COUPON,
5.55%, 4/15/00 7,778,914
7,442,000 REFCORP STRIPS -- COUPON,
5.61%, 10/15/00 7,026,193
3,215,000 REFCORP STRIPS -- COUPON,
5.70%, 10/15/01 2,859,641
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 27,516,057
------------
(Cost $27,523,290)
TOTAL INVESTMENT SECURITIES -- 100.0% $202,839,702
============
(Cost $201,888,246)
NOTES TO SCHEDULE OF INVESTMENTS
BEC = Book Entry Corpus
CATS = Certificates of Accrual of Treasury Securities
COUGAR = Coupons on Underlying Government Securities
CUBES = Coupons Under Book Entry Safekeeping
ETR = Easy Growth Treasury Receipts
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TBR = Treasury Bond Receipts
TIGR = Treasury Investment Growth Receipts
TR = Treasury Receipts
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
8 1-800-345-2021 See Notes to Financial Statements
Target: 2005--Performance
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 1999
INVESTOR CLASS (INCEPTION 3/25/85) ADVISOR CLASS (INCEPTION 8/3/98)
TARGET 11/15/05 MERRILL LYNCH TARGET 11/15/05 MERRILL LYNCH
MATURITIES MATURITY LONG-TERM MATURITIES MATURITY LONG-TERM
TRUST: 2005 STRIPS ISSUE TREASURY INDEX TRUST: 2005 STRIPS ISSUE TREASURY INDEX
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -1.63% -1.76% -2.56% -1.73% -1.76% -2.56%
1 YEAR -5.44% -4.97% -7.59% -5.67% -4.97% -7.59%
===========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 7.85% 8.39% 8.45% -- -- --
5 YEARS 9.91% 10.49% 9.91% -- -- --
10 YEARS 9.75% 10.11% 9.31% -- -- --
LIFE OF FUND 13.27% 14.80%(2) 11.31%(2) 1.74% -0.41%(3) 0.14%(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Since 3/31/85, the date nearest the class's inception for which data are
available.
(3) Since 7/31/98, the date nearest the class's inception for which data are
available.
See pages 53-55 for more information about share classes, returns, the
comparative index, and the fund's benchmark.
[mountain graph - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 9/30/99
11/15/05 STRIPS Issue $26,195
Target Maturities Trust: 2005 $25,358
Merrill Lynch Long-Term
Treasury Index $24,356
Merrill Lynch
Long-Term 11/15/05 STRIPS
Target: 2005 Treasury Index Issue
DATE VALUE VALUE VALUE
9/30/1989 $10,000 $10,000 $10,000
9/30/1990 $9,696 $10,256 $9,740
9/30/1991 $12,279 $12,358 $12,424
9/30/1992 $14,393 $14,120 $14,525
9/30/1993 $18,120 $16,987 $18,502
9/30/1994 $15,810 $15,183 $15,909
9/30/1995 $19,787 $18,654 $20,070
9/30/1996 $20,215 $19,094 $20,572
9/30/1997 $22,560 $21,609 $23,098
9/30/1998 $26,817 $26,357 $27,566
9/30/1999 $25,358 $24,356 $26,195
$10,000 investment made 9/30/89
The graph at left shows the growth of a $10,000 investment in the fund over 10
years. The Merrill Lynch Long-Term Treasury Index and the fund's benchmark are
provided for comparison. The Target: 2005 portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the index and the benchmark do not.
[line graph - data below]
SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
TARGET: 2005
Anticipated Value at Maturity
(Estimated Share Price) $101.28
Actual Share Price (Historical) $72.55
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1985 $16.69 $98.00
$23.74 $97.00
$21.28 $94.59
$24.36 $93.66
$30.18 $93.14
1990 $31.26 $97.25
$37.97 $99.29
$41.597 $99.625
$50.575 $100.087
$46.066 $100.516
1995 $61.108 $100.34
$57.829 $100.707
$64.54 $100.85
$76.72 $101.53
$73.75 $101.07
2000 $72.55 $101.28
2005
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 55), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM. While this
graph demonstrates the fund's expected long-term growth pattern, please keep in
mind that the fund may experience significant share-price volatility over the
short term. Even if fund shares are held to maturity, there is no guarantee that
the fund's share price will reach its AVM. There is also no guarantee that the
AVM will fluctuate as little in the future as it has in the past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 9
Target: 2005--Q&A
- --------------------------------------------------------------------------------
An interview with Jeremy Fletcher and Dave Schroeder (pictured on page 6),
portfolio managers on the Target Maturities Trust investment team.
HOW DID THE FUND PERFORM?
Rising interest rates (see page 4 for details) led to a negative return for
Target: 2005. For the fiscal year ended September 30, 1999, the portfolio
returned -5.44%, compared with the -4.97% return of its benchmark, a STRIPS
issue maturing on November 15, 2005.* (See the previous page for other fund
performance comparisons.)
It's important to note that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's return is not.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PAST YEAR?
Most of the changes we make in an effort to add value revolve around cash
flows into or out of the portfolio. It's the most efficient way to make
adjustments, and it helps keep transaction costs down.
We bought or sold STRIPS, which are the easiest Treasury zero-coupon bonds
(zeros) to buy and sell, to meet cash flow demands. We bought STRIPS during the
first half of the fiscal year as $30 million in new investments came into the
portfolio, and we sold STRIPS over the last six months to meet about $50 million
in cash outflows.
YOU ALSO UNLOADED MOST OF TARGET: 2005'S REFCORPS, WHICH ARE NOW JUST 7% OF THE
PORTFOLIO (DOWN FROM 30% A YEAR AGO). WHY?
Selling REFCORPs early in the fiscal year was one of the few changes we
made without utilizing cash flows. We were able to sell these zeros at
attractive prices because of strong demand for REFCORPs from municipal bond
issuers, which are typically state and local governments.
WHAT DO THESE ENTITIES USE REFCORPS FOR?
Municipal bond issuers use REFCORPs as part of a process to refinance their
high-interest-rate bonds. Many municipal bonds have a brief window of
time--known as a "call date"--when they can be paid off before maturity. This
gives the issuer an opportunity to refinance the bonds if interest rates are
lower.
But the call date doesn't always coincide with a period of lower interest
rates, so issuers often try to refinance ahead of time. They do that by issuing
new bonds when rates are relatively low and investing the proceeds in Treasury
bonds or zeros that mature around the call date. When the call date arrives, the
Treasurys mature, and the issuers pay off the old bonds.
We had a pretty low interest rate environment in late 1998 and early 1999,
so municipal refinancing activity was high. REFCORPs maturing around 2005 were
popular refinancing tools, so we were able to sell most of our holdings at a
premium.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"WE WERE ABLE TO SELL REFCORPS AT ATTRACTIVE PRICES BECAUSE OF STRONG DEMAND
FROM MUNICIPAL BOND ISSUERS."
PORTFOLIO AT A GLANCE
9/30/99 9/30/98
NUMBER OF SECURITIES 45 42
ANTICIPATED GROWTH
RATE 5.64% 3.98%
WEIGHTED AVERAGE
MATURITY DATE 9/30/05 11/8/05
ANTICIPATED VALUE AT
MATURITY (AVM)* $101.28 $101.53
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 9.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 55-56.
10 1-800-345-2021
Target: 2005--Q&A
- --------------------------------------------------------------------------------
(Continued)
HOW DID THESE CHANGES AFFECT THE PORTFOLIO'S WEIGHTED AVERAGE MATURITY (WAM)
DATE?
The WAM date shortened from November 8, 2005, to September 30, 2005. The
shorter WAM date caused the fund's anticipated value at maturity to fall 25
cents over the past year.
The WAM date shortened because most of the zeros we added to the portfolio
in the past year mature in mid-2005, while many that we sold--especially the
REFCORPs--had maturity dates in 2006.
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
A year ago, Treasury yields were as low as they've ever been. Since then,
the economy has shown continued strength, so it's not surprising that yields
have risen significantly in the past year. We think that Treasury yields have
returned to "fair value" based on current economic conditions.
Although we believe that most of the increase in yields is behind us, it's
possible that rates could rise a little further in the coming months. The U.S.
economy grew by 4.1% over the past year, a healthy pace that the Federal Reserve
probably considers inflationary.
So far, though, inflation has remained modest--consumer prices rose 2.6% in
the last year, which is below the long-term average and within the Fed's comfort
level. But inflation has been on the upswing lately, surging at an annual rate
of more than 4% in the last three months.
As a result, it's likely that the Fed will raise short-term rates again in
November, a move that's already been priced into the bond market. After that,
the Fed will probably be on hold until early next year as it focuses its
attention on the banking system during the transition into the year 2000.
So, if we continue to see strong economic growth or more threatening
inflation numbers through the end of this year, bond yields could rise as much
as 25-50 basis points (0.25%- 0.50%) from their current levels. On the other
hand, if the economy and inflation rate level off, then yields should be more
stable.
WHAT ARE YOUR PLANS FOR TARGET: 2005 GOING FORWARD?
We'll keep the portfolio's WAM date near the November 15, 2005 maturity
date of the benchmark. This will help the fund closely track the performance of
its benchmark.
We'll also continue to look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
[right margin]
"ALTHOUGH WE BELIEVE THAT MOST OF THE INCREASE IN YIELDS IS BEHIND US, IT'S
POSSIBLE THAT RATES COULD RISE A LITTLE FURTHER IN THE COMING MONTHS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 1999
STRIPS 54%
REFCORPs 7%
BECCs 23%
TRs 13%
Other 3%
AS OF MARCH 31, 1999
STRIPS 59%
REFCORPs 7%
BECCs 19%
TRs 13%
Other 2%
Investment terms are defined in the Glossary on pages 55-56.
www.americancentury.com 11
Target: 2005--Schedule of Investments
- --------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
SEPTEMBER 30, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 93.3%
$ 15,000,000 BECC, 6.09%, 5/15/04 $ 11,286,187
258,000 ETR, 5.70%, 5/15/04 193,688
3,000,000 BECC, 5.12%, 11/15/04 2,180,158
693,750 CUBES, 6.56%, 11/15/04 506,420
87,000 ETR, 5.96%, 11/15/04 63,068
2,517,000 TIGR, 4.75%, 11/15/04 1,830,970
27,000 TIGR, 5.90%, 11/15/04 19,641
17,000,000 TR, 4.75%, 11/15/04 12,384,938
50,000 TR, 6.24%, 11/15/04 36,426
7,200,000 BECC, 6.95%, 2/15/05 5,138,097
500,000 STRIPS -- COUPON, 6.37%,
2/15/05 361,867
3,456,420 TR, 5.45%, 2/15/05 2,473,016
49,000,000 BECC, 5.83%, 5/15/05 34,404,119
4,615,672 CUBES, 8.59%, 5/15/05 3,256,711
1,000,000 ETR, 6.67%, 5/15/05 700,215
17,374,000 STRIPS -- COUPON, 8.07%,
5/15/05 12,379,608
129,059,000 STRIPS -- PRINCIPAL, 5.61%,
5/15/05 91,909,090
428,750 TBR, 9.37%, 5/15/05 300,217
6,450,000 TR, 8.38%, 5/15/05 4,511,470
108,500,000 STRIPS -- PRINCIPAL, 6.02%,
8/15/05 75,958,839
7,000,020 TR, 4.58%, 8/15/05 4,847,852
30,000,000 BECC, 6.15%, 11/15/05 20,393,440
170,000 CATS, 6.21%, 11/15/05 115,975
491,519 CUBES, 8.86%, 11/15/05 335,915
1,200,000 LION, 6.41%, 11/15/05 812,358
13,600,000 STRIPS -- COUPON, 6.32%,
11/15/05 9,394,396
2,247,000 TBR, 8.45%, 11/15/05 1,522,945
107,056,000 STRIPS -- COUPON, 6.31%,
2/15/06 72,774,188
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,003,875 TR, 5.54%, 2/15/06 $ 673,197
23,678,120 TR, 7.75%, 2/15/06 15,878,518
36,000,000 BECC, 5.09%, 5/15/06 23,659,536
107,000 CATS, 6.05%, 5/15/06 70,593
6,032,000 CATS, 8.83%, 5/15/06 3,954,127
2,567,000 CATS, 8.84%, 5/15/06 1,682,733
566,500 CUBES, 6.53%, 5/15/06 374,466
5,098,000 STRIPS -- COUPON, 7.46%,
5/15/06 3,409,035
410,000 TBR, 8.46%, 5/15/06 268,593
36,264,000 TR, 5.29%, 5/15/06 23,726,264
146,346 TR, 8.89%, 5/15/06 96,489
1,299,780 TR, 8.86%, 8/15/06 843,602
23,625,000 BECC, 5.47%, 11/15/06 15,005,931
100,000 U.S. Treasury Corpus, 5.38%,
11/15/06 63,124
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 459,798,022
------------
(Cost $466,233,588)
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 6.7%
2,000,000 REFCORP STRIPS -- COUPON,
5.84%, 4/15/05 1,422,342
26,170,000 REFCORP STRIPS -- COUPON,
6.65%, 10/15/05 18,031,522
20,319,000 REFCORP STRIPS -- COUPON,
6.18%, 7/15/06 13,336,531
------------
TOTAL ZERO-COUPON U.S.
GOVERNMENT AGENCY SECURITIES 32,790,395
------------
(Cost $32,566,299)
TOTAL INVESTMENT SECURITIES -- 100.0% $492,588,417
============
(Cost $498,799,887)
NOTES TO SCHEDULE OF INVESTMENTS
BECC = Book Entry Callable Corpus
CATS = Certificates of Accrual of Treasury Securities
CUBES = Coupons Under Book Entry Safekeeping
ETR = Easy Growth Treasury Receipts
LION = Lehman Investment Opportunity Note
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TBR = Treasury Bond Receipts
TIGR = Treasury Investment Growth Receipts
TR = Treasury Receipts
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
12 1-800-345-2021 See Notes to Financial Statements
Target: 2010--Performance
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 1999
INVESTOR CLASS (INCEPTION 3/25/85) ADVISOR CLASS (INCEPTION 10/20/98)
TARGET 11/15/10 MERRILL LYNCH TARGET 11/15/10 MERRILL LYNCH
MATURITIES MATURITY LONG-TERM MATURITIES MATURITY LONG-TERM
TRUST: 2010 STRIPS ISSUE TREASURY INDEX TRUST: 2010 STRIPS ISSUE TREASURY INDEX
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -4.06% -3.69% -2.56% -4.20% -3.69% -2.56%
1 YEAR -11.10% -10.62% -7.59% -- -- --
==========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 9.07% 9.67% 8.45% -- -- --
5 YEARS 11.71% 12.60% 9.91% -- -- --
10 YEARS 10.34% 10.74% 9.31% -- -- --
LIFE OF FUND 14.37% 15.79%(2) 11.31%(2) -8.58%(1) -8.34%(1)(3) -6.10%(1)(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Since 3/31/85, the date nearest the class's inception for which data are
available.
(3) Since 10/31/98, the date nearest the class's inception for which data are
available.
See pages 53-55 for more information about share classes, returns, the
comparative index, and the fund's benchmark.
[mountain graph - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 9/30/99
11/15/10 STRIPS Issue $27,740
Target Maturities Trust: 2010 $26,761
Merrill Lynch Long-Term
Treasury Index $24,356
Merrill Lynch
Long-Term 11/15/10 STRIPS
Target: 2010 Treasury Index Issue
DATE VALUE VALUE VALUE
9/30/1989 $10,000 $10,000 $10,000
9/30/1990 $9,315 $10,256 $9,390
9/30/1991 $12,180 $12,358 $12,170
9/30/1992 $13,856 $14,120 $13,748
9/30/1993 $18,513 $16,987 $18,510
9/30/1994 $15,381 $15,183 $15,328
9/30/1995 $20,466 $18,654 $20,735
9/30/1996 $20,626 $19,094 $21,030
9/30/1997 $23,874 $21,609 $24,453
9/30/1998 $30,100 $26,357 $31,037
9/30/1999 $26,761 $24,356 $27,740
$10,000 investment made 9/30/89
The graph at left shows the growth of a $10,000 investment in the fund over 10
years. The Merrill Lynch Long-Term Treasury Index and the fund's benchmark are
provided for comparison. The Target: 2010 portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the index and the benchmark do not.
[line graph - data below]
SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
TARGET: 2010
Anticipated Value at Maturity
(Estimated Share Price) $105.56
Actual Share Price (Historical) $55.10
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1985 $11.43 $97
$17.65 $97
$14.96 $95.27
$17.31 $97.13
$22.16 $96.66
1990 $22.22 $97.52
$26.9 $98.97
$29.534 $100.179
$37.292 $100.874
$32.981 $101.78
1995 $46.864 $101.788
$42.474 $102.529
$49.16 $103.4
$61.98 $104.85
$57.43 $105.50
2000 $55.10 $105.56
2005
2010
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 55), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM. While this
graph demonstrates the fund's expected long-term growth pattern, please keep in
mind that the fund may experience significant share-price volatility over the
short term. Even if fund shares are held to maturity, there is no guarantee that
the fund's share price will reach its AVM. There is also no guarantee that the
AVM will fluctuate as little in the future as it has in the past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 13
Target: 2010--Q&A
- --------------------------------------------------------------------------------
An interview with Jeremy Fletcher and Dave Schroeder (pictured on page 6),
portfolio managers on the Target Maturities Trust investment team.
HOW DID THE FUND PERFORM?
Rising interest rates (see page 4 for details) led to a negative return for
Target: 2010. For the fiscal year ended September 30, 1999, the portfolio
returned -11.10%, compared with the -10.62% return of its benchmark, a STRIPS
issue maturing on November 15, 2010.* (See the previous page for other fund
performance comparisons.)
It's important to note that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's return is not.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PAST YEAR?
Most of the changes we make in an effort to add value revolve around cash
flows into or out of the portfolio. It's the most efficient way to make
adjustments, and it helps keep transaction costs down.
But cash flows were pretty stable over the past year. We saw a little money
trickle out of the fund in the first six months of the fiscal year, and we sold
some of the portfolio's STRIPS, which are the easiest Treasury zero-coupon bonds
(zeros) to trade, to meet these cash outflows.
Outside of fund cash flows, the most significant change we made was to
expand Target: 2010's holdings of REFCORPs. We bought these zeros when they
offered yields that were 20 basis points (0.20%) higher than STRIPS yields.
WHY WERE REFCORPS YIELDING SO MUCH MORE THAN STRIPS?
In late 1998 and again in mid-1999, the yield difference--or
spread--between Treasury and government agency bonds widened substantially. In
both cases, economic uncertainty led investors to shift into Treasurys.
Since the Resolution Funding Corporation, which issues REFCORPs, is a
government agency, the yield spread between STRIPS and REFCORPs also widened. We
took advantage of the higher yields, buying REFCORPs at the end of 1998 and
during the third quarter of 1999.
This caused the composition of the Target: 2010 portfolio to change. A year
ago, REFCORPs made up about 40% of the portfolio, but now they're 60%.
HOW DID THESE CHANGES AFFECT THE PORTFOLIO'S WEIGHTED AVERAGE MATURITY (WAM)
DATE?
The WAM date lengthened from October 16, 2010, to November 1, 2010. The WAM
date extended because most of the REFCORPs we bought mature in 2011, while many
of the STRIPS that we sold had maturity dates in early 2010.
The longer WAM date, as well as the addition of higher-yielding REFCORPs,
caused the fund's anticipated value at maturity to increase by 71 cents over the
past year.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"WE TOOK ADVANTAGE OF THE HIGHER YIELDS, BUYING REFCORPS AT THE END OF 1998
AND DURING THE THIRD QUARTER OF 1999."
PORTFOLIO AT A GLANCE
9/30/99 9/30/98
NUMBER OF SECURITIES 18 18
ANTICIPATED GROWTH
RATE 5.95% 4.41%
WEIGHTED AVERAGE
MATURITY DATE 11/1/10 10/16/10
ANTICIPATED VALUE AT
MATURITY (AVM)* $105.56 $104.85
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 13.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 55-56.
14 1-800-345-2021
Target: 2010--Q&A
- --------------------------------------------------------------------------------
(Continued)
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
A year ago, Treasury yields were as low as they've ever been. Since then,
the economy has shown continued strength, so it's not surprising that yields
have risen significantly in the past year. We think that Treasury yields have
returned to "fair value" based on current economic conditions.
Although we believe that most of the increase in yields is behind us, it's
possible that rates could rise a little further in the coming months. The U.S.
economy grew by 4.1% over the past year, a healthy pace that the Federal Reserve
probably considers inflationary.
So far, though, inflation has remained modest--consumer prices rose 2.6% in
the last year, which is below the long-term average and within the Fed's comfort
level. But inflation has been on the upswing lately, surging at an annual rate
of more than 4% in the last three months.
As a result, it's likely that the Fed will raise short-term rates again in
November, a move that's already been priced into the bond market. After that,
the Fed will probably be on hold until early next year as it focuses its
attention on the banking system during the transition into the year 2000.
So, if we continue to see strong economic growth or more threatening
inflation numbers through the end of this year, bond yields could rise as much
as 25-50 basis points (0.25%- 0.50%) from their current levels. On the other
hand, if the economy and inflation rate level off, then yields should be more
stable.
WHAT ARE YOUR PLANS FOR TARGET: 2010 GOING FORWARD?
We'll keep the portfolio's WAM date near the November 15, 2010 maturity
date of the benchmark. This will help the fund closely track the performance of
its benchmark.
We'll also continue to look for opportunities to add value through
adjustments to the mix of zeros in the portfolio. For example, we added some
CATS--receipt zeros backed by Treasurys and originally issued by Salomon
Brothers in the 1980s--to the Target: 2010 portfolio after the end of the
period. These zeros trade very infrequently, but we usually keep an eye out for
them because they can offer a nice yield pick-up for the fund.
We purchased the CATS in early October at a yield that was 23 basis points
(0.23%) higher than prevailing STRIPS yields. That extra yield should help boost
the fund's long-term performance.
[right margin]
"ALTHOUGH WE BELIEVE THAT MOST OF THE INCREASE IN YIELDS IS BEHIND US, IT'S
POSSIBLE THAT RATES COULD RISE A LITTLE FURTHER IN THE COMING MONTHS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 1999
STRIPS 34%
REFCORPs 60%
ETRs 6%
AS OF MARCH 31, 1999
STRIPS 41%
REFCORPs 52%
ETRs 7%
Investment terms are defined in the Glossary on pages 55-56.
www.americancentury.com 15
Target: 2010--Schedule of Investments
- --------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
SEPTEMBER 30, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 40.0%
$ 28,520,000 ETR, 7.11%, 5/15/09 $ 15,077,712
11,500,000 STRIPS -- PRINCIPAL, 7.18%,
11/15/09 6,021,608
4,000,000 STRIPS -- COUPON, 6.11%,
2/15/10 2,076,862
2,587,000 STRIPS -- COUPON, 6.80%,
5/15/10 1,320,798
20,577,000 STRIPS -- COUPON, 6.75%,
8/15/10 10,329,826
31,839,000 STRIPS -- COUPON, 7.58%,
11/15/10 15,723,690
38,360,000 STRIPS -- COUPON, 7.96%,
2/15/11 18,615,246
14,000,000 STRIPS -- COUPON, 6.32%,
5/15/11 6,679,229
36,715,000 STRIPS -- COUPON, 6.68%,
8/15/11 17,219,831
7,000,000 STRIPS -- COUPON, 6.86%,
11/15/11 3,225,481
------------
TOTAL ZERO-COUPON
U.S. TREASURY SECURITIES 96,290,283
------------
(Cost $90,450,903)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 60.0%
$ 2,000,000 REFCORP STRIPS -- COUPON,
7.98%, 10/15/09 $ 1,044,720
5,772,000 REFCORP STRIPS -- COUPON,
7.85%, 1/15/10 2,962,303
45,728,000 REFCORP STRIPS -- COUPON,
6.78%, 4/15/10 23,067,299
116,053,000 REFCORP STRIPS -- COUPON,
5.98%, 10/15/10 56,581,506
72,361,000 REFCORP STRIPS -- COUPON,
5.67%, 1/15/11 34,653,800
28,850,000 REFCORP STRIPS -- COUPON,
7.21%, 4/15/11 13,577,491
7,000,000 REFCORP STRIPS -- COUPON,
4.98%, 7/15/11 3,244,749
20,000,000 REFCORP STRIPS -- COUPON,
6.00%, 10/15/11 9,115,329
------------
TOTAL ZERO-COUPON U.S.
GOVERNMENT AGENCY SECURITIES 144,247,197
------------
(Cost $152,097,676)
TOTAL INVESTMENT SECURITIES -- 100.0% $240,537,480
============
(Cost $242,548,579)
NOTES TO SCHEDULE OF INVESTMENTS
ETR = Easy Growth Treasury Receipts
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
16 1-800-345-2021 See Notes to Financial Statements
Target: 2015--Performance
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 1999
INVESTOR CLASS (INCEPTION 9/1/86) ADVISOR CLASS (INCEPTION 7/23/99)
TARGET 11/15/15 MERRILL LYNCH TARGET 11/15/15 MERRILL LYNCH
MATURITIES MATURITY LONG-TERM MATURITIES MATURITY LONG-TERM
TRUST: 2015 STRIPS ISSUE TREASURY INDEX TRUST: 2015 STRIPS ISSUE TREASURY INDEX
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -5.39% -4.99% -2.56% -- -- --
1 YEAR -13.70% -13.31% -7.59% -- -- --
===========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 10.43% 10.87% 8.45% -- -- --
5 YEARS 13.56% 14.21% 9.91% -- -- --
10 YEARS 10.66% 11.05% 9.31% -- -- --
LIFE OF FUND 9.87% 10.12%(2) 8.95%(2) -1.44%(1) -0.18%(1)(3) 0.35%(1)(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Since 9/30/86, the date nearest the class's inception for which data are
available.
(3) Since 7/31/99, the date nearest the class's inception for which data are
available.
See pages 53-55 for more information about share classes, returns, the
comparative index, and the fund's benchmark.
[mountain graph - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 9/30/99
11/15/15 STRIPS Issue $28,533
Target Maturities Trust: 2015 $27,554
Merrill Lynch Long-Term
Treasury Index $24,356
Merrill Lynch
Long-Term 11/15/15 STRIPS
Target: 2015 Treasury Index Issue
DATE VALUE VALUE VALUE
9/30/1989 $10,000 $10,000 $10,000
9/30/1990 $8,803 $10,256 $8,784
9/30/1991 $11,806 $12,358 $11,825
9/30/1992 $13,054 $14,120 $13,070
9/30/1993 $18,591 $16,987 $18,726
9/30/1994 $14,590 $15,183 $14,685
9/30/1995 $20,614 $18,654 $20,949
9/30/1996 $20,460 $19,094 $20,937
9/30/1997 $24,544 $21,609 $25,188
9/30/1998 $31,924 $26,357 $32,915
9/30/1999 $27,554 $24,356 $28,533
$10,000 investment made 9/30/89
The graph at left shows the growth of a $10,000 investment in the fund over 10
years. The Merrill Lynch Long-Term Treasury Index and the fund's benchmark are
provided for comparison. The Target: 2015 portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the index and the benchmark do not.
[line graph - data below]
SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
TARGET: 2015
Anticipated Value at Maturity
(Estimated Share Price) $112.62
Actual Share Price (Historical) $43.04
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1986 $14.24 $101.00
$11.37 $102.86
$12.63 $102.75
$16.86 $101.77
1990 $16.29 $102.24
$19.95 $106.05
$21.502 $107.792
$28.064 $106.952
$24.11 $108.832
1995 $36.819 $109.462
$31.962 $110.109
$38.34 $110.52
$49.87 $112.63
$45.49 $112.52
2000 $43.04 $112.62
2005
2010
2015
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 55), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM. While this
graph demonstrates the fund's expected long-term growth pattern, please keep in
mind that the fund may experience significant share-price volatility over the
short term. Even if fund shares are held to maturity, there is no guarantee that
the fund's share price will reach its AVM. There is also no guarantee that the
AVM will fluctuate as little in the future as it has in the past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 17
Target: 2015--Q&A
- --------------------------------------------------------------------------------
An interview with Jeremy Fletcher and Dave Schroeder (pictured on page 6),
portfolio managers on the Target Maturities Trust investment team.
HOW DID THE FUND PERFORM?
Rising interest rates (see page 4 for details) led to a negative return for
Target: 2015. For the fiscal year ended September 30, 1999, the portfolio
returned -13.70%, compared with the -13.31% return of its benchmark, a STRIPS
issue maturing on November 15, 2015.* (See the previous page for other fund
performance comparisons.)
It's important to note that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's return is not.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PAST YEAR?
Most of the changes we make in an effort to add value revolve around cash
flows into or out of the portfolio. It's the most efficient way to make
adjustments, and it helps keep transaction costs down.
In the last year, we saw about $60 million in new investments come into the
Target: 2015 portfolio. We invested this new cash in STRIPS, which are the most
readily available Treasury zero-coupon bonds (zeros). As a result, STRIPS rose
from 50% of the portfolio a year ago to 60% at the end of the period (see the
charts on page 19).
Outside of fund cash flows, the most significant change we made was to sell
some of the portfolio's REFCORPs. We sold a few of these zeros at attractive
prices because of demand for REFCORPs from municipal bond issuers, which are
typically state and local governments.
WHAT DO THESE ENTITIES USE REFCORPS FOR?
Municipal bond issuers use REFCORPs as part of a process to refinance their
high-interest-rate bonds. Many municipal bonds have a brief window of
time--known as a "call date"--when they can be paid off before maturity. This
gives the issuer an opportunity to refinance the bonds if interest rates are
lower.
But the call date doesn't always coincide with a period of lower interest
rates, so issuers often try to refinance ahead of time. They do that by issuing
new bonds when rates are relatively low and investing the proceeds in Treasury
bonds or zeros that mature around the call date. When the call date arrives, the
Treasurys mature, and the issuers pay off the old bonds.
We had a pretty low interest rate environment in late 1998 and early 1999,
so municipal refinancing activity was high. Most of it involved bonds with call
dates of ten years or less, but there were a couple of longer-term refinancing
deals that created demand for REFCORPs maturing in 2015. As a result, we were
able to sell some of our holdings at a premium.
HOW DID THESE CHANGES AFFECT THE PORTFOLIO'S WEIGHTED AVERAGE MATURITY (WAM)
DATE?
They really didn't impact it much. We try to keep the WAM date very close
to the November 15, 2015 maturity date of the fund's benchmark, and most of the
STRIPS we bought during the past year had the same November maturity date.
The steady WAM date explains why Target: 2015's anticipated value at
maturity was virtually unchanged from where it was a year ago.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"WE SOLD A FEW REFCORPS AT ATTRACTIVE PRICES BECAUSE OF DEMAND FROM MUNICIPAL
BOND ISSUERS."
PORTFOLIO AT A GLANCE
9/30/99 9/30/98
NUMBER OF SECURITIES 13 12
ANTICIPATED GROWTH
RATE 6.06% 4.81%
WEIGHTED AVERAGE
MATURITY DATE 11/14/15 11/13/15
ANTICIPATED VALUE AT
MATURITY (AVM)* $112.62 $112.63
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 17.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 55-56.
18 1-800-345-2021
Target: 2015--Q&A
- --------------------------------------------------------------------------------
(Continued)
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
A year ago, Treasury yields were as low as they've ever been. Since then,
the economy has shown continued strength, so it's not surprising that yields
have risen significantly in the past year. We think that Treasury yields have
returned to "fair value" based on current economic conditions.
Although we believe that most of the increase in yields is behind us, it's
possible that rates could rise a little further in the coming months. The U.S.
economy grew by 4.1% over the past year, a healthy pace that the Federal Reserve
probably considers inflationary.
So far, though, inflation has remained modest--consumer prices rose 2.6% in
the last year, which is below the long-term average and within the Fed's comfort
level. But inflation has been on the upswing lately, surging at an annual rate
of more than 4% in the last three months.
As a result, it's likely that the Fed will raise short-term rates again in
November, a move that's already been priced into the bond market. After that,
the Fed will probably be on hold until early next year as it focuses its
attention on the banking system during the transition into the year 2000.
So, if we continue to see strong economic growth or more threatening
inflation numbers through the end of this year, bond yields could rise as much
as 25-50 basis points (0.25%- 0.50%) from their current levels. On the other
hand, if the economy and inflation rate level off, then yields should be more
stable.
WHAT ARE YOUR PLANS FOR TARGET: 2015 GOING FORWARD?
We'll continue to keep the portfolio's WAM date near the maturity date of
the benchmark. This will help the fund closely track the performance of its
benchmark.
We'll also continue to look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
[right margin]
"ALTHOUGH WE BELIEVE THAT MOST OF THE INCREASE IN YIELDS IS BEHIND US, IT'S
POSSIBLE THAT RATES COULD RISE A LITTLE FURTHER IN THE COMING MONTHS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 1999
STRIPS 60%
REFCORPs 40%
AS OF MARCH 31, 1999
STRIPS 63%
REFCORPs 37%
Investment terms are defined in the Glossary on pages 55-56.
www.americancentury.com 19
Target: 2015--Schedule of Investments
- --------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
SEPTEMBER 30, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 60.2%
$ 4,350,000 STRIPS -- COUPON, 9.22%,
2/15/15 $ 1,600,791
39,408,000 STRIPS -- COUPON, 9.14%,
5/15/15 14,268,200
35,603,000 STRIPS -- COUPON, 9.13%,
8/15/15 12,682,671
240,558,000 STRIPS -- COUPON, 6.41%,
11/15/15 84,310,812
36,300,000 STRIPS -- COUPON, 8.38%,
2/15/16 12,517,264
17,700,000 STRIPS -- COUPON, 8.39%,
5/15/16 6,005,033
-------------
TOTAL ZERO-COUPON
U.S. TREASURY SECURITIES 131,384,771
-------------
(Cost $121,544,322)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 39.8%
$ 17,103,000 REFCORP STRIPS -- COUPON,
6.63%, 1/15/15 $ 6,171,281
54,640,000 REFCORP STRIPS -- COUPON,
7.51%, 4/15/15 19,389,582
42,568,000 REFCORP STRIPS -- COUPON,
7.74%, 7/15/15 14,856,201
32,824,000 REFCORP STRIPS -- COUPON,
8.36%, 10/15/15 11,266,025
3,447,000 REFCORP STRIPS -- COUPON,
6.75%, 1/15/16 1,163,556
47,591,000 REFCORP STRIPS -- COUPON,
7.51%, 7/15/16 15,550,519
57,742,000 REFCORP STRIPS -- COUPON,
6.81%, 10/15/16 18,555,466
-------------
TOTAL ZERO-COUPON U.S.
GOVERNMENT AGENCY SECURITIES 86,952,630
-------------
(Cost $79,852,873)
TOTAL INVESTMENT SECURITIES -- 100.0% $218,337,401
=============
(Cost $201,397,195)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
20 1-800-345-2021 See Notes to Financial Statements
Target: 2020--Performance
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 1999
INVESTOR CLASS (INCEPTION 12/29/89) ADVISOR CLASS (INCEPTION 10/19/98)
TARGET MERRILL LYNCH TARGET 11/15/20 MERRILL LYNCH
MATURITIES FUND LONG-TERM MATURITIES MATURITY LONG-TERM
TRUST: 2020 BENCHMARK(2) TREASURY INDEX TRUST: 2020 STRIPS ISSUE TREASURY INDEX
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -7.24% -6.87% -2.56% -7.37% -6.87% -2.56%
1 YEAR -17.16% -16.82% -7.59% -- -- --
=========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 11.64% 12.16% 8.45% -- -- --
5 YEARS 14.91% 15.65% 9.91% -- -- --
LIFE OF FUND 10.08% 9.75%(3) 9.05%(3) -13.94%(1) -13.11%(1)(4) -6.10%(1)(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) From December 1989 through April 1990, the fund's benchmark was an 8/15/19
STRIPS issue; from May 1990 through October 1991, it was an 11/15/19 STRIPS
issue; and from November 1991 to the present, it has been an 11/15/20 STRIPS
issue.
(3) Since 12/31/89, the date nearest the class's inception for which data are
available.
(4) Since 10/31/98, the date nearest the class's inception for which data are
available.
See pages 53-55 for more information about share classes, returns, the
comparative index, and the fund's benchmark.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 9/30/99
Target Maturities Trust: 2020 $25,508
Fund Benchmark $24,771
Merrill Lynch Long-Term
Treasury Index $23,262
Merrill Lynch
Long-Term Fund
Target: 2020 Treasury Index Benchmark
DATE VALUE VALUE VALUE
12/31/1989 $10,000 $10,000 $10,000
3/31/1990 $8,658 $9,592 $8,407
6/30/1990 $9,258 $10,005 $8,818
9/30/1990 $8,025 $9,794 $7,976
12/31/1990 $9,550 $10,645 $9,080
3/31/1991 $9,717 $10,843 $9,257
6/30/1991 $9,208 $10,900 $8,774
9/30/1991 $10,450 $11,802 $10,012
12/31/1991 $11,208 $12,608 $10,623
3/31/1992 $10,592 $12,151 $9,970
6/30/1992 $10,842 $12,654 $10,226
9/30/1992 $11,359 $13,486 $10,690
12/31/1992 $12,143 $13,612 $11,474
3/31/1993 $13,360 $14,518 $12,631
6/30/1993 $14,693 $15,295 $13,854
9/30/1993 $17,269 $16,225 $16,421
12/31/1993 $16,469 $15,956 $15,625
3/31/1994 $14,511 $15,021 $13,672
6/30/1994 $13,378 $14,587 $12,613
9/30/1994 $12,735 $14,501 $11,974
12/31/1994 $13,561 $14,767 $12,775
3/31/1995 $14,769 $15,683 $13,925
6/30/1995 $17,935 $17,402 $17,009
9/30/1995 $18,726 $17,816 $17,816
12/31/1995 $21,876 $19,298 $20,861
3/31/1996 $18,243 $17,998 $17,378
6/30/1996 $18,135 $17,969 $17,361
9/30/1996 $18,334 $18,236 $17,558
12/31/1996 $20,034 $19,106 $19,111
3/31/1997 $18,425 $18,504 $17,620
6/30/1997 $20,268 $19,519 $19,504
9/30/1997 $22,643 $20,635 $21,752
12/31/1997 $25,768 $21,960 $24,758
3/31/1998 $26,100 $22,296 $25,127
6/30/1998 $28,342 $23,319 $27,225
9/30/1998 $30,791 $25,171 $29,781
12/31/1998 $30,015 $24,934 $29,114
3/31/1999 $27,500 $23,872 $26,599
6/30/1999 $26,117 $23,318 $25,347
9/30/1999 $25,508 $23,262 $24,771
$10,000 investment made 12/31/89
The graph at left shows the growth of a $10,000 investment over the life of the
fund.* The Merrill Lynch Long-Term Treasury Index and the fund's benchmark are
provided for comparison. The Target: 2020 portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the index and the benchmark do not.
* 12/31/89 is the date nearest the fund's inception for which index data are
available.
[line graph - data below]
SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
TARGET: 2020
Anticipated Value at Maturity
(Estimated Share Price) $107.30
Actual Share Price (Historical) $30.61
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1990 $11.46 $92.60
$13.45 $97.77
$14.575 $102.184
$19.765 $101.274
$16.273 $102.175
1995 $26.245 $102.54
$22 $103.598
$27.17 $104.84
$36.95 $106.96
$33.00 $106.76
2000 $30.61 $107.30
2005
2010
2015
2020
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 55), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM. While this
graph demonstrates the fund's expected long-term growth pattern, please keep in
mind that the fund may experience significant share-price volatility over the
short term. Even if fund shares are held to maturity, there is no guarantee that
the fund's share price will reach its AVM. There is also no guarantee that the
AVM will fluctuate as little in the future as it has in the past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 21
Target: 2020--Q&A
- --------------------------------------------------------------------------------
An interview with Jeremy Fletcher and Dave Schroeder (pictured on page 6),
portfolio managers on the Target Maturities Trust investment team.
HOW DID THE FUND PERFORM?
Rising interest rates (see page 4 for details) led to a negative return for
Target: 2020. For the fiscal year ended September 30, 1999, the portfolio
returned -17.16%, compared with the -16.82% return of its benchmark, a STRIPS
issue maturing on November 15, 2020.* (See the previous page for other fund
performance comparisons.)
It's important to note that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's return is not.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PAST YEAR?
Most of the changes we make in an effort to add value revolve around cash
flows into or out of the portfolio. It's the most efficient way to make
adjustments, and it helps keep transaction costs down.
Over the last several years, money has consistently flowed out of the
Target: 2020 portfolio. Three years ago, fund assets were nearly $1 billion, but
now they're closer to $300 million. Assets have stabilized somewhat in recent
months--net withdrawals in the past year were about $120 million, but only $20
million of that was in the last six months.
To meet these redemptions, we sold some of the portfolio's STRIPS, which
are the easiest Treasury zero-coupon bonds (zeros) to sell. STRIPS fell from 46%
of the portfolio a year ago to 35% at the end of the period (see the charts on
page 23).
DID THESE INVESTOR WITHDRAWALS HAVE ANY ADVERSE IMPACT ON TARGET: 2020'S
PERFORMANCE?
No. The Treasury zero market is very liquid, so it's easy for us to buy and
sell zeros when necessary to meet cash flow needs. As you can see from the graph
and performance table on page 21, the fund has consistently mirrored the
performance of its benchmark since its inception, despite some volatile cash
flows along the way.
However, selling zeros does have tax consequences. The bond rally in 1997
and 1998 was so strong that almost every bond in Target: 2020's portfolio is
still trading above the price we paid for it, even though zero prices fell quite
a bit in 1999. As a result, our selling activity incurred some taxable capital
gains, and we are required to distribute those gains to shareholders.
DOES THAT MEAN ANOTHER BIG CAPITAL GAINS DISTRIBUTION THIS YEAR?
Yes, although it won't be as large as last year's distribution. In
December, Target: 2020 shareholders will receive a taxable capital gains
distribution of approximately $3.04 per share. Keep in mind that this is only an
estimate, and the amount could change prior to the actual distribution date.
We made an effort to minimize the tax hit by selling our highest-cost zeros
first, but there was just no way to offset all of the gains.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"THE BOND RALLY IN 1997 AND 1998 WAS SO STRONG THAT ALMOST EVERY BOND IN TARGET:
2020'S PORTFOLIO IS STILL TRADING ABOVE THE PRICE WE PAID FOR IT."
PORTFOLIO AT A GLANCE
9/30/99 9/30/98
NUMBER OF SECURITIES 16 15
ANTICIPATED GROWTH
RATE 6.10% 4.90%
WEIGHTED AVERAGE
MATURITY DATE 8/21/20 9/5/20
ANTICIPATED VALUE AT
MATURITY (AVM)* $107.30 $106.96
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 21.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 55-56.
22 1-800-345-2021
Target: 2020--Q&A
- --------------------------------------------------------------------------------
(Continued)
HOW DID THIS SELLING ACTIVITY AFFECT THE PORTFOLIO'S WEIGHTED AVERAGE MATURITY
(WAM) DATE?
The WAM date shortened slightly from September 5, 2020, to August 21, 2020.
Ordinarily, a shorter WAM date would cause the fund's anticipated value at
maturity to decrease, but it actually increased by 34 cents over the past year.
The greater role of REFCORPs in the portfolio accounts for that increase.
Because we've been selling STRIPS to meet investor redemptions, REFCORPs have
grown to 65% of the portfolio. REFCORPs tend to have higher yields than STRIPS,
and that extra yield adds to the expected ending value of the fund's share
price.
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
A year ago, Treasury yields were as low as they've ever been. Since then,
the economy has shown continued strength, so it's not surprising that yields
have risen significantly in the past year. We think that Treasury yields have
returned to "fair value" based on current economic conditions.
Although we believe that most of the increase in yields is behind us, it's
possible that rates could rise a little further in the coming months. The U.S.
economy grew by 4.1% over the past year, a healthy pace that the Federal Reserve
probably considers inflationary.
So far, though, inflation has remained modest--consumer prices rose 2.6% in
the last year, which is below the long-term average and within the Fed's comfort
level. But inflation has been on the upswing lately, surging at an annual rate
of more than 4% in the last three months.
As a result, it's likely that the Fed will raise short-term rates again in
November, a move that's already been priced into the bond market. After that,
the Fed will probably be on hold until early next year as it focuses its
attention on the banking system during the transition into the year 2000.
So, if we continue to see strong economic growth or more threatening
inflation numbers through the end of this year, bond yields could rise as much
as 25-50 basis points (0.25%- 0.50%) from their current levels. On the other
hand, if the economy and inflation rate level off, then yields should be more
stable.
WHAT ARE YOUR PLANS FOR TARGET: 2020 GOING FORWARD?
We'll continue to keep the portfolio's WAM date near the November 15, 2020
maturity date of the benchmark. This will help the fund closely track the
performance of its benchmark.
We'll also continue to look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
[right margin]
"ALTHOUGH WE BELIEVE THAT MOST OF THE INCREASE IN YIELDS IS BEHIND US, IT'S
POSSIBLE THAT RATES COULD RISE A LITTLE FURTHER IN THE COMING MONTHS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 1999
REFCORPs 65%
STRIPS 35%
AS OF MARCH 31, 1999
REFCORPs 52%
STRIPS 48%
Investment terms are defined in the Glossary on pages 55-56.
www.americancentury.com 23
Target: 2020--Schedule of Investments
- --------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
SEPTEMBER 30, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 34.6%
$118,000,000 STRIPS -- COUPON, 8.29%,
2/15/20 $ 31,339,051
63,688,000 STRIPS -- COUPON, 8.38%,
5/15/20 16,658,236
76,135,000 STRIPS -- COUPON, 7.97%,
8/15/20 19,592,735
147,407,000 STRIPS -- COUPON, 7.85%,
11/15/20(2) 37,322,279
7,750,000 STRIPS -- COUPON, 8.08%,
2/15/21 1,938,600
5,500,000 STRIPS -- COUPON, 8.18%,
5/15/21 1,355,077
5,500,000 STRIPS -- COUPON, 7.40%,
11/15/21 1,324,589
------------
TOTAL ZERO-COUPON
U.S. TREASURY SECURITIES 109,530,567
------------
(Cost $81,738,716)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 65.4%
$ 258,000 REFCORP STRIPS -- COUPON,
6.21%, 4/15/19 $ 69,857
91,274,000 REFCORP STRIPS -- COUPON,
7.64%, 1/15/20 23,528,081
29,156,000 REFCORP STRIPS -- COUPON,
5.92%, 4/15/20 7,398,397
69,793,000 REFCORP STRIPS -- COUPON,
7.45%, 7/15/20 17,417,180
249,094,000 REFCORP STRIPS --
PRINCIPAL, 8.17%, 7/15/20 62,350,370
35,406,000 REFCORP STRIPS -- COUPON,
6.46%, 10/15/20 8,689,345
49,000,000 REFCORP STRIPS --
PRINCIPAL, 6.56%, 10/15/20 12,062,347
25,482,000 REFCORP STRIPS -- COUPON,
7.98%, 1/15/21 6,175,731
284,945,000 REFCORP STRIPS --
PRINCIPAL, 7.33%, 1/15/21 69,271,938
------------
TOTAL ZERO-COUPON U.S.
GOVERNMENT AGENCY SECURITIES 206,963,246
------------
(Cost $181,092,046)
TOTAL INVESTMENT SECURITIES -- 100.0% $316,493,813
============
(Cost $262,830,762)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
(2) Security position, or a portion thereof, has been loaned. (See Note 5 in
the Notes to Financial Statements).
24 1-800-345-2021 See Notes to Financial Statements
<TABLE>
<CAPTION>
Target: 2025--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1999
INVESTOR CLASS (INCEPTION 2/15/96) ADVISOR CLASS (INCEPTION 6/1/98)
TARGET MERRILL LYNCH TARGET 11/15/25 MERRILL LYNCH
MATURITIES FUND LONG-TERM MATURITIES MATURITY LONG-TERM
TRUST: 2025 BENCHMARK(2) TREASURY INDEX TRUST: 2025 STRIPS ISSUE TREASURY INDEX
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -6.69% -6.84% -2.56% -6.81% -6.84% -2.56%
1 YEAR -17.21% -17.19% -7.59% -17.41% -17.19% -7.59%
=========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 13.55% 13.09% 8.45% -- -- --
LIFE OF FUND 7.99% 8.77%(3) 6.86%(3) -3.16% -1.85%(4) 1.54%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) The fund's benchmark was an 8/15/25 STRIPS issue from inception through
January 1998, when the benchmark was changed to an 11/15/25 STRIPS issue.
(3) Since 2/29/96, the date nearest the class's inception for which data are
available.
(4) Since 5/31/98, the date nearest the class's inception for which data are
available.
See pages 53-55 for more information about share classes, returns, the
comparative index, and the fund's benchmark.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 9/30/99
Fund Benchmark $13,513
Target Maturities Trust: 2025 $13,209
Merrill Lynch Long-Term
Treasury Index $12,679
Merrill Lynch
Long-Term Fund
Target: 2025 Treasury Index Benchmark
DATE VALUE VALUE VALUE
2/29/1996 $10,000 $10,000 $10,000
3/31/1996 $9,123 $9,810 $9,632
6/30/1996 $8,982 $9,794 $9,361
9/30/1996 $9,022 $9,940 $9,343
12/31/1996 $9,888 $10,414 $10,158
3/31/1997 $8,881 $10,086 $9,077
6/30/1997 $9,964 $10,639 $10,133
9/30/1997 $11,218 $11,247 $11,358
12/31/1997 $12,865 $11,969 $13,127
3/31/1998 $13,067 $12,152 $13,356
6/30/1998 $14,392 $12,710 $14,642
9/30/1998 $15,954 $13,719 $16,319
12/31/1998 $15,671 $13,590 $16,103
3/31/1999 $14,154 $13,011 $14,506
6/30/1999 $13,399 $12,710 $13,718
9/30/1999 $13,209 $12,679 $13,513
$10,000 investment made 2/29/96
The graph at left shows the growth of a $10,000 investment over the life of the
fund.* The Merrill Lynch Long-Term Treasury Index and the fund's benchmark are
provided for comparison. The Target: 2025 portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the index and the benchmark do not.
* 2/29/96 is the date nearest the fund's inception for which index data are
available.
[line graph - data below]
SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
TARGET: 2025
Anticipated Value at Maturity
(Estimated Share Price) $111.81
Actual Share Price (Historical) $26.22
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1996 $17.91 $109.24
$22.27 $110.88
$31.67 $112.23
$28.10 $111.41
2000 $26.22 $111.81
2005
2010
2015
2020
2025
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 55), which fluctuates from day to day based on the fund's
expected maturity date. The bottom line represents the fund's historical share
price, which is managed to grow over time to reach the fund's AVM. While this
graph demonstrates the fund's expected long-term growth pattern, please keep in
mind that the fund may experience significant share-price volatility over the
short term. Even if fund shares are held to maturity, there is no guarantee that
the fund's share price will reach its AVM. There is also no guarantee that the
AVM will fluctuate as little in the future as it has in the past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 25
Target: 2025--Q&A
- --------------------------------------------------------------------------------
An interview with Jeremy Fletcher and Dave Schroeder (pictured on page 6),
portfolio managers on the Target Maturities Trust investment team.
HOW DID THE FUND PERFORM?
Rising interest rates (see page 4 for details) led to a negative return for
Target: 2025. For the fiscal year ended September 30, 1999, the portfolio
returned -17.21%, compared with the -17.19% return of its benchmark, a STRIPS
issue maturing on November 15, 2025.* (See the previous page for other fund
performance comparisons.)
It's important to note that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's return is not.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PAST YEAR?
Asset growth was the big story. Most of the changes we make in an effort to
add value revolve around cash flows into or out of the portfolio. It's the most
efficient way to make adjustments, and it helps keep transaction costs down.
In the past year, shareholders invested more than $400 million in the
Target: 2025 portfolio, doubling the fund's assets. With such a large amount of
cash coming in on an almost daily basis, we invested it in STRIPS because they
are the most readily available Treasury zero-coupon bonds (zeros) in this
maturity sector.
These investments pushed our STRIPS holdings from 67% of the portfolio a
year ago to 86% at the end of the period (see the charts on page 27).
DID THESE INVESTMENTS AFFECT THE PORTFOLIO'S WEIGHTED AVERAGE MATURITY (WAM)
DATE?
Yes. During the first six months of the fiscal year, we bought a lot of
STRIPS maturing in February 2025 because they were offering the most attractive
yields. This caused the WAM date to shorten from May 30, 2025, to May 1, 2025.
In the last six months, we started buying STRIPS maturing in August 2025,
which had slightly higher yields than the February zeros. We were quick to take
advantage of this because it's unusual--zero-coupon bond yields typically peak
around 2020; after that, yields start to decline the further out you go on the
maturity scale (see the graph on page 4 for an example).
Adding a large amount of August 2025 zeros to the portfolio caused the WAM
date to extend back out to June 9, 2025, by the end of the period.
IN THE PAST, YOU TALKED ABOUT LOANING OUT SOME OF THE PORTFOLIO'S BONDS. ARE YOU
STILL DOING THAT?
Absolutely. It's a great way to enhance the fund's returns. There is still
a somewhat limited supply of zeros with maturities around 2025, and we're one of
the major investors in this area of the market. That makes the fund an
attractive source for dealers who need to borrow securities.
We recently expanded our list of potential borrowers, although not all of
them have been active yet. We have the flexibility to lend as much as a third of
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"IN THE PAST YEAR, SHAREHOLDERS INVESTED MORE THAN $400 MILLION IN THE TARGET:
2025 PORTFOLIO, DOUBLING THE FUND'S ASSETS."
PORTFOLIO AT A GLANCE
9/30/99 9/30/98
NUMBER OF SECURITIES 23 20
ANTICIPATED GROWTH
RATE 5.73% 4.80%
WEIGHTED AVERAGE
MATURITY DATE 6/9/25 5/30/25
ANTICIPATED VALUE AT
MATURITY (AVM)* $111.81 $112.23
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 25.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 55-56.
26 1-800-345-2021
Target: 2025--Q&A
- --------------------------------------------------------------------------------
(Continued)
the portfolio, but currently we have about 6% of the portfolio's securities
loaned out. The fees we earn on these loans provide a boost to the fund's
overall return.
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
A year ago, Treasury yields were as low as they've ever been. Since then,
the economy has shown continued strength, so it's not surprising that yields
have risen significantly in the past year. We think that Treasury yields have
returned to "fair value" based on current economic conditions.
Although we believe that most of the increase in yields is behind us, it's
possible that rates could rise a little further in the coming months. The U.S.
economy grew by 4.1% over the past year, a healthy pace that the Federal Reserve
probably considers inflationary.
So far, though, inflation has remained modest--consumer prices rose 2.6% in
the last year, which is below the long-term average and within the Fed's comfort
level. But inflation has been on the upswing lately, surging at an annual rate
of more than 4% in the last three months.
As a result, it's likely that the Fed will raise short-term rates again in
November, a move that's already been priced into the bond market. After that,
the Fed will probably be on hold until early next year as it focuses its
attention on the banking system during the transition into the year 2000.
So, if we continue to see strong economic growth or more threatening
inflation numbers through the end of this year, bond yields could rise as much
as 25-50 basis points (0.25%- 0.50%) from their current levels. On the other
hand, if the economy and inflation rate level off, then yields should be more
stable.
WHAT ARE YOUR PLANS FOR TARGET: 2025 GOING FORWARD?
We'll continue to keep the portfolio's WAM date within the target year,
although it will likely remain shorter than the November 15, 2025 maturity date
of the benchmark for the time being.
We'll also continue to look for opportunities to add value through
adjustments to the mix of zeros in the portfolio. Our options are somewhat
limited because the vast majority of zeros in the 2024-2026 maturity range are
STRIPS. The only REFCORP zeros available in this maturity range are interest
coupons on bonds maturing in 2030, and there aren't many of those.
However, we can take advantage of relative values among different STRIPS
issues. For example, STRIPS maturing in 2024 and early 2025 outperformed STRIPS
maturing in late 2025 and 2026 over the past year. Having a lot of these
shorter-term STRIPS in the Target: 2025 portfolio helped improve fund
performance.
[right margin]
"ALTHOUGH WE BELIEVE THAT MOST OF THE INCREASE IN YIELDS IS BEHIND US, IT'S
POSSIBLE THAT RATES COULD RISE A LITTLE FURTHER IN THE COMING MONTHS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 1999
STRIPS 86%
REFCORPs 14%
AS OF MARCH 31, 1999
STRIPS 76%
REFCORPs 24%
Investment terms are defined in the Glossary on pages 55-56.
www.americancentury.com 27
Target: 2025--Schedule of Investments
- --------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period.
SEPTEMBER 30, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 85.8%
$ 159,500,000 STRIPS -- COUPON, 5.83%,
11/15/24(2) $ 33,329,747
277,500,000 STRIPS -- PRINCIPAL, 6.27%,
11/15/24 58,128,874
371,900,000 STRIPS -- COUPON, 6.10%,
2/15/25(2) 76,606,455
528,300,000 STRIPS -- PRINCIPAL, 6.30%,
2/15/25 109,090,756
134,500,000 STRIPS -- COUPON, 5.83%,
5/15/25 27,277,247
303,000,000 STRIPS -- COUPON, 5.90%,
8/15/25(2) 60,500,639
1,118,600,000 STRIPS -- PRINCIPAL, 6.23%,
8/15/25 223,914,050
99,499,000 STRIPS -- COUPON, 5.94%,
11/15/25 19,560,282
115,000,000 STRIPS -- COUPON, 6.27%,
2/15/26 22,286,837
40,000,000 STRIPS -- COUPON, 6.10%,
5/15/26 7,652,013
17,000,000 STRIPS -- COUPON, 6.03%,
8/15/26 3,214,523
-------------
TOTAL ZERO-COUPON
U.S. TREASURY SECURITIES 641,561,423
-------------
(Cost $671,495,962)
Principal Amount Value
- --------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 14.2%
$ 10,000,000 REFCORP STRIPS -- COUPON,
6.19%, 1/15/24 $ 2,102,429
25,998,000 REFCORP STRIPS -- COUPON,
6.42%, 4/15/24 5,378,785
3,926,000 REFCORP STRIPS -- COUPON,
7.10%, 7/15/24 801,256
89,170,000 REFCORP STRIPS -- COUPON,
6.75%, 10/15/24 17,930,813
42,005,000 REFCORP STRIPS -- COUPON,
6.93%, 1/15/25 8,322,700
33,899,000 REFCORP STRIPS -- COUPON,
6.75%, 4/15/25 6,609,888
15,142,000 REFCORP STRIPS -- COUPON,
6.55%, 7/15/25 2,905,668
102,028,000 REFCORP STRIPS -- COUPON,
6.76%, 10/15/25 19,267,528
56,435,000 REFCORP STRIPS -- COUPON,
6.74%, 1/15/26 10,501,794
50,559,000 REFCORP STRIPS -- COUPON,
6.58%, 4/15/26 9,282,799
37,000,000 REFCORP STRIPS -- COUPON,
7.27%, 7/15/26 6,711,874
90,139,000 REFCORP STRIPS -- COUPON,
6.95%, 10/15/26 16,113,839
-------------
TOTAL ZERO-COUPON U.S.
GOVERNMENT AGENCY SECURITIES 105,929,373
-------------
(Cost $99,147,675)
TOTAL INVESTMENT SECURITIES -- 100.0% $747,490,796
=============
(Cost $770,643,637)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
(2) Security position, or a portion thereof, has been loaned. (See Note 5 in
the Notes to Financial Statements).
28 1-800-345-2021 See Notes to Financial Statements
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
SEPTEMBER 30, 1999 2000 2005 2010
ASSETS
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $201,888,246,
$498,799,887, and $242,548,579,
respectively) (Note 3) .............$ 202,839,702 $ 492,588,417 $ 240,537,480
Cash ................................. 111,505 370,126 144,809
Investment in affiliated money
market fund (Note 2) ............... 136,662 523,140 1,637,413
Securities lending fee receivable .... -- -- --
------------- ------------- -------------
203,087,869 493,481,683 242,319,702
------------- ------------- -------------
LIABILITIES
Payable for capital shares redeemed .. 85,965 455,289 399,223
Accrued management fees (Note 2) ..... 97,289 238,048 113,865
Distribution and service
fees payable (Note 2) .............. 340 957 466
Payable for trustees' fees
and expenses ....................... 532 1,293 622
Accrued expenses and
other liabilities .................. 1,063 4,534 5,210
------------- ------------- -------------
185,189 700,121 519,386
------------- ------------- -------------
Net Assets ...........................$ 202,902,680 $ 492,781,562 $ 241,800,316
============= ============= =============
NET ASSETS CONSIST OF:
Capital paid in ......................$ 192,962,632 $ 471,336,233 $ 234,562,749
Undistributed net investment income .. 8,476,606 18,541,166 9,891,894
Accumulated undistributed net
realized gain (loss)
on investment transactions ......... 511,986 9,115,633 (643,228)
Net unrealized appreciation
(depreciation) on investments
(Note 3) ........................... 951,456 (6,211,470) (2,011,099)
------------- ------------- -------------
$ 202,902,680 $ 492,781,562 $ 241,800,316
============= ============= =============
Investor Class
Net assets ...........................$ 201,970,770 $ 490,248,093 $ 240,605,972
Shares outstanding ................... 2,101,412 6,757,051 4,366,827
Net asset value per share ............$ 96.11 $ 72.55 $ 55.10
Advisor Class
Net assets ...........................$ 931,910 $ 2,533,469 $ 1,194,344
Shares outstanding ................... 9,723 35,022 21,730
Net asset value per share ............$ 95.85 $ 72.34 $ 54.96
</TABLE>
See Notes to Financial Statements www.americancentury.com 29
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1999 2015 2020 2025
ASSETS
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $201,397,195,
$262,830,762, and $770,643,637,
respectively) (Note 3) .............$ 218,337,401 $ 316,493,813 $ 747,490,796
Cash ................................. 174,606 704,831 5,168,849
Investment in affiliated money
market fund (Note 2) ............... 121,378 2,500,761 3,364,245
Securities lending fee receivable .... -- 8,517 38,018
------------- ------------- -------------
218,633,385 319,707,922 756,061,908
------------- ------------- -------------
LIABILITIES
Payable for capital shares redeemed .. 322,693 2,268,469 341,022
Accrued management fees (Note 2) ..... 105,379 150,927 350,760
Distribution and service
fees payable (Note 2) .............. 3 238 392
Payable for trustees' fees
and expenses ....................... 575 823 1,915
Accrued expenses and
other liabilities .................. 4,225 6,646 14,447
------------- ------------- -------------
432,875 2,427,103 708,536
------------- ------------- -------------
Net Assets ...........................$ 218,200,510 $ 317,280,819 $ 755,353,372
============= ============= =============
NET ASSETS CONSIST OF:
Capital paid in ......................$ 193,480,403 $ 219,074,158 $ 768,702,308
Undistributed net investment income .. 8,994,220 13,317,766 20,751,314
Accumulated undistributed net
realized gain (loss)
on investment transactions ......... (1,214,319) 31,225,844 (10,947,409)
Net unrealized appreciation
(depreciation) on investments
(Note 3) ........................... 16,940,206 53,663,051 (23,152,841)
------------- ------------- -------------
$ 218,200,510 $ 317,280,819 $ 755,353,372
============= ============= =============
Investor Class
Net assets ...........................$ 218,193,111 $ 316,707,307 $ 754,355,948
Shares outstanding ................... 5,069,339 10,347,549 28,765,540
Net asset value per share ............$ 43.04 $ 30.61 $ 26.22
Advisor Class
Net assets ...........................$ 7,399 $ 573,512 $ 997,424
Shares outstanding ................... 172 18,770 38,170
Net asset value per share ............$ 43.02 $ 30.55 $ 26.13
</TABLE>
30 1-800-345-2021 See Notes to Financial Statements
<TABLE>
<CAPTION>
Statements of Operations
- --------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
YEAR ENDED SEPTEMBER 30, 1999 2000 2005 2010
INVESTMENT INCOME
Income:
<S> <C> <C> <C>
Interest ............................$ 12,801,787 $ 30,110,200 $ 14,541,083
Income from securities lending ...... -- -- --
------------ ------------ ------------
12,801,787 30,110,200 14,541,083
------------ ------------ ------------
Expenses (Note 2):
Management fees ..................... 1,258,019 3,089,694 1,435,149
Distribution fees -- Advisor Class .. 1,268 2,311 1,391
Service fees -- Advisor Class ....... 1,268 2,311 1,391
Trustees' fees and expenses ......... 8,562 20,164 9,643
------------ ------------ ------------
1,269,117 3,114,480 1,447,574
------------ ------------ ------------
Net investment income ............... 11,532,670 26,995,720 13,093,509
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized gain (loss)
on investments .................... 882,851 9,503,624 3,303,613
Change in net unrealized
appreciation on investments ....... (7,272,041) (67,594,700) (47,947,788)
------------ ------------ ------------
Net realized and unrealized
loss on investments ............... (6,389,190) (58,091,076) (44,644,175)
------------ ------------ ------------
Net Increase (Decrease) in
Net Assets Resulting
from Operations ...................$ 5,143,480 $(31,095,356) $(31,550,666)
============ ============ ============
</TABLE>
See Notes to Financial Statements www.americancentury.com 31
<TABLE>
<CAPTION>
Statements of Operations
- --------------------------------------------------------------------------------
(Continued)
YEAR ENDED SEPTEMBER 30, 1999 2015 2020 2025
INVESTMENT INCOME
Income:
<S> <C> <C> <C>
Interest ............................$ 12,263,365 $ 20,298,253 $ 26,975,612
Income from securities lending ...... -- 65,684 159,726
------------- ------------- -------------
12,263,365 20,363,937 27,135,338
------------- ------------- -------------
Expenses (Note 2):
Management fees ..................... 1,225,471 2,196,094 2,705,602
Distribution fees -- Advisor Class .. 3 548 1,179
Service fees -- Advisor Class ....... 3 548 1,179
Trustees' fees and expenses ......... 8,398 14,432 17,249
------------- ------------- -------------
1,233,875 2,211,622 2,725,209
------------- ------------- -------------
Net investment income ............... 11,029,490 18,152,315 24,410,129
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized gain (loss)
on investments .................... (1,189,705) 40,557,105 (9,083,532)
Change in net unrealized
appreciation on investments ....... (42,858,822) (132,226,209) (93,055,873)
------------- ------------- -------------
Net realized and unrealized
loss on investments ............... (44,048,527) (91,669,104) (102,139,405)
------------- ------------- -------------
Net Increase (Decrease) in
Net Assets Resulting
from Operations ...................$ (33,019,037) $ (73,516,789) $ (77,729,276)
============= ============= =============
</TABLE>
32 1-800-345-2021 See Notes to Financial Statements
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
YEARS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
Increase (Decrease) 2000 2005 2010
in Net Assets 1999 1998 1999 1998 1999 1998
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income .... $ 11,532,670 $ 13,784,666 $ 26,995,720 $ 21,177,808 $ 13,093,509 $ 10,026,197
Net realized gain (loss)
on investments ......... 882,851 6,149,330 9,503,624 5,444,663 3,303,613 2,154,470
Change in net unrealized
appreciation
on investments ......... (7,272,041) 679,135 (67,594,700) 42,618,545 (47,947,788) 34,621,133
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in
net assets resulting
from operations ........ 5,143,480 20,613,131 (31,095,356) 69,241,016 (31,550,666) 46,801,800
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Investor Class ......... (13,127,657) (15,765,056) (23,463,873) (15,987,498) (11,224,267) (7,102,391)
Advisor Class .......... (3,731) -- (5,103) -- (872) --
From net realized gains on
investment
transactions:
Investor Class ......... (3,117,167) -- (7,397,428) (1,217,264) (5,371,126) (850,424)
Advisor Class .......... (897) -- (1,643) -- (420) --
In excess of net realized
gains on investment
transactions:
Investor Class ......... -- -- -- -- (643,178) --
Advisor Class .......... -- -- -- -- (50) --
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets
from distributions
to shareholders ........ (16,249,452) (15,765,056) (30,868,047) (17,204,762) (17,239,913) (7,952,815)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE
TRANSACTIONS (NOTE 4)
Net increase (decrease)
in net assets from
capital share
transactions ........... (23,579,846) (15,636,711) 20,658,855 200,372,715 6,762,551 120,167,530
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets .......... (34,685,818) (10,788,636) (41,304,548) 252,408,969 (42,028,028) 159,016,515
NET ASSETS
Beginning of period ...... 237,588,498 248,377,134 534,086,110 281,677,141 283,828,344 124,811,829
------------- ------------- ------------- ------------- ------------- -------------
End of period ............ $ 202,902,680 $ 237,588,498 $ 492,781,562 $ 534,086,110 $ 241,800,316 $ 283,828,344
============= ============= ============= ============= ============= =============
Undistributed net
investment income ...... $ 8,476,606 $ 10,075,324 $ 18,541,166 $ 16,898,403 $ 9,891,894 $ 8,023,524
============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements www.americancentury.com 33
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
(Continued)
YEARS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
Increase (Decrease) 2015 2020 2025
in Net Assets 1999 1998 1999 1998 1999 1998
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income .... $ 11,029,490 $ 7,132,681 $ 18,152,315 $ 27,196,872 $ 24,410,129 $ 10,439,415
Net realized gain (loss)
on investments ......... (1,189,705) 298,681 40,557,105 55,277,618 (9,083,532) 1,681,458
Change in net unrealized
appreciation
on investments ......... (42,858,822) 29,541,335 (132,226,209) 86,449,383 (93,055,873) 60,753,235
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in
net assets resulting
from operations ........ (33,019,037) 36,972,697 (73,516,789) 168,923,873 (77,729,276) 72,874,108
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Investor Class ......... (7,536,221) (6,501,208) (24,377,620) (44,888,306) (12,412,051) (4,549,154)
Advisor Class .......... -- -- (988) -- (9,148) --
From net realized gains on
investment
transactions:
Investor Class ......... -- (4,326,524) (61,543,905) (41,866,720) -- (305,669)
Advisor Class .......... -- -- (2,511) -- -- --
In excess of net realized
gains on investment
transactions:
Investor Class ......... (295,396) -- -- -- (3,038,701) --
Advisor Class .......... -- -- -- -- (2,318) --
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets
from distributions
to shareholders ........ (7,831,617) (10,827,732) (85,925,024) (86,755,026) (15,462,218) (4,854,823)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE
TRANSACTIONS (NOTE 4)
Net increase (decrease)
in net assets from
capital share
transactions ........... 88,969,917 29,036,713 (9,329,139) (149,668,103) 492,333,318 214,370,948
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets .......... 48,119,263 55,181,678 (168,770,952) (67,499,256) 399,141,824 282,390,233
NET ASSETS
Beginning of period ...... 170,081,247 114,899,569 486,051,771 553,551,027 356,211,548 73,821,315
------------- ------------- ------------- ------------- ------------- -------------
End of period ............ $ 218,200,510 $ 170,081,247 $ 317,280,819 $ 486,051,771 $ 755,353,372 $ 356,211,548
============= ============= ============= ============= ============= =============
Undistributed net
investment income ...... $ 8,994,220 $ 5,500,951 $ 13,317,766 $ 19,544,059 $ 20,751,314 $ 8,762,384
============= ============= ============= ============= ============= =============
</TABLE>
34 1-800-345-2021 See Notes to Financial Statements
Notes to Financial Statements
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Target Maturities Trust (the trust) is
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. The trust is composed of the following series:
Target 2000 Fund (2000), Target 2005 Fund (2005), Target 2010 Fund (2010),
Target 2015 Fund (2015), Target 2020 Fund (2020), and Target 2025 Fund (2025)
(the funds). Each fund seeks to provide the highest attainable investment return
consistent with the creditworthiness of U.S. Treasury securities and the
professional management of reinvestment and market risks. Each fund invests
primarily in zero-coupon U.S. Treasury securities and will be liquidated shortly
after the conclusion of its target maturity year. The funds are authorized to
issue two classes of shares: the Investor Class and the Advisor Class. The two
classes of shares differ principally in their respective shareholder servicing
and distribution expenses and arrangements. All shares of the funds represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes. Sale of the Advisor Class for
2010, 2015 and 2020 commenced on October 20, 1998, July 23, 1999 and October 19,
1998, respectively. The following significant accounting policies are in
accordance with generally accepted accounting principles; these policies may
require the use of estimates by fund management.
SECURITY VALUATIONS -- Securities are valued based on data obtained through
a commercial pricing service or at the mean of the most recent bid and asked
prices. When valuations are not readily available, securities are valued at fair
value as determined in accordance with procedures adopted by the Board of
Trustees.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
INCOME TAX STATUS -- It is the funds' policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized gains are declared and paid annually in December.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
For the eleven month period ended September 30, 1999, 2010 and 2025 incurred
net capital losses of $437,880 and $3,643,967, respectively. The fund has
elected to treat such losses as having been incurred in the following fiscal
year.
REVERSE SHARE SPLITS -- The Trustees may authorize reverse share splits
immediately after and of a size that exactly offsets the per share amount of the
annual dividend and capital gain distribution (if any). After taking into
account the reverse share split, a shareholder reinvesting dividends and capital
gain distributions will hold exactly the same number of shares owned prior to
the distributions and reverse share split. A shareholder electing to receive
dividends in cash will own fewer shares.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the trust's
distributor. Certain officers of FDI are also officers of the trust.
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM), under which ACIM provides the funds with
investment advisory and management services in exchange for a single, unified
management fee per class. The Agreement provides that all expenses of the funds,
except brokerage, taxes, portfolio insurance, interest, fees and expenses of the
Trustees who are not considered "interested persons" as defined in the
Investment Company Act of 1940 (including counsel fees) and extraordinary
expenses, will be paid by ACIM. The fee is calculated daily and paid monthly. It
consists of an Investment Category Fee based on the average net assets of the
funds in a specific fund's investment category and a Complex Fee based on the
average net assets of all the funds managed by ACIM. The rates for the
Investment Category Fee range from 0.2425% to 0.3600% and the rates for the
Complex Fee range from 0.2900% to 0.3100%. The Advisor Class is 0.2500% less at
each point within the Complex Fee range. For the year ended September 30, 1999,
the effective annual Investor Class management fee was 0.59% for each fund.
The Board of Trustees has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the plan), pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The plan provides that the funds will pay ACIM an annual
distribution fee equal to 0.25% and service fee equal to 0.25%. The fees are
computed daily and paid monthly based on the Advisor Class's average daily
closing net assets during the previous month. The distribution fee provides
compensation for distribution expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the funds. The service
fee provides compensation for shareholder and administrative services rendered
by ACIM, its affiliates or independent third party providers. Fees incurred
under the plan for the period ending September 30, 1999, were $2,536, $4,622,
$2,782, $6, $1,096, and $2,358 for 2000, 2005, 2010, 2015, 2020, and 2025,
respectively.
www.americancentury.com 35
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1999
Certain officers and trustees of the trust are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the trust's investment manager, ACIM, and the
trust's transfer agent, American Century Services Corporation.
As of September 30, 1999, 2000, 2005, 2010, 2015, 2020, and 2025 had
invested $136,662, $523,140, $1,637,413, $121,378, $2,500,761, and $3,364,245,
respectively, in shares of the Capital Preservation Fund (CPF). CPF is a money
market fund managed by ACIM. The terms of these transactions were identical to
those with non-related entities except that, to avoid duplicative management
fees, the funds did not pay ACIM management fees with respect to assets invested
in CPF.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions in U.S. Treasury securities, excluding short-term
investments, for the year ended September 30, 1999, were as follows:
<TABLE>
2000 2005 2010 2015 2020 2025
<S> <C> <C> <C> <C> <C> <C>
Purchases $64,693,101 $427,052,161 $120,265,367 $194,303,399 $119,046,866 $717,932,149
Proceeds from Sales $116,476,387 $429,054,434 $130,679,497 $113,603,420 $218,140,390 $249,729,449
On September 30, 1999, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal income tax purposes was as follows:
2000 2005 2010 2015 2020 2025
Appreciation $1,303,988 $5,111,730 $7,362,428 $19,838,366 $56,188,760 $2,651,479
Depreciation (352,532) (12,282,675) (9,578,021) (4,199,740) (2,613,931) (33,106,557)
------------ ------------ ------------ ------------ ------------ -------------
Net $951,456 $(7,170,945) $(2,215,593) $15,638,626 $53,574,829 $(30,455,078)
============ ============ ============ ============ ============ =============
Federal Tax Cost $201,888,246 $499,759,362 $242,753,073 $202,698,775 $262,918,984 $777,945,874
============ ============ ============ ============ ============ =============
</TABLE>
36 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows (unlimited number of
shares authorized):
<TABLE>
2000 2005 2010
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
Year ended
September 30, 1999
<S> <C> <C> <C> <C> <C> <C>
Sold ..................... 612,092 $57,770,190 3,807,270 $285,909,492 3,066,873 $180,610,643
Issued in reinvestment
of distributions ....... 181,232 15,837,405 284,344 20,558,418 291,993 16,796,367
Redeemed .................(1,039,070) (98,046,529) (3,876,362) (288,258,701) (3,272,275) (191,905,328)
Reverse share split ...... (185,554) -- (418,534) -- (299,137) --
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) .. (431,300) $(24,438,934) (203,282) $18,209,209 (212,546) $5,501,682
=========== ============= =========== ============= =========== =============
Year ended
September 30, 1998
Sold ..................... 644,385 $57,705,555 4,720,449 $331,282,758 4,025,597 $223,483,879
Issued in reinvestment
of distributions ....... 191,104 15,630,392 270,807 17,061,205 159,789 7,888,903
Redeemed ................. (996,398) (89,034,661) (2,122,395) (148,063,950) (1,984,180) (111,205,252)
Reverse share split ...... (192,640) -- (272,951) -- (160,955) --
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) .. (353,549) $(15,698,714) 2,595,910 $200,280,013 2,040,251 $120,167,530
=========== ============= =========== ============= =========== =============
ADVISOR CLASS
Year ended
September 30, 1999(1)
Sold ..................... 11,570 $1,094,025 42,734 $3,107,666 21,871 $1,267,921
Issued in reinvestment
of distributions ....... 53 4,628 41 2,962 23 1,342
Redeemed ................. (2,525) (239,565) (8,969) (660,982) (141) (8,394)
Reverse share split ...... (53) -- (90) -- (23) --
----------- ------------- ----------- ------------- ----------- -------------
Net increase ............. 9,045 $859,088 33,716 $2,449,646 21,730 $1,260,869
=========== ============= =========== ============= =========== =============
Period ended
September 30, 1998(2)
Sold ..................... 678 $62,003 1,571 $112,702
Redeemed ................. -- -- (265) (20,000)
----------- ------------- ----------- -------------
Net increase ............. 678 $62,003 1,306 $92,702
=========== ============= =========== =============
</TABLE>
(1) October 20, 1998 (commencement of sale) through September 30, 1999 for 2010.
(2) August 20, 1998 (commencement of sale) through September 30, 1998 for 2000,
and August 3, 1998 (commencement of sale) through September 30, 1998 for
2005
www.americancentury.com 37
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in shares of the funds were as follows (unlimited number of
shares authorized):
<TABLE>
2015 2020 2025
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
Year ended
September 30, 1999
<S> <C> <C> <C> <C> <C> <C>
Sold ..................... 4,900,767 $ 231,105,218 9,471,007 $ 322,941,734 36,680,251 $ 1,034,698,158
Issued in reinvestment
of distributions ....... 148,946 7,107,814 2,776,706 81,173,983 483,568 14,677,215
Redeemed ................. (3,227,104) (149,250,610) (12,145,981) (414,047,230) (19,136,239) (558,021,783)
Reverse share split ...... (163,477) -- (2,906,872) -- (507,859) --
--------------- --------------- --------------- --------------- --------------- ---------------
Net increase (decrease) .. 1,659,132 $ 88,962,422 (2,805,140) $ (9,931,513) 17,519,721 $ 491,353,590
=============== =============== =============== =============== =============== ===============
Year ended
September 30, 1998
Sold ..................... 2,651,059 $ 117,890,797 13,812,474 $ 442,006,671 24,090,981 $ 649,193,136
Issued in reinvestment
of distributions ....... 281,652 10,744,494 3,356,693 85,814,004 199,765 4,802,916
Redeemed ................. (2,235,577) (99,598,578) (21,005,162) (677,488,778) (16,157,277) (439,697,727)
Reverse share split ...... (283,586) -- (3,387,874) -- (201,848) --
--------------- --------------- --------------- --------------- --------------- ---------------
Net increase (decrease) .. 413,548 $ 29,036,713 (7,223,869) $ (149,668,103) 7,931,621 $ 214,298,325
=============== =============== =============== =============== =============== ===============
ADVISOR CLASS
Year ended
September 30, 1999(1)
Sold ..................... 172 $ 7,495 28,341 $ 905,834 51,875 $ 1,424,236
Issued in reinvestment
of distributions ....... -- -- 120 3,499 378 11,465
Redeemed ................. -- -- (9,571) (306,959) (16,521) (455,973)
Reverse share split ...... -- -- (120) -- (378) --
--------------- --------------- --------------- --------------- --------------- ---------------
Net increase ............. 172 $ 7,495 18,770 $ 602,374 35,354 $ 979,728
=============== =============== =============== =============== =============== ===============
Period ended
September 30, 1998(2)
Sold ..................... 20,572 $ 568,207
Redeemed ................. (17,756) (495,584)
--------------- ---------------
Net increase ............. 2,816 $ 72,623
=============== ===============
</TABLE>
(1) July 23, 1999 (commencement of sale) through September 30, 1999 for 2015,
and October 19, 1998 (commencement of sale) through September 30, 1999 for
2020.
(2) June 1, 1998 (commencement of sale) through September 30, 1998 for 2025.
38 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
5. SECURITIES LENDING
At September 30, securities valued at $18,989,389 for 2020 and $45,126,305
for 2025 were on loan to brokers. Securities received as collateral, at this
date, were valued at $19,764,618 and $47,238,010. The fund's risks in securities
lending are that the borrower may not provide additional collateral when
required or return the securities when due.
- --------------------------------------------------------------------------------
6. BANK LOANS
Effective December 18, 1998, the funds, along with certain other funds
managed by ACIM, entered into an unsecured $570,000,000 bank line of credit
agreement with Chase Manhattan Bank. Borrowings under the agreement bear
interest at the Federal Funds rate plus 0.40%. The funds may borrow money for
temporary or emergency purposes to fund shareholder redemptions. The funds did
not borrow from the line during the period December 18, 1998 through September
30, 1999.
www.americancentury.com 39
<TABLE>
<CAPTION>
Target: 2000--Financial Highlights
- --------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 93.78 $ 86.05 $ 79.95 $ 76.86 $ 66.93
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............. 5.06 5.13 5.10 4.75 4.37
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions .............. (2.73) 2.60 1.00 (1.66) 5.56
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ..... 2.33 7.73 6.10 3.09 9.93
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income ........... (5.57) (5.64) (5.20) (3.94) (3.42)
From Net Realized Gains .............. (1.32) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions .................. (6.89) (5.64) (5.20) (3.94) (3.42)
----------- ----------- ----------- ----------- -----------
Reverse Share Split .................... 6.89 5.64 5.20 3.94 3.42
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ......... $ 96.11 $ 93.78 $ 86.05 $ 79.95 $ 76.86
=========== =========== =========== =========== ===========
Total Return(3) ...................... 2.48% 8.97% 7.64% 4.01% 14.84%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.59% 0.59% 0.56% 0.53% 0.63%
Ratio of Net Investment Income
to Average Net Assets ................ 5.34% 5.75% 6.14% 5.99% 6.13%
Portfolio Turnover Rate ................ 31% 82% 10% 29% 53%
Net Assets, End of Period
(in thousands) ....................... $ 201,971 $ 237,525 $ 248,377 $ 267,757 $ 294,736
</TABLE>
(1) Computed using average shares outstanding throughout the period.
(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.
40 1-800-345-2021 See Notes to Financial Statements
Target: 2000--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Advisor Class
1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .............. $ 93.76 $ 91.41
------- -------
Income From Investment Operations
Net Investment Income(2) ........................ 4.88 0.54
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ...................... (2.79) 1.81
------- -------
Total From Investment Operations ................ 2.09 2.35
------- -------
Distributions
From Net Investment Income ...................... (5.50) --
From Net Realized Gains ......................... (1.32) --
------- -------
Total Distributions ............................. (6.82) --
------- -------
Reverse Share Split ............................... 6.82 --
------- -------
Net Asset Value, End of Period .................... $ 95.85 $ 93.76
======= =======
Total Return(3) ................................. 2.23% 2.57%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........................... 0.84% 0.84%(4)
Ratio of Net Investment Income
to Average Net Assets ........................... 5.09% 5.06%(4)
Portfolio Turnover Rate ........................... 31% 82%
Net Assets, End of Period
(in thousands) .................................. $ 932 $ 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 returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 41
<TABLE>
<CAPTION>
Target: 2005--Financial Highlights
- --------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 76.72 $ 64.54 $ 57.83 $ 56.61 $ 45.22
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............. 3.77 3.84 3.74 3.50 3.33
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions .............. (7.94) 8.34 2.97 (2.28) 8.06
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ..... (4.17) 12.18 6.71 1.22 11.39
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income ........... (3.39) (3.61) (3.61) (2.06) (2.41)
From Net Realized Gains .............. (1.07) (0.27) (0.44) (0.58) (0.67)
----------- ----------- ----------- ----------- -----------
Total Distributions .................. (4.46) (3.88) (4.05) (2.64) (3.08)
----------- ----------- ----------- ----------- -----------
Reverse Share Split .................... 4.46 3.88 4.05 2.64 3.08
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ......... $ 72.55 $ 76.72 $ 64.54 $ 57.83 $ 56.61
=========== =========== =========== =========== ===========
Total Return(3) ...................... (5.44)% 18.87% 11.60% 2.15% 25.16%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.59% 0.59% 0.57% 0.58% 0.71%
Ratio of Net Investment Income
to Average Net Assets ................ 5.10% 5.53% 6.15% 6.05% 6.58%
Portfolio Turnover Rate ................ 81% 35% 15% 31% 34%
Net Assets, End of Period
(in thousands) ...................... $ 490,248 $ 533,986 $ 281,677 $ 238,864 $ 183,452
</TABLE>
(1) Computed using average shares outstanding throughout the period.
(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.
42 1-800-345-2021 See Notes to Financial Statements
Target: 2005--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Advisor Class
1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........... $ 76.69 $ 70.91
--------- ---------
Income From Investment Operations
Net Investment Income(2) ..................... 3.60 0.58
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ................... (7.95) 5.20
--------- ---------
Total From Investment Operations ............. (4.35) 5.78
--------- ---------
Distributions
From Net Investment Income ................... (3.32) --
From Net Realized Gains ...................... (1.07) --
--------- ---------
Total Distributions .......................... (4.39) --
--------- ---------
Reverse Share Split ............................ 4.39 --
--------- ---------
Net Asset Value, End of Period ................. $ 72.34 $ 76.69
========= =========
Total Return(3) .............................. (5.67)% 8.15%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........................ 0.84% 0.84%(4)
Ratio of Net Investment Income
to Average Net Assets ........................ 4.85% 4.87%(4)
Portfolio Turnover Rate ........................ 81% 35%
Net Assets, End of Period
(in thousands) ............................... $ 2,533 $ 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 returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 43
<TABLE>
<CAPTION>
Target: 2010--Financial Highlights
- --------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 61.98 $ 49.16 $ 42.47 $ 42.14 $ 31.67
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............. 3.07 2.94 2.79 2.58 2.41
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions .............. (9.95) 9.88 3.90 (2.25) 8.06
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ..... (6.88) 12.82 6.69 0.33 10.47
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income ........... (2.78) (2.46) (2.82) (1.57) (1.48)
From Net Realized Gains .............. (1.33) (0.29) (1.17) -- (0.48)
In Excess of Net Realized Gains ...... (0.16) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions .................. (4.27) (2.75) (3.99) (1.57) (1.96)
----------- ----------- ----------- ----------- -----------
Reverse Share Split .................... 4.27 2.75 3.99 1.57 1.96
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ......... $ 55.10 $ 61.98 $ 49.16 $ 42.47 $ 42.14
=========== =========== =========== =========== ===========
Total Return(3) ...................... (11.10)% 26.08% 15.75% 0.78% 33.06%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.59% 0.59% 0.62% 0.67% 0.71%
Ratio of Net Investment Income
to Average Net Assets ................ 5.31% 5.39% 6.15% 5.98% 6.56%
Portfolio Turnover Rate ................ 49% 34% 26% 24% 26%
Net Assets, End of Period
(in thousands) ....................... $ 240,606 $ 283,828 $ 124,812 $ 111,117 $ 95,057
</TABLE>
(1) Computed using average shares outstanding throughout the period.
(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.
44 1-800-345-2021 See Notes to Financial Statements
Target: 2010--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
Advisor Class
1999(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .................... $ 60.12
---------
Income From Investment Operations
Net Investment Income(2) .............................. 2.81
Net Realized and Unrealized Loss
on Investment Transactions ............................ (7.97)
---------
Total From Investment Operations ...................... (5.16)
---------
Distributions
From Net Investment Income ............................ (2.76)
From Net Realized Gains ............................... (1.33)
In Excess of Net Realized Gains ....................... (0.16)
---------
Total Distributions ................................... (4.25)
---------
Reverse Share Split ..................................... 4.25
---------
Net Asset Value, End of Period .......................... $ 54.96
=========
Total Return(3) ....................................... (8.58)%
RATIOS/SUPPLEMENTAL DATA
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 ................................. 49%
Net Assets, End of Period
(in thousands) ........................................ $ 1,194
(1) October 20, 1998 (commencement of sale) through September 30, 1999.
(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.
See Notes to Financial Statements www.americancentury.com 45
<TABLE>
<CAPTION>
Target: 2015--Financial Highlights
- --------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 49.87 $ 38.34 $ 31.96 $ 32.20 $ 22.79
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............. 2.39 2.17 2.00 1.85 1.71
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions .............. (9.22) 9.36 4.38 (2.09) 7.70
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ..... (6.83) 11.53 6.38 (0.24) 9.41
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income ........... (2.10) (2.11) (2.05) (1.28) (0.87)
From Net Realized Gain ............... -- (1.40) (0.34) (1.61) --
In Excess of Net Realized Gains ...... (0.08) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions .................. (2.18) (3.51) (2.39) (2.89) (0.87)
----------- ----------- ----------- ----------- -----------
Reverse Share Split .................... 2.18 3.51 2.39 2.89 0.87
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ......... $ 43.04 $ 49.87 $ 38.34 $ 31.96 $ 32.20
=========== =========== =========== =========== ===========
Total Return(3) ...................... (13.70)% 30.07% 19.96% (0.74)% 41.29%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.59% 0.59% 0.61% 0.65% 0.71%
Ratio of Net Investment Income
to Average Net Assets ................ 5.25% 4.96% 5.79% 5.63% 6.40%
Portfolio Turnover Rate ................ 55% 31% 21% 17% 70%
Net Assets, End of Period
(in thousands) ...................... $ 218,193 $ 170,081 $ 114,900 $ 115,654 $ 114,647
</TABLE>
(1) Computed using average shares outstanding throughout the period.
(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.
46 1-800-345-2021 See Notes to Financial Statements
Target: 2015--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
Advisor Class
1999(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ...................... $43.65
------
Income From Investment Operations
Net Investment Income(2) ................................ 0.46
Net Realized and Unrealized Loss
on Investment Transactions .............................. (1.09)
------
Total From Investment Operations ........................ (0.63)
------
Net Asset Value, End of Period ............................ $43.02
======
Total Return(3) ......................................... (1.44)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................................... 0.83%(4)
Ratio of Net Investment Income
to Average Net Assets ................................... 5.01%(4)
Portfolio Turnover Rate ................................... 55%
Net Assets, End of Period
(in thousands) .......................................... $ 7
(1) July 23, 1999 (commencement of sale) through September 30, 1999.
(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.
See Notes to Financial Statements www.americancentury.com 47
<TABLE>
<CAPTION>
Target: 2020--Financial Highlights
- --------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 36.95 $ 27.17 $ 22.00 $ 22.47 $ 15.28
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) ............. 1.62 1.53 1.51 1.41 1.19
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions .............. (7.96) 8.25 3.66 (1.88) 6.00
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ..... (6.34) 9.78 5.17 (0.47) 7.19
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income ........... (2.06) (2.35) (1.45) (0.40) (0.21)
From Net Realized Gains .............. (5.20) (2.19) -- (0.04) --
----------- ----------- ----------- ----------- -----------
Total Distributions .................. (7.26) (4.54) (1.45) (0.44) (0.21)
----------- ----------- ----------- ----------- -----------
Reverse Share Split .................... 7.26 4.54 1.45 0.44 0.21
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ......... $ 30.61 $ 36.95 $ 27.17 $ 22.00 $ 22.47
=========== =========== =========== =========== ===========
Total Return(3) ...................... (17.16)% 36.00% 23.50% (2.09)% 47.05%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.59% 0.59% 0.53% 0.61% 0.72%
Ratio of Net Investment Income
to Average Net Assets ................ 4.82% 4.83% 6.29% 6.25% 6.24%
Portfolio Turnover Rate ................ 31% 18% 14% 47% 78%
Net Assets, End of Period
(in thousands) ....................... $ 316,707 $ 486,052 $ 553,551 $ 926,319 $ 574,702
</TABLE>
(1) Computed using average shares outstanding throughout the period.
(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.
48 1-800-345-2021 See Notes to Financial Statements
Target: 2020--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
Advisor Class
1999(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ..................... $ 35.50
-------
Income From Investment Operations
Net Investment Income(2) ............................... 1.50
Net Realized and Unrealized Loss
on Investment Transactions ............................. (6.45)
-------
Total From Investment Operations ....................... (4.95)
-------
Distributions
From Net Investment Income ............................. (2.05)
From Net Realized Gains ................................ (5.20)
-------
Total Distributions .................................... (7.25)
-------
Reverse Share Split ...................................... 7.25
-------
Net Asset Value, End of Period ........................... $ 30.55
=======
Total Return(3) ........................................ (13.94)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................................. 0.84%(4)
Ratio of Net Investment Income
to Average Net Assets .................................. 4.57%(4)
Portfolio Turnover Rate .................................. 31%
Net Assets, End of Period
(in thousands) ......................................... $ 574
(1) October 19, 1998 (commencement of sale) through September 30, 1999.
(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.
See Notes to Financial Statements www.americancentury.com 49
<TABLE>
<CAPTION>
Target: 2025--Financial Highlights
- --------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Investor Class
1999 1998 1997 1996(1)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..$ 31.67 $ 22.27 $ 17.91 $ 19.85
----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(2) ............ 1.46 1.33 1.21 0.72
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ... (6.91) 8.07 3.15 (2.66)
----------- ----------- ----------- -----------
Total From Investment Operations .... (5.45) 9.40 4.36 (1.94)
----------- ----------- ----------- -----------
Distributions
From Net Investment Income .......... (1.28) (0.70) (0.72) --
From Net Realized Gains .............. -- (0.05) -- --
In Excess of Net Realized Gains ..... (0.31) -- -- --
----------- ----------- ----------- -----------
Total Distributions ................. (1.59) (0.75) (0.72) --
----------- ----------- ----------- -----------
Reverse Share Split ................... 1.59 0.75 0.72 --
----------- ----------- ----------- -----------
Net Asset Value, End of Period ........$ 26.22 $ 31.67 $ 22.27 $ 17.91
=========== =========== =========== ===========
Total Return(3) ..................... (17.21)% 42.21% 24.34% (9.77)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 0.59% 0.59% 0.62% 0.67%(4)
Ratio of Net Investment Income
to Average Net Assets ............... 5.25% 4.94% 6.14% 6.57%(4)
Portfolio Turnover Rate ............... 54% 52% 58% 61%
Net Assets, End of Period
(in thousands) ......................$ 754,356 $ 356,122 $ 73,821 $ 35,661
</TABLE>
(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.
50 1-800-345-2021 See Notes to Financial Statements
Target: 2025--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Advisor Class
1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .............. $ 31.64 $ 27.27
------- -------
Income From Investment Operations
Net Investment Income(2) ........................ 1.39 0.41
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ...................... (6.90) 3.96
------- -------
Total From Investment Operations ................ (5.51) 4.37
------- -------
Distributions
From Net Investment Income ...................... (1.23) --
From Net Realized Gains ......................... -- --
In Excess of Net Realized Gains ................. (0.31) --
------- -------
Total Distributions ............................. (1.54) --
------- -------
Reverse Share Split ............................... 1.54 --
------- -------
Net Asset Value, End of Period .................... $ 26.13 $ 31.64
======= =======
Total Return(3) ................................. (17.41)% 16.02%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........................... 0.84% 0.84%(4)
Ratio of Net Investment Income
to Average Net Assets ........................... 5.00% 4.37%(4)
Portfolio Turnover Rate ........................... 54% 52%
Net Assets, End of Period
(in thousands) .................................. $ 997 $ 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 returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 51
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of the American Century Target
Maturities Trust
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the American Century Target
Maturities Trust: 2000 (2000) (formerly the American Century - Benham Target
Maturities Trust: 2000), the American Century Target Maturities Trust: 2005
(2005) (formerly the American Century-Benham Target Maturities Trust: 2005), the
American Century Target Maturities Trust: 2010 (2010) (formerly the American
Century-Benham Target Maturities Trust: 2010), the American Century Target
Maturities Trust: 2015 (2015) (formerly the American Century-Benham Target
Maturities Trust: 2015), the American Century Target Maturities Trust: 2020
(2020) (formerly the American Century-Benham Target Maturities Trust: 2020), and
the American Century Target Maturities Trust: 2025 (2025) (formerly the American
Century-Benham Target Maturities: 2025) (the "Funds") at September 30, 1999, and
the results of their operations for the year then ended, the changes in their
net assets and the financial highlights for each of the two years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. The financial highlights for each of the three years in the period
ended September 30, 1997, for 2000, 2005, 2010, 2015, and 2020, and for the two
years in the period ended September 30, 1997, for 2025 were audited by other
auditors, whose report, dated November 3, 1997, expressed an unqualified opinion
on those statements. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at September 30, 1999 by correspondence with the custodian and
brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Kansas City, Missouri
November 10, 1999
52 1-800-345-2021
Share Class and Retirement Account Information
- --------------------------------------------------------------------------------
SHARE CLASSES
Two classes of shares are authorized for sale by the fund: Investor Class
and Advisor Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
Both classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
www.americancentury.com 53
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios to long-term bond funds and including both taxable and tax-exempt
funds. Each fund is managed to provide a "pure play" on a specific sector of the
fixed-income market.
To ensure adherence to this principle, the basic structure of each fund's
portfolio is tied to a specific market index. Fund managers attempt to add value
by making modest portfolio adjustments based on their analysis of prevailing
market conditions.
Investment decisions are made by management teams, which meet regularly to
discuss market analysis and investment strategies.
In addition to these principles, each fund has its own investment policies:
The six TARGET MATURITIES TRUST funds, including TARGET: 2000, TARGET:
2005, TARGET: 2010, TARGET: 2015, TARGET: 2020, and TARGET: 2025, invest
primarily in zero-coupon U.S. Treasury securities and will be liquidated shortly
after the conclusion of their target maturity year. Although these funds offer a
relatively predictable return if held to maturity, they may be subject to
dramatic price fluctuations that can result in significant gains or losses if
sold prior to maturity.
COMPARATIVE INDICES
The following index is used in the report for fund performance comparisons.
The index is not an investment product available for purchase.
The MERRILL LYNCH LONG-TERM TREASURY INDEX is an index of U.S. Treasury
securities with maturities greater than 10 years.
FUND BENCHMARKS
The benchmarks for the Target Maturities Trust funds are coupon STRIPS
issues maturing in the target year of each portfolio.
The benchmark for the Target: 2000 fund is the 11/15/00 STRIPS ISSUE -- a
zero-coupon Treasury bond that matures November 15, 2000.
The benchmark for the Target: 2005 fund is the 11/15/05 STRIPS ISSUE -- a
zero-coupon Treasury bond that matures November 15, 2005.
The benchmark for the Target: 2010 fund is the 11/15/10 STRIPS ISSUE -- a
zero-coupon Treasury bond that matures November 15, 2010.
The benchmark for the Target: 2015 fund is the 11/15/15 STRIPS ISSUE -- a
zero-coupon Treasury bond that matures November 15, 2015.
The benchmark for the Target: 2020 fund is the 11/15/20 STRIPS ISSUE -- a
zero-coupon Treasury bond that matures November 15, 2020.
The benchmark for the Target: 2025 fund is the 11/15/25 STRIPS ISSUE -- a
zero-coupon Treasury bond that matures November 15, 2025.
[left margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
DAVE SCHROEDER
JEREMY FLETCHER
54 1-800-345-2021
Glossary
- --------------------------------------------------------------------------------
INVESTMENT TERMS
* BASIS POINT -- one one-hundredth of a percentage point (or 0.01%). 100 basis
points equal one percentage point (or 1%).
* COUPON -- the stated interest rate of a security.
* YIELD CURVE -- a graphic representation of the relationship between maturity
and yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical axis.
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on pages 40-51.
STATISTICAL TERMINOLOGY
* NUMBER OF SECURITIES -- the number of different securities held by a fund on a
given date.
* ANTICIPATED GROWTH RATE (AGR) --an approximation of the annualized rate of
return that an investor may expect from his purchase date to the fund's WAM
date, assuming all dividends and capital gains distributions are reinvested. It
assumes that the AVM is reached on the WAM date.
* WEIGHTED AVERAGE MATURITY (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount.
* WEIGHTED AVERAGE MATURITY DATE (WAM DATE) -- an average of the maturity dates
of a portfolio's securities, weighted by dollar amount. The WAM date is
calculated based on the WAM of the portfolio's investments on a given day.
* ANTICIPATED VALUE AT MATURITY (AVM) -- the expected redemption value of a
portfolio share on the portfolio's WAM date. (Even if fund shares are held to
maturity, there is no guarantee that the fund's share price will reach its AVM
or that the AGR will be realized.)
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a percentage
of average net assets. (See Note 2 in the Notes to Financial Statements.)
TYPES OF SECURITIES
* ZERO-COUPON BONDS (ZEROS) --bonds that make no periodic interest payments.
Instead, they are sold at a deep discount and then redeemed for their full face
value at maturity. When held to maturity, a zero's entire return comes from the
difference between its purchase price and its value at maturity.
TYPES OF ZEROS
* STRIPS (SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES)
- -- the U.S. Treasury Department program that allows broker-dealers to "strip"
Treasury securities into their component parts. The securities created by this
"stripping" activity are also known as STRIPS. STRIPS are direct obligations of
the U.S. government and are the most liquid (easily bought and sold) Treasury
zeros.
* REFCORPS (RESOLUTION FUNDING CORPORATION ZEROS) -- zeros created from bonds
issued by the Resolution Funding Corporation, a U.S. government agency. The
principal portions of these bonds are secured by Treasury zeros, and the
interest portions are guaranteed by the U.S. Treasury. REFCORPs are also
relatively liquid.
* RECEIPT ZEROS -- zeros created and issued by broker-dealers before the STRIPS
program was implemented in 1985. Broker-dealers created receipt zeros by
purchasing Treasury bonds, depositing them in a custodian bank, and then selling
receipts representing ownership interest in the interest coupons or principal
portions of the bonds. The types of receipt zeros include:
TRS (TREASURY RECEIPTS) --generic receipt zeros.
ETRS (EASY-GROWTH TREASURY RECEIPTS) --issued by Dean Witter Reynolds, Inc.
* BECCS -- principal zeros that have been converted from physical delivery to
wirable (i.e., able to be transferred electronically) form.
www.americancentury.com 55
Glossary
- --------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that the fund's category may change over
time. Therefore, it is important that you read a fund's prospectus or fund
profile carefully before investing to ensure its objectives, policies and risk
potential are consistent with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
56 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Tax-Managed Value
Strategic Allocation -- Income & Growth
Moderate Value
Strategic Allocation -- Large Cap Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
New Opportunities Global Gold Emerging Markets
Giftrust(reg.tm) International Discovery
Vista International Growth
Heritage Global Growth
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
- --------------------------------------------------------------------------------
[back cover]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY TARGET MATURITIES TRUST
INVESTMENT MANAGER AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
- --------------------------------------------------------------------------------
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
Funds Distributor, Inc. is
9911 the distributor of American Century funds
SH-ANN-18630 (c)1999 American Century Services Corporation
